Video of Columbia Seminar is Live

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185 Responses to Video of Columbia Seminar is Live

  1. Ben says:

    The banking sector net saves in order to pay future taxes and in order to be prepared, if their customers pay their future taxes.

    Reply

  2. Ben says:

    If the government absorbs the banking sector, where is the inside money and where is the outside money?

    Reply

    WARREN MOSLER Reply:

    it’s all ‘inside money’ for any given sector

    Reply

    Ben Reply:

    @WARREN MOSLER,

    ‘it’s all ‘inside money’ for any given sector’

    So there is no outside money necessary.

    A society can have two types of creditor and debtor relations. Relations between members of the society and relations between members and the society as a whole.

    If you do a job as a judge than you work in favour of the whole society. The whole society is indebted to you, because you do this job, so you get a credit on your account.

    If you are driving too fast, than you are endangering other members of the society, so you are indebted to the whole society. Your debt is cancelled by debiting your account.

    When A buys something from B. The account of A is debited (he is the debtor) and the account of B gets a credit (he is the creditor). (See Mitchell Innes: What is money)

    Creditor and debtor relation between the society as a whole and the members of the society are mostly settled by the government and its institutions.

    So in a given society we have different creditor and debtor relations expressed in a money of account, that also measures the ‘value’ of goods, sevices, real assets, ‘injuries’ infringements of law and so on

    So we need no outside money and the private sector of the society net saves in order to pay future debts and not only taxes.

    Reply

    WARREN MOSLER Reply:

    i did not say there is no outside money necessary

    Ben Reply:

    @WARREN MOSLER, Is a financial crisis characterised by the inability of the private sector to pay its taxes?

    Reply

    WARREN MOSLER Reply:

    not the financial crisis per se, but unemployment which is the evidence the govt isn’t spending enough to cover tax liabilities plus savings desires

    Ben Reply:

    @Ben, In Germany 95% of the tax revenues arise from some sort of income taxes and some sort of sales taxes.

    You don’t try to earn money to pay your taxes. If you earn money, than you have to pay taxes.

  3. Ben says:

    Let’s go back to the parents example:

    If the parents don’t provide enough food for their children, the children might prefer to live by their grandparents and the value of the coupons is zero.

    If the parents don’t be fair with their children, the children rebel and the value of the coupons is zero.

    The ability of the government to tax is not independent, how it treats the population.

    Furthermore,it seems to me, that the vertical side of money is the consequence of the existence of different pay communities, whose members want to make transactions with each other, governments decision, that granting loans and checking creditworthiness should be done by the private sector, and the implementation of a lender of last resort.

    Someone who pays taxes in US-Dollar belongs to the pay community of the US.
    A customer of J.P.Morgan belongs to the pay community of J.P.Morgan.
    Someone who pays taxes in Yen belongs to the pay community of Japan.
    A customer of the Deutsche Bank belongs to the pay community of the Deutsche Bank.

    Imagine that all the nations in the world join in the US, so that everybody pays its taxes in US-Dollar. Further imagine that the US Government absorbs the worlds private banking sector. In this case the consolidated government and banking system would act as a super-clearinghouse for all credits and debts in the world.

    There would exist (with some exceptions) only one pay community and only one currency. There would be no need for vertical money. We have not to care about reserves, the federal funds rate, deposit insurance, clearing at par and so on. Analyzing such a monetary system is much easier and could bring some enlightenment for the understanding of the real monetary system.

    Reply

    WARREN MOSLER Reply:

    without a tax, the driver of the ‘vertical component’, it’s all just an infinite regression with no source of value.

    Reply

    Ben Reply:

    @WARREN MOSLER, I just read, that you had the same discussion several times. I agree that it is not easy to get bank money accepted. But I can see no infinite regression. The borrower has to redeem the loan later, or he will lose collateral and this is the point, where the regression stops.

    Reply

    Nihat Reply:

    @Ben,

    Not meaning to start a polemic the terms of which I may or may not understand (*), but I recently came across a certain Bernard Lietaer (100 minutes on youtube); he appears to be calling our government-issued money bank-debt money anyways. Given that all govt spending beyond tax collections goes by law to create treasury securities that pay interest, he may have a point.

    (*) I don’t know, I felt like being defensive; there may already be such a polemic as Lietaer appears dismissive of otherwise-praiseworthy (his characterization) efforts of chartalists at UMKC.

    WARREN MOSLER Reply:

    I heard him a while ago as well and he had quite a bit right!

    WARREN MOSLER Reply:

    ‘bank money’ is always denominated in some currency that’s already accepted.

    notice that no one borrows confederate dollars from banks any more, because they can’t buy anything with it.

    Neil Wilson Reply:

    “‘bank money’ is always denominated in some currency that’s already accepted.”

    Isn’t it slightly more than that – in that it is *pegged* to some currency that is already accepted.

    That’s how it can be swapped one for one – it is actually converted as opposed to exchanged.

    WARREN MOSLER Reply:

    i like to say it leverages an existing currency
    like gold futures leverage gold

    Ben Reply:

    Because English is not my first language, it could be, that I misunderstand something.

    Means ‘to lend money’ the same as ‘to grant a loan’?
    Can anybody define the term ‘money thing’ without using the word ‘thing’? Thank you.

    WARREN MOSLER Reply:

    yes

    financial asset used in exchange?

    i never use the term.

  4. Ben says:

    3 questions to Tschernevas Monopoly Money, The State as a Price Setter

    1. The colonial government could punish the Africans for not paying taxes, so why not punish them for not doing the required work?

    2. Why introducing an European currency instead oa a new national currency?

    3. Is it not Wrays existential uncertainty, which induces the desire to save?

    Reply

    WARREN MOSLER Reply:

    1. pretty much the same thing. and the first is more expedient
    2. they could have, as it could not be obtained other than by local work
    3. Davidson’s actually. Unc used to be the reason people used ‘money’ but with soft currency economics it became the/a reason to save.

    Reply

    Ben Reply:

    @WARREN MOSLER, 1. and 2. there could be a small but important difference: The Africans know that they can buy goods only available for them with the European currency.

    Example: The government needs 10 l barley. It pays 10 Dollar for 10 l barley.

    It taxes A with 10 Dollar. If A sells 10 l barley to the government, it would be the same as if the government had confiscated the barley from A.

    If A has 10 bananas that B wants to buy than B could sell 10 l barley to the government and than buy 10 bananas from A.

    A could choose to sell 10 l barley to the government or to sell 10 bananas to B.

    If A has nothing, that B wants to buy than he has to sell the barley to the government.

    My point is: the government could only tax and issue its currency, when A has something that B wants to buy. And Tschernevas example makes it not fully clear, if the Africans accept the European currency because of the tax, or because of the tax and the possibility to buy goods only available for them with that currency.

    I might add that even when A had something that B wants to buy the government can in the long run only tax and issue its currency when it gives a good reason, why it taxes A and not B.

    Reply

    WARREN MOSLER Reply:

    in any case it’s about what the govt wants, which is generally labor as in this case.

    so by putting a hut tax in place payable in something only the govt can provide,
    the govt can provision itself as desired by offering to buy what it wants with its otherwise worthless currency

  5. Ben says:

    Seems to me, that there is not much practical difference if one needs Dollar to pay taxes or one needs Dollar to repay a dollar denominated loan regarding the demand for Dollar.

    To initiate the demand for Dollar you have to tax, but when the system is running and loans are granted in Dollar, you can be sure that there is a demand for Dollar without taxing.

    Therefore I see no difference if the government fights deflation with spending 500 billion and zero taxes or with spending 700 billion and taxing 200 billion regarding the value of the currency.

    Reply

    WARREN MOSLER Reply:

    note that all the great latin american inflations were characterized by massive amounts of loans outstanding.

    you need to re read the 7 dif on this website

    Reply

    MamMoTh Reply:

    @Ben,

    Seems to me, that there is not much practical difference if one needs Dollar to pay taxes or one needs Dollar to repay a dollar denominated loan regarding the demand for Dollar.

    and if one needs oil and can only buy it in dollars

    Reply

    ESM Reply:

    @MamMoTh,

    Anybody could support the dollar at a positive value, the Saudis especially, if they decided to exchange real goods and services for dollars. I don’t see why anybody would do this, however, except the US government (although the US government has an easier way to support value, which is to impose a tax).

    Saudi Arabia is simply one more entity which will note the decreasing demand/value for the dollar and raise prices accordingly. Eventually, they will stop denominating oil in dollars because it will be impractical, but there is little material difference between a price of $1MM/barrel that is growing at an exponential rate and the dollar being completely worthless.

    Reply

    WARREN MOSLER Reply:

    sellers of oil will take any currency you have if it trades in the fx markets, which they all do

    it’s not about ‘needing’ the dollars,
    value is about what you have to do to get them.

    zillions of turkish lira were continually needed to make loan payments while the inflation rate was 100%

    Reply

    Ben Reply:

    @WARREN MOSLER, The real question is not what you have to do to get the dollars but rather what are you willing and able to do, to avoid the adverse consequences, if you don’t pay your debts.

    In the case of taxes, maybe the debtor tries to avoid to go to prison.

    In the case of bank loans and sound banking: The debtor tries to avoid to lose collateral.

    If there are no adverse consequences debts are worthless notwithstanding how much debts there are.

    WARREN MOSLER Reply:

    the question at hand is the value of a dollar, right?

    the value is what you have to do to get it from the issuer, right?
    same as any monopoly?

    Ben Reply:

    @WARREN MOSLER, In my opinion the (minimum) value of the dollar consists in the desire to avoid punishment by not paying taxes.

    The price of the dollar is what you have to do, to get the dollar.

    To use the parents example: Your children have to pay 10 coupons to avoid ban on watching TV. They can get 10 coupons for mowing the lawn.

    The minimum value of the coupons is the desire of the children to watch TV. The price that they have to pay for the coupons is to mow the lawn. If there is no desire to watch TV the system won’t work.

    WARREN MOSLER Reply:

    ok

    and if they want to watch tv the value the coupons will exchange at in the private sector is the value implied by the work needed to otherwise be done mowing

    ESM Reply:

    @WARREN MOSLER,

    “the value is what you have to do to get it from the issuer, right?
    same as any monopoly?”

    As Ben recognizes, this is not quite right. There are two components to value: a bid and an ask. The two can be very far apart, and in the case of an intangible like a unit of fiat currency, the bid can easily be zero.

    I have long advocated keeping some part of one’s savings in canned tuna fish. That way, if the bid goes to zero, you can always eat it.

    MamMoTh Reply:

    @WARREN MOSLER,

    the value is what you have to do to get it from the issuer, right? same as any monopoly?

    this would be right if there were only vertical transactions, like with the Buckaroos, but it’s not clear what it means in a market economy where most transactions take place at the horizontal level.

    how hard it is to get the money from the issuer is only part of the picture. if there is a JG that pays someone 10$ an hour to perform the same task in an expensive big city like NY or in much cheaper small town, then the value of 1$ will be different in terms of the goods and services it can purchase at the local level, but it will be as hard or as easy to earn 1$ in both places.

    WARREN MOSLER Reply:

    yes, what it can buy in different place differs for lots of reasons. but the ‘source of value’ remains as stated.

    ESM Reply:

    @Ben,

    “… but when the system is running and loans are granted in Dollar, you can be sure that there is a demand for Dollar without taxing.”

    This is part of the reason there is inertia in the system. But without the recurring tax, or at least the expectation of future taxes, the demand for the dollar will decline and its value will fall, and the price of real assets will rise in dollar terms. This makes it easier to pay back the loans and/or less costly to default on them. So demand for dollars to pay back loans will decrease, which further depresses the value. It’s a death spiral. It takes time, but any value above zero is unstable. It could last a while of course if there are people who believe the government will support the value, e.g. by starting to tax again or by exchanging real goods and services or assets for the dollar. But if the government were simply to collapse, like the Confederacy during the US Civil War, then demand for its currency would as well.

    Reply

    Nihat Reply:

    I think it’s appropriate to modify the motto: United Taxed, we stand!
    That may get the democrats attention. Perhaps?

    Reply

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