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Forum Post: The government, when it issues its own currency, and goes into debt in that currency can always pay its debt.

Posted 2 years ago on Aug. 29, 2012, 9:11 a.m. EST by flip (7545)
This content is user submitted and not an official statement

“‘By virtue of the power to create or destroy money by fiat and its power to take money away from people through taxation, [the State] is in a position to keep the rate of spending in the economy at the level required [for full employment].’ this is from a talk by Assoc Professor Stephanie Kelton in Rimini. - “The government, when it issues its own currency, and goes into debt in that currency can always pay its debt, can never go broke, can never run out of money. It can afford anything that is for sale in that currency. It doesn’t need to borrow its own currency. And it can set its own interest rate. It does not have to pay what markets want. It does not become a victim to speculation, to bond vigilantes. It has additional policy space. It can do things for its economy and for its people that a government that does not have a sovereign currency cannot do. “So, let’s begin with the first lesson. What is money? All money exists as an IOU. It’s a debt. When we say, ‘I owe you,’ we mean two people are involved in every monetary relationship. The ‘I’ is the debtor. The ‘U’ is the creditor. I Owe You. IOUs are recorded in what we call the money of account. The money of account in Australia is the Australian dollar. The money of account in the U.S., the U.S. dollar. The money of account in Japan, the Japanese Yen. In Britain, the British pound. In Italy, the Euro. Do you see a difference? You will by the end of this talk.

(c. 6:21) “The money of account is something abstract, like a metre, a kilogram, a hectare. It’s not something you can touch or feel. It’s representational, something only a human could imagine. In any modern nation the money of account is chosen by the national government. MMT emphasises the state’s power over money. This is not something new. It dates back as far as Aristotle. You can find it in Adam Smith and in the work of John Maynard Keynes.

“As long as the state has the power to enforce its tax laws, the people will need the government’s money. The currency will have value. People will work to sell things—goods and services—to the government in order to get government money. Whatever the government accepts in payment to itself becomes the ultimate, ‘definitive,’ money in the economy. It is the only way to settle a debt. You must use government money. We can imagine in any economy a hierarchy of money. But not all money is created equal. The most acceptable money sits at the top of the pyramid. Those are the IOUs that everyone accepts and everyone must accept. Those are the IOUs that are ultimately needed to pay our debts. Those are the government’s IOUs. The rest of us can go in debt, issue IOUs, but our debt is not as good as government debt. It’s not as acceptable. It can’t be used to pay for things.

“In the U.S., the hierarchy looks like this: The government’s IOU—the United States dollar—sits at the top of the pyramid. It is a fiat currency. The United States government is the monopoly issuer of the U.S. dollar—the only entity on the planet that can legally create the currency. The U.S. government taxes in dollars. It spends in dollars. And it controls its own currency. Why is this important? What are the benefits of issuing your own currency? They are extraordinary.

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83 Comments


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[-] 2 points by BradB (2693) from Washington, DC 2 years ago

hmmmm..... so much confusion here....

look at the other side of the coin....

if we never had printed more money.... the whole economy would have a limited amount of money... no ?

and as people are added to the economy.... thru population increase ... or thru immigration or thru 3rd world industrialization ... etc...

how would these new people participate ?

We as the world... MUST add more money into the system as economic growth expands ...

[-] 2 points by flip (7545) 2 years ago

right on - not sure what some of these people are thinking. the populists figured out in the 1880's the same thing that you just said. look to stephanie kelton and michael hudson to explain the whole thing in detail. here is hudson talking about europe - If the peripheral nations still had their own currencies, they could and would use devaluation to quickly restore competitiveness. But they don’t, which means that they are in for a long period of mass unemployment and slow, grinding deflation. Their debt crises are mainly a byproduct of this sad prospect, because depressed economies lead to budget deficits and deflation magnifies the burden of debt.

Depreciation would lower the price of labor while raising the price of imports. The burden of debts denominated in foreign currencies would increase in keeping with the devaluation, thereby creating problems unless the government passed a law re-denominating all debts in domestic currency. This would satisfy the Prime Directive of international financing: always denominated debts in your own currency, as the United States does.

[-] 2 points by jrhirsch (4714) from Sun City, CA 2 years ago

Printing money is the smoke screen that presents the illusion that we are becoming richer, when in reality most of us are not.

Printed money derives it's value from the loss in value of previously printed money.

You can double the number of dollars in circulation today, but you will be 50% poorer tomorrow.

The lost wealth goes to those who print the money, whether they are counterfeiters or government, there is absolutely no difference. Both are criminal acts.

[-] 2 points by SparkyJP (1646) from Westminster, MD 2 years ago

You are right. When you print more money, you dilute the value of the currency. Simple supply and demand - the more you have, the less the value. That's why when the fed does more QE (money printing), the value of the dollar drops.

"Paper is poverty... It is not money, but the ghost of money."

~Thomas Jefferson~

[-] 2 points by jrhirsch (4714) from Sun City, CA 2 years ago

QE is really double speak for mass counterfeiting. Theft on a grand scale.

[-] 1 points by SparkyJP (1646) from Westminster, MD 2 years ago

It's an extraction of Americas wealth and they know exactly what they're doing and what effects it will have. It's almost like they're the enemy of the people. Another country could not do as much damage to our way of life, as what the fed is doing to us now.

"America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves." ~ Abraham Lincoln ~

[-] 3 points by jrhirsch (4714) from Sun City, CA 2 years ago

Lincoln's words are sadly quite appropriate.

[-] 1 points by shoozTroll (17632) 2 years ago

The actual extraction is sitting in "bank accounts", in places like the Caymans and Lichtenstein.

It's performed by people like Romoney.

What else could any country do when that much value is hidden away from it's economy?

[-] 2 points by SparkyJP (1646) from Westminster, MD 2 years ago

I know what you're saying and I agree with you to a point. What pisses me off more than Romney and the rich hiding their money overseas to avoid paying taxes, is that they have that ability and that congress has written laws that allows this tactic in the first place and they refuse to correct it. Probably because much of congress does the same.

Although the rich have paid for this tax haven through campaign contributions (buying congress), it lowers our tax revenue and it's a "I'll scratch your back, you scratch mine" kind of deal, that exemplifies the corruption that permeates throughout DC. It also reinforces the idea of "Two Sets of Rules".

[-] 1 points by shoozTroll (17632) 2 years ago

What you've pointed out here is very real factor.

What I'm trying to say, is those Swiss type accounts are in stasis, in effect "extracted" from economic activity. They are more like a safety deposit box.

$21 to 32 trillion is SIGNIFICANT! (caps on purpose), and effects economies all over the World in negative ways.

To make up for the loss, and encourage continued activity, money must be printed/minted to make up for it.

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

most money comes fro banks making loans

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

The rich don't let their money sit idle. It's being invested or speculated with as we speak.

Romney's net worth of about $250 million is equivalent to 12,000 people working for an entire year at $10 an hour.

[-] 1 points by shoozTroll (17632) 2 years ago

Then I must say, you have no idea of what such an "account" does.

Indeed, it is removed from all such activity.

It's sitting in a hidey hole to the tune of 21 to 23 trillion, and that's just what can be gleaned by the researchers..

[-] 0 points by jrhirsch (4714) from Sun City, CA 2 years ago

The money may be deposited in a bank in the Cayman Islands, but it's definitely being invested somewhere else. Why would the rich acquire all of that money and and then let it's value depreciate because of inflation?

That same money might be invested in new businesses or it could be in the commodities markets, raising the price of grain an oil, impoverishing us further.

[-] 0 points by shoozTroll (17632) 2 years ago

To answer your question, it's called greed, and yes, those kind of accounts do not draw interest.

[-] 1 points by Mooks (1985) 2 years ago

If you have money in an account that earns no interest wouldn't the real value of that account go down over time due to inflation? Greedy people use their money to make more money, not slowly lose it over time.

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

inflation happens because we are willing to pay more

[-] 1 points by shoozTroll (17632) 2 years ago

You'd have to ask them.

I believe it comes from their fear of helping anyone, other than themselves.

I just know those kinds of accounts, bear no interest, or dividends.

They are in effect "safety deposit boxes".

[-] 1 points by Mooks (1985) 2 years ago

Do you have a source? To say that they would rather lose money than inadvertently help someone by investing their money somewhere which would actually earn them a returns makes zero sense.

[-] 1 points by shoozTroll (17632) 2 years ago

They don't advertize those kinds of accounts.

[-] 1 points by Mooks (1985) 2 years ago

How do you know about them then?

Generally if something makes zero sense, it usually isn't true.

[-] 1 points by notaneoliberal (2269) 2 years ago

You don't get it. The gov. expands the money supply as the economy grows, as the need for something to represent the increased goods and services in circulation. Does that help you understand?

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

The government expands the money supply even when the economy isn't growing.

[-] 1 points by notaneoliberal (2269) 2 years ago

They have been known to do so. You may disagree with me on this but, here goes. History has shown that increasing the money supply, moderately, tends to stimulate an economy. It must be done in advance of recovery. So why, you might ask, since we have had considerable stimulus, has the economy remained flat (or in decline). Well there are some specific reasons. Most of the stimulus has been directed at recapitalizing banks. That alone will do little or nothing to help the general economy. The only effective stimulus is the type that gets directly into the hands of the average Joe, as in the WPA, etc. The other very pertinent item is the fact that the US has outsourced so much of it's manufacturing base. Much of Obamas' stimulus money for those shovel ready projects went to offshore companies. No amount of stimulus can fix that problem.

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

Stimulating the economy by inflating the money supply is like using a drug. It increases confidence temporarily, but you always need more and more until finally it has no effect at all and recession kicks in. The hangover.

You're right about money needing to go to the average Joe. If his economic health is poor, the whole country suffers.

With the housing and stock market losses, both the rich and middle class lost. But the rich are so fat they can afford to lose 50% and still function. But when the middle class loses 50%, it cuts into their muscle and bone. They are still not functioning.

The participation rate in labor continues to decline since the recession as well.

http://en.wikipedia.org/wiki/File:US_Labor_Participation_Rate_1948-2011_by_gender.svg

[-] 1 points by notaneoliberal (2269) 2 years ago

Well at least you can agree on the second part. The best historical example of stimulus working is post Depression era. There has been much bickering over what got us out but to me it's pretty clear. It's standard Keynesian economics. In boom times, you pay down the deficit. In times of recession, you stimulate.

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

The best from of economic stimulus comes when the lower 90% get a raise in pay that stays well ahead of the inflation rate. Temporary fixes can never repair the underlying permanent problem of low wages.

[-] 1 points by notaneoliberal (2269) 2 years ago

On that, I could not agree more. That (lowered wages) is the legacy of free trade.

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

"That (lowered wages) is the legacy of free trade."

Can you expand on that?

[-] 1 points by notaneoliberal (2269) 2 years ago

Yes I can expand. The push for free trade agreements and the abandonment of the protectionist policies that allowed the US to achieve the status of the top economic, top industrial nation in the world has undermined the wage structure and worker protections that took decades to achieve. We have thus moved from a manufacturing- exporting nation with a large trade surplus to a nation that tries to rely on banking and stock market speculation. The results are; our workers are in direct competition with slave wage nations. Free trade has resulted in US workers being "free" from having jobs and income. http://economyincrisis.org/free-trade

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

Look at the following graph. The stagnation of the lower 90%'s wages is not a result of free trade. It's a result of the top 10% taking all of the gains in wealth over the past 40 years. Inflation masks this most important fact. Our wages climb, but our purchasing power does not.

http://stateofworkingamerica.org/who-gains/#/?start=1968&end=2008

[-] 1 points by notaneoliberal (2269) 2 years ago

You misunderstand. Yes, the wealthy are keeping an ever more disproportionate piece of the pie. The primary check on this trend, in the past, has been the counter of organized labor and the enactment of labor laws. The destruction of these protections has been the goal of the wealthy. Free trade has been the chief mechanism by which this has been accomplished. To put it another way, neoliberalism has taken hold, worldwide. If your not familiar the term see the link below. http://www.corpwatch.org/article.php?id=376

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

The mechanism the wealthy use to increase their wealth is inflation. It conceals their theft, both in the wages they pay, and the prices they set.

Inflation has increased seven fold in the last 40 years. The average person doesn't have a clue if they are receiving a fair wage or if they are paying a fair price because fairness changes day by day.

[-] 1 points by notaneoliberal (2269) 2 years ago

reply to; "Having a completely free economy..." I agree, completely.

[-] 1 points by notaneoliberal (2269) 2 years ago

reply to; "I can definitely see....." Now we are on the same page. All the things we are discussing can be subsumed under a single term. NEOLIBERALISM. I think I may have already given you the link describing that term, but I will post it again. It is among other things, the worship of a type of libertarian free market ideology that got a big boost during the Reagan - Thatcher era and has been advanced by both parties since. http://www.corpwatch.org/article.php?id=376

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

Having a completely free economy and expecting justice to prevail would be like having no laws in society and expecting justice to prevail. It goes against the very nature of man.

I do prefer the least regulation possible of each though. Total regulation is just as cruel as no regulation.

[-] 1 points by notaneoliberal (2269) 2 years ago

The ability of corporations to send jobs to China (and elsewhere) without the penalty of tariffs, which we had in place throughout most of our history, has completely undermined the negotiating strength of unions. The position of the corporation can now be-Go ahead and strike, we will just move your job to China. Average manufacturing worker in China gets $4.11 a day. not per hour, per day. There are some countries that are even lower.

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

I can definitely see the threat of job loss from outsourcing involving manufacturing jobs. But take a giant corporation like Walmart. They fight unions tooth and nail, even though they can't use the threat of outsourcing against the stock clerks and cashiers. There is a very strong anti union bias among corporations right now and it will be a tough fight to make real gains in wages.

It seems the underlying reason tariffs are not in place, and anti union laws increase is because these corporations have bought Congress and the state legislatures. Another clear example of why we must remove the influence of money in politics.

[-] 1 points by notaneoliberal (2269) 2 years ago

reply to;" Inflation is like a smoke screen...." No, the idea that inflation is a CAUSE of wage disparity is a smoke screen. You've simply bought into a right wing talking point. "It's the deficit -It's the deficit" No it isn't. Throughout the 50s through early seventies we had constant inflation. We also had real wage growth. I am now repeating myself. Out.

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

If you look at both graphs, wages stagnated and inflation soared at the same in the 70's. Union membership has also been in decline since the 50's, exacerbating the problem of low or no real wage increase.

You say in a previous post that free trade is the cause. Then describe the mechanism that causes wealth inequality to increase.

[-] 1 points by notaneoliberal (2269) 2 years ago

reply to; "The Knowledge of your income..." Knowledge is good. I agree with you that real wealth comes from human labor. I think the bigger question is, which is more important-the knowledge that your income is shrinking, or the fact itself and the ability to do something about it. I think most wage earners are quite painfully aware that their income is shrinking, but it is not due to inflation. The fact is, all else being equal, that real wages are far more likely to decline in a deflationary cycle than in an inflationary cycle. Again, the ability of employers to take a larger cut is not, and has not ever been due to inflation.

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

Inflation is like a smoke screen, it allows someone to pick your pocket without your knowledge. Every year, Walmart pays their minimum wage employees in cheaper and cheaper dollars.

The minimum wage in 2009 was $7.25 an hour, in 2012 to keep up with inflation they should be making $7.74 an hour. The employees are losing 50 cents an hour from an already meager wage.

Walmart has 1.5 million employees. If 1 million of the minimum wage workers make just 50 cents less an hour than they should, Walmart profits over $1billion dollars in one year.

http://www.usinflationcalculator.com/

[-] 1 points by notaneoliberal (2269) 2 years ago

Reply to "This Chart.. ." I think we're going in circles here. Whether or not my income kept up with inflation is not the metric that is of concern. During the 50s through the early 70s real (inflation adjusted) wages rose steadily for wage earners despite continual moderate inflation. As I think I already pointed out to you, inflation favors debtors and disfavors creditors. Therefore, since the wealthy are more often the creditors they do not favor inflation. Your advocacy of deflation is naive. It was deflation that intensified, if not caused the Great Depression. If you had taken the time to read the article on Keynes, you might understand. If you did read it, and you still don't get it, I guess we will just have to agree to disagree.

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

The knowledge of your income keeping up with inflation is incredibly important. In 1968, the minimum wage was equal to over $10 an hour in todays dollars. Today it's just $7.25 an hour. That's a $6000 a year difference not being paid to todays full time minimum wage worker..

Let's talk about wealth. Every penny comes as the result of human labor. It doesn't matter if you are a borrower or a creditor. Banks are both borrowers and creditors. Many businesses are. Even homeowners if they have a savings account are.

Underpaying human labor is the first key to obtaining wealth. The second is selling that labor for more than it's worth.

That is why inflation is so important to the wealthy. It disguises true value. Without knowing what a fair price or a fair wage is, those who do will take economic advantage of those who don't. The minimum wage worker who should be making 40% an hour more sinks deeper into poverty as his employer rises higher into luxury.

[-] 1 points by notaneoliberal (2269) 2 years ago

Let me give you an anecdote. In 1951 we had a 7.9% inflation rate.The unemployment ranged from 3.1% to 3.7%. In 2011 we had 3.2% inflation, unemployment; 7.9% to 9.8%. http://nakedkeynesianism.blogspot.com/2012/08/full-employment-why-it-is-important.html

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

Did your salary keep up with inflation the last few decades?

nope

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

This chart shows inflation over many decades. A single years rise does not matter. Notice the deflations that countered the inflations before 1947? Inflation overall was very low relative to today.

Then look since 1967. Constant and steep inflation. Zero deflation.

Did your salary keep up with inflation the last few decades? Most people really don't know.

http://visualizingeconomics.com/2008/05/18/inflation-in-the-untied-states-1774-2007/#.UELgQ6A4KpT

[-] 1 points by Builder (4202) 2 years ago

You're onto it. The bunch of criminals hiding behind the hat called FED reserve hand money out all over the globe without informing anybody. The "need" to notify anyone of this action was nullified by the previous admin during a war "crisis". Look it up.

[-] 0 points by flip (7545) 2 years ago

you need to do a bit more thinking - ron paul fan?

[-] 2 points by jrhirsch (4714) from Sun City, CA 2 years ago

Just did some more thinking.

"that currency can always pay its debt" by stealing it's citizen's wealth. If it continues long enough and deep enough, eventually the entire country will become destitute. Any entity can feed on itself for only so long.

[-] 1 points by flip (7545) 2 years ago

that is obviously incorrect. why would a country become destitite - exactly how does that happen? spell it out - simply and carefully with out the usual bullshit cliches. why does it have to cause inflation? and if wages rise faster than the price of goods then what? not sure you know what thinking is - how is it that we had huge increase in the monetary base and thus currency debasement from 1850 until 1980 and yet a huge rise in the standard of living. and then since 1980 we have had very little inflation and a lowered standard of living. you need to think it through and not just read paul or hayek. you have some expaining to do!

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

Take a bottle of 12% alcohol wine. Pour half into another bottle. Fill both bottles with water. You now have twice as much wine, but the alcohol content in each is just 6%. The volume of wine has increased, but half of the alcohol value has been lost by one bottle and gained by the other.

Same with money. Printing more money dilutes the value of the old currency and transfers it to the new.

In the last 40 years that dollar bill has been devalued deeply and if not for inflation, caused by the excessive printing of money, it would be able to buy $7 in goods.

[-] 2 points by flip (7545) 2 years ago

did you not read what i wrote - your wine bottle example is so off base i can only assume you are hitting it right now. tell me about 1850 to 1980. you are right about the $7 dollars but what have wages done? come on - use some sense - let's have a real conversation not one where you just hang on to your religious beliefs about money.

[-] 0 points by jrhirsch (4714) from Sun City, CA 2 years ago

What you wrote implies that the government can always pay it's debts, no matter what. That's true, but debt always gets paid by someone. It does not magically disappear by printing new money. Those debts are transferred through the printing of new money to the holders of the old currency. They pay the debt by the loss in value of the currency they hold, and if that debt is large enough, they will become destitute.

[-] 2 points by flip (7545) 2 years ago

you have to be a ron paul guy - i had too many conversations with those people in zuccotti park. all they do is repeat the same phrases no matter what the question. the only difference is that at the park - when it becomes clear to those listening that they have no answer then the converstaion turns to trying to understand the real issues. sometimes the paul people stay and open their thinking - usually they walk away muttering. could you answer my questions - 1850 to 1980 and then 1980 to present - and as to wages the last 40 yrs. while you are at it why not explain why wages have not risen as fast since 1980 and why the rose faster from1945 to 1980. that will be hard for you - it will require some study.

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

Wages haven't risen since the 70's due to the decline in union membership. If we don't negotiate for our pay, we won't receive a fair share of the product of our labor.

http://philebersole.files.wordpress.com/2012/06/screen-shot-2012-06-07-at-12-03-16-pm.png

[-] 1 points by flip (7545) 2 years ago

and why did union membership decline? and the other questions? those are more to the point don't you think? and just so you know there is no need to send me links - i have enough of my own reading to do - i am interested in what you have to say

[-] 2 points by jrhirsch (4714) from Sun City, CA 2 years ago

Union membership dropped as the percentage of manufacturing jobs declined from 30% in 1950 to 10% in 2010. Union membership in the non manufacturing jobs that replaced them was not as high.

http://globaleconomicanalysis.blogspot.com/2012/08/robots-to-rule-world-taking-all-jobs.html

Antagonism from big business, government regulation such as Taft Hartley in '47, union corruption, and a feeling of financial well being are also some of the many factors that have contributed to the decline in union membership.

"how is it that we had huge increase in the monetary base and thus currency debasement from 1850 until 1980 and yet a huge rise in the standard of living. and then since 1980 we have had very little inflation and a lowered standard of living."

Currency debasement from 1850 till about 1950 was relatively mild due to deflationary and inflationary periods balancing each other. It wasn't until the 70's that inflation continued unchecked.

http://visualizingeconomics.com/2008/05/18/inflation-in-the-untied-states-1774-2007/#.UEGgC6AsFGh

Since 1970 inflation hasn't been low, it's been high. Since then the standard of living has increased for just one segment of society, the upper 10%.

[-] 1 points by flip (7545) 2 years ago

come on man, get a grip - you think prices were about the same in 1950 and 1850 - wow - you need help. do not just invent numbers - inflation was about 300% from 1850 to 1950 - about 350% from 1950 to 1980 and then 260% from 1980 to 2012. we have had huge inflation since the 1850's and huge increases in the standard of living - your theory cannot explain that so you need to rework the theory not change the facts. if what you say is true we would all be poorer than the people living here in 1850 - an obvious non fact so now what. don't send me your usual nonsense - explain simply how a pizza at lombardis (in nyc) cost $.35 in 1935 and then $22.00 today and yet we are a much richer country and population - go ahead explain how your theory handles that. give up your theory - you are a shill for the rich - the worst part is you don't even know it - brainwashed is the term i believe!

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

Provide the source for your inflation numbers.

[-] 1 points by flip (7545) 2 years ago

i did look at the graph - did you read what i wrote - the graph is silly - no infaltion until 1970 - sure - ask your grandmother. it doesn't matter anyway - that is not the point - just a way of understanding the world. your idea that inflation eats away at wealth is wrong. sorry but i have read and understood both sides of the debate - you can only see one side. you are arguing for the rulers - that is fine - someone has to but do not expect me to buy it. the populists understood it in 1890 and keynes understood it in 1930 - you can't see it - fine, we can leave it at that but do not expect me to buy your snake oil - i know better.

[-] 1 points by flip (7545) 2 years ago

if you think there was no inflation from 1920 to 1970 then there is no hope for you - ask someone older than you - do you have grandparents? the economists who determine policy - those economists who created thsi great policy? ask a good economist and he will tell you that "numbers lie"

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

Did you look at the graph? The period from 1920 to 1940 was relatively flat, picked up a bit until 1970 where it has risen dramatically ever since.

[-] 1 points by flip (7545) 2 years ago

google it - my numers for pizza in 1935 come from the bio of vince lombardi when he was playing at fordham - interesting book if you have time. as to the price today well go to the pizza shop

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

The CPI numbers from 1774 to the present were given in my previous reply. Here is the source for my figures again:

http://visualizingeconomics.com/2008/05/18/inflation-in-the-untied-states-1774-2007/#.UEGgC6AsFGh

This graph clearly shows the effects of inflation and deflation on the relative value of money. Luckily, pizza prices are not used by economists to determine economic policy

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

we no longer work where we live

so labor talk outside of work doesn't happen naturally

[-] 1 points by PublicCurrency (1387) 2 years ago

Unlike Greece, which is dependent on an uncooperative European Central Bank for funding, the U.S. still has the legal power to issue its own dollars or borrow them interest-free from its own central bank. The government could buy back its bonds and refinance them at 0% interest through the Federal Reserve—which now buys them on the open market at interest like everyone else—or it could simply rip them up.

The chief obstacle to that alternative is the bugaboo of inflation, but many countries have proven that this approach need not be inflationary. Canada borrowed from its own central bank effectively interest free from 1939 to 1974, stimulating productivity without creating inflation; Australia did it from 1912 to 1923; and China has done it for decades.

The private creation of money at interest is the granddaddy of all pyramid schemes; and like all such schemes, it must eventually collapse, despite a quadrillion dollar derivatives edifice propping it up. Willie and Kirby think that time is upon us. We need to have alternative, public and cooperative systems ready to replace the old system when it comes crashing down.

http://www.webofdebt.com/articles/

[Deleted]

[-] 1 points by flip (7545) 2 years ago

read graeber (one of the founders of ows somehow) - "debt the first 5000 years" - then you might not brag about being uneducated. money is an iou - sorry you cannot understand it but it is a fact. learn some history - i thought they were smarter than us in quebec

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[-] 1 points by flip (7545) 2 years ago

you seem a bit confused - brag about no education then think that i am a fish on a hook? read the book - money is debt - an iou passed from one person to another. try rereading this section - it is correct - “The money of account is something abstract, like a metre, a kilogram, a hectare. It’s not something you can touch or feel. It’s representational, something only a human could imagine. In any modern nation the money of account is chosen by the national government. MMT emphasises the state’s power over money. This is not something new. It dates back as far as Aristotle. You can find it in Adam Smith and in the work of John Maynard Keynes.

“As long as the state has the power to enforce its tax laws, the people will need the government’s money. The currency will have value. People will work to sell things—goods and services—to the government in order to get government money. Whatever the government accepts in payment to itself becomes the ultimate, ‘definitive,’ money in the economy. It is the only way to settle a debt. You must use government money. We can imagine in any economy a hierarchy of money. But not all money is created equal. The most acceptable money sits at the top of the pyramid. Those are the IOUs that everyone accepts and everyone must accept. Those are the IOUs that are ultimately needed to pay our debts. Those are the government’s IOUs. The rest of us can go in debt, issue IOUs, but our debt is not as good as government debt. It’s not as acceptable. It can’t be used to pay for things." the book is very long so with your low iq you might have trouble with it - if you can't get this part you will have trouble with everything. google hudson mmt if you want to learn - if you just want to be a silly frog then don't read anything. i have to go to work now - teaching tennis (i also have a low iq) - we will be coming to visit your province next week - see the whales and drive the fjord - i will try to disocver the general education level of the province when i am there - looks like the students in montreal know the story!

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[-] 1 points by flip (7545) 2 years ago

you are the one who brought up your lack of education not me. read what einstein or chomsky say about education - they agree with you. you are wrong about money but i don't need to convince you - think what you want - enough people here get it and i will spend my time with them and not agruing with someone who thinks they understand economics

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[-] 1 points by flip (7545) 2 years ago

well i try to live in the real world - i understand what you are saying but i want to try to help people understand what is happening to them and what they can do about it. what you say is of no value when paul ryan is telling people we have to cut the debt. read what the populists said about money in 1890

[-] 1 points by stone2012 (5) 2 years ago

The private corporations that own the U.S. Federal Reserve Bank (as in practically every country) lend money to governments and make GIGANTIC profits doing so. Wars generate tremendous debt and these private bankers often lend equally to both sides.

Washington, Jefferson, Madison, Franklin, Jackson, Lincoln, Roosevelt, and Roosevelt stood up against private bankers.

“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” ~ Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)

“The hand that gives is above the hand that takes. Money has no motherland; fiananciers are without patriotism and without decency; their sole object is gain.” ~ Emperor Napolean Bonaparte 1812

fraud – n. the intentional use of deceit, a trick or some dishonest means to deprive another of his/her/its money, property or a legal right. A party who has lost something due to fraud is entitled to file a lawsuit for damages against the party acting fraudulently, and the damages may include punitive damages as a punishment or public example due to the malicious nature of the fraud. Quite often there are several persons involved in a scheme to commit fraud and each and all may be liable for the total damages. Inherent in fraud is an unjust advantage over another which injures that person or entity.

treason – n. the crime of betraying one’s country, defined in Article III, section 3 of the U.S. Constitution: “Treason against the United States shall consist only in levying war against them, or in adhering to their enemies, giving them aid and comfort.” Treason requires overt acts and includes the giving of government security secrets to other countries, even if friendly, when the information could harm American security.

The venomous private banks, their corporations, government employed stooges and controlling shareholders commit treason against citizens’ common welfare for the sake of immense profits for a few. Greed, corruption, fraud, revolving doors. Res ipsa loquiter.

[-] 1 points by flip (7545) 2 years ago

what is your point - does this have something to do with the original post

[-] 1 points by stone2012 (5) 2 years ago

Flip, it would SEEM that US Government sits at the top of the pyramid you set out in your original post. After all, the Bank is called the Federal Reserve Bank. But the Federal Reserve Banks of each region are owned by (issue their stock exclusively to) the member banks of that same region. The member banks are privately owned corporations. Thus the Federal Reserve Banks are privately owned. This is a matter of law and anyone may read the Federal Reserve Act of 1913 for themselves.

“Let me issue and control a nation’s money and I care not who writes the laws.” Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.

“The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” The Rothschild brothers of London writing to associates in New York, 1863.

[-] 1 points by flip (7545) 2 years ago

i know all of this but he is talking in theoretical terms - a central bank not the fed. and please get off the rothschild thing - the point is to take the money out of the hands of the private banks and to create a democratic central bank. then you can do whatever you like as long as you have the hard resources to build with.

[-] 1 points by flip (7545) 2 years ago

i own it and watched too much of it - mostly nonsense. did you read the original post since it blows up money masters quite easliy

[-] 2 points by PublicCurrency (1387) 2 years ago

The twelve Federal Reserve banks are owned exclusively by the member banks of their district. This is a matter of law and anyone can read the Federal Reserve Act.

We borrow the use of our own money from private banks!

All of our money (except coins) originates as a loan from a private bank!

Money Masters is accurate.

[-] 1 points by flip (7545) 2 years ago

yes it is in that one respect but it has nothing to do with what he is saying. it is a distraction - he is talking about a public currency - interesting don't you think.

[-] 1 points by PublicCurrency (1387) 2 years ago

The power to create money is an awesome power – at times stronger than the Executive, Legislative and Judicial powers combined. It’s like having a “magic checkbook,” where checks can’t bounce. When controlled privately it can be used to gain riches, but much more importantly it determines the direction of our society by deciding where the money goes – what gets funded and what does not. Will it be used to build and repair vital infrastructure such as the New Orleans levees and Minneapolis bridges to protect major cities? Or will it go into warfare and real estate loans creating the real estate bubble – leading to a crash and depression.

Thus the money issuing power should never be alienated from democratically elected government and placed ambiguously into private hands as it is in America in the Federal Reserve System today. Indeed, most people would be surprised to learn that the bulk of our money supply is not created by our government, but by private banks when they make loans. Through the Fed’s fractional reserve process the system creates “money” when banks make loans into accounts; so most of our money is issued as interest-bearing debt.

Under the Constitution, Article I, Sec. 8, our government has the sovereign power to issue money and spend it into circulation to promote the general welfare, for example, through the creation and repair of infrastructure, including human infrastructure - health and education - rather than misusing the money system for speculation as banking has historically done; periodically causing one crisis after another. Our lawmakers must now reclaim that power!

Money has value because of skilled people, resources, and infrastructure, working together in a supportive social and legal framework. Money is the indispensable lubricant that lets them “run.” It is not tangible wealth in itself, but a power to obtain wealth. Money is an abstract social power based in law; and whatever government accepts in payment of taxes will be money. Money’s value is not created by the private corporations that now control it. As Aristotle wrote: “Money exists not by nature but by law.”

Unhappily, mankind’s experience with private money creation has undeniably been a long history of fraud, mismanagement and even villainy, and the present crisis could become the worst yet! Banking abuses are pervasive and self-evident. Major banks and companies focus on abusing the money system instead of production. Billions have been stolen, trillions more are being shamelessly grabbed in so called bailouts! Much of our leadership is acting like patsies, instead of protecting our people as the financiers rape America.

Private money creation through “fractional reserve” banking fosters an unprecedented concentration of wealth which destroys the democratic process and ultimately promotes military imperialism. Less than 1% of the population now claims ownership of almost 50% of the wealth, but vital infrastructure is ignored. The American Society of Civil Engineers gives a D grade to our infrastructure and says it will soon be a D-; and estimates that $2.2 trillion is needed to bring it to safe levels over the next 5 years! That fact alone shows the world’s dominant money system to be a major failure crying for reform.

http://www.monetary.org/wp-content/uploads/2011/12/32-page-brochure-sept20111.pdf

http://www.monetary.org

[-] 1 points by geo (2638) from Concord, NC 2 years ago

MMT...... absolutely correct. Although the risk of inflation is always there. You just proved that we can't ever be insolvent, bankrupt.

[-] 1 points by shadz66 (19985) 2 years ago

Q : "What are the benefits of issuing your own currency ?"

A : "They are extraordinary" !

Thanx for another very good post 'flip' ; The final 'Q&A' warranted repetition.

fiat lux ...

[-] 2 points by shadz66 (19985) 2 years ago

"How Big Banks Run the World - at Your Expense", by Gar Alperovtz :

"Living Paycheck To Paycheck Is Reality For Two In Five Households" :

"Banks Weren’t Meant to Be Like This", by Prof. Michael Hudson :

"Key Lesson from Iceland Crisis is 'Let Banks Fail'", by Haukur Holm :

"Crises of Capitalism" :

Appending the above as I think that they're relevant & I repeat a quote from J.K.Galbraith (1908-2006) :

  • “The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.”

fiat lux ...