The dynamics of modern money: Mick Taylor at TEDxBrighton
Вставка
- Опубліковано 4 жов 2024
- Mick is a former teacher of mathematics with a PhD in mathematical epidemiology, studying how changes in social structures and human behaviour can lead to different outcomes in the event of a disease outbreak. Mick is fascinated by human systems, particular in monetary systems and how the design of our money supply impacts on all aspects of human life. Mick is obsessed by the emergence of social structures, such as families, communities or regions. He recently launched OurFest, a not-for-profit festival with a flat organisational hierarchy, whereby the festival's success is dependent on the contributions and interactions of the participants.
In the spirit of ideas worth spreading, TEDx is a program of local, self-organized events that bring people together to share a TED-like experience. At a TEDx event, TEDTalks video and live speakers combine to spark deep discussion and connection in a small group. These local, self-organized events are branded TEDx, where x = independently organized TED event. The TED Conference provides general guidance for the TEDx program, but individual TEDx events are self-organized.* (*Subject to certain rules and regulations)
Oh dear... Mick Taylor nearly gets it right, except he doesn't realise the Gov issues new currency, free gratis, all the time, in the act of spending. Destroying money in the act of taxing.
Thus, the accumulated Gov 'deficits' - the so called Gov 'debt' that isn't debt - in fact represents the total Gov money issued to date, which is also, by accounting identity, the total net savings of the Non Gov sector (private sector households and businesses), to the penny.
The Gov, as currency issuer, does not, cannot have, have meaningful 'debt', or any need to borrow from anyone, including banks as Mick wrongly states around 10min 20secs.
The Gov Bonds, which are the supposed 'debt' instruments are NOT a lending operation for banks, but simply an Asset exchange for banks excess reserves held in their accounts at the Central Bank, the BoE. A 100% secure - backed by the currency issuer Gov - savings deposit facility that pays them a little interest.
Hi Mike, thanks for you comment. What you've described is almost right - spending and taxation do indeed create and destroy money, just as bank lending does. However, the difference here is that the government is, as you've said, obligated to issue bonds to cover any deficits - in other words if they spend more than they tax they need to borrow this money from private interests, issuing bonds in return. There is indeed interest to be paid on these bonds. This is not necessarily a 'bad thing' as these bonds make up pension pots etc, but the govt's hands are tied with regards to being net neutral in terms of increasing or decreasing the money supply through spending - they merely redistribute. In fact, this was not always the case. The Maastricht Treaty was one of the key pieces of legislation in setting the current state of affairs. I like your comment but you have confused a few things and I just wanted to take the chance to clarify. Cheers!
@@micktaylor6071 I think you are the one who got it wrong. Yes, it is true that now the Gov. always sells bonds when it deficit spends. However, 1st it spends and then t borrows. So, it gives the banks the money that it then borrows back and pays some interest.
Deficit spending does create additional money because [unlike bank loans] Gov. debt is almost never paid down [let alone "off"]. Instead the Gov. borrows all the money that it pays as other bonds come due. It can do this because it issues the money, all the real money. It can always pay its bills, always.
Also, the Gov. does not need to borrow by selling bonds, it can just spend the money. It did this in the GFC/2008 to the tune of trillions. In the US $27T was created to prop up the world's banks.
Also, you conflated the eurozone with the UK or US. They are not at all the same.
There is no inconsistency between the two phenomena of govt created money and private bank created money. Both do occur. It is incorrect to say that all money (or 'real money' whatever that means) is created by the govt ( although the existence of tax obligations does underpin the value of all money). It is also incorrect to say that all money other than notes and coins must be created by private banks. Various govts, including my own New Zealand govt, have put a self imposed restraint on themselves to 'fully fund' any deficit spending by issuing matching bonds. It they changed the law they could return to 'unfunded' deficit spending which would indeed create more money in circulation. No essential conflict here. Mick Taylor's point is essentially correct. I think that given the time constraint of his talk he has done a marvelous job of enlightening the audience as to what money is, and how it might be different. I recommend people check out both Positive Money UK and Michael Kumhof (on 100% reserve banking) as well as the brilliant bunch of MMT (Modern Monetary Theory) economists and teachers such as Warren Mosler and Stephanie Kelton.
A "credit-based" monetary system is also an "asset-based" money system. Money is both an asset and a liability at the same time, to counter-parties, for centuries and for millenia, in basic accounting and bookkeeping. The financial assets WE have by definition MUST be the liability or debt of the issuer (and tax collector) the Govt. Taxes are usually payable only in the Govt's currency.
Full reserve banking could ONLY be run by a non-profit body, like the national Treasury, which already exists. Private banking is preferable to have, to great extent, because of the capacity of local decisions and fast expansion of money, issuing credit for investment capital. This COULD be done via a single monetary body, but more slowly and less efficiently than how bank credit works.
(Then again, the current COSTS and PROFITS of banking and finance counter the so-called "efficiency". But those profit levels are policy decisions, not mandatory.) (Then again, public issuance of currency via spending -- even today, without radical changes -- is or can be far more democratic than private banking, because govt's are non-profit public institutions, which ostensibly serve the entire community and facilitate market capitalism.)
Govts are not technically or theoretically constrained to borrowing from banks, but in the UK like the US, the Treasury is forced to emit Bonds when taxes are less than spending, which is necessary most of the time due to how our modern economies are structured. Milton Friedman advocated for MILD inflation as a way to prevent debt-collapse driven deflation, which is extremely destructive both of jobs and of existing capital, both real and intellectual. (People miss out on education and experience, physical capital lies in ruins.)
This taxing/spending ratio made some sense when operating under a political EDICT called the "gold standard" or FIXED EXCHANGE RATE regime, meaning a FIXED PRICE for gold vs. nominal currency. With that political edict abolished, Govts are not constrained in money creation or issuance or spending, which it does via Lawful orders or instructions.
But the system is designed in this convoluted fashion by which Govts borrow from global banks by providing interest-paying Bonds (or Consuls?) as a kind of SERVICE to the financial sector. Banks (global and domestic) in turn can borrow from the Central Bank in order to lend money to the Govt. Effectively, the Govt is borrowing money from another part of the Govt, the chartered national central bank. At least in the US, the central bank returns 100% of it's net profits, over 90% of it's total revenue, back to the Govt. The Fed is self-funding AND not-for-profit, since it pays an effective 100% "tax" rate.
Govt "borrowing" is a function of monetary policies, and taxation is a function of economic policies and choices, NOT of Govts "financing" their spending decisions by "getting" money from outside of Govt. Banks are invited along for the ride.
In other words, TAXPAYERS are off the hook, technically, except in Eurozone nations that use the Euro instead of their own political national currency and their own central banks, which they have surrendered to a "foreign" bank, the ECB. In a nation-state like Britain, the govt has theoretically unlimited policy space for net spending and tax reduction, setting aside possible risks that this total govt spending -- when coupled with private credit expansion -- could create actual Demand-Pull inflationary conditions.
These risks of inflationary conditions are not based on the debunked Quantity Theory of Money, but on conditions of Full Employment or other scarce resources, in which case there would truly be too much money chasing limited supplies of goods and/or services. QTM is inapplicable per Irving Fisher because dynamic economies normally expand output to absorb new money, unlike some theoretical "static" economy where "V" in that equation is assumed to be fixed.
As such a point where financial saturation seems near, automatic stabilizers or new policies can tamp down and avert "excessive" inflation --- smart tax hikes and spending cuts --- such that inflation risks are subdued or countered.
But to institute such policies because of a belief that the NON-PROFIT sector of the economy that effectively has the power to create money is "going broke" is ludicrous. That would have been like surrendering to Hitler because the US or England couldn't finance military expansion without "Debt". (Nations normally suspend the gold std promises during such emergencies.)
War bonds are normally sold not to patriotically finance wars, but to prevent new consumer spending from competing for scarce industrial output and resources. Like voluntary rationing. Taxes DO NOT actually "pay for" anything, at least nothing that Govts couldn't do or spend without taxes.
+dilbertgeg
'Govts are not technically or theoretically constrained to borrowing from
banks, but in the UK like the US, the Treasury is forced to emit Bonds
when taxes are less than spending, which is necessary most of the time
due to how our modern economies are structured.'
Why is that necessary and why are economies structured like that?
'(Nations normally suspend the gold std promises during such emergencies.)'
Do you consider a commodity standard necessary? Should we bring such a thing back?
Great explanation - thanks.
JonGodcommadore65 An arbitrary politically determined commodity standard -- including Fixed Exchange Rate -- including the promise that Govt will do GIVEAWAYS of commodity metals at fixed DISCOUNT prices -- is extremely counterproductive ...
unless you think the problem most Americans face today is having too much money and business having nothing to sell.
An arbitrary commodity standard *is* literally "fiat" in the sense that a bunch of politicians, bureaucrats, & bankers have a meeting (Bretton Woods) and decide on an official price.
Since it's never a problem for Govt to sell securities (numbers w official logo) for reserves (cash) or convert bonds back to reserves, or add more official numbers to the acct for interest payments, AND NONE OF THE FUNDS COME FROM TAX REVENUE ANYHOW, there is really no problem at all, let alone crisis ... in this area.
There's problems with PRIVATE FOR PROFIT BANKS bidding up corp stocks and other speculative gambling with our common money/credit supply, to extract a fat profit, but the safety and security of National Govt Securities and Cash is not the issue at all. (Stock buybacks used to be illegal and considered fraud.)
I was looking for a Mike Norman (investor) YT video but try this for now.
drive.google.com/open?id=0B33tI3hlseizdWphY19sdkpLN28
tooo boody pissed mqatwe will respond sober!!
*mate
Unfortunately no transcript - TED Talks usually have one and often , but this is TEDxBrighton - and not subtitels either. I looked auf the webpage, the event was in Oct. 2013, the video they have there is THIS video in embedded form (so no subs, the only option would be the automatic transcript youtube produces and then editing it).
(I checked the blog, the speaker description etc. - nope, no transcript, and also no subtitiles in the video - which can be extracted to form a transcript).
Even if they would only publish the notes he had for the talk in the blog and gave the link in the description box it would be helpful.
.....Oh, well maybe I'll going to make one.
Hi @TEDxTalks, subtitles in English and Swedish are ready on Amara. Please publish them.
Mira Tekelova
Hello 👋 Mira.
Just in case you don't know, MMT is for a Sovereign Fiat Currency: so NOT what Sweden currently has (but it could if it got off the Euro). Mosler & others talk about the Euro. What is said by MMT ppl does not apply to European countries like Greece.
SORRY if you already knew that.....but you looked new, so I thought I'd double check.
Cheers 👍🙏
Mira Tekelova
Though I just noticed you posted FOUR years ago......🙊
Jct: Yes, government could create new debt-free money to pay for new projects, even for a citizen's dividend, just as King Henry I paid for projects with new wooden Tallies. Except King Henry knew he had to tax those tallies back as the bridge deteriorated in order to keep other tallies backed up by the work they were issued for. This video has the spending part right, but lacks the collecting part.
well said!
The first mistake Mike makes is in believing the Monetary Policy body is free from politics. He even says "that money would be spent into the economy by a democratically elected government". There would be no difference from the system we have today where governments decide what to spend the new money on based on politics not sound economics or sound finance. .
The second fatal flaw of his idea is that there needs to be some other type of balance introduced by a decision of a policy board to regulate the quantity of money created by lending and that destroyed by a drop in lending.
What the effect of the changes in lending and borrowing does presently is to vary the demand in the economy at times which is a result of other related factors because there is no insulation of savings or credit or debt in the economy that operates without a corresponding adjustment of the other factors. e.g. lower interest means easier repayments and higher borrowing which then relates to more credit in the cycle of borrowing. The fact is the decisions by some policy board to regulate could itself cause a huge problem rather than minimize one. That is the history of such regulators.
@Mick,
Good talk in parts but you might want to include in your argument that:
*Pound notes, or five pound notes, from the Bank of England are IOUs too. All modern money is debt to the issuer and an asset to the holder.
*The government doesn't HAVE to borrow from private banks. Why would they need to borrow their own IOUs? They pretend to borrow and pay interest to set the level of interest rates.
Not quite correct - Cash in the UK is issued debt free i.e. there is no corresponding debt contract associated with it - it is still an IOU though.
Government bonds are a different thing - they exist to cover the difference between tax receipts and govt expenditure and this *is* borrowed from private banks and in turn endebts the public to private banks - this year we will pay the banks 43 billion for that privilege !
lurkio77 Cash in the UK is part of the National DEBT. That doesn't mean that debt is a bad thing. If there were no National debt in the UK then no one would have any money. The country would have to switch to Euros or Dollars :-)
Government bonds are also part of the National debt. Bonds are pretty much the same as cash. They both are either pieces of paper, or digits in a Govt computer.
Bonds in digital form are like a savings account at the BoE.
Cash in digital form is like a current, or cheque, account at the BoE.
Normally there is more interest in a savings account. Not much at the moment though. QE is like taking money out of a savings account and putting it into a current account. It doesn't make much difference to the economy at all.
John Jones Ooooh no no no, you really have got this arse about tit - notes and coins and their production have little to do with the national debt - in fact if the government decides to instruct the Mint to make some more it results in a credit on the public's books - this is why tin pot dictators (like R Mugabe) end up with massive inflation, because they try to print their way out of trouble.
No , National (public) debt is what the people via the government owe the private banking system
If we had no public debt there would still be cash and bank created credit money from private loans
lurkio77
If what you say was true then the government could pay off its debt by printing a couple of trlllion pound banknotes which is obviously a nonsense.
Recently in the US it was noticed that the issuing of coins wasn't subject to the same accounting regulations as paper money. They couldn't print a trillion dollars that would have taken them over their debt ceiling, but they could issue a trillion dollar coin!
But this was just a technicality that may have been possible through an oversight. The idea was rejected, probably on that basis.
lurkio77 The government only owe the private banking system in the sense that the banks keep their reserves at the BoE. It like saying Lloyds bank, or whovever, owe you because you have an account there. The government uses the interest rates paid on those bonds to control the level of interest rates. They are pretty close to 0% right now. That's the way government wants it. If they wanted 10% they could have 10% simply by setting the overnight rate and issuing longer term bonds which paid 10%.
Can't understand his accent :(