Thread by @robert_cauneau

The fact that (i) the sum of the financial balances of the public and private sectors can only be zero, and (ii) only the State can, by spending, ↗️ the NET financial wealth of private sector agents, logically leads to the primacy of the role of the State.
#MMT #LearnMMT
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1 Until recently, without sharing them, it seemed to me "acceptable" that non-MMT approaches, both orthodox and heterodox, could describe the monetary system by excluding the State from the analysis, and/or by not recognizing that the State creates its own currency by spending.

2 However, with a bit of hindsight, I associate in my reasoning 2 fundamental elements:
(i) the fact that the sum of the financial balances of the public and private sectors can only be zero, according to the accounting identity that is verified in all countries,...

3... and (ii) the fact that only the government can make final payments, thus increasing the NET financial wealth of private sector agents.
mmt-france.org/2020/07/24/fic…

4 If we consider the most frequent situation, that of a public deficit, the question may arise as to whether it is the private sector that "finances" this public deficit, as some claim, or whether the public deficit feeds the private surplus, as MMT analyses.

5 This question of whether the private sector could finance the public deficit would be conceivable if the two sectors had the same capacity to feed the NET financial situation of the other. However, observation of the accounting processes shows that this is NOT the case (tw #3)

6 Indeed, transactions between private sector agents, including bank credit, cannot change its NET financial WEALTH. Only the public sector can, through its deficit, given that the sectoral balance presents the NET financial position.

7 On this basis, it is therefore logical that the causal chain of "financing" between the public and private sectors can only work in the direction of the public deficit feeding the NET financial wealth of the private sector, and in no way in the opposite direction.

8 Thus, it appears without any ambiguity that the proponents of monetary approaches that do not recognize, on the one hand, the fact that the State creates its own currency by spending...

9 ...and, on the other hand, the fact that the State alone, through its deficit, can create and maintain the NET financial wealth of private sector agents, are simply victims of a logical error.

10 This error stems from the fact that the advocates of these monetary approaches do not "reason" in NET, as MMT does. They "reason" in GROSS, not taking into account, wrongly, the fundamental difference between deficit public spending...

11... which is formalized through definitive payments, and bank credit, which must be repaid, and which therefore does not increase the NET financial wealth of private agents. The same is true for all transactions between private sector agents.

12 This error also stems from the fact that supporters of other approaches do not take into account the fact that one agent's income is necessarily another's expenditure, which leads them to fail to understand the need for accounting formalization of their own analysis.

13 This undoubtedly explains the fact that, basing their own analysis on a "financing" of public expenditure by private savings, or even by bank credit, these people are unable to produce the complete accounting schemes of their own vision.

14 MMT in no way advocates more power for the State in the process of monetary creation. It only shows, and demonstrates, that ONLY the state creates its currency, which itself, based on definitive payments, conditions the possibility of bank credit.

15 Despite the evidence that emerges from observation and analysis of the system, both the
@banquedefrance
declaring that "90% of money is created by banks", and @Economie_Gouv ignore (voluntarily?) the primary role of the State in the money creation process.

16 Money creation according to the Banque de France: abc-economie.banque-france.fr/sites/default/…
And according to Bercy, which nonetheless, albeit timidly, recognizes that the State creates "money" via "the budget deficit": economie.gouv.fr/facileco/banqu…
Do central banks create money?

17 One question that inevitably comes to mind is whether this "forgetting" of the role of the State is the result of a real ignorance, or of a simulated ignorance, even maintained, in order to maintain the domination of the neo-liberal, austeritarian, mortifying ideology.

@threadreaderapp unroll please