In 1942, the Canadian parliament debated the growing WWII debt. An MP asked the governor of the Bank of Canada if the debt was a private sector asset. He agreed that it was. The Minister of Finance at the time, J. L. Ilsley then commented that "If the federal debt is a private sector asset, how do we make it and asset of the people?"
But it's important to keep in mind that the government has a monopoly on violence. In the US you can go to prison if you refuse to accept US dollars as payment for goods and services. You legally are required to accept them and since the US government issues the currency it can therefore buy whatever it wants. And since the US government is backed by the strongest military in the world are you really going to oppose them?
We do need to inspect the Investor Class directing US Foreign Policy, to improve their profits. This Woman speaks to defend the Investor Class. Like the Monarchy that the US supposedly eliminated in 1776, the Oligarchy that even former President now calls it, seems to resemble the Monarchy. The Oligarchy does need to defend the Capitalist system, the ability to blame the entire problem on Covid , appears to occur at the same time, as the Economic situation became unsupported by the G-7 Guys. Just sayin......
But it also touches on some deeper concepts like how money is more a religious concept based on debt and how it's backed by the violence of the state. The state has infinite money cause it has a monopoly on violence. The state can never go broke cause they have the guns to defend themselves from any institution that wants to punish them. The US government can afford to buy anything in the US because everyone is legally required to accept US dollars and those that don't go to prison.
I am writing Jan. 4, 2024. Inflation has come down to just over 3 percent from over 9 percent a year ago. The Fed pushed interest rates higher but it hasn't slowed the economy down noticeably since GDP grew 4.8 percent in the last quarter as the unemployment rate is down to 3.7 percent and 6 million jobs have been added over the year. It is obvious that the Phillips Curve model, which posits that there is an inverse relationship between inflation and unemployment has not been valid. As Stephanie Kelton noted, it has more to do with the supply chain being restored.
Though she also is kind of evasive about the real reason the US dollar has value. It's because the US government has a ton of guns and has the monopoly of violence to make anyone who disputes the value of the dollar shut up. You HAVE to trade in US dollars and you HAVE to pay your taxes in dollars because the US government wills it and it has the manpower and the right to commit violence to those that refuse it's will.
The inflation was mainly because of China not opening up while everyone else did. China was and still is the world's factory so if they don't produce while everyone else resumes consumption you're going to get inflation cause you have the same amount of money chasing far fewer goods.
But the national credit rating has been downgraded from a triple A rating. Because other countries and bond holders are doubtful that the USA will pay back what they owe. The distrust is reflected in weakened value of the dollar. That's called inflation.
Looking back from November 23, 2023 on the pandemic fiscial injections. consider the counterfactual as factual. The injection of liquidity saved the USA and the World from another GFC. Much of the inflation realized was corprate poaching, per as normal. MB
But that also makes sense if you think about it logically. We live in a capitalist economy, not a Soviet planned economy. It's really weird to blame the government for price increases cause they don't set the prices. I don't blame Wallmarkt for having to pay taxes to the US government cause that doesn't make sense. So you also shouldn't blame the US government for the prices Wallmarkt sets.
Because it's a more efficient way of doing it. Instead of just forcing everyone to do what they tell them it's much easier to just print money and collect it back in taxes to get the people to do what you want. In the past empires just use naked force but taxes came about as a more efficient and less heavy handed way for governments to control their people. The US government can never run out of money cause that's not the source of it's power. The source of power is that it has a massive army and a powerful police state. If you refuse to use the US dollar in the US you will be sent to prison and if you don't have dollars when the tax collector comes you will also be thrown in prison. If you try to fight back against government decisions that is an insurrection and will be crushed by the massive US military. So you have to sell your labor to the government cause that will give you money that they will collect back in taxes. The government could stop doing that and just sent armed men to your house and demand that you do what they say. The US government actually has done that in some instances, the main example for that is the military draft. You are not allowed to refuse the draft, you will be punished if you do cause the government decides you are supposed to do it. However heavy handed use of force usually isn't too popular with the people so spending and taxing feels a lot less aggressive.
What you are asking is a political question, not an economic one. I can come up with several reasons, and whether you think they are good or bad reasons will simply depend on your political standpoint. I realise this is an old question from you, so let me know if you still want reasons suggested
When the central banks raise interest rates to fight inflation they add to inflation because things cost more because of an added interest charge to things purcahsed on credit. And they increase inequality by transferring assets from the public -- usually the middle class -- to the wealthy 1% and the purchasers of bonds such as pension funds and banksters. It is not that new a paradigm given my other comment about WWII below.
It's important to remember you're talking about the US government. The real goal of the current US government is to shield the elite from any harm no matter the consequences to everyone else. If you want to reduce inflation without harming the top 1% in any way then raising interest rates does indeed work. Cause it doesn't hamper the profiteering ability of the capitalists much at all.
This planet is our Ark.. Michael Hudson has recovered the kind of cyclical civilizing programs fitted to the environment in which we exist in metastability, in which the necessity of defending the health and welfare of the constituent population is protected by a philosophical application to lawful compliance with what supports Common Good, sense-in-common conscious awareness. Default logic determines where-when threats become apparent and policy that is predetermined in the collective philosophical agreement aligned by democratic popular counteraction. The military industrial complex is civilised intent "out of tune" with the collective intent to do right with the planet ecology in general.
Of course the whole idea that taxes make the currency valuable is utter rubbish which is demonstrated by the failure of taxes to put any value into the money in countries where inflation made the money worthless. Additionally when taxes rise the value of the money does Not increase.
Inflation is the imposition of liabilities on society by price setters forcing the transfer of assets to the price setters. Higher interest rates is a further imposition of liabilities on society and the additional transfer of assets to the banks. Assets minus liabilities equal equity. So think about the balance sheets of the members of society and the impact on their equity. A double whammy of liabilities leads to a double whammy of transfer of assets away from the public towards price setters and bankers. But the price setters and bankers have an increase in their equity because they are acquiring more assets for the liabilities they imposed. It seems that if you want to limit inflation you must limit the imposition of liabilities thus reducing the transfer of assets away from people. I suppose you could raise assets for people but that is thought to set off a wage-price spiral. In other words the rich get richer and the poor or the rest of us get poorer.
Kelton's doper idea about financial wealth existing (i.e. financial assets that are Treasury securities) which ignores the reality of all financial assets are worthless without someone else holding an equivalent financial liability. Failure to disclose this leads to incorrect deductions being made that grossly misdirect people. The national debt is not part of wealth at all. Wealth is not a financial asset if it is also debt obligation which will be forced with applicable interest onto the holder of the asset. It is net liability to the taxpayer including its interest. It is part of financial assets backed by financial debts that the taxpayer is obliged to pay out on maturity of the financial asset itself (i.e. the Treasury security). A high proportion (up to 30%) of those financial assets and debt is held by overseas entities.
What an absurd belief that you cannot spend more than you have as an income because you are a household or business and must balance your budget because there will be negative consequences but politicians (government) can because they have some extra super ability to fail to fiscally account and run deficit budgets to spend more than they have as government income and there be no negative consequences.
@@MrMarinus18 Just like Zimbawe and the Weimar republic and other countries which were leaders in wealth until their government fixed things with their interventions and made their economies shrink and collapse. -They had ' Super ability'.
@@MrMarinus18 Nobody gets "super ability " to create wealth by passing some law or expanding the money supply. You are in a fantasy world like child believing in something they have seen on TV that is not real. .
@@Rob-fx2dw The Weimar republic had massive strikes and had it's industry occupied and also faced large amounts of disloyalty from it's army who refused to crush the strikes or push out the French. I have already explained several times that the government can and does use violence to force demand of it's currency. In Weimar that power collapsed so there was hyperinflation. The Nazi's actually printed WAY more marks than the Weimar republic ever did but there never was hyperinflation. Because the Nazi's imprisoned anyone who raised prices and had an iron grip on German industry. Printing money might create an incentive to raise prices but if doing so will gets you sent to the concentration camps then you're not going to do it. With the Soviet-Union you might think the Soviet ruble is worthless but you will accept it as a currency if the alternative is hammering solid granite in Siberia.
Kelton's stupid argument where she doesn't like the word 'deficit' and states "the deficit is just the difference between two numbers" . Would the government itself say deficits are not relevant or treats them as so taking a stance that deficits are just irrelevant because they are just the difference between two numbers ? Try that argument with the tax collector when you have a deficit in taxes you owe and see how the tax collectors treat you ! Would they take your argument as valid? Or would you go to prison for failing to pay the correct tax ?
The government already does it all the time. They go to war or spend massively on the police or corporate bailouts without a second thought. And indeed you as a citizen can't make that argument to the tax collectors. This is something only the government can do, they have the guns to tell anyone who would argue otherwise to shut up.
You also kind of touched on why MMT works. If you were to oppose the government going to war or you were to reject the government spending then you can likely go to prison. Governments don't get their power from fiscal capacity. They get it from the sovereignty they have over their territory and their monopoly on violence within it. Companies in the US don't choose to use the Dollar, they legally have to. You can be charged and even imprisoned if you refuse to accept US dollars in the US. If you refuse a government order then you can be arrested for civil disobedience. The right to print money isn't the only exclusive right the US government has. It also has the exclusive right to use violence against people in the country if they disobey it. So yeah the dollar can't lose value cause the US government can imprison and punish anyone who tries to destroy it's value. What happened in Weimar Germany is that the government lost that power cause of the civil unrest and massive strikes and the army not being loyal to the state. In Weimar Germany the power of the government to enforce it's will was severely eroded and so this combined with the economic downturn collapsed the currency. Those are the two pillars that keep the US currency strong: The power of the US economy and the power of the US government.
I think the best way to understand it is to let go of the concept of money and see money for what it is: A currency for the private sector. However money isn't the only currency in existence. Votes are a form of currency in a democracy. They mobilize resources the same way money can. Religion can also mobilize people. Simply put the reason the state can never run out of money is because they never relied on it to start with. Money itself has no value, it's the mobilization of labor and the possession of resources that has value. Votes can have value if they result in the mobilization of resources.
@@Rob-fx2dw I do support MMT. I'm just arguing against the strawman you are presenting. Government does actually have a limited currency but it's not dollars, it's votes. Governments can indeed go broke if they make too many mistakes which is getting voted out and replaced. I think the idea that governments are households is because of the all encompassing power of capitalism in society. Governments is one of the very few actors outside of that system. One that mobilizes resources and people not build on money. If the government has enough votes to make firmly decide to do something and it has the resources within the area of it's juristiction then it can make it happen. Money is no object to the government cause it just isn't run on money but on votes. Inflation is a result of economic failure but it's very premature to assume every government economic plan is going to be a failure. Public sectors should and can be productive institutions in their own right. We have been heavily conditioned by over 100 years of propaganda to believe only the private sector can be a productive force in society and that's just false. Private sectors can and are productive sometimes but they also can be parasytic at other times. Governments are the same, some are productive and some are extractive.
Kelton's description of how the deficit works is false because it omits the full cost of deficits operate and who pays for them. When the government runs deficit it does NOT just put more money into the economy than it takes out. The idea she puts across is a complete fallacy because to run a deficit the government has to borrow money from either from the existing amount already in the economy or from new money created by the Federal reserve via Treasury security sales and all of this money has to be paid back when those securities mature. The treasury securities all mature in time and the taxpayer is the source of funds to pay for those maturing Treasury securities. It operates very much like private loan from a bank which has to be all repaid on maturity.
She and others argue that, even though that’s the default way most governments go, if your government controls its currency than you can actually just print money. It’s a critique MMT does all the time. Why are governments that issue their own currency doing it through issuing debt instead of just printing money
@@NoaChonky Good question but you seem to have jumped passed the point that is an incorrect assumption that the fait money we use today can be created without corresponding debt being created at the same time. The corresponding debt obligation is the critical part that gives the money any value. That is because money today is what is called financial asset. It is not a usable asset that people need since that is apparent when people just swap things that people need like doing work for someone and the recipient of that work also doing a favour of similar worth for you. The value is in the work they have done. With fiat money there is no value in the moeny itself because it is worthless without having some one to exchange it with for a service or goods that you need or want. Money also facilitates you getting a delayed benefit for later work by saving it knowing that you can get what you want later in trade with another person or being able to exchange goods and services with someone who does not need the goods you might have to exchange with them which they are unwilling to trade in but you can make payment in money because they will use it to buy goods from someone else. It is a financial asset and financial assets are worthless without being able to get something in return for them. .
@@Rob-fx2dw well, again, you are right in some ways. The thing is, governments do print money without getting anything else in return (debt) many times: It’s called quantitive easing. And many times the government even had negative exchange rate because it need do badly to put money out there. But again, the governments issuing their own currency don’t need to do that. As they did in 2020 with the pandemic. They just printed rivers of money and gave it to corporations, which bought their own shares in return. You see… what MMT tries to explain is that money can also just be printed and then collected back later on (taxes). If you want to add Debt, it’s up to you, or the government. and again, you are right, in most of the cases money is created through debt but it doesn’t have to be, so it doesn’t have to become a financial asset per se because of there is interest to collect.
@@Rob-fx2dw and, let’s not forget, debt is canceled ALL THE TIME, not to you nor me though… :) So, you see, debt isn’t a sacrilegious thing after all. When time comes, the ones that can (have the power) can just write off debt
@@NoaChonky When people write off debt that one party owes they also write off assets that separate parties rely on and have worked for. Usually it is because they are not the one's who suffer the the personal loss as consequence.
In 1942, the Canadian parliament debated the growing WWII debt. An MP asked the governor of the Bank of Canada if the debt was a private sector asset. He agreed that it was. The Minister of Finance at the time, J. L. Ilsley then commented that "If the federal debt is a private sector asset, how do we make it and asset of the people?"
But it's important to keep in mind that the government has a monopoly on violence. In the US you can go to prison if you refuse to accept US dollars as payment for goods and services. You legally are required to accept them and since the US government issues the currency it can therefore buy whatever it wants.
And since the US government is backed by the strongest military in the world are you really going to oppose them?
We do need to inspect the Investor Class directing US Foreign Policy,
to improve their profits.
This Woman speaks to defend the Investor Class.
Like the Monarchy that the US supposedly eliminated in 1776,
the Oligarchy that even former President now calls it,
seems to resemble the Monarchy.
The Oligarchy does need to defend the Capitalist system,
the ability to blame the entire problem on Covid ,
appears to occur at the same time,
as the Economic situation became unsupported by the G-7 Guys.
Just sayin......
excellent conversation.
What a wonderful, thoughtfull, intellegent, adult conversation.
A Classic Ship Of State demostration, 2,500 years or so on.
But it also touches on some deeper concepts like how money is more a religious concept based on debt and how it's backed by the violence of the state. The state has infinite money cause it has a monopoly on violence. The state can never go broke cause they have the guns to defend themselves from any institution that wants to punish them.
The US government can afford to buy anything in the US because everyone is legally required to accept US dollars and those that don't go to prison.
I am writing Jan. 4, 2024. Inflation has come down to just over 3 percent from over 9 percent a year ago. The Fed pushed interest rates higher but it hasn't slowed the economy down noticeably since GDP grew 4.8 percent in the last quarter as the unemployment rate is down to 3.7 percent and 6 million jobs have been added over the year. It is obvious that the Phillips Curve model, which posits that there is an inverse relationship between inflation and unemployment has not been valid. As Stephanie Kelton noted, it has more to do with the supply chain being restored.
Brilliant!
Though she also is kind of evasive about the real reason the US dollar has value. It's because the US government has a ton of guns and has the monopoly of violence to make anyone who disputes the value of the dollar shut up. You HAVE to trade in US dollars and you HAVE to pay your taxes in dollars because the US government wills it and it has the manpower and the right to commit violence to those that refuse it's will.
The economist who said just a few years ago that the inflation was a sign of 'growing pains' in the economy.
The inflation was mainly because of China not opening up while everyone else did. China was and still is the world's factory so if they don't produce while everyone else resumes consumption you're going to get inflation cause you have the same amount of money chasing far fewer goods.
But the national credit rating has been downgraded from a triple A rating. Because other countries and bond holders are doubtful that the USA will pay back what they owe. The distrust is reflected in weakened value of the dollar. That's called inflation.
Looking back from November 23, 2023 on the pandemic fiscial injections. consider the counterfactual as factual. The injection of liquidity saved the USA and the World from another GFC. Much of the inflation realized was corprate poaching, per as normal.
MB
But that also makes sense if you think about it logically. We live in a capitalist economy, not a Soviet planned economy. It's really weird to blame the government for price increases cause they don't set the prices. I don't blame Wallmarkt for having to pay taxes to the US government cause that doesn't make sense. So you also shouldn't blame the US government for the prices Wallmarkt sets.
Why not make it a blanket right to steal the property of anyone you choose? Oh, rights do not come from government.
so why gov continue to tax population instead corps which got much best % to land money from? :)
Because it's a more efficient way of doing it. Instead of just forcing everyone to do what they tell them it's much easier to just print money and collect it back in taxes to get the people to do what you want. In the past empires just use naked force but taxes came about as a more efficient and less heavy handed way for governments to control their people.
The US government can never run out of money cause that's not the source of it's power. The source of power is that it has a massive army and a powerful police state. If you refuse to use the US dollar in the US you will be sent to prison and if you don't have dollars when the tax collector comes you will also be thrown in prison. If you try to fight back against government decisions that is an insurrection and will be crushed by the massive US military.
So you have to sell your labor to the government cause that will give you money that they will collect back in taxes. The government could stop doing that and just sent armed men to your house and demand that you do what they say. The US government actually has done that in some instances, the main example for that is the military draft. You are not allowed to refuse the draft, you will be punished if you do cause the government decides you are supposed to do it. However heavy handed use of force usually isn't too popular with the people so spending and taxing feels a lot less aggressive.
What you are asking is a political question, not an economic one. I can come up with several reasons, and whether you think they are good or bad reasons will simply depend on your political standpoint.
I realise this is an old question from you, so let me know if you still want reasons suggested
When the central banks raise interest rates to fight inflation they add to inflation because things cost more because of an added interest charge to things purcahsed on credit. And they increase inequality by transferring assets from the public -- usually the middle class -- to the wealthy 1% and the purchasers of bonds such as pension funds and banksters. It is not that new a paradigm given my other comment about WWII below.
It's important to remember you're talking about the US government. The real goal of the current US government is to shield the elite from any harm no matter the consequences to everyone else. If you want to reduce inflation without harming the top 1% in any way then raising interest rates does indeed work. Cause it doesn't hamper the profiteering ability of the capitalists much at all.
This planet is our Ark..
Michael Hudson has recovered the kind of cyclical civilizing programs fitted to the environment in which we exist in metastability, in which the necessity of defending the health and welfare of the constituent population is protected by a philosophical application to lawful compliance with what supports Common Good, sense-in-common conscious awareness.
Default logic determines where-when threats become apparent and policy that is predetermined in the collective philosophical agreement aligned by democratic popular counteraction.
The military industrial complex is civilised intent "out of tune" with the collective intent to do right with the planet ecology in general.
Taxing makes the currency valuable? Now do Bitcoin
Of course the whole idea that taxes make the currency valuable is utter rubbish which is demonstrated by the failure of taxes to put any value into the money in countries where inflation made the money worthless. Additionally when taxes rise the value of the money does Not increase.
Inflation is the imposition of liabilities on society by price setters forcing the transfer of assets to the price setters. Higher interest rates is a further imposition of liabilities on society and the additional transfer of assets to the banks.
Assets minus liabilities equal equity.
So think about the balance sheets of the members of society and the impact on their equity. A double whammy of liabilities leads to a double whammy of transfer of assets away from the public towards price setters and bankers.
But the price setters and bankers have an increase in their equity because they are acquiring more assets for the liabilities they imposed.
It seems that if you want to limit inflation you must limit the imposition of liabilities thus reducing the transfer of assets away from people. I suppose you could raise assets for people but that is thought to set off a wage-price spiral.
In other words the rich get richer and the poor or the rest of us get poorer.
this is so hard to listen to...
She is profoundly wrong, and cannot be corrected. She's convinced of her own infallibility.
Kelton's doper idea about financial wealth existing (i.e. financial assets that are Treasury securities) which ignores the reality of all financial assets are worthless without someone else holding an equivalent financial liability.
Failure to disclose this leads to incorrect deductions being made that grossly misdirect people.
The national debt is not part of wealth at all. Wealth is not a financial asset if it is also debt obligation which will be forced with applicable interest onto the holder of the asset.
It is net liability to the taxpayer including its interest.
It is part of financial assets backed by financial debts that the taxpayer is obliged to pay out on maturity of the financial asset itself (i.e. the Treasury security). A high proportion (up to 30%) of those financial assets and debt is held by overseas entities.
What an absurd belief that you cannot spend more than you have as an income because you are a household or business and must balance your budget because there will be negative consequences but politicians (government) can because they have some extra super ability to fail to fiscally account and run deficit budgets to spend more than they have as government income and there be no negative consequences.
They have a super ability, it's called sovereignty.
@@MrMarinus18 Just like Zimbawe and the Weimar republic and other countries which were leaders in wealth until their government fixed things with their interventions and made their economies shrink and collapse. -They had ' Super ability'.
@@MrMarinus18 Nobody gets "super ability " to create wealth by passing some law or expanding the money supply. You are in a fantasy world like child believing in something they have seen on TV that is not real. .
@@Rob-fx2dw The Weimar republic had massive strikes and had it's industry occupied and also faced large amounts of disloyalty from it's army who refused to crush the strikes or push out the French.
I have already explained several times that the government can and does use violence to force demand of it's currency. In Weimar that power collapsed so there was hyperinflation.
The Nazi's actually printed WAY more marks than the Weimar republic ever did but there never was hyperinflation. Because the Nazi's imprisoned anyone who raised prices and had an iron grip on German industry. Printing money might create an incentive to raise prices but if doing so will gets you sent to the concentration camps then you're not going to do it.
With the Soviet-Union you might think the Soviet ruble is worthless but you will accept it as a currency if the alternative is hammering solid granite in Siberia.
@@Rob-fx2dw In summery the US dollar has value cause the US government has a lot of guns to make anyone who would dispute that shut up.
Kelton's stupid argument where she doesn't like the word 'deficit' and states "the deficit is just the difference between two numbers" .
Would the government itself say deficits are not relevant or treats them as so taking a stance that deficits are just irrelevant because they are just the difference between two numbers ?
Try that argument with the tax collector when you have a deficit in taxes you owe and see how the tax collectors treat you ! Would they take your argument as valid? Or would you go to prison for failing to pay the correct tax ?
The government already does it all the time. They go to war or spend massively on the police or corporate bailouts without a second thought.
And indeed you as a citizen can't make that argument to the tax collectors. This is something only the government can do, they have the guns to tell anyone who would argue otherwise to shut up.
You also kind of touched on why MMT works. If you were to oppose the government going to war or you were to reject the government spending then you can likely go to prison. Governments don't get their power from fiscal capacity. They get it from the sovereignty they have over their territory and their monopoly on violence within it.
Companies in the US don't choose to use the Dollar, they legally have to. You can be charged and even imprisoned if you refuse to accept US dollars in the US. If you refuse a government order then you can be arrested for civil disobedience.
The right to print money isn't the only exclusive right the US government has. It also has the exclusive right to use violence against people in the country if they disobey it. So yeah the dollar can't lose value cause the US government can imprison and punish anyone who tries to destroy it's value. What happened in Weimar Germany is that the government lost that power cause of the civil unrest and massive strikes and the army not being loyal to the state. In Weimar Germany the power of the government to enforce it's will was severely eroded and so this combined with the economic downturn collapsed the currency. Those are the two pillars that keep the US currency strong: The power of the US economy and the power of the US government.
I think the best way to understand it is to let go of the concept of money and see money for what it is: A currency for the private sector.
However money isn't the only currency in existence. Votes are a form of currency in a democracy. They mobilize resources the same way money can. Religion can also mobilize people.
Simply put the reason the state can never run out of money is because they never relied on it to start with. Money itself has no value, it's the mobilization of labor and the possession of resources that has value. Votes can have value if they result in the mobilization of resources.
@@MrMarinus18 So you don't suport MMT because of all of it's faults? Or do you ? - I don't know where you are going with this but keep on thinking.
@@Rob-fx2dw I do support MMT. I'm just arguing against the strawman you are presenting.
Government does actually have a limited currency but it's not dollars, it's votes. Governments can indeed go broke if they make too many mistakes which is getting voted out and replaced.
I think the idea that governments are households is because of the all encompassing power of capitalism in society. Governments is one of the very few actors outside of that system. One that mobilizes resources and people not build on money. If the government has enough votes to make firmly decide to do something and it has the resources within the area of it's juristiction then it can make it happen. Money is no object to the government cause it just isn't run on money but on votes.
Inflation is a result of economic failure but it's very premature to assume every government economic plan is going to be a failure. Public sectors should and can be productive institutions in their own right. We have been heavily conditioned by over 100 years of propaganda to believe only the private sector can be a productive force in society and that's just false.
Private sectors can and are productive sometimes but they also can be parasytic at other times. Governments are the same, some are productive and some are extractive.
Kelton's description of how the deficit works is false because it omits the full cost of deficits operate and who pays for them.
When the government runs deficit it does NOT just put more money into the economy than it takes out.
The idea she puts across is a complete fallacy because to run a deficit the government has to borrow money from either from the existing amount already in the economy or from new money created by the Federal reserve via Treasury security sales and all of this money has to be paid back when those securities mature.
The treasury securities all mature in time and the taxpayer is the source of funds to pay for those maturing Treasury securities. It operates very much like private loan from a bank which has to be all repaid on maturity.
She and others argue that, even though that’s the default way most governments go, if your government controls its currency than you can actually just print money.
It’s a critique MMT does all the time. Why are governments that issue their own currency doing it through issuing debt instead of just printing money
@@NoaChonky Good question but you seem to have jumped passed the point that is an incorrect assumption that the fait money we use today can be created without corresponding debt being created at the same time.
The corresponding debt obligation is the critical part that gives the money any value.
That is because money today is what is called financial asset. It is not a usable asset that people need since that is apparent when people just swap things that people need like doing work for someone and the recipient of that work also doing a favour of similar worth for you. The value is in the work they have done.
With fiat money there is no value in the moeny itself because it is worthless without having some one to exchange it with for a service or goods that you need or want. Money also facilitates you getting a delayed benefit for later work by saving it knowing that you can get what you want later in trade with another person or being able to exchange goods and services with someone who does not need the goods you might have to exchange with them which they are unwilling to trade in but you can make payment in money because they will use it to buy goods from someone else.
It is a financial asset and financial assets are worthless without being able to get something in return for them.
.
@@Rob-fx2dw well, again, you are right in some ways.
The thing is, governments do print money without getting anything else in return (debt) many times: It’s called quantitive easing.
And many times the government even had negative exchange rate because it need do badly to put money out there. But again, the governments issuing their own currency don’t need to do that.
As they did in 2020 with the pandemic. They just printed rivers of money and gave it to corporations, which bought their own shares in return.
You see… what MMT tries to explain is that money can also just be printed and then collected back later on (taxes).
If you want to add Debt, it’s up to you, or the government.
and again, you are right, in most of the cases money is created through debt but it doesn’t have to be, so it doesn’t have to become a financial asset per se because of there is interest to collect.
@@Rob-fx2dw and, let’s not forget, debt is canceled ALL THE TIME, not to you nor me though… :)
So, you see, debt isn’t a sacrilegious thing after all. When time comes, the ones that can (have the power) can just write off debt
@@NoaChonky When people write off debt that one party owes they also write off assets that separate parties rely on and have worked for. Usually it is because they are not the one's who suffer the the personal loss as consequence.