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Deficit Owls @DeficitOwls
, 3 tweets, 1 min read Read on Twitter
"Monetarily sovereign" is defined as 1) issues own currency, 2) floating exchange rate, 3) no foreign-denominated debt. "Floating exch rate" implies that you have to... let it float. What Argentina is doing (as best I can tell) is because they're unhappy with how much their
currency is floating. The reason their unhappy is because, like many developing nations, they're quite dependent on imports. So a fall in the currency means the price of consumer goods rises noticeably (contrast with the US, where the dollar regularly has huge swings that nobody
even notices). Is this a good way to run their country? Tough to say. This is a situation that MMTers have written about in the past. See here: neweconomicperspectives.org/2014/02/mmt-ex…
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@Alantwatts23 In detail :)

The truth is, anybody can create money. The problem is to get it accepted. Both banks and government are very good about getting people to accept their IOUs as money.
@Alantwatts23 The government does it through threat of force: you have to pay your taxes with government money, or else the gov will jail you. The banks largely do it through the carrot rather than the stick: they offer nice things like checking services, interest, convenience, etc. And the
@Alantwatts23 gov assists the banks by providing deposit insurance and a lender of last resort, so your bank money is safe.

But there is a hierarchical relationship here: only gov money can (ultimately) be used to settle taxes, bank money cannot. The banks stand in between gov and us, making
Read 5 tweets
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Since money used to primarily take the form of coins stamped by the government, people just assumed that gov controlled the total amount of money. Seems logical, right? And that assumption has continued.

But it's wrong. Nobody controls the money supply. It's on auto-pilot. (1/n)
First, let's see where most money comes from. While the coins and notes in your pocket did come from the gov (you can tell because they're signed by the Treasury Secretary), most money is actually "bank money," that has no physical form, but only exists on your bank's ledger (2/)
How does bank money get created? There are several ways, but the main one is when banks make loans. For instance, if you draw on a line of credit at your bank, the bank will add dollars to your account, created from thin air. This also happens when you use a credit card. (3/)
Read 16 tweets
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Does Modern Monetary Theory say we should just print a ton of money and use it to pay for things?

No! It's even more radical: MMT says we're *already* doing that, 100% of the time. (1/n)
We're taught in elementary school that government can get money to spend from 3 sources: taxes, borrowing, or printing money. So the link goes: get money -> spend money.

MMT cuts that link. The government doesn't "get money" from anywhere. It just spends. From thin air. (2/)
When the government spends, that adds money (deposits/reserves) to the economy. Sometime later, some of that money gets used to pay taxes, and some gets used to buy government bonds, which we sometimes call "borrowing." Any amount left over gets counted as "money creation." (3/)
Read 7 tweets

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There was a debate yesterday on foreign denominated debt between Warren Mosler and Neil Lovatt. I think it was Neil Lovatt.

I've tried to capture it all but there was so many different branches I've probably missed some of it.

This has moved the debate on to where it should be
Warren is in Bold.
Neil is worried that "Sterling denominated" debt would cause a crises in an independent Scotland.

I should make it clear at this point. Nobody knows what size the sterling debt would be anybody who says they do are lying.
Read 12 tweets
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What could a country do with pensions that uses a fiat currency-flexible exchange rate system ?

First of all you have to identify the problem and it aint about money. The major flaw in this main stream dialogue is what is called a ‘fallacy of composition’
They say somehow we have to ‘save’ public funds today for the future, what we must cut back on are expenditures today, which does nothing but set our economy back and causes the growth of output and employment to decline.
Every mainstream economist will agree that there pretty much isn’t anything in the way of real goods we can produce today that will be useful 50 years from now.
Read 14 tweets
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I've never read it but Is the GERS report comparing apples and oranges ?

Now this nonsensical view of the way the monetary system operates is based on the same fundamental building blocks as views expressed in the GERS report.
None of these arguments are remotely correct in a fiat monetary system. My arguement is not about wether the GERS figures are accurate. My arguement is if Scotland becomes independent the GERS figures are of no help to anybody.
A very clever magic trick by the charlitans of all colours who use the GERS figures in whatever form as a starting platform to discuss the success or failure of an independent Scotland. A propaganda triumph worthy of Pathe News for those who say indy is not an option.
Read 12 tweets
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#Argentina, #Turkey and #Pakistan indicate emerging market crash. wsj.com/articles/emerg…
And #China worries grow. bloomberg.com/news/articles/…
Is the world ready for a coming #China crash? IMF issues warning. invests.com/2018/10/08/chi…
Read 3 tweets
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So as @AndrewWilson has laid down the floor for healthy debate, I wish to do a thread on why an independent Scotland should have its own currency. I do not believe that having monetary policy controlled by the BoE that doesn't suit our needs is the correct approach.
First, I will take head on the key tests that are laid out in the @sgcommission's report. Many of the points I will raise have already been touched upon by the likes of @RichardJMurphy, @billy_blog and @Common_Weal. I highly recommend you read up on their views. The six key tests laid out by the Growth Commission are 1) Fiscal sustainability 2) Central Bank credibility and stability of debt issuance 3) Financial requirements of Scottish residents and businesses 4) Sufficiency of foreign exchange and financial reserves 5) Fit to trade and investment patterns 6) Correlation of economic and trade cycle
1) Fiscal sustainability

One fact that #MMT teaches us is that monetary sovereign nations cannot go bankrupt in regards to their own currency. How can they when they are the monopoly supplier and own most of their debt? You can see my thread on Japan.

Read 29 tweets
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Why the recent crisis in Argentina is so interesting, and why they were right in calling in the Fund. 1/n

Context: Argentina faced a classic currency crisis with a floating exchange rate regime and inflation targeting, not a fixed exchange rate as in the past.
2/n
1. It has long been known that inflation targeting EMEs cannot ignore the effects of exchange rate pass-through on inflation;
3/n
2. Partially dollarized economies like Argentina still (probably) retain a fairly high degree of exchange rate pass-through, even if pass-through has come down somewhat for most EMEs.
Read 10 tweets

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