Thread: Here’s a quick #MMT lesson on debt, interest rates, and exchange rate regimes.

Government can set the interest rate on its liabilities wherever it wants. Why? Because it is the monopolist for its currency, and it has the taxing authority.

But countries with commitments involving foreign currencies (ie. they owe debt in a foreign currency, or have promised to fix the price of their own currency to some other currency) often choose to set interest rates in particular ways, that can tie it to the size of their debt. Why?

An important piece of MMT-adjacent work that should get more attention is Bill Black's work on "control fraud," so here's a short thread on that.

Control Fraud is when managers loot a company for profit, taking actions that generate record short-run profits then collapse. /1 In the financial sector the formula for control fraud goes:

1) Grow like crazy, by
2) making trash loans/investments at a high interest yield, while
3) employing maximum leverage, and
4) setting aside little or no reserves for losses. /2

One popular idea in "Keynesian economics" is that the government should balance its budget over the course of the business cycle, running deficits for stimulus during recessions, then surpluses in booms to bring down the debt.

This is a bad strategy, because it neglects /1 the interconnectedness of financial positions in the economy.

One entity's spending is another's income; so for somebody to run a surplus, somebody else has to run a deficit. So if we say "gov should run a surplus," what does that imply about private financial positions? /2

It's the finale, Day 8 of our online book club for @StephanieKelton's The Deficit Myth!

Today we're reading Chapter 8, and we'll post highlights below. Read along and post your favorite parts with the hashtag #TheDeficitMyth.

Happy reading🦉... While describing a meeting with a Congressional representative, Kelton reports that he "winced, as if experiencing physical pain, as Mosler explained that the purpose of collecting taxes is to regulate inflation, that we never need to retire the national debt." #TheDeficitMyth

It's Day 7 of our online book club for @StephanieKelton's The Deficit Myth!

Today we're reading Chapter 7, and we'll post highlights below. Read along and post your favorite parts with the hashtag #TheDeficitMyth.

Happy reading🦉... "For decades, America has placed trust and power in a global network of financial and political elites who have profoundly failed to address the economic concerns of most people on the planet." #TheDeficitMyth

It's Day 6 of our online book club for @StephanieKelton's The Deficit Myth!

Today we're reading Chapter 6, and we'll post highlights below. Read along and post your favorite parts with the hashtag #TheDeficitMyth.

Happy reading🦉... Chapter 6 is about entitlements. While the conventional wisdom says these programs are running out of money, SK says we can always afford to make dollar payments, the question is will there be goods for those dollars to buy? #TheDeficitMyth

It's Day 5 of our online book club for @StephanieKelton's The Deficit Myth!

Today we're reading Chapter 5, and we'll post highlights below. Read along and post your favorite parts with the hashtag #TheDeficitMyth.

Happy reading🦉... Chapter 5 is about trade, trade deals, and sectoral balances. I'm actually pretty excited to read this, since it's rare to hear a fully spelled-out MMT-informed take on trade. #TheDeficitMyth

It's Day 4 of our online book club for @StephanieKelton's The Deficit Myth!

Today we're reading Chapter 4, and we'll post highlights below. Read along and post your favorite parts with the hashtag #TheDeficitMyth.

Happy reading🦉... Chapter 4 is about sectoral balances and "crowding out." Kelton says that the crowding out myth is more technical and wonky than the prior myths, but still commonplace, dangerous, and wrong. #TheDeficitMyth

It's Day 3 of our online book club for @StephanieKelton's The Deficit Myth!

Today we're reading Chapter 3, and we'll post highlights below. Read along and post your favorite parts with the hashtag #TheDeficitMyth.

Happy reading🦉... Chaper 3 is about national debt. Kelton begins by recounting the war of birds between the deficit hawks and the deficit doves, and introduces the deficit owl as the wise bird that can see things from a different perspective. We agree!! #TheDeficitMyth

It's Day 2 of our online book club for @StephanieKelton's The Deficit Myth!

Today we're reading Chapter 2, and we'll post highlights below. Read along and post your favorite parts with the hashtag #TheDeficitMyth!

Happy reading🦉... Chapter 2 is about inflation. While recounting her work on the Senate Budget Committee, Kelton refers to Congress as "the sausage factory" lol. #TheDeficitMyth

It's Day 1 of our online book club for @StephanieKelton's The Deficit Myth!

Today we're reading the Introduction and Chapter 1, and we'll post highlights below. Read along and post your favorite parts with the hashtag #TheDeficitMyth.

Happy reading🦉... This is the promise of MMT: that we can build a better economy. Nobody is saying it will be easy, or that there won't be challenges, but "finding the money" isn't the problem. #TheDeficitMyth

On a stroll through Austrian Twitter today, somebody asked a good question I'd like to clarify here: wouldn't it be better if the government taxed and spent in gold instead of fiat money?

Presenting:

Why Fiat Money is the Best System of Government We've Yet Devised - A Thread. This person's point was that on a gold standard, it's much harder for the government to "borrow money it doesn't have."

MMT highlights this as a fundamentally flawed point of view. Let's start in the usual way, with the problem we're trying to solve here. /2

New Working Paper out with the Global Institute for Sustainable Prosperity!

Who once called taxation an "essential anti-inflationary weapon"? Was it one of those Modern Monetary Theory economists? Or was it...the US Government in 1942?

(A thread)

global-isp.org/working-paper-… @GISP_Tweets In this paper, I piece together the worldview held by top US Treasury officials during World War Two, and compare it to that espoused by MMT, to find many striking similarities. The paper looks at taxes, bond sales, interest rates, and national debt. (2) global-isp.org/working-paper-…

MMTers rightly point out that "the burden of the national debt" is largely a myth for a nation like the US. But I don't think enough attention has been paid to the difference between peacetime debt and wartime debt. This will become important for a Green New Deal. (1/n) (With the caveat that this thread is about a total war like WW2, not the kind of smaller ongoing wars that the US has been engaged in the last few decades) (1.5/n)

Here's a few words on UBI and inflation. Not every kind of universal income scheme has to be inflationary, but there is one king that almost by its very definition will cause inflation. That would be a "living wage" UBI. (1/) Proponents of this level of BI believe that everybody should have the right to choose not to work, so BI should allow that. Ok. Presumably, this means that they wouldn't view the policy as a success unless some decent fraction of people actually DID choose to not work. (2/)

You’ve probably seen the videos that this account tweets regularly. We’re about to embark on a little experiment: tweeting MMT research/publications as well! They look like this:

https://twitter.com/deficitowls/status/1100317719587627008

There will probably be one every few days on average (it’s random) to give you time to read them. While most of it will be accessible to all, a few of the links will require a journal subscription or library access. 🙁

While this is at least a noticeable improvement from his earlier "work" engaging MMT, this piece by Krugman still has quite a few issues. In this thread, I'll tackle just one, the issue of government surpluses. nytimes.com/2019/02/12/opi… (1/) Krugman, citing a hypothetical world in which r (the interest rate on gov debt) becomes larger than g (the nominal GDP growth rate) for a prolonged period even though this never happens in real life, notes this would lead to runaway debt and claims it requires gov surpluses. (2/)

Here's one way to help "pay for" a Green New Deal that hasn't been getting enough discussion:

A mass saving campaign.

(Thread) First, what does "paying for" a GND mean exactly? Let's get one thing straight: the US government does not need your money. If you've ever looked at whose signatures are on the Federal Reserve Notes in your wallet, then you understand that the US gov cannot run out of US$. (2/)

What is Modern Monetary Theory's take on the wealth tax proposals? Let's review some basics.

First, a reminder that you don't have to be a left-winger to support MMT and not all MMTers are (though I have heard many MMTers express approval of the idea). (1/) Next, what would a wealth tax be for?

Since this would be a federal tax, and the US federal government is a monetary sovereign, this tax would have ONE purpose only: to make rich people have less money. (2/)

1. If you follow MMT, you've probably heard the latest critique from mainstreamers, which is that raising taxes is politically difficult, and so we can't rely on it to stop inflation.

Of course taxes aren't the only MMT tool against inflation. But even so, the view is wrong. 2. The reason these people are getting it wrong is because most of them haven't actually lived through a time when serious inflation was being caused by excess aggregate demand for goods and services - which is the only time when taxes would help.

@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