Mental cages

We have social stratification (rich and poor) because most people insist on being slaves. Because of this, when I see an intelligent comment about money, I know that readers’ responses to it will always take one of four forms…

[1] Hostility

[2] Apathy (i.e. no response at all)

[3] Meaningless gibberish

[4] Some combination of 1-through-3

Any of the four result in more collective poverty and slavery.

Below is an intelligent comment about money that I did not write. It’s from the reader response section below the article.

Since the U.S. government uses a fiat currency, it can never go broke. It can literally create money out of thin air. Anyone who says that the US is going broke either doesn’t understand our monetary system, or is lying for political reasons. Families, cities, states, and corporations can go broke, since they aren’t allowed create money out of thin air, but the US government can create money without limit. There’s no maximum ceiling that once exceeded causes bankruptcy. Unlike charities, churches, individuals, cities, and states, we can afford to help those who need assistance, especially since we seem to have an unlimited cash flow for the Military-Industrial-Complex.

One reader responds to this with [3] meaningless gibberish.

No, the US does not create money out of thin air. You do not understand the monetary system. If the US were simply printing money that was essentially worthless, a claim made by ideologues of the Right (Ryan. Paul) and the Left (Stein) inflation would have long ago erased any value. To the contrary, the dollar has retained, even gained value against other currencies, gold, whatever measure you apply. Congress played with that strength by threatening to suspend debt payments. Those debts are largely to ourselves.

Typical bullshit.

The first person comes back with this…

Yes the U.S. government does create money out of thin air. We have a fiat currency, not a currency based on finite resources such as gold, silver, lead, or dirt. There is no limit to the amount of money the federal government can create. We control how much we create to avoid unchecked inflation or deflation. But if we really wanted to, we could create a trillion-dollar coin tomorrow, pay off all of our debt, and then destroy the coin. If you believe that the U.S. government can go bankrupt, then you would have to believe that there is a ceiling on the amount of currency it can create.

Good, except the U.S. government has no “debts” in the sense of borrowing its spending money.  Also, there is no need to create a “trillion dollar coin,” just as there is no need to create a “trillion point coin” for a sports scoreboard.

But at least this reader has a clue.

Then a different reader chimes in, again using [3] meaningless gibberish…

That well is about to dry up, as a third of international trade is already bypassing the U.S. dollar and being conducted in direct currency exchange, mostly between Russia, China, Iran and various developing nations in Asia and South America. Even Canada has a direct exchange agreement with China. But if you look at the membership of the China initiated AIIB, you wonder, when the dyke will break and the greenback will be completely sidelined.

Nonsense. The U.S. government could create as many dollars as it liked out of thin air, even if the dollar was not the world’s most widely used currency. Monaco is only two square kilometers in size, which (if it was a perfect square) would measure only 1414 x 1414 meters (1546 x 1546 yards). Monaco had its own currency (the Monégasque franc) which was legal tender in Monaco, France and Andorra — until Monaco adopted the euro on 1 Jan 1999.

Other reader responses are equally meaningless, and I will not take the time to debunk them. The point is that most people are voluntarily enslaved. They enslave themselves. As the old saying goes, “When the disciple is ready, the guru appears,” meaning that we cannot be taught until we are genuinely willing to listen. Such willingness is rare.

Some people are slaves because they are lazy and arrogant. Other people are slaves because they are selfish assholes. Here’s a cowardly example of the latter from that same thread of reader comments….

For healthcare to be affordable, some people must do without it and DIE! That’s the unfiltered truth if you can handle it. If there is always an ability and willingness buy something regardless of price, it’ll never be cheap. Why will I sell a car for $15,000 if everyone will buy it at $150,000? If society will find a way to pay for Healthcare regardless of the costs, healthcare will NEVER be affordable and ultimately when you run out of other people’s money, society will go broke! It’s that simple.

Cute.

Anyway let’s rise from this cesspool and go to a different article

MMT begins with the premise that a monetary sovereign, such as the United States government, does not need to collect funds in order to spend funds. Because the U.S. government issues currency backed by its own full faith and credit, denominates its debts only in that currency, and floats its exchange rates, it does not face a solvency constraint. It cannot, legally speaking, “go broke.” In this way, it is profoundly unlike a local government, business, or household. It need not fear its own debts in the same manner. It need not balance its budget — in the short run or the long run. It need not tax, borrow, or fine in order to “afford” social programs… or social punishment.

Sounds good, except that the U.S. government does not borrow its spending money, and therefore has no “debts.”

MMT presses us to reimagine money as a public tool rather than a private commodity, and meditate on what exactly this should mean for society.

Sounds good, except that we don’t need to “reimagine” money. We just need to cut the bullshit.

The article is very long-winded, and says what we already know…

Without sufficient federal financing, the only way courts can fulfill their function in the criminal legal system is by imposing fines and fees, and this will inevitably disproportionately hurt poor communities of color.

 Yes, and that’s the whole point of austerity: to crush the lower classes, and thereby widen the gap between them and the upper classes.

Then comes a lot of stuff that we already know, but it’s worth repeating anyway.

As long as we’re talking dollars, U.S. government payments can be met. During the debt ceiling debates, even the elites pointed this out: Greenspan, Bernanke, Krugman, Buffet. As far back as 1945, in a talk delivered to the American Bar Association, New York Fed Chair Beardsley Ruml stated flat out that we do not collect federal taxes in order to spend federal money.  In 1995, Paul Samuelson, a Nobel Prize winning economist, acknowledged that the “superstition” that the federal budget must be balanced is part of an “old fashioned religion,” meant to hush people who might otherwise demand the government create more money. The U.S. government cannot run out of dollars. If you take a Corporate Finance class at a law school, one of the first things they’ll tell you is to assume zero risk when accounting for U.S. Treasury bonds, because the payments will always clear.

Unlike you or me, the U.S. government does not face a financial survival constraint. It can always pay. On the asset side of the federal government’s balance sheet is essentially a massive INFINITY sign. So why doesn’t it spend more money? It’s a mix of malice, miseducation, and misunderstanding.

Stopping austerity will not eliminate the drive to subordinate people of color, but it will at least remove a great lie used to justify certain horrors.

When earnest liberal bureaucrats or even rebellious lawyers make demands on the state they get caught up with the question, “How are you going to pay for it?” as if the government were a household that must collect or borrow before it can spend.

Banks do not lend out deposits or even key their lending to a pile of deposits. They generate credit and because they have special legal privileges, their IOUs are very valuable. They lend and borrow whenever they see a profitable opportunity to do so, knowing the state will back them up if things go really poorly. They’re higher up on the food chain.

Lots of good stuff there, but afterward in the comments section a reader exhibits EBS (Ellen Brown Syndrome), claiming that all money is created by banks as loans.

This delusion is so absolute that no one in the universe can get you out of it. Only you can.

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7 Responses to Mental cages

  1. IC says:

    Do you think inflation is taxation on poor?

    Regarding money, I totally agree with you. Federal government can create any amount of money out of thin air (fiat currency). But state government can not. Greek’s problem is joining EU by giving up their right of printing their own money out of national debt. EU is bound by common currency is no different from old-fasion gold coin international trade.

    As rich person myself, each time government inflation enrich me further. Yet average working class living standard went down due to inflation. The relative purchase power between rich and poor get further shifted to the rich. My purchase power is in line of government inflation. Yet working class purchase power lack behind the inflation.

    I feel inflation is indirect taxation on working poor. Only government universal income is indirect taxation on rich.

    Like

  2. IC says:

    Also Taxation is the real control of inflation, not interest rate.

    Like

    • IC says:

      Due to progressive taxation in federal income tax system, I am paying 45% income tax rate which is almost half what I earn each year. I do not have complain about it. Due to ovarian lottery, I can figure out to make money more efficiently than average people and snowball my wealth exponentially. Despite of such high taxation, I will never live in poverty for sure. With progressive taxation, redistribution of part of my earning backs to society and poor-people is fine for me.

      But poor people need to know. Even you kill off all wealthy and redistribute all their wealth will not make any poor people wealthier much. Communist revolution in many countries had proven that. Lottery winners from working class have proven that also. Hating rich is form of jealousy/envy. When no nobody wealthier than you are around, you will be the next target for somebody even poorer than you.

      Like

  3. IC says:

    “The U.S. government cannot run out of dollars.”

    That is exactly how Chinese government finance its infrastructure projects and job growth for long time. That is the partial reason that Chinese currency is low comparing to US dollars due to higher rate of money printing out thin air.

    If US politicians complain about Chinese currency manipulation to keep exchange ratio low, the solution is simple. USA just needs to print money faster than Chinese government. Then using printed extra money to finance infrastructure construction/maintenance or social benefits.

    “Print” = create. Do not take it literally.

    Like

  4. IC says:

    Mental cages?
    No idiot can be talked into genius. All those debate or persuasion are mostly useless. If someone could not figure out the staff on self own, it is mostly hopeless to advance intellectually. Most achievement of high intellectual are result of self-teaching.

    A lot of opinion difference is really IQ difference. If average joe can be talked into genius, we would have no problem creating numerous Einstein. It turns out that IQ is very much like height genetically. No short person can be turn into NBA players no matter how good all good nutrient or training are for obvious reason.

    http://infoproc.blogspot.com/2017/05/nytimes-in-enormous-success-scientists.html

    So value of education is overrated.

    Like

  5. Raúl Carrillo says:

    Thanks for the engagement. I agree that the U.S. does not “borrow” funds and indicate as much in my remarks.

    However, I do think it’s important to recognize three things:

    1. An entity doesn’t have to borrow anything to incur a debt.

    2. A stock of outstanding U.S. Treasuries is statutorily defined as “public debt.” Sometimes it’s important to meet people where they’re at.

    https://www.law.cornell.edu/uscode/text/31/subtitle-III/chapter-31

    3. In the context of monetary policy, even if you think it’s misleading to say the U.S. Government incurs nominal debts, it does incur real debts, most notably the obligation of tax receivability.

    Like

    • Thank you for visiting and commenting.

      [1] “An entity doesn’t have to borrow anything to incur a debt.”

      Please see my comments about debts and credits here…
      https://monetarysov.wordpress.com/2017/07/13/just-now-i-biffed/

      [2] “A stock of outstanding U.S. Treasuries is statutorily defined as ‘public debt.’ Sometimes it’s important to meet people where they’re at.”

      The so-called “national debt” is money that various parties have deposited into Federal Reserve savings accounts. This happens automatically when parties buy T-securities. It is a “debt” in the sense that the money in each savings account must be given back to the depositor when the T-security matures. The deposited money is an asset for the U.S. government, since it functions as reserves. Likewise in regular banks, deposited money is both a debt and an asset. It is on loan to the banks. None of this has anything to do with regular government spending.

      [3] “In the context of monetary policy, even if you think it’s misleading to say the U.S. Government incurs nominal debts, it does incur real debts, most notably the obligation of tax receivability.”

      Please explain.

      Like

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