My big fat Greek MMT exit strategy

Due to popular demand, I’ve begun outlining a Greek exit strategy to exit the euro currency,
and instead use its own new currency to provision itself:

1. The Greek government would announce that it will begin taxing exclusively in the new currency.
2. The Greek government would announce that it will make all payments in the new currency.

That’s it, deed done!
The govt can now provision itself and continue to function on a sustainable basis.

Now some Q and A:

Q. How will the new currency exchange for euro?
A. The new currency will be freely floating, with exchange between willing buyers and sellers at market prices.

Q. What about the existing euro debt?
A. Announce that it will consider it on a ‘when and if’ basis with no specific payment plans.

Q. What about existing govt contracts for goods and services?
A. They will be redenominated in the new currency.

Q. What about euro bank deposits and euro bank loans?
A. They remain in place.

Q. What about foreign trade?
A. Markets forces will function to adjust the trade balance to reflect foreign desires to accumulate financial assets denominated in the new currency.

To maintain full employment and internal price stability, I would further recommend the following:

1. The govt would fund a minimum wage job for anyone willing and able to work.

2. For any given size government, taxes should be adjusted to ensure the labor force that works for that minimum wage be kept to a minimum.

3. I would recommend the govt levy only a tax on real estate for the following reasons:
   a. Compliance is maximized and compliance costs and related issues are minimized- if the
       tax isn’t paid the property can be simply sold at auction.
   b. Everyone contributes as either an owner of the property or as a renter as the owner’s costs
       are ultimately passed through to renters.
   c. Transactions taxes are eliminated, thereby removing those restrictions on transactions.
       Freedom to transact is the source of that substantial contribution to real wealth.

4. A zero rate policy where govt deficit spending remains as non interest bearing balances held by counter parties at the Bank of Greece, and no govt securities are permitted.

5. All bank deposits in the new currency will be fully insured by the govt.

6. Banks will be govt regulated and supervised, which will include a 15% capital requirement, govt guaranteed liquidity, and a prohibition from any secondary market activity.

Comments welcome with additional questions, thanks!

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122 Responses to My big fat Greek MMT exit strategy

  1. very interestimng…thank you!!

    Well, at the time of this writing (today) a new 130 Bio Euro “rescue package”…

    to be honest, I still have not made up my mindif I am a fan of pumping more and more money into Greece (to rescue French banks?) and if that move is necessary to rescue the Euro (which I believe is a good thing)…

    so wouldn’t releasing Greece from the Euro (while they lied their way in) create a crisis?

    To be honest I do not understand our Chancellor (am German) in her insistence on bailing everyone out… while it does not seem that the help reaches the Greek people and we (NL, FIN,A, GER) are thanked with burning flags, like the US flag in Iran…

    this situation is very annoying… why can’t we just let them have their way…but they do not want to leave the Euro…which I also do not understand, when I read your texts…

    so can you shed any light why everyone clings to this unhealthy situation? Is it the US pressurizing Germany etc. to ensure Obama’s reelection?

    Just reading “Currency Wars” by Rickards…I wonder what a currency war has to do with this…

    any idea??

    Thx

    Dan

    Reply

  2. Pingback: A Default is Better Than the Deal on Offer « Greek Left Review

  3. Lisa says:

    Right. But theoretically, is there an alternative way?

    Reply

  4. Lisa says:

    @Warren: “and agreed about the monetary system in general.
    govt provision via taxation radically changes the human life experience
    i regret having had to live with it”

    Is there any other way to provision a government, especially in a complex industrial system as ours–aside from pure communism, of course?

    Reply

    WARREN MOSLER Reply:

    and, more to the point, those that provision this way have won the wars, so it’s an adaptive trait.
    :(

    Reply

  5. Oliver says:

    Michael Pettis put this up at econommonitor.

    http://www.economonitor.com/blog/2011/11/will-greece-unravel-by-christmas/

    I was wondering what you thought about this passage, since it seems to contradict what you wrote:

    By openly acknowledging that Greece could abandon the euro, Europe’s leaders may have set in motion events that will automatically force Greece to leave. Here is the logic. If Greece is ever forced to leave the euro, it will first have to redenominate domestic corporate and household liabilities into the new currency – let’s call it the drachma – or else domestic borrowers will be wiped out by the fall in the value of revenues relative to debt as the drachma immediately depreciates against the euro.

    But it doesn’t end there. If a bank’s assets – its outstanding loans – are to be redenominated into drachma, then its liabilities, i.e. deposits, must be redenominated too, or else the balance sheet mismatch will bankrupt the bank.

    My comment is the first of under ‘OlivilO’.

    Reply

  6. Jim says:

    Re: have you read the 7 deadly innocent frauds on this website?

    :-)

    Reply

  7. Why should this currency monopolist need to tax? Isn’t that a DIF?
    What does Greece do to guard against currency speculation?
    Where does Greece obtain funding to recapitalize its banks under the requirements of Basil III?

    Reply

    WARREN MOSLER Reply:

    have you read the 7 deadly innocent frauds on this website?

    Reply

  8. Jim says:

    Re: Is the problem not caused by (re)defining
    coercion,theft,fraud etc. as ‘legitimate’ when done by ‘government’?
    How can anybody claim a (just) ‘right’ to take food I have earned off my table for themselves or their mates?
    —-

    Well, no human society is possible without government. We are not angels, and “it takes all kinds to make a world.” Nor is any person entirely “independent,” since without other people I could not exist. I benefit from community and I also benefit from infrastructure for which is it fair that I contribute my fair share. I have no problem with being “coerced” into being civilized or even charitable. It is a question of initial intentions as well as of a sense of limits and proportions.

    Reply

    Joe Reply:

    @Jim, it is the matter of *how* ‘government’ is funded I was calling into question not whether anybody benefits from community or not. I would agree that no man is an island. I contend merely that by funding ‘government’ by all the methods reserved as ‘illegal’ for individuals will result in thieves, liers, cheats etc gravitating to positions within ‘government’ leaving a cartel of miscreants in charge of the funding for those community goods we all do benefit from and
    these scum WILL loot and pillage at best of times – make it legal and you will never be able to solve any problem.
    Or stated another way – why not fund community stuff at the lowest level (where you know the people who get your cash in ‘their’ communal kitty) – with checks to stop anything getting kicked upstairs unless it really were supraregional. Why should ‘government’ even have a ‘right’ to borrow? Since borrow-spend-tax is necessarily also dictate-and-enslave.

    How about ‘government’ charging for services like any other business just with no profit distributions and no compulsion to use. I personally highly object to being forced to pay tax for using a tv/radio that I don’t even have or having my water rates hiked because the local govt. hiked water removal charges to the local water co. in order to bail out the local state bank that went bankrupt guaranteeing rental income to ‘govt.s’ chums and tv stars who often didn’t even rent the flats out (that were often financed by aforementioned state bank too) since their income was guaranteed…

    Why not even have the same rules for all (no exceptions for politicians?) Any reason limited liability for corporations should not be called into question? Just *why* should it be possible to be able to limit liability for some but not for others?

    Reply

    Unforgiven Reply:

    @Joe,

    “… I would agree that no man is an island.”

    True. But if people don’t know how their currency works, they will end up electing a bunch of stupid atolls.

    You have to assume that the price you get for your services and or merchandise includes something for the cost of being governed (it’s priced in). How you distribute that portion is more of a political preference.

    If we know how our currency works, then we can automatically turn our backs on those that use deficit terrorism (we’ll go bankrupt, we’ll become Greece, there’s no money, we’ll turn into Zimbabwe, etc) as they clearly don’t know what they’re talking about and clearly don’t deserve public office. If they DO get elected, then they will continue to to baffle the populace with bullshit and waste money flailing about to no good effect, putting together Super Committees and the like.

    Reply

  9. Jim says:

    Re: don’t forget the federally funded job for anyone willing and able to work which will pay more than enough for the property tax

    True,a but the principle of non-ownership remains. A person’s home should be inviolable.

    Also what about the elderly, the ill, the ones who aren’t able to work and don’t fit into a government program. Bottom line is that people are at the mercy of the bureaucracy even to the extent of not even being owners of their home. Finally it is the state which owns your life, all because of money. Not good. It turns the human being into nothing more than an instrument, a means, a mere homo economicus. Everything should have limits–even taxes and the power of the state.

    Re: yes, lots of details for Congress to sort through.

    Imagine. One is in the hands of that lot! As if we had a gov’t representing people, towns, cities, rather than corporate entities and the “vampire squid.”

    Reply

    WARREN MOSLER Reply:

    if desired for public purpose, my rent to own proposal would fit nicely here.

    and welfare for those less fortunate deemed worthy goes without saying.

    and agreed about the monetary system in general.
    govt provision via taxation radically changes the human life experience
    i regret having had to live with it

    Reply

    Joe Reply:

    @WARREN MOSLER,

    Is the problem not caused by (re)defining
    coercion,
    theft,
    fraud etc
    as ‘legitimate’ when done by ‘government’?
    How can anybody claim a (just) ‘right’ to take food I have earned off my table for themselves or their mates?

    Reply

    WARREN MOSLER Reply:

    good question! but that’s what govt is all about. read Hobbs any?

    Chaz Reply:

    @Joe,

    You may have earned many things, but you earned them with society’s very extensive assistance. So society’s entitled to a cut and a say.

    If you want to earn everything by yourself, for yourself, go to the Montana wilderness, wander a few miles off the highway, and build yourself a cabin. I promise we’ll leave you alone.

    Save America Reply:

    @Joe, I just watched this movie “into the wild” about this guy that moves into the woods in alaska because he is disgusted with society. At the end of the movie he dies because he eats some poisonous food and can’t get back to society to save his life. Before he dies he concludes life is meant to be shared with other people, and living alone in the wilderness for an extended period of time is not the way to nirvana. You will be assimilated, resistance is futile…

    selise Reply:

    @WARREN MOSLER,

    “and agreed about the monetary system in general.
    govt provision via taxation radically changes the human life experience
    i regret having had to live with it”

    what alternative would you (if you could now) choose?

    Reply

    WARREN MOSLER Reply:

    The closest thing for me would have been a govt job…

  10. Ron T says:

    After default nobody would export to Greece for Drahma, they would demand USD/EUR. So this would force Greece to either be a net exporter or become a closed economy. Don’t you think it is unfeasible?

    Reply

    Neil Wilson Reply:

    @Ron T,

    I take it you’re not an entrepreneur. If ‘nobody’ will export to Greece for Drachma, then there is a whopping great profit to be made by enabling that to happen.

    Certainly I hope that ‘nobody’ does export to Greece for Drachma, because I would quite happily do the Euro/Drachma exchange for anybody too scared to take the money.

    I know Greek taxation gives Drachma value and I’m quite happy to charge people who don’t believe that.

    And if I am, then you can be damn sure many other would. I wouldn’t be the only one (regrettably).

    Reply

    MamMoTh Reply:

    @Neil Wilson,

    Sure, anything can happen at the right price. There will always be currency speculators that would make trade possible using drachmas at some price shared by Greek importers and foreign exporters, mostly by the former.

    Reply

    WARREN MOSLER Reply:

    hasn’t been the case with other nations. in fact, they all seem to have a ‘problem’ of excessive imports?

    Reply

  11. Adam, in Norway every second “krone” (= NOK)is transacted via EFTPOS card (I do not include credit cards). 70% of all payment transactions are done this way. And the share is steeply increasing. Cash is on the decline. All card transactions go through the privately run company “Nets”, http://www.bbs-nordic.com/en/ . The trend towards electronic transactions is unstoppable, which is rational and excellent. I think that conjuring up Big Brother in this context is scaremongering. What is really the big problem about all transactions in a society being logged and cleared in a computer system (preferably at the CB, not privately run)? Do you yourself avoid paying by EFTPOS card because of fear of “1984”?

    Reply

  12. Jim says:

    Obviously, the above does not involve commercial properties. But what about corporate farmland and grazing lands, in our subsidized ag country?

    Reply

    WARREN MOSLER Reply:

    yes, lots of details for Congress to sort through

    Reply

  13. Jim says:

    Re: would recommend the govt levy only a tax on real estate for the following reasons:
    a. Compliance is maximized and compliance costs and related issues are minimized- if the
    tax isn’t paid the property can be simply sold at auction.
    b. Everyone contributes as either an owner of the property or as a renter as the owner’s costs
    are ultimately passed through to renters.
    ——————————————–
    This is one item that has always seemed unjust to me. A person’s home is their last piece of security in this hard world. And yet, if they lose their income and cannot pay taxes on their home they are thrown out. In reality, as well, no one really owns their home, because it can be taken from them if they don’t pay taxes.

    I fully endorse people having to pay taxes on their their second home, or on plush villas, and the like, in cases where it is obvious the person has no security problem. I am against the average Joe being put in that position. One could for example, tax acreage over 5 acres and sq. footage over 2000 sq. ft. or some such standard. This keeps it objective, and yet also maintains security for the non-rich.

    Same goes for renters. People paying low rents should not be taxed via some clever or rapacious landlord.

    Reply

    WARREN MOSLER Reply:

    don’t forget the federally funded job for anyone willing and able to work which will pay more than enough for the property tax

    Reply

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