This entry was posted on Monday, August 30th, 2010 at 10:09 am and is filed under Banking, CBs, ECB.
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Scott’s paper is accurate, but it won’t win the battle for the hearts and minds of the public, the media and the politicians.
The debt-hawks are winning, because they use simple, everyday terms to put forth their pseudo-logic. Your book is the best I’ve read at informing the people, who make the decisions that affect our lives.
The MMT authors who knew how to write for the people, rather than writing for other economists, don’t receive the respect they deserve. The “other side” seems to have a lock on plain speaking and plain writing, even though what they say and write is nonsense.
Excellent paper! Sums up everything that’s been discussed on this and other MMT blogs over the last couple of months (and probably on many other occasions that I’m not aware of). Should go straight to the ‘mandatory readings’ section.
Excellent paper! The trick to simplifying for the laymen is a two part process. First pose everything in binary terms. People naturally think in binary terms – good/evil, male/female, good/bad, on/off.
so first thing let’s pose Scott’s logic in binary terms
Issuer vs. User
Spending vs. Savings
Savings vs. Debt
Asset vs. Liability
Now comes the second part – reframing
All issuer liabilities, or debt, is user savings.
Debt for a user is a burden. Debt for an issuer is not a burden…it’s a convenience.
I’ve tried to reword things on my site – DollarMonopoly.com.
I think we Americans have a “democratic prejudice” that blinds us to the purely mythological nature of the term.
The mass of humanity is neither intelligent nor moronic–they are, by definition neither particularly intelligent nor particularly stupid. The fact is that a collectivity is always passive by nature and is led, either for good or evil. The mass media people understand this very well. If you are with any size group, automatically the leaders are sought out, whether for good or ill, and the rest normally follow their lead, minus a few rebel or intelligently independent types, as the case may be.
So, the point is not to try to convince “most Americans,” which is a total waste of time and would be like chasing a mirage, but rather to try to convince the people who will, eventually, be responsible for determining public opinion. It is not about quantity (another American bugbear) but about quality.
In “Soft Currency Economics”, the chapter “The Myth of the Money Multiplier” 2nd paragraph reads:
“….In the real world banks make loans independent of reserve positions, then during the next accounting period borrow any needed reserves. The imperatives of the accounting system, as previously discussed, require the Fed to lend the banks whatever they need.”
If this practice remains the same nowadays banking sector rather borrows then spends “out of thin air” until aggreagate savings
in banking system are higher than aggreagate loans no new money creation takes place.
Thank you for you kind remarks, Sir. Banking system seems now to fit in my model. I have to admit that there’s one thing i’m still striving with, namely that US trade deficit is “good” for US. In case of Japan you even jokingly compare it to “war reparations”. :-).
If you agree that Foreign sector US dollars positive balance (cash reserves, Tsy, etc) is IOU on US domestic assets and future US GDP then what is “good” about leaving future US generations to share GDP with more people than US population ?