1/ Bank created money versus Congress created money. [THREAD]

#LearnMMT

Congress created money is called "high powered." Roughly, when they pass a bill into law, whatever number is in that bill ($1T, or whatever serves to make that bill become a reality) is "appropriated."
2/ Example: $730M of that $1T goes to a CA construction company to build a new hospital wing for #MedicareForAll. They sign a gov't contract and are legally obligated to use it for only that purpose. Once complete, the money, is distributed to private citizens via paychecks.
3/ The only remaining obligation for that money is the portion that will be taxed back in April. The rest is yours to keep, no strings attached. You can invest it, save it, spend it, or keep it in your wallet. This is your savings, and it is DEBT FREE.
4/ Banks also create money. Maybe, because the federal government is not giving you healthcare, you now need a loan to cover the portion of your hospital bill not covered by your gofundme. So you walk into your local bank branch and ask for $1,000. thenib.com/a-gofundme-cam…
5/ The bank analyzes your financial/credit history to determine if you’re worth the risk. They decide you are and they give you the money. Instantaneously, you are now IN DEBT to that bank for $1,000, plus interest. This is "private debt" and it is a very scary thing.
6/ If you don't pay this private loan back, the bank will hound you & do whatever it takes to get their money back. Or take your car or house.

You will hear from them for sure. You will pay them back or you will be made very unhappy. This private debt is truly DEBT LADEN money.
7/ Every private debt is simultaneously both an asset and liability, for all parties.

The bank:

- Asset: The right to collect $1,000 plus interest (or confiscate your stuff).
- Liability: The $1,000 they gave you.
8/ Here is your view of that same loan:

Asset: The $1,000 in your pocket.
Liability: You owe the bank $1,000 plus interest.

This is called an "accounting identity."
9/ So, no matter how much private debt there is in the economy, it always, eventually goes back to zero (aside from the interest) once that debt is repaid.

This is because

X - X = 0

No matter how big X is.
10/ Aside from the portion taxed back, high powered/Congress-created money doesn't ever disappear from the economy (it may move around, but it's out there somewhere). This is the DEBT FREE portion of your value, or savings. You did what the gov't needed and now you have savings.
11/ The fed gov't also has an asset & liability:

- Asset: The new hospital wing, happier citizens.
- Liability: The $1T now the economy, which can extinguish federal tax obligations.

But this is not "a loan." It does not have to be "paid back." They can always create more!
12/ The national debt is the DEBT FREE portion of the American people's value. You received your portion through your paycheck. Bank money is debt "laden." Sure, it's the same kind of regular old money, but it's simultaneously a very scary *PRIVATE* debt to a bank.
13/ If you don't pay a private debt back, you've got big problems – there's almost nothing the gov't can (or will) do to help you if you don't pay it back. That's the difference between debt-free Congress created money, and debt-laden private bank created money.
14/ In other words, private debt puts you into debt to a FOR-PROFIT PRIVATE corporation. A little bit is fine, but too much and we're in big trouble.

Unfortunately, since our fed gov't doesn't help its people nearly as much as they should, we are forced into private debt.
15/ Being cut off from the fed gov't forces us into private debt: bank/mortgage/student loans, credit cards, begging, charity, crime (stealing, selling illegal things) more and more.

If our fed gov't provided for us, we'd still need private debt but not for EVERY DAY SURVIVAL.
16/ Finally, because our fed gov't (who can create the currency) does not provide for its people it forces state & local gov'ts (which can't create the currency) to rely more on our taxes. So not only are we getting less from the fed gov't, we now must give more to state & local.
17/ Sure, the federal government does plenty of war and tax breaks for the few. They "spend a lot." But the problem is not "what they spend" or "how much they spend," it's what they choose to *DO*, who they choose to do it *FOR*, and who they choose to *NOT* do it for.
18/ The problem is not that our gov't "spends too much," it's that they choose to spend it only on the few, and not on the many.

The problem is not that we have "too much national debt" (which is our DEBT FREE savings!) it's the INEQUALITY of that savings.

@ptcherneva:
19/ The problem is not that banks or credit card companies hound us and keep us chained in debt. The problem is that our federal government chooses to not provide for its people, even though they have WAY more than enough real resources sitting idle, ready and waiting to do so.
20/ The federal government doesn't provide for the people, because they're paid to not provide for the people. Because if they did provide for the people (AS IT EASILY CAN), the owners of those banks & credit card companies & for-profit jails & so on...would make less money.
21/ If the fed gov't did provide for the people (AS IT EASILY CAN), the owners of those banks & credit card companies & for-profit jails... would not be in control of our lives (a FOR PROFIT health insurance company decides if we should get that procedure, not the gov't).
22/ If the fed gov't provided for its people (AS IT EASILY CAN), then the people would not be chained to their jobs and their private debt, and they afford to stand up to their bosses. They could afford to leave their jobs. They wouldn't have to be afraid.
23/ But most of all, they could afford (not be afraid!) to run for office. Because if THAT happened, we might actually get a gov't that cares more about the people than their big donors.

THAT is why the federal government is paid to not provide for its people: power.
24/ Because power is relative.

The only way the powerful can stay powerful
is to actively keep the powerless powerless.

#LearnMMT
25/25 Technical terms:
- Federal government created money is "high powered money" or "exogenous." (It is *EX*ternal to the non-government sector – the economy)
- Bank created money is "endogenous."

To #LearnMMT:
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