Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Austerity = poverty and leads to civil disorder.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================
Here is yet another example of how the government, with the unquestioning approval of the voters, steals dollars out of the economy
Yahoo Finance
Treasury says to raise $5 billion from AIG stock saleWASHINGTON (Reuters) – The U.S. Treasury Department said on Friday it expects to raise $5 billion from its sale of American International Group (AIG) stock, cutting the government’s stake in the bailed-out insurer to 55 percent.
Translation: The U.S. Treasury, which creates dollars, and so, does not need to receive dollars from anyone, expects to drain $5 billion from the U.S. economy.
The sale, which would bring a profit of about $300 million to the U.S. Treasury, comes as President Barack Obama campaigns for a second term and has been forced to defend his administration’s decision to use taxpayer money to prop up companies during the crisis.
Translation: $300 million of those dollars are in addition to the dollars the Treasury previously had pumped into the economy as a stimulus. So our struggling economy has now been “unstimulated” by the previous stimulus plus an extra $300 million drained out.
The Treasury Department priced the offering at $30.50 a share, six percent above the $28.72 price needed for the U.S. government to break even on its investment in the insurer.
Translation: The Treasury hopes to drain as many stimulus dollars out of the economy as possible.
AIG intends to buy up to $3 billion of the offering.
Translation: Although taxes weaken the economy, AIG intends to pay $3 billion in extra taxes.
The sale of 163.9 million shares of AIG stock will reduce the government’s holding in the insurer to 55 percent from 61 percent. The offering is expected to close next week.
Translation: The Treasury will continue to drain many billions of dollars from the economy.
The insurer received multiple bailouts under both the Obama and Bush administrations, with the government pledging as much as $182 billion in aid. After the latest sale, the Treasury’s investment in AIG will be about $25 billion.
Translation: The economy received multiple stimuli under both the Obama and Bush administrations. Since then, the Treasury has drained all but $25 billion of that stimulus. The Treasury still intends to drain $25 billion more out of the economy.
The Obama administration has been unwinding its position in the politically unpopular financial crisis bailout programs. More than 300 small banks have yet to repay taxpayers. The administration could sell its remaining stake in AIG this year but has been adamant in saying it will not act for political reasons.
Translation: “Politically unpopular” means the voters have not been told the truth: The economy needs the dollars and the federal government does not. When 300 small banks pay extra tax to the government, the economy will suffer even more. The administration’s political reasons for not acting are simple: It knows the economy would suffer, and that would help sink President Obama’s reelection chances.
Summary: The upper income 1% wants the economy to tank, because that opens the gap between the 1% and the 99%. As we have explained previously, absolute income is less important than comparative income. The 1% prefers the income gap to open, even if that means they themselves lose a bit of income.
The administrate, being beholden to the 1%, also wants the gap to open, but realizes the resultant economic decline would mitigate against reelection, so will hold off on further austerity measures until after November.
And the 99%, having been brainwashed by the 1%, not only approves of anti-stimulus, money draining, they insist on it.
Rodger Malcolm Mitchell
Monetary Sovereignty
==========================================================================================================================================
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports
#MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
Rodger,
There’s a pretty good list over at UST of all the special financings that were provided to AIG, using taxpayer-funded borrowings issued by the Treasury.
That having been done, are you against the Treasury getting its money back so as to be able to repay the borrowings it made from the bankers and other purchasers of that government debt?
Cause that’s what this sounds like.
Also
“”The U.S. Treasury, which creates dollars, and so, does not need to receive dollars from anyone, ……””.
Please explain how and where the Treasury creates dollars.
What is the source for this statement?
Thanks
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Taxpayers do not fund federal spending. In a Monetarily Sovereign nation, even if taxes were $0, this would not reduce the federal government’s ability to pay its bills.
In monetarily non-sovereign governments (Illinois, Chicago, Greece et al), taxpayers do fund government spending. That is one of the differences between Monetary Sovereignty and monetary non-sovereignty.
The Treasury pays government bills by sending instructions to banks to mark up the numbers in creditors’ checking accounts. When the banks obey these instructions, dollars are created.
The instructions can be in the form of a wire or a check.
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Thanks, Rodger,
Perhaps you missed my question –
You said: “”The U.S. Treasury, which creates dollars, and so, does not need to receive dollars from anyone, ……””.
I asked: “”Please explain how and where the Treasury creates dollars.
What is the source for this statement?””
Any reply on that – how does the Treasury create dollar?
Also, does the Treasury KNOW that it creates dollars?
If the government does NOT know government finance, then how does Rodger know government finance?
And here, each and any of these statements, please Rodger:
1. “Taxpayers do not fund federal spending.”
2. “In a Monetarily Sovereign nation, even if taxes were $0, this would not reduce the federal government’s ability to pay its bills”
3. “The Treasury pays government bills by sending instructions (to) banks to mark up the numbers in creditors’ checking accounts.”
Any source for any of these statements, Rodger?
Just wondering?
Thanks.
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Roger is so darn impatient that he will not do the 101 of this. Roger is correct in pointing out that if you are in charge of printing monopoly money, you can determine the velocity of said currency in its creation.
Think about a local bank. It gets deposits and based on those deposits is allowed to loan money. In a closed system like a small town this becomes very important. You see that bank then loans out that money on a fractional banking method. Look up fractional banking to get a full impact of this. Then compound that will the Federal Reserve purchasing Treasury vehicles, say a T bill. T bill is a perfect medium since it has a value at a certain date. So lets say a T bill if worth $110 after 12 months. That means it will increase in 12 months by 10%. If the government creates 10% more money in the economy, then the net is a break even on T bills.
In essence the basis of Rogers argument is that since the government can increase the velocity of money in the aggregate system, they can keep running deficits because they control the money supply in the same way the biggest player can effect a table in a game of Texas holdem.
This entire system of being monetarily sovereign means you control the total chips or the largest amount of chips at the table. The good news this works as long as all the players at the table agree that those chips are accepted to settle debts. Currently no one wants to trust anyone else with the chips so you can keep producing chips until a substitute is created. Since no one trusts anyone else at the table you can work this advantage.
You see no one wants to trust China in chip creation nor do they want to trust the Europeans or the Russians. So who do you allow to make the global chips. The entire global financial system is based on systems that track through the or are pegged to the dollar. Example would be all oil trades. Most countries do not trust themselves to do this and that is why pegs to the dollar are predominant.
Rogers argument is valid until another chip is created. If the US gets greedy doing the creation, they will have no other choice but to change chips. Until them Roger is right. The problem is Roger does not accept or conceed that the event of printing and inflation may push that system to a point of no return. The kind that England lost its control.
The Pound Sterling used to be that chip until the 1920’s. Brenton Woods was the final nail for them. The transfer of chips was what brought us the great depression. The true test of Rogers argument took place in 1980’s, right after the US decoupled international settlements using gold and admitted to the world that it was fully floating exchange rates. The 1980’s was an example of finding how many dollars can float. That is why Rodger falls back on the statement “stop creating money when inflation goes up”. The problem is when that happens the Fed is out of steering inputs to control it.
As long as the Dollar is the standard chip of trade, Roger is right that the system can be gamed. Dangerous game Roger.
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1. Congress and the President make the initial money creation decisions, when they allocate budgets to the various federal agencies. These budgets are not constrained by tax receipts, which is why there is a “deficit” and a “debt.” If taxes were $0, Congress still could allocate the same budgets.
2. The federal agencies make decisions,. when they write checks (instructions) to creditors’ banks.
After that, no further decisions are made. Everything is automatic clearing.
3. The creditors’ banks clear through the Federal Reserve Bank and the Federal Reserve Bank clears through the Treasury, both of which debit federal accounts — automatically.
If taxes exceed spending, these accounts are positive. If spending exceeds taxes, these accounts are negative. It makes no difference to the Treasury whether these accounts are positive or negative. It’s just accounting to them.
No federal check ever has or ever will bounce. If Congress and the President authorize an agency to spend $100 trillion, that agency can issue $100 trillion worth of checks, and all will be cleared by the Federal Reserve Bank and the Treasury — automatically.
And if you worry about the governments “need to borrow,” this became obsolete on 8/15 71, when the government became Monetarily Sovereign. Today, the government merely maintains T-security accounts at the FRB for investors who want a safe investment. If the total of private investing in T-securities is not as much as the total “debt,”, the Fed makes up the difference — automatically.
The decision makers — Congress, the President and the federal agencies — neither see nor care about T-securities. Congress and the President allocate whatever they wish, and the agencies spend whatever they are allocated — and all this federal spending creates dollars.
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From Warren Mosler:
the tsy had an account at the Fed
member banks have accounts at the fed
when tsy spends it instructs the fed to credit the appropriate member bank account.
this credit balance is generally defined as ‘money’ by the mainstream.
the fed also debits the tsy’s account for the same amount, but tsy balances at the fed are not counted as ‘money’ by the mainstream.
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Joebhed,
Please post the responses you get, I am also interested in a couple of the questions you raised particularly how taxes “destroys” money. I still don’t have a good answer for that…the only thing I can think of is that the word “destroyed” is being used in a different way then what it actually means, especially now with the paragraph that Rodger wrote above about taxes exceeding spending and spending exceeding taxes and having a positive or neg account.
Rodger,
A lot of what you/MS say is correct and is valuable info but it seems to ignore certain aspects and it seems to stop at a certain point and does not follow the process all the way through or ignores certain parts of the process.
The problem with MS as I have said in the past is that it just looks at the accounting of the U.S. government (debits/credits) and that is mostly it, it does not follow the process all the way through. It then fills in the rest with standard mainstream economics.
I think one of the major problems most of us have, that have an issue with MS, is with #3 above for example and with how MS treats the issuing of debt and the federal reserves.
In a past post I think we all agreed that we have a debt based money system. What MS describes when it ignores certain aspects of the process is a non-debt based system which we don’t have but could have and which the government sometimes acts like we do have. It then treats the debt part as insignificant and does not really define the role of the federal reserves.
So for example with # 3 above your correct but then you stop or you ignore or dismiss the rest of the process. That after the government credits someone account it then issues T-securities. You write this off as insignificant but what is happening is the government is creating debt and it is the creation of that debt that is actually creating money and not the crediting of accounts.
So just like you and me when we borrow money, through fractional reserve banking we “create” money, hence our debt based money. The government does the same thing.
In a sense you are right that when the government credits someone’s account it is creating money by putting money into their accounts or into the economy where there may not have been any before but it can only do so because the federal reserve through its member banks is also issuing debt at the same time.
So again in a way you are right that when the Gov spends or credits someone account it creates money but you ignore the debt part where the money is actually created. You also ignore or gloss over the fact that the federal reserves can create money on its own.
In addition, whether or not the Gov needs to do it this way is a separate issue. If the Gov can create more money to repay those loans that is also a separate issue and just because the Gov can do so does not change the process.
The only difference between the Gov and the individual when they create money is that the Gov basically does not have a limit or I should say the federal reserves and its member banks do not impose a limit on the Gov, otherwise the Gov could change a few laws and put them out of business so the federal reserves always accommodates the Gov in its borrowing .
So when I borrow say to buy a house I may have a limit of say 500,000. The Gov theoretically has no limits. The only limits it has is the self imposed debt limit which I think we can all agree is a bit of a joke and the economic impact of creating money ie..inflation which MS admits is a limit but does not know where it would kick in.
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Yukon,
Contrary to popular belief, there is no historical relationship between dollar creation and inflation, nor do I expect there to be in the foreseeable future. See: https://rodgermmitchell.wordpress.com/2010/04/06/more-thoughts-on-inflation/
China, Canada, the UK, Australia and Japan among others, are Monetarily Sovereign, so all have the unlimited ability to create their sovereign currency, and all of their currencies are freely exchanged on the world market.
Monetary Sovereignty and the ability to create sovereign currency, has nothing to do with the dollar being the most widely used and accepted currency in the world. All Monetarily Sovereign nations have this ability.
All can control inflation by raising domestic interest rates, which increases demand for their currency. Only in the remote possibility that high interest rates were not sufficient to stem inflation, would these nations need to fall back on reducing money creation.
As world trade increases, the likelihood of an uncontrollable (by interest rates) local inflation decreases from its already near zero level.
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Rodger,
If there is no connection between dollar creation and inflation then how do you explain the loss of purchasing power of the dollar? How do you explain that the dollar is only worth less than 5 cents compared to 100 years ago or that it lost at least half (probably more, I have to look up the actually numbers again) since we went off the gold standard 40 yrs ago??
Do you see any connection with the fact that someone making 40,000 today would need to be making close to 100,000 (again approx numbers) to have the same purchasing power as someone 40yrs ago??
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Tom,
Look at https://rodgermmitchell.wordpress.com/2010/04/06/more-thoughts-on-inflation/
There you will see that inflation is related to oil prices and is not related to federal deficits.
The explanation you requested is this: The Fed believes the economy prospers when there is a little inflation. So they have set the target inflation rate at 2%-3% per year. They control this via interest rate adjustments.
A 3% inflation for 40 years means something costing $10 in 1972 would cost $32 today.
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I am sorry but you can say that no connection statement over and over but we already agree that if non of the players care about chip creation, they you are right. The problem is when they do. That is why China has already began trading in their own currency. If they own enough chips they can change the table stakes the same way the US took over that table right after WWI. International trade is a big engine and right now we have the most chips on the table. Until a viable alternative is created we have time. But we are forcing other countries to start that process already and the harder we push your method the faster they must respond.
You are in luck and your theory will be proven. Your theory is being tested as we speak with a nation that has its own sovereign capacity and they started in March of 2012. Argentina!!!!
Full float currency, few large trading partners, good local eco system that is fairly closed. Great lab.
“The banker added that “it is totally false to say that printing more money generates inflation, price increases are generated by other phenomena like supply and external sector’s behaviour”.
“We’re recovering the sovereign capacity to formulate and implement economic policy”, said Marcó del Pont who anticipated some pictures will be coming down from the bank’s hall of fame “beginning with Milton Friedman.”
http://en.mercopress.com/2012/03/26/printing-money-does-not-lead-to-inflation-argues-argentine-central-bank-president
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” . . . you can say that no connection statement over and over . . . “
It’s not me saying it; it’s the data saying it. I merely show what the data says. Unfortunately, some folks would rather believe their intuition than the facts. They are incapable of learning.
This is a problem in economics: People ignore facts and prefer intuition — just as with religion.
It’s the reason Creationism still exists, and scientists are required to defend Evolution “over and over.”
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Tom, here is how taxes destroy dollars. When you pay taxes, dollars are removed from your checking account, That destroys your dollars.
The dollars go to the Treasury, but as Warren Mosler said (and every other economist knows), treasury balances at the FRB are not counted as “money.”
The reason: Those balances can be changed at will, so do not represent what is available to be spent. It would be like asking how many points there are in a scoreboard.
As for a “debt-based” money system, every money system is debt based. There is no money system that is not based on debt, simply because every form of money is debt.
Let me explain how the government “borrows” from China:
1. First, China deposits already existing dollars into its checking account at the Federal Reserve Bank.
2. Then, to “lend” to us, China instructs the FRB to transfer those dollars from its checking account to its T-security account,
Period. That’s all there is. It’s identical with you instructing your bank to transfer dollars from you checking account to your savings account.
Then, when the government “pays off the loan,” it merely transfers dollars back from China’s T-security account to its savings account — plus a bit extra for interest.
Federal “borrowing” is not like your personal borrowing, and federal finances are not like your personal finances. The Federal government is Monetarily Sovereign and you are monetarily non-sovereign.
But if you are saying T-securities are an unnecessary relic of the gold standard days, you are correct. They could be eliminated, tomorrow.
Yes, the debt limit is a joke, for several reasons, one of which is it doesn’t limit debt, but instead limits payment for already contracted debt. It’s as though you bought a house, and then arbitrarily limited what you will pay on future mortgage payments.
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Rodger,
Thanks for replying, your are making me put my thinking cap on!
I think one of problems is with the terminology and also, please don’t take offense, some of the examples that are provided.
The scoreboard example above really does not apply. Yes there are unlimited points available however even though the score may change at any given moment I can see what the actual score is. I can see if my team is positive or neg points. Also even though there are unlimited points available the only way points can be added is if a team actually scores (if the scorekeeper just adds points at random they you are not really playing what ever game is being scored and the scoreboard is not being used for its intended purpose), the team has to score first, the scorekeeper cannot add points without a team scoring unlike the gov/feds who can add points when they want or the “economy” (if you will, for lack of a better word..tip of the tongue) can add points when it grows. So this kinda makes the point I made in a previous post about whether money is needed to grow an economy or if a growing economy needs money to continue to grow.
But I am getting off the point. The other example I wanted to bring up in terms of terminology is how the word “destroyed” is used. When I think of something being destroyed especially in monetary terms I think of not existing.
So when you say people are taxed and it destroys money I think that the trsy accounts are not being credited at all and the money ceases to exist. But in fact the accounts are being credited and that credit can be used for debits (spending).
For example if I am taxed $100 and we put aside all the other transactions (I understand one moment the gov account could be positive 100 billion and a second later it could be negative 100 billion) when I am taxed the $100 in my account is debited and the gov account is credited $100, If the gov then spends $200 it’s balance will be neg $100.
If money was being destroyed then when my account is debited $100 the gov account would still be $0 that is until the gov spent the $200 and then it would be neg $200.
So let me ask this, is this how the accounting works, when I am taxed $100 is the gov accounts credited $100 and is that $100 available to be spent (to be transferred or to mark up someone else’s account) or is the gov accounts $0 until the gov spends money??
When you (or Warren Mosler says) say (and I understand this point) that the trys accounts with the frb are not counted as money that is because if the trys account is positive (ie credited) then this reduces overall reserves (I am not sure specifically how that accounting works but I accept that is the result). When you reduce the overall reserves this reduces “money”. On the other hand when the gov spends, it’s account is neg, that increases overall reserves ie creates money (I believe it is the opposite of when a person deposits money with their bank and another person take out a loan, which is an example of how the gov is not like a person when it comes to it’s finances).
However and this is where I get a little lost myself..if the overall reserves go down by a positive trys account then federal reserves can just add ( press a few buttons and create money) to those reserves and increase them. Also don’t forget the gov spends more than it is credited with anyway so where it reduces “money” it then creates more “money”
So in this sense no money is really “destroyed” that is it ceases to exist.
Or please correct me where I am going wrong. That is am I wrong in saying that when I am taxed $100 the trys accounts are not credited $100?? Also am I wrong in saying that frb can make up any decreases in the overall reserves when it needs/wants to??
I would not characterize this as “destroying” money but if you want to then please at least be clear on that point because it is a bit different than what the mainstream thinks when they hear the word “destroy”.
Also I do agree with you about taxing takes money out of the “private” sector and I would agree with you that this is bad. However t I would disagree with you in characterizing it as destroying money and I would probably disagree with you on why it is bad but why it is bad is another issue entirely.
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The purpose of an analogy is to illustrate, not to be an exact replica. All analogies are different from their subject.
The money is “destroyed,” because it ceases to be counted as money. When you pay federal taxes, every money supply measure goes down.
If I blow up a building, I destroy it. Original bricks may remain, but they no longer comprise a building. (Please don’t explain to me why my analogy isn’t perfect.)
I have no idea who the so-called “mainstream” is, but whoever they are, the day I start to worry about what they think, is the day I’ll go into politics — something like Romney, who cares only about what the mainstream thinks.
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The problem is money is not ceasing to exist and it is not being “destroyed” or blown up because this is mostly an accounting mechanism. It is still available for the gov to spend and the feds can make up any difference and gov spending also can make up the difference so it is a little deceptive to say it is destroyed.
When you say “I have no idea who the so-called “mainstream” is, but whoever they are, the day I start to worry about what they think, is the day I’ll go into politics….”
The mainstream was the wrong word for me to use. Basically I meant folks not familiar with the terminology of MS or MMT or who are not part of MS or MMT and especially those who are learning about it. It is not so much that you need to worry about it or care what they think but if you want to get your points across then it is important otherwise you are just preaching to the choir or will be talking past people.
Here is a link to a good article, you may not agree with it but hopefully you will at least look at it (I am not trying to convert you from MS or anything, I think MS has a lot to offer and any criticisms are meant to be constructive). There are 3 parts but I think only two are out. Also it provides graphs to make its point.
http://www.washingtonsblog.com/2012/08/its-a-matter-of-trust-part-one.html
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Also Rodger,
I did have another question you might be able to answer. Related to the t-securities.
I am going to leave the question of whether the t-securites are a relic aside..again it would depend on terminology but let me agree that the gov can just “print” money or either actually print it or click a few buttons on the keyboard.
But here is my question, using mainstream terms (it is getting late and I am getting tired, so I am just going to use mainstream terms rather than exact M.S terms) when the gov spends more than it take in ie..its debits are more than its credits does the federal reserve issue treasuries or t-securites as you described above to cover the deficit or do they just print money or do they not cover the deficit at all??
So does the the debt/deficits = the amount of treasuries outstanding?? If the gov runs a deficit of 1 trillion this year is the amount of treasuries issued for the year = 1 trillion??
As for the other question I had for you about inflation, I was actually talking about purchasing power and I was not talking solely about federal deficits per say but about total “money” creation but that is another issue for some other time.
Again thank you for responding!
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Federal debt = total outstanding T-securities.
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Yup, Tom & Yukon Dave – Rodger is quite right, endlessly fighting the good fight here. People like Joebhed have completely confused ideas about money & debt. They imagine there can be such a thing as debt-free money, by redefining a word that children understand perfectly well – “Debt”. Their “debt-free money” is debt. Debt just means – a niceness owed by A to B. B scratches A’s back. By the primeval primate I’ll-scratch-your-back-if-you-scratch-mine contract, A owes B. That’s all money, debt etc is. A dollar bill is just a statement “Uncle Sam owes you one back-scratch”. Maybe there should be a Federal Back-Scratching Building in DC to make things clear. We could go to the Back-Scratch Standard. The Vice-President could scratch all comers’ backs for $1 – it would give him something to do, and keep him from the enticement of corruption.
The misguided & confused misguiders then do the accounting of government finance incorrectly to contend that the government is not to all intents & purposes, issuing / creating money at will. Frequently make an insane distinction between bonds & dollar bills – two pieces of paper with slightly different dates on them. Try counterfeiting FR Notes with the date 2013 on them – and tell the T-men that hey, they ain’t dollars, the date is wrong.
Everything to do with trust=credit. Nothing to do with international trade in particular. Nobody, no state, has ever printed like wild just for the hell of it to destroy their own currency=trust=credit=debt. Printing had nothing to do with the fall of the pound from dominance, reserve currency status. (Except that Britain didn’t print enough in the 20s &30s & wrecked its own economy before the Great Depression)
Yes, there is a stupid shell game going on. No, it doesn’t mean much. The main purpose is to confuse you to think that there is some purpose other than confusion. The magical maestro’s only power is to get you to look at his smoke & mirrors and his assistant, Miss Direction. The locus of the real power – the US Treasury, acting at the behest of Congress, is hidden, and nonsense is written about how private banks run our debt-based money system, as if there were another kind! Private banks corrupt the agents of our State-based money system, which is an entirely different thing.
The thing to remember is that it is all so simple it repels the mind. Unfortunately the majority of economic theorists, including the proponents of debt-free money, have a passionate desire to make things more complicated than they really are, and so confuse themselves and others.
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Gawd, Calc
Rather than point out the many errors and strawmen presented here, I have a one-word reference for your debt-free monetary ignorance to chew on for a moment. Greenbacks.
They were issued debt-free, without debt (IOU) to anyone, by action of the sovereign government.
Unknown to Rodger, yourself and many, THAT is what monetary sovereignty is all about.
They (Greenbacks) maintained what is the essential aspect of a sound money system – they were PERMANENT money. The present-debt-based money “expires” with repayment of loans, requiring more loans.
(Is that a little PROBLEM today?)
Real money can circulate as pocket-checking money forever.
Real money becomes a “debt” when it is loaned.
When Loans of Real (debt-free) money are repaid, the money remains in existence.
Real (Debt-free) money can not be destroyed in financial commerce.
FYI, debt-free money only refers to the ‘issuance’ of the money.
When it becomes part of the banking system, it immediately assumes that debit-credit, asset – liability relationship which too many confuse as being related to a real “debt”.
Which It is not.
Gawd.
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“Greenback” has several meanings, but I assume you’re talking about the civil war money issued by the Confederacy. True?
All money is debt, and all debt is backed by collateral. The collateral for the U.S. dollar is the full faith and credit of the U.S. government.
The collateral for the Confederacy’s money was the Confederacy’s full faith and credit. As the Confederacy began to lose the war, its collateral lost value. When collateral loses value, the loan loses value.
In this case, the loan was the Confederacy’s money, so the Confederacy’s money lost value, and by the end of the war, the full faith and credit of the Confederacy was worth nothing, so their money was worth nothing.
If you would like to know the meaning of “full faith and credit,” go to: https://rodgermmitchell.wordpress.com/2011/06/20/why-a-dollar-bill-is-not-a-dollar-and-other-economic-craziness/
Were you really conflating Confederacy money with the U.S. dollar??
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Greenbacks= Union=Lincoln=Financing Union Army=Pennsylvania Colony=Franklin=Revolutionary War Financing of Militia Among Many Other Things=Know Your History!
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All paper dollar bills are federal reserve notes. The words “bill” and “note” signify a debt document.
What is owed and by whom? The federal government owes the holder of a paper dollar full faith and credit. Were it not for that debt, it would just be a worthless piece of paper. Full faith and credit is the collateral for that note. Collateral is what gives debt its value.
Every form of sovereign money is, and always has been, a form of sovereign debt. No exceptions.
This is described at: https://rodgermmitchell.wordpress.com/2011/06/20/why-a-dollar-bill-is-not-a-dollar-and-other-economic-craziness/
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Tom says:
August 5, 2012 at 12:51 pm
Joebhed,
Please post the responses you get, I am also interested in a couple of the questions you raised particularly how taxes “destroys” money. I still don’t have a good answer for that…the only thing I can think of is that the word “destroyed” is being used in a different way then what it actually means, especially now with the paragraph that Rodger wrote above about taxes exceeding spending and spending exceeding taxes and having a positive or neg account.
To Tom,
Here are the replies from Bill Black and Mat Forstater.
Randy Wray’s came back as undeliverable and when I came back here looking for Rodger’s post with the addresses I did not find it.
I will go to UMKC and re-send the note to Randy
No reply from Dr Bill Mitchell.nor Scott Fulwiler.
Mostly they recommend reading things I have already read. – “”the nuances of reserve accounting”” nuanced money.
AM setting out to read Fulwiler’s 2006 piece.
Only Warren offers his brief response – somewhat nuanced.. More on that later
Bill Black:
I recommend my colleague Randy Wray’s primer on Modern Monetary Theory, available on the UMKC economics blog (New Economic Perspectives) for a full explanation of money creation.
WM BLACK
Mat
Hi Joe, please call me Mat. I recommend a couple papers by Stephanie Bell (now Kelton), Scott Fullwiler and/or Randy Wray on this topic. I would start with:
Stephanie Bell, “Do Taxes and Bonds Finance Government Spending?,” Journal of Economic Issues, 2000
Stephanie Bell and L. Randall Wray, “Fiscal Effects on Reserves and the Independence of the Fed,” Journal of Post Keynesian Economics, 2003
Scott Fullwiler, “Setting Interest Rates in the Modern Money Era,” Journal of Post Keynesian Economics, 2006
MAT FORSTATER
For the Money System Common
Rodg – Have you removed some comments from this thread?
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Joebhed,
Thank you for posting this!! Stephanie Bells readings look interesting.
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