"Yeah, so? All government spending is money printing. Get over it."
You don't sigh. Don't get all flustered. Don't equivocate. Just say, "Yeah that's right. What is your point?"
Where do people think money comes from? Do we dig it up out of the ground?
Don't shy away from the "printing money" term like so many people do. Embrace it. Use it against your opponent. Make it verbal Akkido.
If you shy away from it and become defensive that makes your argument look weak and it looks like your're not the serious person and that makes your counterpart the Very Serious Person (VSP).
So when they say it just say, "That's right, it's money printing. Next question."
"Oh, but that's going to cause inflation and hyperinflation and we'll be Weimar and Argentina and blah, blah, blah..."
"Nah...not going to happen. There isn't an economist in the whole entire fucking world that will tell you more income necessarily equates to less stuff being produced."
Booyah...that's the end of their inflation thesis and you just won the argument.
But they might persist...
"Okay, then you're saying we can just print our way to prosperity?"
"Yep, just go ask our defense contractors. They've been pretty happy getting our printed dollars all these years. I don't see them complaining."
23 comments:
Then shift it to real resources. "We can print prosperity" say "MMT tells us the only constraint is real resources, in fact MMT tells us the opposite. Instead of the evil statist government printing money, let's imagine you Ted use up your savings to buy a bunch of stuff."
Also "taxes provide revenue" say "Government always has an unlimited amount of money and can buy anything in its own currency. Infinity + £x = infinity."
people were all too happy with the banks doing all the money printing. no one feared hyperinflation, ... well except some crazy austrians who want to go back to the digging money out of the ground method. they want to forbid money printing altogether, ... how libertarian is that?
and it's not the money printing that brought the crisis, it's the fact that the private sector just can't keep up the money printing.
Ipeople were all too happy with the banks doing all the money printing. no one feared hyperinflation
That's because when banks create money, the money supply does not increase. Only government spending increases the money supply.
Mike?
That's because when banks create money, the money supply does not increase.
The money supply is defined as the total amount of money available for use in the economy (non-government).
The monetary base (settlement balances aka bank reserves and vault cash) is not part of the money supply. There is no money multiplier.
The total US money supply includes M1, M2, M3 and MZM.
When banks extend loans and credit deposit accounts, M1 increases as a result.
Only government spending increases the money supply.
Only government injection (spending and transfers) can increase net financial assets of non-government (asset on the side of non-government and liability on the side of government). Only a fiscal deficit (surplus) can increase (decrease) non-government net financial assets in aggregate.
When the central bank buys a government security in the course of monetary operations, one asset (security) is swapped for another (settlement balances aka bank reserves). The amount of non-government net financial assets remains unchanged — although henceforth government gets the interest payments rather than non-government.
I strongly agree, Mike. The leading MMTers made a conscious decision to eschew the phrase "money printing" some years ago - and I have been saying for a long time this was a mistake. Abba Lerner made the same points on rhetoric as you do & he was right. There is even a classical Greek name for the device of using "pejoratives" supposedly against your own side, like "printing money" - followed by a "so what" - but I forget what it is. :-)
That's because when banks create money, the money supply does not increase.
you're either new to the subject matter or being sarcastic.
i know the banking stuff and the endogenous money creation is a bit confusing at start.
yes private lending nets out to 0, and you generally can not pay your taxes with it, but it does have an effect on purchasing power.
and besides government spending, there is also the matter of government lending.
the money supply is not the monetary base, and the quantity theory of money has some issues also.
I have some questions myself, I'm uncertain about:
How can monetarists believe government spending creates both inflation yet causes crowding out? in order to cause crowding out obviously the velocity of money would have to go down by at least as much as to negate inflation, or what am i not 'getting' there?
you're either new to the subject matter or being sarcastic.
I was using it in a generic sense the same way "money printing" was used. That's all. Btw, have Bernie Sanders in his next campaign rally use economic jargon like monetary base, endogenous money, etc. and just watch how all the eyes start staring to oblivion.
Thanks for the reply, Tom. I got Mosler's Soft Currency Economics and Wray's MMT books in my library ;)
Good post mike
When banks create money, the money supply does increase.
As Tom says, only government operations can increase or decrease the net financial assets of the non-government sector. But nothing follows from that about the money supply. The money supply can grow even if non-government net financial assets decrease or stay the same. Similarly, the money supply can contract even if non-government net financial assets increase or stay the same.
Also, to make the first sentence in the last paragraph true, we have to remember to include the central bank under the label "government". If the central bank makes more interest payments to the private sector than it collects during a given period of time, then the non-government's net financial assets can grow, even if the treasury is running a perfectly balanced budget during that period of time.
It's not clear that the concept of non-government net financial assets is an economically meaningful concept.
No, we can't just 'print our way to prosperity'.
Try to spend a whole load of new money into an economy that for whatever reason can't produce the goods, and you'll have a problem.
If we have a problem on that (supply side) front, then we'll get too high inflation, which we don't want.
So you need a productive economy, but you also need the money to finance that economy. You can't have one without the other.
Dan Kervick:
"It's not clear that the concept of non-government net financial assets is an economically meaningful concept"
It's meaningful because the private sector generally wants to accumulate net financial assets overall. It wants to be a net saver.
So you need a productive economy, but you also need the money to finance that economy. You can't have one without the other.
A lot also depends on the kinds and quality of spending. The world doesn't necessarily get better just because there is more generic demand resulting in more generic supply of output and more people employed in the production of that output. We could have a higher-output world if more people were producing and consuming meth amphetamines and 7000-calorie hot-dog stuffed triple layer burritos. We could also have more economic output of services if millions of people were involved in beating people with baseball bats, or being beaten by them so that it could be televised on TV.
Macroeconomics - a small, closed group of logical identities from which various pseudo-scientific and extremely limited theories have been constructed - leads to morally brain dead thinking unless it is combined with much more vivid and enlightened detail about what is actually important in human life.
Net saving has to come from somewhere. There are three sources. Net savers in the domestic private sector are offset by net borrowers. Net borrowing is constrained by income and ability to repay. It can come from external borrowing in the case of net exporters. Alternatively it can come from government borrowing, I.e., fiscal deficits.
If neither government nor the external sector accommodate saving domestic private net saving desire, then there will net savers in that sector offset by net borrowers. We have already seen how that is unsustainable for long.
The "trick" is to provide for sufficient demand leakage to maintain circular flow at optimal resource use including full employment as the most efficient and effective option. Left to itself, the market does not maintain equilibrium at this level. This is where economic policy comes in.
It's also important to realize that saving desire also includes debt repayment (deleveraging).
Taking Greece as an example, the country cannot reasonable net export itself out of its hole while providing for debt repayment. And the domestic private economy is a shambles due to austerity. The only solution is massive borrowing in a currency that Greece doesn't issue, or regaining its own currency.
Even though the specifics are under negotiation, it's pretty clear that the eurocrats are not going to cut Greece the space it needs. The result will be to postpone the inevitable while making things worse on the way.
As they say, "the money has to come from somewhere," and if you can can't print it yourself, you have to get it somewhere else.
Net saving has to come from somewhere.
Tom, whether there is a high rate of saving or low rate of saving in an economy has nothing to do with whether net financial assets of the economy are somewhat negative, somewhat positive or exactly zero.
Saving in a given year is the total quantity of output that is not consumed. Saving is essential for the growth of output, and some portion of saving is always reinvested in the production of additional output. The fact that saving increases does not at all mean that there is a "demand leakage". Under some conditions, an increase in saving might actually increase demand and employment if it contributes to a shift from consumption to capital development. Also, an uptick in economic activity and a boost in "animal spirits" can increase demand and output purely through velocity changes, even if there is no overall change in the quantity of money or the net financial asset position of the private economy.
The reason for drops in demand and output is not accounted for simply by the fact that economic agents just save more, but is more do to the fact that rather than seeking to save by producing and accumulating new capital goods, they accumulate those savings in the form of relatively inert "safe assets" that are not effectively engaged in the capital development of the country. If people tense up economically and seek to protect themselves by buying land, paintings, jewelry, blue chip stocks in non-dynamic companies and government securities, or by literally locking cash up in vaults - then the economy will stagnate. If instead they are less risk averse and seek to save by buying productive machinery, factories, new houses, stock in growth oriented companies, etc., then the economy will grow.
If various economic agents experience an increased desire to accumulate financial savings and thus purchase more financial assets, then the cash flow from those agents into the asset market is matched dollar for dollar by the increased cash flow to the asset sellers. Does this increase or decrease demand, spending and output? The answer can't be deduced a priori. It all depends on which agents are buying financial assets and which ones are selling them, and what the ones who end up with more cash do with that cash.
"and seek to save by buying productive machinery, factories, new houses, stock in growth oriented companies, etc., then the economy will grow."
That's not saving. That's real investment. Which is just more spending from an MMT monetary analysis point of view since it causes production and the money to pass onto the producer for another round.
You're using a different definition of 'save' than we are here which generally refers to storage in financial assets within the financial circuit. And that's just confusing everybody.
What happens in the real circuit is a different analysis and is where you drop into the Post Keynesian view - generally following Kalecki and a few others. At that point you look at the amount being spent on the various goods and services and the mix of that to see if you are creating enough of the right sort of capital.
In other words it is pointless tuning the engine until you've fixed the oil pump problem and got enough oil circulating to eliminate unnecessary friction.
Concentrating on the oil pump problem, doesn't mean that you're not interested in tuning the engine.
..., whether there is a high rate of saving or low rate of saving in an economy has nothing to do with whether net financial assets of the economy are somewhat negative, somewhat positive or exactly zero.
The net financial assets of the total economy is always 0, or do you mean just the non-government sector of the economy? How can the non-government sector financial assets ever net to 0 (or even less) without a currency collapse?
"That's not saving. That's real investment."
The economic definition of saving is income minus consumption, and it therefore includes real investment.
Oh not arguments over the definition of 'saving' again.
http://www.3spoken.co.uk/2012/02/savings-explaining-humpty-dumpty-word.html?m=0
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