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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

press release

Posted by WARREN MOSLER on October 22nd, 2010

Senate Candidate Bets Congress $100 Million That the U.S. Government Cannot Run out of Money

Warren Mosler Offers $100 Million of His Own Money to Pay Down the Federal Deficit If Any Lawmaker Can Prove Him Wrong


WATERBURY, Conn.–(BUSINESS WIRE)–Warren Mosler, Connecticut’s Independent candidate for U.S. Senate today announced that it is an indisputable fact that U.S. Government spending is not operationally constrained by revenue and will give $100 million of his own money to pay down the Federal deficit if any Congressman or Senator can prove him wrong. “I am running for U.S. Senate to see my policies implemented to create the 20 million jobs we need. And to do this it must be understood that there is simply no such thing as the U.S. Federal government running out of money, nor is the Federal government operationally dependent on borrowing from China or anyone else. U.S. states, individuals, and companies can indeed become insolvent, but U.S. government checks will never bounce,” states Mosler. “Yes, large Federal deficits that push the economy beyond the point of full employment can lead to inflation or currency devaluation, but not bankruptcy and not bounced checks. If lawmakers today understood this fact, they would not be looking to cut Social Security and we would not still be mired in this disastrous recession.”

With 37 years of experience as an ‘insider’ in monetary operations, Mosler knows that President Obama is wrong when he says that the U.S. government has ‘run out of money’ and is dependent on borrowing from China in order to spend. As Fed Chairman Bernanke publicly stated in March of 2009, the Fed makes payments by simply marking up numbers in bank accounts with its computer. Mosler explains further; “The Government doesn’t get anything ‘real’ when it taxes and doesn’t give up anything ‘real’ when it spends. There is no gold coin that goes into a bucket at the Fed when you are taxed and the government doesn’t hammer a gold coin into its computer when it spends. It just changes numbers in our bank accounts.” Mosler likens this scenario to a football game; when a touchdown is scored, the number on the scoreboard changes from 0 to 6. No one wonders where the stadium got the 6 points, no one demands that stadiums keep a reserve of points in a “lockbox” and no one is worried about using up all the points and thereby denying our children the chance to play.

Warren Mosler urges his opponents, Linda McMahon and Richard Blumenthal, and the entirety of Congress to recognize how the monetary system actually works and implement a full payroll tax (FICA) holiday and his other proposals to restore full employment and prosperity while not cutting Social Security benefits or eligibility.

About Warren Mosler

Warren Mosler is running as an Independent. His populist economic message features: 1) A full payroll tax (FICA) holiday so that people working for a living can afford to buy the goods and services they produce. 2) $500 per capita Federal revenue distribution for the states 3) An $8/hr federally funded job to anyone willing and able to work to facilitate the transition from unemployment to private sector employment. He has also pledged never to vote for cuts in Social Security payments or benefits. Warren is a native of Manchester, Conn., where his father worked in a small insurance office and his mother was a night-shift nurse. After graduating from the University of Connecticut (BA Economics, 1971), and working on financial trading desks in NYC and Chicago, Warren started his current investment firm in 1982. For the last twenty years, Warren has also been involved in the academic community, publishing numerous journal articles, and giving conference presentations around the globe. Mosler’s new book “The 7 Deadly Innocent Frauds of Economic Policy” is a non-technical guide to the actual workings of the monetary system and exposes the most commonly held misconceptions. He also founded Mosler Automotive, which builds the Mosler MT900, the world’s top performance car that also gets 30 mpg at 55 mph.

88 Responses to “press release”

  1. Mr. e Says:

    Nice one!! You rule.

    Prediction: This gets more attention than everything MMT has done before.

    Reply

    WARREN MOSLER Reply:

    so far no attention. but still too soon to know…

    Reply

  2. Mr. e Says:

    Note that kotlikoff wrote this today – and his email is in the article!

    http://www.bloomberg.com/news/2010-08-11/u-s-is-bankrupt-and-we-don-t-even-know-commentary-by-laurence-kotlikoff.html

    Challenge him to a throwdown: this against him giving up his chair + writing pieces for the WSJ propaganda page and Bloomberg detailing how you are correct.

    Reply

    Paul Reply:

    Back when this article hit, I emailed Kotlikoff with a criticism based in MMT, here is his repsonse.

    “Paul, bankruptcy means not paying your bills. The U.S. Won’t formally default, but it will pay people less in real terms on net (net here means net of taxes and real means inflation adjusted). Best, Larry”

    Reply

    WARREN MOSLER Reply:

    so any positive inflation rate is a default by his logic, which he’s entitled to, but it sure doesn’t say much to use the word that way. why not just use the word ‘inflation?’

    Reply

    Ivan Reply:

    Then the Treasury should only issue inflation indexed bonds. At that point, default is impossible. Next objection?

    Tom Hickey Reply:

    Ivan, is in even necessary to go to TIPS only since that option already exists? People that are concerned about inflation can just choose TIPS if they are in for the long haul. Many bond buyers are not and the protection doesn’t matter to them.

    K argument seems like a canard to me.

    Ivan Reply:

    No…just making a point. If inflation is “default”, which of course it isn’t since there is an inflation expectation in bond yields, then eliminating the inflation risk eliminates the default risk. End of story. U.S. Govt can’t default.

    ESM Reply:

    This is not a good line of argument. Having inflation-linked liabilities is pretty much the only way governments can get themselves into an inflationary spiral. If the US went to all TIPS, then I think the probability of default (using the legal definition) would rise from a mere theoretical possibility to a real risk. The default might manifest itself as a failure to pay nominal payments, as in Russia in 1998 with GKos and OFZs, or it might manifest itself as a failure to honestly measure inflation, as in Argentina presently. The choice would no longer be between default and substituting for savings deposits with checking deposits at the Fed. It would be between some sort of substantive default and unacceptable inflation.

    Ivan Reply:

    ESM:

    Did you think the Russian government ran out of money to pay off their debt because of inflation? Did their computers not have enough digits?

    I’m not arguing the benefits of Tips versus fixed rate treasuries. I’m only making the point that to the extent that inflation is now a “default”, inflation is already factored in on nominals and explicitly on Tips. Whether or not it’s good policy isn’t my point. My point is that any argument that inflation is a default is idiotic. Did the US default in 1981? Was our “debt” downgraded?

  3. Unforgiven Says:

    Way to go Warren!!! Right on the money!

    Reply

  4. Greg Says:

    I like it Warren

    @Paul

    I’ve had those same irritating discussions with folks where they pull the “inflation equals default” BS. Lately Ive countered with ” Well then, deflation equals usury”. Usually they have no answer except hmmmmmph

    Reply

    Tom Hickey Reply:

    Good one. I’ll remember than for the next time I get hit.

    Reply

    Jill K Reply:

    Clever!

    Reply

  5. Winslow R. Says:

    While a good story will sometimes attract attention, media attention is also connected to capitalistic self-interest. Self-interest is especially important if you have to struggle to earn a living. My local public radio station that has no ‘ads’ yet is full of sponsorships.

    Tried advertising/sponsoring your book and cars in Connecticut media outlets? I’m curious what the return on investment is in media advertising compared to a political donation.

    Reply

    Mr. e Reply:

    I also consider Soro’s tactic to be effective. Just make money with the theory and let the record speak for itself – with the help of massive self-promotion.

    ;)

    Reply

  6. Elliot Rosewater Says:

    Well you made it into DealBreaker…

    http://dealbreaker.com/2010/10/hedge-fund-managersenate-candidate-puts-up-100-million-for-someone-to-prove-to-him-the-us-can-run-out-of-money/#more-29886

    You clearly have no understanding why you can trade $1 for a chocolate bar, or anything else for that matter.

    Reply

    WARREN MOSLER Reply:

    you haven’t yet read ‘the 7 deadly innocent frauds’ on this website where it goes into exactly that? or the ‘mandatory readings?’
    this website is the definitive source for where the value of a currency comes from

    Reply

  7. Warren Mosler Offers $100 Million of His Own Money to Pay Down the Federal Deficit If Any Lawmaker Can Prove Him Wrong – Smart Taxes Network Says:

    [...] Warren Mosler Offers $100 Million of His Own Money to Pay Down the Federal Deficit If Any Lawmaker C… [...]

  8. Forrest Says:

    Normally I would just bother Mr Google until I got the answer for myself, but since I’m beset by minutiae: his rhetorical flourishes aside, what’s the response to Denninger’s criticism?

    Reply

    Matt Franko Reply:

    Forrest,
    Denninger is at best an alarmist. He runs with the Zero Hedge/Mish/Austrian/GoldBug type crowd. Look at the comments on his and these similar blogs…he is a magnet for sociopaths. Recommend you avoid his writings.

    Reply

    Tom Hickey Reply:

    Matt, you are correct. They are alarmists.

    But I would temper this by saying that while their interpretations are often off because of their presuppositions and attitude, ZH, Mish, Denninger, etc., do uncover some good info at times. For example, Denninger was one of the early people calling fraud, and Mish digs out a lot of interesting data that you might not find yourself unless this is your field.

    So I would not blanket condemn everything they write, but if a person isn’t able to distinguish the good from the bad, probably best not to read them at all, or else disregard everything but the actual data they present as evidence.

    Reply

    Matt Franko Reply:

    Tom,
    You are not (supposed to be) a financial professional (btw at this point I have infinite more respect for your insight than anything by Denninger or these people). So you may have gone to some of these places and you may have learned something new as you have been learning about macro etc. Let me tell you, at this point you have more true knowledge in the tip of your pinky finger than Denninger has in his entire probably fat body, he has NOTHING left to tell you. You can learn nothing from him or his ilk anymore.

    Did you click on the link? Did you see the word he used in his headline wrt WM? This is way beyond boorish. He is no professional. This jerk cannot even read a chart. Look at his commodity charts. They have HUUUUUUGGGGGEEEE spikes in prices BEFORE the so-called “money supply” went asymtotic. Is he talking about the small retraces that have taken place recently? BIG DEAL! What about $150 oil? $13 Nat Gas? $50 plywood? Beans in the teens? $8 corn? All of this BEFORE reserves were increased in late 2008 to bail out foreign banks who probably got caught in stupid USD ‘carry trades’ or whatever…give me a break! This @&$*%#& jerk!

    Dan w Reply:

    The ZH, Denninger crowd are magnets for disaffected and angry people…many of whom can behave in sociopathic ways, no doubt. However, MMT is setting itself up as the ultimate Ivory Tower constructionists. MMT’s operational arguments, an Warren’s policy statements, ignore the human toll that massive cost inflation has on tens of millions of Americans…and cost inflation is what happens when operational realities in fiat system are exploited while government policy does nothing to rein in billionaireism and unbounded avarice. I say this: just watch what happens in the wake of QE II. Thebtop 10% of Americans vis wealth will do well for a time, but the vast majority o Americans will find the 12$/hour jobs don ‘t even pay the rent.

    beowulf Reply:

    Denninger’s fake quotes are pretty shady…
    .
    To “inflate away” the debt as Mr. Mosler claims he can do to “support” employment, we would have to reduce the debt in the system (or it’s impact) to roughly year 2000 levels. This would require emitting about $20 trillion dollars in currency.

    I don’t recall Warren advocating we “inflate away”. And its that (fake) statement by Warren that’s the underlying premise for the rest of his parade of horribles. I love his redundant use of “$” and “dollars”, which I love. :o)

    Denninger later writes:

    If we were to once again double the monetary base (that is, monetize just another $2 trillion, or issue another $2 trillion in debt) it is reasonable to expect that the price of commodities would again double. And so on, for each additional doubling… if we were to do what he claims he wants to in order to create his “20 million jobs” we would have to increase the monetary base, or its equivalent via debt issuance, by a factor of five.

    Did I miss that part of mathematics in grade school? If the monetary base is $2 trillion, increasing “by a factor of 5″ gets you to $10 trillion, so where did he get that $20 trillion at the beginning (is he simply double counting Tsy spending and Tsy debt)? I guess I’m genuinely curious to know if Denninger thinks Warren’s guaranteed job program will cost $500,000 per job or (heh heh) $1 million dollars. :o)

    Forrest Reply:

    I make use of a variety of seasonings when reading the Market Ticker; I wanted to know about the specifics of that particular entry rather than general philosophy.

    After pestering Mr Google I find for instance that he points out elsewhere that “…we can trivially compute the inflationary impact of printing the required $4.57 trillion [that] the government has instead paid in interest from the years 1988 to 2009[:] 2.18% – and not per year either. Rather, that’s the total inflation as a consequence of this policy over the entire 22 year period of time! Why is it that we are allowing debt merchants to ‘finance’ our deficits?”

    This seems in conflict with the later argument, although I could be wrong as it’s 12:02 AM and my synapses are shorting out.

    Reply

    WARREN MOSLER Reply:

    the govt/fed sets interest rates where ever it wants to. it’s done by vote. if they set it above zero it’s presumably because they think there is some public purpose doing that.

    i’d set it at 0 and leave it there permanently. see ’0 is the natural rate of interest’ on this website.

  9. Dan w Says:

    I am so embarrassed for Warren, and for people like him, who use their absurd wealth to purchase power, influence, etc. Many of us live a hand to mouth existence….literally. We watch our school systems flounder, our kids go without. And folks like Warren flaunt their billion dollar empires without so much as a hint of humility. I’m sorry Warren, but you live in another universe…yes, to you it may be the center of the universe…another universe from the majority of us who live right on the edge. thanks for reminding me of just how fantastically insensitive the wealthy in the nation truly are.

    Reply

    beowulf Reply:

    Dan W.,

    If someone of great wealth uses his money to advocate cutting taxes on working Americans (payroll taxes are terribly regressive), providing a guaranteed job for any American who wants to work and ensuring every American has medical coverage, how does that make him a bad guy?

    Warren could just as easily (and I trust, more profitably) spend his time and knowledge doing something else. Or worse, he could be like the Koch brothers or Pete Peterson, who use their fortunes to convince ($$$) politicians to pass laws to take from the poor and give to the rich.

    Warren’s not always right (for one thing, he should have put a fraction of that $100 million into TV ads), but he’s definitely a mensch.

    Reply

    Dan w Reply:

    Respectfully disagree. No billionaires are Mensches. The “useless eaters” of the world can attest to that.

    Reply

    beowulf Reply:

    Warren’s not a billionaire, so your assertion does not in any way constrain mine. :o)

    ESM Reply:

    How do you know Warren’s not a billionaire? And by the way, the other Warren definitely is a billionaire and definitely is a mensch. Although I disagree with him on the estate tax.

    WARREN MOSLER Reply:

    here’s my endorsement from Bill Black, not that it matters:

    Letters of Endorsement for Warren Mosler
    Independent Candidate for United States Senate from the State of Connecticut

    Warren Mosler is an amazing individual and would be an extraordinary representative. He has demonstrated exceptional skills in finance without ever being becoming an apologist for the industry. Indeed, he is famous internationally for exposing the industry’s shortcomings. His warnings came long before the crisis. His high performance in finance has continued even during the most challenging economic circumstances in 80 years. He is also strong in identifying phony crises.

    Warren is one of the rare individuals that understands money and finance and how the Treasury and the Fed really work. He receives information from industry experts from all over the world. He deliberately seeks out individuals with very different views. He enjoys polite debate focused on the merits of the issues. He is intellectually curious and honest and always trying to learn more about a broad range of issues. He cares about the fate of every American. He is fiercely independent in thought and deed.

    He understands that America’s success depends on how well we prepare future generations. He has put his money, and his time, to improve that preparation.

    If you elect him, he will work for you and he will work hard and well with all his integrity, passion, guts, and brains.

    —William K. Black
    Associate Professor of Economics and Law, University of Missouri-Kansas City

    Tom Hickey Reply:

    he should have put a fraction of that $100 million into TV ads

    Disagree. Wealthy people financing their own campaigns is plutocratic, and I hope the voters are intelligent enough to figure this out in Connecticut, California and elsewhere, as well as the consequences of Citizens United. The US is already enough of a plutocratic oligarchy. We don’t need to make it out and out.

    Reply

    ESM Reply:

    What’s wrong with a plutocracy? Is it better that our governing class is composed of liars, demogogues, and egomaniacs, like it is now?

    Reply

    Calgacus Reply:

    What we have now is a predatory (and violent) plutocracy. A government of liars, demagogues and egomaniacs would be a big step up.

    ESM Reply:

    Violent? Not sure what you mean there. But I don’t think we have a plutocracy in the US. Obama wasn’t rich before he gained political power. Neither was Biden. Many of the most powerful people in the House and Senate were not rich before they got there (some still aren’t). The expected future Speaker of the House is not rich.

    It’s not sufficient to argue that rich people have influence. When somebody is rich, it means he owns lots of valuable property, including credits upon the government. It is a truism that a rich person has the ability to trade property he owns for other things, including popularity and influence. You will never get around that in any society, no matter how it is structured.

    We would have a plutocracy here if people could literally buy positions in government with money. It’s possible to increase your probability of winning (cf Michael Bloomberg and Jon Corzine), but it’s not possible to win with certainty (cf Jon Corzine). And in any case, voters are not being coerced to vote for somebody like Bloomberg just because he has money.

    I still find purchasing a higher probability of winning elective office by using personal wealth to buy advertising much less offensive than doing it through family connections (cf anything Kennedy related) or outright bribery and fraud (cf anything Kennedy related).

    Tom Hickey Reply:

    I would quibble with this analysis, ESM. The problem is that the ultra-wealth control the levers of power through cronies, not that they are the politicians themselves. They rent the politicians as long as they are useful tools, and then they drop them for other more compliant tools as changing conditions call for.

    The cronies are typically people making more than about 300K a year plus perks. This isolates them from the vast majority of ordinary people since they have “the basics,” so to speak, — that is, they are financially independent enough not to feel the pain of “the little people.”

    WARREN MOSLER Reply:

    couldn’t agree more. as I think it was bob dylan who said, money doesn’t talk, it swears.

    i do what i do here as a matter of conscience, but agreed that it’s personal. and there are others with a lot more resources doing same and with their misguided understanding of monetary operations are responsible for the sorry state of our economy and the world economy as well.

    Reply

  10. Michael Norman Says:

    You have $100 million???

    Reply

  11. MMT Proselyte Says:

    Forrest – it’s a strawman. Warren concedes that deficits leading to AD > AS could lead to inflation, but MMTers would never prescribe such deficits. Denninger seizes upon this comment, and structures his whole article as if Warren had prescribed a huge dose of inflation. In fact, all Warren is prescribing is that the govt continues to accommodate the private sector’s huge ex ante propensity to deleverage. This has nothing to do with inflation, and as Warren himself would favour reducing the deficit once idle capacity falls, there is no respectable theoretical basis for saying that such a policy would lead to inflation. Denninger highlights a run-up in commodity prices, but it’s a red herring: broad money data do not show an increase in the wider money supply.

    Dan W – to call this press release “flaunting” Warren’s wealth is oversensitive. This is not ostentation – I doubt Warren cares if more people know how much he is actually worth. He is simply trying to get media attention for his cause as part of an attempt to make the world a better place by reducing idle economic capacity (and depressed human capital). If the system has allowed him to amass such a large fortune and you don’t like that, then fight the system; he personally has nothing to be ashamed of.

    Warren – I respectfully think you probably should have added a comment in your release that “if a large deficit DOESN’T take the economy past the point of full employment, then inflation is NOT likely”; I worry that closed-minded people (many of the target audience) will have as a takeaway “OK so we won’t go bust, but deficits will lead to hyperinflation or currency revulsion”…but I appreciate that every extra word detracts from the message!

    Best wishes
    MMTP

    Reply

    Dan w Reply:

    Respectfully disagree. The issue is that Warren off-handedly talks about throwing 100 million dollars at a problem, Meanwhile, people like me have to sell our cars so that we can buy used mobile homes so that we can hopefully move back closer to our children whom we have had to move away from in order to make enough money to put oil in the oil tank and food on the table. Warren is oblivious to these stories, and his relationship to money, and not to the situation of his fellow men, exposes him for being just one more in a very long line of Americans who simply don’t get it. it boggles the mind that men like Warren can rationalize the legitimacy of their ever growing fortunes, while on the street over a man starves to death. And, it is uniquely American to argue that everyone has the chance to be like Warren, and that men should be able to amass as much wealth as they can. Meanwhile, 41 million Americans are on food stamps, and 1 in 5 children lives in poverty. Embarrassing is a kind way to put it.

    Reply

    ESM Reply:

    I respectfully suggest you stop worrying about how much money other people have. You’ll be a happier person if you do. Warren’s wealth doesn’t hurt you; in fact, it’s helping you, since he is using his wealth to advocate policies that will increase economic activity and employment.

    I’m sure that Warren would have preferred to keep the extent of his wealth private. Even Mike Norman had no idea. It was pretty courageous of Warren to do this in order to advance the cause of MMT, and I thank him for it.

    Reply

    Dan w Reply:

    Oh please, courageous??? I will admit to being jealous and covetous of Warren’s success and of his wealth. I’m working on that issue. :) But I still feel that my point is valid…namely, that people of wealth have no idea what suffering really looks like and really feels like, and thus the propensity to behave without sensitivity when discussing money in general. My sister, a woman of wealth, once complained that a waitress who was serving her should get a new job if she hates so much being a waitress. Got it?

    WARREN MOSLER Reply:

    and i’ve seen more of that than you can imagine.

    did I tell you the story about the presentation I made a few years back in Argentina to a group of think tankers and central bankers?

    WARREN MOSLER Reply:

    Not that it matters, but I’d have to sell absolutely everything I have to pay it.

    and i’m so illiquid now i have to sell things to pay for anything.

    Mr. E Reply:

    Just an FYI – Warren has been the smartest guy in the room for decades. Decades. Ask early Treasury Futures traders..

    Reply

    Mr. E Reply:

    If Warren’s ideas get taken seriously by even 10% of professional economist, the worlds growth rate will increase by 1-2%. This alone will pull hundreds of millions of people out of poverty in years, not decades.

    It is a matter of the best good. Also, Warren is a capitalist. Nothing wrong with that.

    Warren estimates we could see numbers as high 15% growth. I’d have to run some numbers but if 8% in the first world became the norm, my sons would live forever.

    Reply

    jason m Reply:

    Do you even know Warren? You seem to be telling us all here about how bad a man he is, so I assume you know him personally. Do we fault him for using his intelligence in a legal fashion to make money? Is it Warren’s fault you have fallen on hard times? I’m just not following your logic.

    Reply

    Dan w Reply:

    Well, I guess I’m finally outed as a closet Commie. I’m sure Warren is a lovely man. And yes, my hars times are…well….hard. I just think that fantastic wealth is wrong. Gandhi said, “poverty is the worst form of violence”. There’ s a lot of poverty out there, and our consumeristic, non sustainable lifestyles are not helping. Anyway….ignore my rant. I’m suffering, and I am struggling with being able to find wealth such as Warren’s OK. I apologize.

    WARREN MOSLER Reply:

    seen my proposals for the financial sector? read anything on this website???

    WARREN MOSLER Reply:

    read the ‘mandatory readings’ yet?

    Start with ‘Soft Currency Economics’

    or ‘the 7 deadly innocent frauds’ also on this website

    Reply

    WARREN MOSLER Reply:

    “as if Warren had prescribed a huge dose of inflation.”

    right, this happens all the time. must just be fun for them to take cheap shots.

    good thoughts on future wording.

    I think it was Lee Trevino who was asked about pressure during a pro golf tournament, and he said that’s not pressure. pressure is being in a $20 game when you only have $2 in your pocket…

    Reply

  12. Tom Hickey Says:

    Matt, I used to visit a lot different places until I finally found MMT and then quickly became convinced that the MMT’ers had it right. I put up MMT comments at those blogs for awhile but to no apparent avail. I no longer visit those other places since it is not only a waste of my time but also frustrating to find what is going down. That said, I did occasionally pick up some interesting data there even though the interpretations were off base.

    I didn’t check out Karl’s latest since I grew tired of his rants some time ago. He’s a broken record.

    Reply

    Dan w Reply:

    Tom, how do the MMTers approach the issue of rising costs for goods when the majority of operationally created dollars do not find their way into the accounts of the most needy?

    Reply

    Tom Hickey Reply:

    Dan, MMT’ers are not recommending QE2, and didn’t recommend QE1. MMt’ers did not support the bank bailout as it was structured but rather suggested putting insolvent banks into resolution and committing to real financial reform. They also recommended a far larger stimulus package aimed at increasing demand from the bottom up.

    One of the principal conditions that leads to rising commodity prices is the financialization of the commodity markets, in which commodities are viewed as asset classes. This decoupled commodity markets from orientation toward productive use and divert them toward financial ends, resulting in imbalance. This is in need of reform, too.

    Have you read the mandatory readings and proposals at the navigation bar at the top of the page? MMT and Warren specifically have addressed a lot of concerns that you raise.

    Reply

    Mr. E Reply:

    Dan,

    Warren’s policy prescriptions cut right to the heart of the problem of low aggregate demand in the most direct, most effective way possible – a payroll tax cut.

    Unlike QEII, Warren’s proprosals provides cash money to real people. QE II lowers lending rates for some well positioned institutions, and indirectly for other people.

    The idea operates on such different principles that thinking about it without trying to learn the basics of the ideas is counterproductive. Read first.

    Reply

    Dan w Reply:

    I have read the materials. My point…and I have mass it here before…is that MMT is a long long way from becoming policy, and in the meantime Warren’s monetary ideas still fall under the aegis of our current policy regime. As such, even though MMTers might reject QE and financialization of commodities, carrying out the operational truths of printing under an irredeemable currency has the net impact of destroying the middle class’s disposable income base.

    WARREN MOSLER Reply:

    all govt spending is ‘printing’

    you need to read the 7 deadly innocent frauds before continuing.

    jcmccutcheon Reply:

    As such, even though MMTers might reject QE and financialization of commodities, carrying out the operational truths of printing under an irredeemable currency has the net impact of destroying the middle class’s disposable income base. How do you come to this conclusion? As long as there is enough slack in the economy and as long as we can continue to import we can create money.
    Inflation is the upper limit on creating money. In modern time we have never seen this limit hit. Even now with nearly 10% GDP deficits, no inflation.

    WARREN MOSLER Reply:

    Although QE probably adds nothing of consequence to aggregate demand, and more likely lowers it under most circumstances I’ve seen.

  13. Linda G Says:

    Hello.

    Our new little internet community website (see the link provided), going by the broad title “Over the Peak,” with about 170 members signed up so far, has been bringing up MMT from time to time lately.

    I, too, have put up a front page blog post about it, as I, too, am just beginning to try to learn more about it. I posted this press release, and I also mentioned Mosler’s book, *7 Deadly Innocent Faults of Economic Policy*, which I’ve read just in the past couple of days (I mentioned that Mosler was an independent candidate for President, but have since learned how that has changed – sorry about my mistake).

    But most of us trying to learn more about this are truly just beginners at doing so, and it’s hard for us to contribute meaningfully to the discussions about it.

    For example, within my post, there was most recently a set of criticisms that I imagine would make for thoughtful discussion, but I just didn’t have enough knowledge about the subject to contribute anything further.

    We could sure use some of you folks to help us get to know this subject better. It’s easy to become a member there, and the originator of the site, Nick (aka “Mystic,” ;-), although there doesn’t seem to be much that’s “mystical” about him except for a strong curiousity and desire to better understand some things, such as MMT…) is very encouraging to members who would like to contribute their own blog posts.

    So whether it’s simply to join in on some of the discussions of posts by others, or to create your own posts (and/or create contribute to “groups” on the site), we could sure use some help over there from anyone who might be interested in contributing to our understanding of MMT (or anything else that might legitimately become a part of such a site)…

    Thanks in advance to anybody who might like to help us out over there…

    Sincerely,

    Linda G

    Reply

    Linda G Reply:

    Here’s a link to my post, in particular, regarding MMT (linked to my name, as is the case on my previous post (a link to the homepage of the site). By the time some of you might check out the site, my particular post might not be seen on the homepage anymore.

    And there are some other posts before and after mine that discuss either MMT or some of the key issues that MMT addresses (but some folks are looking at some of those issues with something else in mind).

    So, anyway, whether or not a post explicitly brings up MMT, some of you might have something you might like to contribute to those other discussions as well.

    As I mentioned, within the broad topic that many of us are concerned about (resource depletion, what’s happening world-wide regarding economic issues… things along those lines), there are several discussions to which the MMT perspective might provide a helpful addition.

    Linda G

    Reply

    WARREN MOSLER Reply:

    thanks!

    Reply

    Linda G Reply:

    You’re certainly welcome.

    Maybe you can help me, Warren… My 2 comments still say “awaiting moderation.” I’m guessing they can’t be seen until they are cleared? Do you (or anyone involved) know how long it takes to be approved? I thought maybe it was declined (I don’t know, maybe due to pointing to a different site), but having seen your reply, I’m thinking maybe it was OK afterall, even though it still has that “awaiting moderation” tagline.

    Anyway, hoping for some help with this stuff over at our site, ;-).

    Linda G.

    Reply

    WARREN MOSLER Reply:

    just saw that. clearing them now.

    Linda G Reply:

    Thank you!

    And, in fact, I see that someone has since stopped by and taken part in the discussion (specifically, in the one that I posted – mentioned above… but MMT comes up fairly often over there these days, among other tries at getting a handle on some of the things going on…)

    To whomever that was from here (that person is using the name “Calgacus” on that site) – thank you!

    (And I’ll be stopping by here fairly regularly as well – probably not commenting much because I’m still so knew at all of this, but I’m definitely interested in these ideas and would like to keep up with what’s happening, especially as Warren Mosler attempts to bring these ideas more into the public light for discussion.

    I had never heard about MMT until “The Modern Mystic,” on his youtube channel – before creating his new site a few weeks ago – began to struggle with its ideas a few months ago. And he’s been coming back to it from time to time ever since (while also considering other ideas as well), basically doing what “thinking things through” that he can with some of this stuff… which seems to have had a kind of a contagious effect on some of us who have been “listening in” as he’s been doing so.

    I know this, among a few other things along these lines, have “caught” my imagination now as well… And I don’t think I’m the only one.

    And I must say, Warren Mosler’s work to put this into terms that laypeople like me can better understand, has made a world of difference in my attempt to do so.

    Linda G

  14. Dan w Says:

    Re: all government spending is printing

    Yes, I grok. My argument, if you will, is that we cannot circumvent the way in which that printing impacts different social classes. If MMT levels the playing field and truly helps alleviate or mitigate poverty, great. But printing in it’s current form is productive of eventual cost inflation, and this disproportionately hurts poorer people. My concern is that, like all financial strains of thought, the tenets of MMT can be twisted and cooped by the monied class for their own benefit, and the less wealthy get further trampled.

    Reply

    WARREN MOSLER Reply:

    instead of ‘printing’ you should say ‘spending.’ yes, spending is directed for political purpose.

    Reply

    Dan w Reply:

    Right. Don’t see an enormous distinction here, but I get your point.

    Reply

  15. Dan w Says:

    Final thought. Sorry for rambling and ranting. Things are difficult, and my musinfs are kind of an excellent example of how the pre-frontal lobe can get hyjacked by emotional stress. My bad. Soldiering on…and best to everyone here.

    Reply

  16. jorge rl Says:

    “Debt Has Increased $5 Trillion Since Speaker Pelosi Vowed, ‘No New Deficit Spending’…”

    Well we know now that $5 Trillion increase STILL doesn’t get you inflation…hmmmmm.

    Way to go Warren, i remember they did the same thing with the $1mm car challenge, they pontificated , called the car ugly, called you eccentric etc…but they couldn’t do one thing COLLECT!!!!!

    Reply

  17. Ivan Says:

    I have two questions/scenarios for Warren and the MMT guys that I’d appreciate your thoughts:

    1) Scenario one is a significant tax cut that frees up purchasing power. However, because of our highly regulated economy (cap and tax, EPA, minimum wage etc) relative to our trading partners who have a competitive advantage, we use all that extra spending power to purchase goods made in China and Vietnam but don’t increase demand for goods and services at home. As a result, unemployment doesn’t move and we end up like many of the European countries with a persistent output gap and high unemployment. Thoughts? This leads me to questions/scenario 2.

    2) While I fully understand that we don’t leave our children with debt, we do leave our children with a situation where our trading partners have massive amounts of dollars. Presumably, the reason they hold dollars is because at some point they want to buy something (a lot of things) with those dollars. If we couldn’t provide them with real goods, entertainment, travel options, scientific advancements etc etc, they wouldn’t want to hold or accept dollars in exchange for their goods. Now, if you take this to an extreme, at some point the Chinese are cashing in and buying everything that we produce. Are we not then at a point where our children and grandchildren are working to produce goods (pay off the debt) for the Chinese without increasing their own standard of living. At that point, aren’t we competing for those goods and services, driving up the cost and creating inflation? If so on both counts, can’t an argument be made that we have left our children and grandchildren with a massive “debt”? Don’t they just become the mid and late 21st century version of sharecroppers?

    Reply

    jcmccutcheon Reply:

    Response to Scenario 1) It would increase demand for services which cannot be exported. Also, government spending should be directed toward R&D, infrastructure, NASA, defense, more nuclear power plants, subsidizing the production of electric vehicles, bio-tec, etc. Right now Obama is cutting back on NASA because of budget constraints. This is insane.

    Scenario 2) Yes imports are a benefit and exports are a cost. If inflation becomes a problem, we have to increase taxes to reduce demand. Do you consider China,Japan,Korea to be our sharecroppers right now?

    Reply

    Ivan Reply:

    In many ways, the Chinese are our cheap labor. Don’t get me wrong…I understand that they’re doing it of their own free will and they’re enhancing their standard of living so they don’t view it that way. Nor should we view it that way in all our political correctness. However, as exports are a cost and as dollars pile up in Chinese savings accounts, there will be a cost that will be paid in the future by our children and grandchildren that is a direct result of budget deficits that allow us to consume everything we make as well as everything they make. Forget inflation in the argument and just focus on exports as a result of huge external dollar reserves.

    From a political perspective, the democrats probably think that’s great. Lot’s of demand for US goods and services that we don’t get to use but we send it elsewhere! That’s what they’d like to do today to protect their union base.

    Reply

    jcmccutcheon Reply:

    Yes are children will bare the ‘cost’ of having to produce in your scenario with a lower standard of living. I would just say you have the causality wrong. Its not because of fiscal spending deficits its because the Chinese refuse to trade with us by purchasing out goods and services. Its their desire to save dollars.

    ESM Reply:

    Ivan, I predict that if the day ever comes when the Chinese actually want to spend their dollars instead of save them, >80% of Americans will consider it a wonderful thing. We’ll have low unemployment, everybody will be working hard and making and saving lots of money, and the President will be taking credit for how competitive the American worker is and how robust the economy is.

    And if inflation really is a problem, then it’s possible to have export duties, so that the Chinese essentially get taxed on their dollar spending. The dollar may go down, it’s true, but we probably won’t see a signficant decrease in our spending power, especially considering how much money everybody will be making/taking from the Chinese.

    I don’t envision this ever happening, however. The Chinese and the rest of the world will keep saving in dollars until they’re finally sated, and then we will reach equilibrium where we will have approximately balanced trade. It won’t be a dramatic change. It will be gradual, happening over decades most likely.

    WARREN MOSLER Reply:

    just an fyi, japan has been accumulating even more $ than china for maybe 60 years, still is, and’s never spent a penny.

    WARREN MOSLER Reply:

    the net exporters are the world’s slaves

    Reply

    jorge rl Reply:

    “Presumably, the reason they hold dollars is because at some point they want to buy something (a lot of things) with those dollars. If we couldn’t provide them with real goods, entertainment, travel options, scientific advancements etc etc, they wouldn’t want to hold or accept dollars in exchange for their goods.”
    Wrong you are, this is where a lot of people get confused. They hold dollars because they want to sell something (a lot of things) and they get dollars for that….if they dont want to accept dollars , they have to find somewhere else to sell those things. If that someone doesn’t buy as much as U.S. their economy slows down.
    If they dont want to “hold” our dollars AFTER they sell things to U.S. they can 1-spend them buying things from U.S.( we can then tax the seller) 2-hide them under a mattress or 3-Buy Govt. Bonds.

    “Don’t get me wrong…I understand that they’re doing it of their own free will and they’re enhancing their standard of living so they don’t view it that way. Nor should we view it that way …”
    Right you are and that’s the way it is , exports are a cost!

    consuming everything we make and everything they make is the goal!

    Reply

    Ivan Reply:

    Jorge:

    I understand. However, years from now the Chinese will have a massive number of dollars and we’ll be exporting or providing services to them in exchange for those dollars. That’s when we feel the cost. No?

    Alternatively, they sell the dollars for another currency (euros), thereby depreciating the value of the dollar and reducing our purchasing power. Our standard of living declines as a result.

    Reply

    jcmccutcheon Reply:

    depreciating the dollar versus the chinese currency but appreciating the value of the dollar versus whoever the buyer of those dollars is.

    jorge rl Reply:

    Once again, years from when they have a massive number of dollars they only have THREE options…
    1-buying things from us (that’s when we export or provide goods and services for those dollars) WE DETERMINE PRICE AND QUANTITY…while exports are a cost the market price will determine how much we export and at what price. When an american sells something he gets the dollars(less the amount the govt. taxes from him)
    2-Putting them under a mattress.
    3- Save them in U.S. Bonds

    If they sell their dollars for another currency, the buyer of those dollars then has the three options..The situation for U.S. as far as dollars overseas doesn’t change.
    Our standard of living declines when we consume only what we produce…then you can only drive american cars, drink california wine, Budweiser and Sam Adams…no more Heineken! no more Lois Vitton etc etc.
    Owning dollars does not give them power to set our policy! we don’t need their dollars!

    WARREN MOSLER Reply:

    just so you all know, ivan and jorge used to work in the same room. they’re a lot better at this now! :)

    WARREN MOSLER Reply:

    1. that’s a good thing. means we can cut taxes further! until we get to full employment.

    2. we have lots of options at that point. tell china we’ve had a computer glitch and lost their account records. export taxes. inflation. etc. etc. etc. we hold all the real cards.

    Reply

    Ivan Reply:

    Not sure if you saw this in today’s Opinion section of the Journal but the author seems to have a reasonable understanding of the trade deficit with China.

    http://online.wsj.com/article/SB10001424052702303467004575574101493496596.html?mod=WSJ_Opinion_LEADTop

    Reply

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