Thread by @darenpa72

@SelfDestructCap Yes, taxes drain - and cutting or eliminating taxes, while money is still being injected by FG (incl it’s agency the Fed) will see the bathtub overflowing with liquidity.

Tbond sales also drain. Until maturity, or QE time, when FG reinject.

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@SelfDestructCap (The depth of the water in the PS bath

x

The speed of the churn by banking system turbo)

/

The goods and services available to buy with the money

=

Price level

@SelfDestructCap Banks create the illusion of more money, by churning money faster.

So this, for example, is how The Clinton Miracle could work.

Less money, but economy booming (velocity).

@SelfDestructCap This goes into reverse and FG have a mandate for price stability, so are “duty bound” to inject to counteract the collapse in velocity in the banking system.

So we can see how QE created more money but prices don’t rise as many expect. Their models fail them.

So far so MMT.

@SelfDestructCap Question:

If we cut taxes (reduce fear for the future), do you think people are more likely to “use” dollars, or less?

I am thinking they would “use” (spend along to the next guy) them more than if we say raised taxes (created fear for the future).

@SelfDestructCap So the purpose of taxes is dual: to effect control over velocity, as well as to reduce liquidity.

@SelfDestructCap (Not a trick question, genuinely interested in your opinion, as someone who has clearly taken the considerable trouble to understand all the rest.)

@SelfDestructCap It seems everyone thinks FG can only cut rates in the face of economic headwinds (counterintuitive as that may seem).

But the problem is really velocity, because demand to borrow is still low.

So taxes should be cut in the face of recession (counterintuitive as that may seem)?

@SelfDestructCap As you said yourself, this plugs the drain - so the bath stops emptying.

Reducing dry up of liquidity.

@SelfDestructCap It’s only counterintuitive to anyone who believes government taxes first to spend second.

@SelfDestructCap Atlas cannot deal with this on his own, by piling up coins in his basement and taking a bath in them in the dead of night when nobody is looking (and he is not working).

@SelfDestructCap Finally I have taken yall Full Keynes.

- Money is a trade lubricant.

- Banks are a turbo not printers.

- Money is for spending not hoarding.

- Gold is for hoarding.

- Central Bank money is hypothecation of its reserves (gold)

- Gold always has been the only real MONEY (SoV)

@SelfDestructCap @threadreaderapp how did I do today? Please unroll for the answer.