tag:blogger.com,1999:blog-6884280745873696862024-03-14T00:56:26.300-05:00It's The People's MoneyA nation's money belongs to the people and should serve the public good. Unknownnoreply@blogger.comBlogger76125tag:blogger.com,1999:blog-688428074587369686.post-82217086899657913742018-02-04T11:34:00.003-06:002018-02-04T11:36:24.022-06:00Modern Money Basics Expands<span style="color: #666666; font-family: "trebuchet ms" , sans-serif;">A nation's currency is a public tool that should be used to serve the people.</span><span style="color: #666666; font-family: "trebuchet ms" , sans-serif;"> </span><span style="color: #666666; font-family: "trebuchet ms" , sans-serif;"><span style="color: #666666;">Check out the recently launched </span><a href="https://modernmoneybasics.com/facts/"><b><span style="color: orange;">FACTS</span></b></a><span style="color: #666666;"> section of Modern Money Basics for an easy-to-understand guide to how modern economies work.</span><br /><br /><a href="http://modernmoneybasics.com/" style="color: #666666;">ModernMoneyBasics.com</a><span style="color: #666666;"> is designed for those without any economics background. </span></span><br />
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<span style="color: #666666; font-family: "trebuchet ms" , sans-serif;">Read. Share. Help spread the knowledge to friends, family and colleagues. Help to elect people to Congress that understand these ideas. Hold our representatives in government accountable to use our public currency to meet public needs and to raise living standards, especially for those marginalized and in need. </span><br />
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<span style="color: #666666; font-family: "trebuchet ms" , sans-serif;">A much better economy is within our reach! </span><br />
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<br />Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-1828084374380040922017-06-01T18:21:00.000-05:002017-06-01T18:21:16.125-05:00Modern Money Basics Video<div class="separator" style="clear: both; text-align: center;">
<iframe width="320" height="266" class="YOUTUBE-iframe-video" data-thumbnail-src="https://i.ytimg.com/vi/TDL4c8fMODk/0.jpg" src="https://www.youtube.com/embed/TDL4c8fMODk?feature=player_embedded" frameborder="0" allowfullscreen></iframe></div>
<br />Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-88053805113685481722017-02-04T12:24:00.005-06:002017-08-27T15:36:09.016-05:00Recent Posts<span style="color: #666666; font-family: "trebuchet ms" , sans-serif;">I have recently been writing blog posts for the <a href="http://patrioticmillionaires.org/" target="_blank">Patriotic Millionaires</a>, a group committed to addressing in equality in our economy and political process. My author blog page is <a href="https://patrioticmillionaires.org/author/geoff-coventry/" target="_blank">here</a>.<br /><br />These blogs are also cross-posted to the Huffington Post and are listed <a href="http://www.huffingtonpost.com/author/geoff-268" target="_blank">here</a> for easy reference.</span>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-24427767787807975432016-07-14T05:37:00.001-05:002016-07-14T09:53:46.821-05:00Ending Fiscal Stimulus: A Case For Sensible Fiscal Policy<span style="font-family: "trebuchet ms" , sans-serif;">Whenever the economy isn’t doing so well, the talk inevitably turns to fiscal stimulus. This usually means proposals for some kind of infrastructure improvements – often long overdue – and a preference for so-called “shovel-ready” projects that are intended to move money into the economy quickly (whether they do or not is another matter). Such proposals are often attacked as too slow to have any effect, or being poorly planned and resulting in wasted spending or even graft.</span><br />
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<span style="font-family: "trebuchet ms" , sans-serif;">Anyone who has been following my posts for long will know that I am a proponent of significant investment to develop national capital (infrastructure, health, research, education, ecology, arts, etc.), but here I would agree that infrastructure is a poor economic stabilizer and provides weak stimulus in the near term when it is most needed. Infrastructure and other investments should be made <u>if and when such projects are needed</u> or deemed beneficial to the nation, not because the economy needs a kick-start.<br /> <br /><br />When the economy is in a downturn then businesses and households increase their savings, sales and revenues fall, investment is cut back, and unemployment rises as companies cut costs. But while our politicians and pundits debate stimulus packages something else is already going on: a powerful government fiscal response kicks in all by itself (as it was designed to do). </span></div>
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<span style="font-family: "trebuchet ms" , sans-serif;">What is happening is that the government is adding more spending power into the economy than it removes via taxation. Tax payments drop due to slower sales and lower incomes; simultaneously there is an increase in unemployment and welfare payments which add money directly into the economy. Such targeted spending is mostly spent by those in need, increasing sales for businesses and slowing the economic decline. These intentional net increases of government monetary contributions to the economy are what economists call automatic stabilizers, and they are the main reason we don’t have regular great depressions. It is also a major reason why the government “deficit” and “debt” rise during recessions and fall during economic expansions (as much as Presidents from both parties love to take credit!)</span></div>
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<span style="font-family: "trebuchet ms" , sans-serif;">It should be obvious from this that we could do a better job of designing our automatic stabilizers to optimize their effect in maintaining a healthy economy during downturns. We can do much more to shorten a recession and maintain employment and incomes for people during times when businesses are struggling. Too little attention has been given by economists to analyze what tax structures and progressive rates will act best to stabilize our economy during business cycles to more effectively maintain a fully productive and employed economy. But there is a bigger problem with our approach.</span><br />
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<span style="font-family: "trebuchet ms" , sans-serif;">Fiscal stimulus is simply the wrong paradigm. We need currency management.</span></h3>
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There is a more fundamental issue with how we discuss responses to the economy and what is in the public interest. The term “fiscal stimulus” betrays an ignorance of our currency and appropriate fiscal <b><u>policy</u></b>.</span></div>
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<span style="font-family: "trebuchet ms" , sans-serif;"><br /> <br />The idea behind fiscal “stimulus” is that the economy is a big market that operates generally on its own, but once in a while it can get stuck. It is during these times that the government can step in <i>temporarily</i> to help give it a push start. But otherwise, the government should behave like all other market participants and not "intervene".<br /> <br /> <br />This framework is erroneous for many reasons, but most fundamentally, it ignores the fact that the national government is the sole issuer of the nation’s currency. <b>The currency-issuer plays a unique and vital role in the overall economy <u>in addition to</u> the government's role of issuing currency to fulfill public purpose</b>. The management of the currency must also take into effect the changes in the demand for its currency that occur during ebbs and flows in the economy. Failure to do so results in painful results for portions of the population.</span><br />
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<span style="font-family: "trebuchet ms" , sans-serif;"><u>Public Purpose</u></span></h4>
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The reason why the typical nation has its own currency is to fulfill public purpose in ways that markets can never do and that meet the needs of its inhabitants: provisioning for defense, building infrastructure, investing in long term research, providing incomes for the elderly and education for the young, etc. Via our democratic process and representative government, decisions are made as to what the government should pay for. This defines the base budget which sets the amount of its currency the government is expecting to add into the economy during a given time-frame.</span><br />
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<span style="font-family: "trebuchet ms" , sans-serif;"><u>Currency Management</u></span></h4>
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While we have a basic tax structure that generally removes a large amount of this newly-added currency back out of the economy, effective currency management becomes critical at this stage. If the government taxes too much out, then it will create unemployment. If it leaves too much in there can be periods of unwelcome levels of inflation. And all of this is also affected by the trade balance (how much currency is being saved abroad), along with the general state of the domestic economy (heavily influenced by levels of private credit growth).<br /> <br /> <br />Imagine a Public Water Utility that exclusively serves a city and has an unlimited source of water (just as the government has an unlimited ability to create its currency). If some residents started building bigger swimming pools and some businesses began bottling and selling the water abroad, but the Utility refused to add more water into the system to compensate for the water being stored and exported, many local residents would go thirsty and maybe even die – probably the poorer ones who lacked money or political clout to get relief. <br /><br /><br />That's basically what happens when the currency isn't managed appropriately.</span><br />
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<span style="font-family: "trebuchet ms" , sans-serif;"><u>A Different Framework</u></span></h4>
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The currency exists to provision the government and fulfill public purpose, <u>but must be managed to also account for broader economic effects</u>. The following are some of the more essential concepts:</span></div>
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<li>Taxation simultaneously creates demand for the government’s currency (we need it to pay the tax), while also reduces spending power (less income gets spent buying what businesses make).</li>
<li>Government spending creates new currency as it pays for resources and labor, filling the “gap” created by taxation.</li>
<li>In this sense, it can be said that taxation creates some unemployment, and government spending restores (or should result in the restoration of) full employment.</li>
<li>It would make no sense for a government to create more unemployment via taxation than it intends to restore by buying enough resources from the private sector and paying for all remaining unemployed workers.</li>
<li>It also makes no sense that the government allows for or encourages trade and the saving of its currency by trading partners, which not simultaneously ensuring the domestic economy can maintain full employment.</li>
<li>Likewise, it makes no sense for the government to allow its currency to be saved domestically, and not ensure that this was factored into the amount it taxes so as to allow the economy to maintain full employment.</li>
<li>So we can say that unemployment is a primary indicator that the currency issuer is not doing its job well, and needs some combination of appropriate tax reductions and spending increases.</li>
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<span style="font-family: "trebuchet ms" , sans-serif;">The Currency and the Job Guarantee: A Perfect Match</span></h3>
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It should now be clear why it makes economic sense, not just social and moral sense, for the currency issuer to fund a transition job for anyone who is able and willing to work but is not currently employed in the public or private sector.<br /><br /><br /> By setting a price for “unused labor” and guaranteeing availability of work, the contributions of the government’s currency will rise and fall automatically during economic cycles, the economy will maintain a base of productivity during downturns, and our workers will be able to retain employment and incomes until they find their next job.<br /> <br /><br />It should also be clear that “stimulus” is a misguided concept for a currency-issuing government. Appropriate fiscal policy is what is most needed. While government investments in infrastructure may vary over time, they should be driven not by "stimulus" goals, but by what is in the national interest and the furtherance of increasing national capital and general well being in all realms of life, including the arts and our ecosystems. <br /><br /><br /><b>If unemployment is persisting, then the government has a responsibility to remove the constraints is has placed on its currency that are giving rise to the problem.</b> Tax policy should be carefully reevaluated with these concepts in mind, but <b>most importantly, we need a job guarantee as the anchor for our economy, our currency, and our society</b>.<br /><br /><br /><br /> <br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /> <br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /> <br /><br />x</span></div>
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Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-32985601605214818572016-06-05T17:10:00.000-05:002016-06-19T12:16:12.333-05:00Taxes. Can't live with 'em. Can't live without 'em.<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; line-height: 32px; margin-bottom: 32px; outline: 0px; padding: 0px; vertical-align: baseline;">
<span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">The question of taxation boils down to how much and from whom should the government take back out of the economy <strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border-image-outset: initial; border-image-repeat: initial; border-image-slice: initial; border-image-source: initial; border-image-width: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">after</strong> it spends. It is a critical question of public purpose, morality, and economic stability. The problem is that we're asking the wrong questions because we don't understand our own national currency. </span></div>
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<span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">There's a lot of emotion and bravado when the topic of taxes comes up. You hear a lot of "me" & "mine", and accusations of the big bad government "stealing" or "taking" what was "hard earned" and "deserved". In some pockets of the USA, it seems there's nothing folk love more than to hate their federal government and its overbearing taxes (even from those who draw their salary or rely on support from it)!</span></div>
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<span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">Now unlike state and local governments, (which do need to collect taxes to pay their bills and make payments on their bonds), the federal government makes its own money - the US Dollar. Every time it spends or makes a payment (usually via its bank, the Fed), it adds US Dollars into bank accounts. Brand spanking new money just shows up in the form of bigger balances in our accounts.</span></div>
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<span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">Now sure, some of us work and collect wages from private companies that don't have government contracts, so it doesn't appear that <span class="underline" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; text-decoration: underline; vertical-align: baseline;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">our</strong></span> money came from Uncle Sam. But we're all part of a bigger economy which would be that much smaller without these US Dollars contributing to private sector sales and incomes. More than likely, there's a fairly short chain of transactions from some recipient of US Dollars from the Government and a purchase at the company you work for, and therefore some percentage of your pay check may well be said to be comprised of Uncle Sam's currency.</span></div>
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<span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">In any case, here's the point. Taxation by Uncle Sam takes <span class="underline" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; text-decoration: underline; vertical-align: baseline;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">BACK</strong></span> some of the US Dollars it <span class="underline" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; text-decoration: underline; vertical-align: baseline;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">FIRST</strong></span> created when it spent. Federal taxes redeem what the federal government first issued.</span></div>
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<span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">Federal taxes don't fund anything. Zip. Zilch. Zero. They are there to ensure we use & accept US Dollars and to remove their added purchasing power from the economy when needed. We're so used to talking in terms of how to "pay for" what our government does, we've forgotten that we issue our own sovereign currency, and that since we left the gold standard, we have no threat of insolvency since no one can demand convertibility.<br style="box-sizing: border-box;" /><br style="box-sizing: border-box;" />This is profoundly different than how the average person thinks about our sovereign government. And it completely changes how we should think about taxes and tax policy.</span></div>
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<span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">To repeat the opening statement: the question of taxation boils down to <span class="underline" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; text-decoration: underline; vertical-align: baseline;">how much</span> of its currency, and f<span class="underline" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; text-decoration: underline; vertical-align: baseline;">rom whom</span>, the government should take back out of the economy <span class="underline" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; text-decoration: underline; vertical-align: baseline;">after it spends</span>.</span></div>
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<span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">When you look at it in this light, ideas like the flat tax suddenly sounds quite irrational and even unethical. Taxes are not about asking everyone to chip in to fund Uncle Sam.<br style="box-sizing: border-box;" /><br style="box-sizing: border-box;" />Rather, we should be asking questions like:</span></div>
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<li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 32px; margin: 0px 0px 15px; outline: 0px; padding: 0px; vertical-align: baseline;"><span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">Who is disproportionately benefiting from Uncle Sam's spending? </span></li>
<li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 32px; margin: 0px 0px 15px; outline: 0px; padding: 0px; vertical-align: baseline;"><span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">Where are the US Dollars accumulating? </span></li>
<li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 32px; margin: 0px 0px 15px; outline: 0px; padding: 0px; vertical-align: baseline;"><span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">What parts of the economy need to be "cooled down"?</span></li>
<li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 32px; margin: 0px 0px 15px; outline: 0px; padding: 0px; vertical-align: baseline;"><span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">Are there entities that are using wealth to destabilize our democratic institutions?</span></li>
<li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 32px; margin: 0px 0px 15px; outline: 0px; padding: 0px; vertical-align: baseline;"><span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">Are there entities or individuals that have too many claims on the nation's limited natural resources and are restricting access in ways that undermine the general welfare or the pursuit of happiness for all?</span></li>
<li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 32px; margin: 0px 0px 15px; outline: 0px; padding: 0px; vertical-align: baseline;"><span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">Are there sectors of the economy that are using their access to money to harm the health of people, living ecosystems, water/air/soil quality, and could a different tax structure result in different outcomes that would bring positive changes?</span></li>
<li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 32px; margin: 0px 0px 15px; outline: 0px; padding: 0px; vertical-align: baseline;"><span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">What kind of incomes do we want to encourage and to leave those receiving them with more purchasing power (e.g. should we lower payroll taxes on lower- & middle-income wage earners) and which kinds of earnings should be discouraged, reduced, or eliminated (such as carried interest)?</span></li>
<li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border: 0px; box-sizing: border-box; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: 32px; margin: 0px 0px 15px; outline: 0px; padding: 0px; vertical-align: baseline;"><span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">How can we better calibrate the tax rates on many of our major tax structures such that they function in a more optimal manner to provide counter-cyclical, stabilizing currency flows to keep the economy healthy?</span></li>
</ul>
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<span style="color: #444444; font-family: "trebuchet ms" , sans-serif;">A tax system overhaul is certainly in order, but until we ask the right questions and are solving the right problem, we won't be able to make the right choices. The first place to start is to understand our modern monetary system. #MMT.</span></div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-45105737626318179912016-03-29T13:26:00.001-05:002016-03-29T16:52:28.748-05:00Modern Money: The Basics<span style="color: #666666; font-family: "trebuchet ms" , sans-serif;">Money is a wonderful human invention – perhaps one of our greatest. Most nations have a monetary system designed to provide for private commercial needs, but also, simultaneously, to enable governments to access sufficient resources to create safe, just and ever-improving societies. <br /><br />How does this work?<br /><br />Since there are many different kinds of money and ways to define money (e.g. banks create a different kind of money than governments), we will use “currency” to distinguish the money that the government issues from all other money forms.<br /><br />The core concepts:</span><br />
<ul>
<li><span style="color: #666666; font-family: "trebuchet ms" , sans-serif;"><b>Why do we have a national currency?</b> When nations and governments are formed, they need a way for the government to obtain the resources it needs to fulfill its role, whatever that may be. In most developed nations, this is typically done using a national currency.</span></li>
<li><span style="color: #666666; font-family: "trebuchet ms" , sans-serif;"><b>What and whose money do governments use?</b> Governments actually create their own currency. There is a basic formula most countries use to create a national currency: (i) decide on a national money unit (e.g. Japan called theirs the “Yen”; the United States the “Dollar”, etc.); (ii) the government issues various forms of money “things” denominated in that unit (Yen or Dollar bills, coins, or electronic bank credits); (iii) impose a broad-based tax that can only be paid using the government’s newly created money. And now the government can issue and spend its own currency to obtain resources.</span></li>
<li><span style="color: #666666; font-family: "trebuchet ms" , sans-serif;"><b>Why is government currency accepted and how does it have any value? </b>The tax obligation causes the government’s currency to become in demand and have value. Since businesses and households must obtain the government currency in order to pay their taxes, it becomes universally adopted in that economy.</span></li>
<li><span style="color: #666666; font-family: "trebuchet ms" , sans-serif;"><b>Does the government need to collect taxes before it can spend?</b> Note above how taxes simply return to the government the money it first created. The spending has to happen first since the only way we can pay taxes in government currency is by first obtaining government currency. The government never needs our taxes in order to spend since it creates the money that it spends.</span></li>
<li><span style="color: #666666; font-family: "trebuchet ms" , sans-serif;"><b>If the government doesn't need our taxes to spend, what are taxes for? </b>Taxes cause demand for the government’s currency so we accept it in payment for goods and services. Taxes also reduce spending power in the economy so that when the government spends to obtain necessary resources, it doesn’t create excessive inflation. Taxes are also useful as incentives and disincentives to influence behavior in the rest of the economy for public policy.</span></li>
<li><span style="color: #666666; font-family: "trebuchet ms" , sans-serif;"><b>If national governments can just create money, are there any limits to what they can spend?</b> Yes, there are definitely limits. A big constraint on government spending is the political process. It is usually difficult to get spending approved and funded, and the public generally require their government to act responsibly and to avoid excessive inflation. The availability of the real resources that can be obtained with the state currency is a firm constraint. So governments can’t use their currency to buy what is not for sale in their currency, but they are never limited by the availability of their own currency.</span></li>
<li><span style="color: #666666; font-family: "trebuchet ms" , sans-serif;"><b>Can sovereign governments go bankrupt?</b> A nation that issues its own currency can never go bankrupt or be unable to pay its bills, as long as those bills are due in the money they create. Governments that owe debt in a currency or commodity they don’t create can certainly become insolvent and default. So too can governments who promise to exchange their currency for another currency they don’t control. However, fully sovereign nations are the monopoly issuer of their currency, and they can always issue their money to make any payment due in their currency.</span></li>
<li><span style="color: #666666; font-family: "trebuchet ms" , sans-serif;"><b>Do governments borrow to fund their spending?</b> Since currency-issuing governments create money when they spend, they do not need to – and in fact can’t – borrow their own self-issued currency. Government bonds can only be purchased with government currency that is already spent into the economy. This means that government bonds are serving some other role in the economy aside from funding the government. It is easiest to say that bonds simply provide a safe interest-earning way to save government-created money. A more complicated reason is that bonds help the central bank manage interest rates, but bonds are never needed to finance government spending.</span></li>
<li><span style="color: #666666; font-family: "trebuchet ms" , sans-serif;"><b>Does understanding modern money provide policy guidance?</b> The knowledge that sovereign nations issue their own currency means that they are not constrained in the same way that currency-using governments are constrained. This has a profound impact on the range of policy options available to such governments that are not available to those with less monetary sovereignty. The debate over public policy is important and differences of opinion will remain: however, the debate should not place artificial constraints on the monetary system, but rather look at the effects of each policy on the economy and the general welfare of the people. An important example is unemployment: we now know that governments can afford to employ everyone who is willing to work for the government’s money, and that the effects of doing so can stabilize and grow the economy while enhancing the general welfare of the nation.</span></li>
</ul>
<br />
<span style="color: #666666; font-family: "trebuchet ms" , sans-serif; font-size: x-small;"><i><br /></i></span>
<span style="color: #666666; font-family: "trebuchet ms" , sans-serif; font-size: x-small;"><i>Credits: As usual, this post relies heavily on the work of other economists and MMT scholars. The inspiration & much of the content here came from Randy Wray's many works, including the excellent presentation </i></span><span style="line-height: 107%;"><span style="font-family: "trebuchet ms" , sans-serif; font-size: x-small;"><a href="https://www.youtube.com/watch?v=-KRi9nF8BiA" target="_blank">Modern Money Theory: Intellectual Origins and Policy Implications</a></span></span><i style="color: #666666; font-family: 'Trebuchet MS', sans-serif; font-size: small;">.</i><br />
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Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-82361112404125781982015-06-01T21:17:00.000-05:002015-06-01T21:17:02.565-05:00You know you understand modern money when...<span style="color: #666666;"><span style="font-family: Trebuchet MS, sans-serif;">Some people can smile at the future when others frown and cower. Some people can see solutions when others see only problems. </span></span><br />
<span style="color: #666666;"><span style="font-family: Trebuchet MS, sans-serif;"><br /></span></span>
<span style="color: #666666;"><span style="font-family: Trebuchet MS, sans-serif;">Sometimes it's a simple as changing your perspective; of learning something you didn't know.</span></span><br />
<span style="color: #666666;"><span style="font-family: Trebuchet MS, sans-serif;"><br /></span><span style="font-family: Trebuchet MS, sans-serif;">You know you understand modern money when...</span><span style="font-family: Trebuchet MS, sans-serif;"><br /></span></span><br />
<br />
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know the difference between a currency issuer and a currency user.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that the US, UK [or name your sovereign currency-issuing nation] will never be like Greece.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that currency-issuers can never run out of their own money.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that too much foreign-denominated debt can limit a currency-issuing nation's options, but debt denominated in their own currency cannot.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that interest rates are established by the central bank, not by market forces.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know sovereign (currency-issuing) nations will never be forced by "markets" to pay interest rates above what it desires.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that taxes simply remove money that first came from the government when it spent them into existence.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that taxation creates demand for the sovereign currency and influences economic behavior but in no way funds the government.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that China only obtains US Dollars because they sell the US a lot of real goods.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that China holds US bonds so they can earn interest on US Dollars obtained from trade, not because the US needed to borrow money from China.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that it is our <u>real resources</u> that are scarce and that money is always able to be issued to utilize (or preserve) scarce resources.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that involuntary unemployment can be ended anytime with the right kind of tax cuts and spending increases.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that recessions can always be ended with the right combination of tax cuts and spending increases.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that if the government "tightens its belt" during a recession, the recession only gets worse.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that the fiscal policies of a currency-issuing government are <u>nothing</u> like the budgets of a business or household.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that <u>real</u> fiscal responsibility means the currency-issuing government is responsible for balancing the economy, the needs of the people and the sustainability of resources, <u>not</u> balancing the accounting of tax receipts and spending.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that the national "debt" is actually the net savings of the nation's currency around the world.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that reducing the "debt" means reducing those savings.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that children and grandchildren can never be burdened by the accumulation of such savings.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know the government can always pay its bills and any future financial obligations when the time comes, and that what really matters for the future are the real resources needed by the people.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that if a nation has the necessary human and real resources, it can always afford to deploy them for needs such as healthcare or modern infrastructure.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that nations can always afford to invest in their human capital such as education, research & technology development.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that most financial crises are related to too much <u>private</u> debt, not how much money the government had issued into the economy over time (what many call "deficits" and "debt" but are really net injections of new money accumulated as savings).</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that businesses grow when they have more customer demand, not because they have less taxes or lower interest rates.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that customer demand comes from growing household incomes that are subsequently spent.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that taxing reduces customer demand and that government spending increases it.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">You know that all sovereign nations can use modern money for the well-being of their people, and you are intent on seeing that happen!</span></li>
</ul>
<span style="color: #666666;"><span style="font-family: Trebuchet MS, sans-serif;"><span style="color: #666666;"><span style="font-family: Trebuchet MS, sans-serif;"><br /></span></span>
When you understand modern money you can smile at the future. Spread the hope!</span></span><br />
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Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-66354546145499607042015-02-26T22:31:00.000-06:002015-02-28T19:22:53.814-06:00When good analogies go bad<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We've all heard it. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">"If I ran my business like the government I'd be bankrupt". </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It sounds so intuitive; so moral. It would be irresponsible for a government to keep spending more than is earns. And for many governments, it really is true - all those cities, states, and the nations that do not issue their own currency (like Greece). Yes - they all have to get the money they spend because they are all <u>users</u> of a currency.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><b>But what about nations that <u>issue</u> their own currency?</b> After-all, that's most sovereign nations. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Let's go back to our analogy. We said if I ran my business like the government... stop right there. What business issues its own money? Businesses are currency <u>users</u> just like cities, but the United States is a currency issuer. In what way can a business <u>ever</u> run like a currency issuer?<br /><br />Some analogies are just bad. So bad, in fact, that they can mislead whole nations into thinking something false is true, and something true is false. Or, to put it in moral terms, they lead us to believe that something very destructive to our economy is actually the only righteous solution, and that the very thing that could help society and people is deemed irresponsible and even evil. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">That's what happens when good analogies go bad.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">So how can we best describe a sovereign currency-issuing government that is "of and for the people"? Is there a simple metaphor that can resonate with our sense of morality and be intuitive? </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Honestly, I'm still searching for the best answer to that question and would love your input, but one I find helpful is this: <b>the government should run itself like a bank for public purpose, not like a business for profit.</b></span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Yes, rather than the household or business metaphor, which draws images of "fiscal responsibility" through annual balanced budgets, the bank analogy is a much more appropriate metaphor for currency-issuing nations.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Here's why.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Banks have been granted a special power to <u>issue new money</u> for profit-seeking people & businesses, or for those who can demonstrate an ability to repay. They perform this public service so that resources that otherwise could not be afforded out of savings can be deployed to create value. Every new loan results in new money going to fund some asset. We rely on banks to evaluate good investments and the ability of those that seek them to pay back their loans. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Bank credit is a powerful invention that can create real assets that benefit people and businesses. <i>(Note: this special money-creation power given solely to private banks needs to be carefully regulated so that this power isn't abused for speculative & non-productive purposes that increase financial instability and risk, as is too often the case today!)</i></span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">With all that said, <u>bank money creation is limited</u> to only those things that have sufficient cash flow to enable their repayment with profit. Bank credit doesn't work well for the host of other things that nations deem important but that have little or no immediate monetary benefits (e.g. national parks & highways) or that take too long to generate cash (e.g. much scientific research & technology development).</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">For thousands of years societies have organized themselves to create and benefit from such things that serve a common good. </span><br />
<br />
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">A city temple for religious cohesion and authority for the settlement of disputes. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">A great wall of protection from invading northern hordes. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Aqueducts to bring fresh water from miles away. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Roads and highways to enable commerce or support troop movements. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Universities to educate the next generation of civil leaders and advance the nations knowledge. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The list can go on and on. </span></li>
</ul>
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">In each case, these projects and initiatives were deemed to be in the interest of the collective society or the ruling class or protection of the state. They </span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">don't generate near term cash flow for profit-seeking interests.</span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">How did we, as evolving and developing societies, solve this? We created sovereign money!</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /><b>Just as we give banks power to create money for private interests, we have also granted to our government the ability to issue new money for public purposes. </b></span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br />Governments shouldn't be compared at all to a business that balances a budget, but rather to a bank that issues money for what the people deem to be their national interests. Nations differ on their priorities but most seek some level of national security, rule of law, general education, public health, public safety, national infrastructure, research and development, and much more.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">As the currency-issuer, the government has a solemn responsibility to make sure that it issues (net of what it taxes back) just the right amount relative to the obligations it has been directed to perform. If it issues too little money it creates unemployment; too much and there's a risk of inflation. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It is quite obvious that our governments are issuing too little today, given the high unemployment numbers and low economic growth.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Think of the government as a public bank - issuing money for public purpose. It can do so without limit, so it is up to us to decide what is in our best interests and to invest in our nation's & children's future. Full employment should always be our goal, but there are also many other very important initiatives that we can and should direct our resources toward: from transitioning our economy toward a sustainable energy & resource system to investing in the skill development of all workers to ensuring we have the advances in medicine and resources for medical care to meet the needs of all. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">A balanced budget would be disastrous for our nation, economically and in the toll it would take on human lives and the opportunities for the next generation due to lack of investment in the real things needed for health and prosperity. It would starve our economy of sufficient inflows of money to make up for the money leaving the economy via imports and what sits on the sidelines as our total national savings. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">All because of a bad analogy.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Sovereign governments are <b><u>nothing</u></b> </span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">like businesses that earn income to pay their expenses. They are </span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">like banks - issuing money for public purpose. We're not broke. We're not over-indebted. We're not fiscally irresponsible when we issue more money than we tax. That's just a sovereign government acting normal - we just need to make sure they do it enough to balance the whole economy and keep our nation moving forward. With this understanding, the future suddenly gets a lot brighter!</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Does this metaphor make sense to you? </span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">How can we improve it or is there a better one?</span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">What do you think is in our public interest today?</span>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-58269611889623030022015-01-27T21:52:00.004-06:002015-01-28T06:31:47.930-06:00How to run a currency Part V: Restoring hope<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We come to the final installment in this series on how sovereign nations should run their national currencies. The focus has been on restoring the primacy of good "fiscal" policy; understanding its vital role in balancing the economy and developing national capital. State-money was created for the very purpose of a people "affording" those things that are in the public interest and might be otherwise unattainable. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We will save for another day the topics of central banks, interest rates, and financial institutions (the realm of "monetary policy"). They are deliberately left out of this story because they already get too much attention! When countries have returned to running their sovereign currencies properly, they will find that they don't need to rely on them nearly as much as they want us to believe. But we can still find some small useful roles for them to play in serving the needs of a productive society. (Banks can actually play a remarkably beneficial role if they are kept on the tracks, helping evaluate good investments and creating the money for real productive assets to become reality).</span><br />
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<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Building a hope-filled future for the next generation</span></h4>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Just as we did with taxation, we begin should always begin discussions of government investment or spending with the setting of objectives. What do we need or want? What are we trying to achieve? There's plenty of room to debate and let our democratic process sort out what rises to the top, but let's make sure we're debating with the same fiscal rule book - the one that says "we can afford it" - then we can analyze the effects on the economy, and whether these are things we want to be financed via new injections of government money or whether they are best left to the private sector.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We should also keep reminding ourselves that government "funded" does not have to mean government "run". We can have local governments manage job programs or cities decide on their utility needs but still choose to have funds issued from the Treasury to pay for it if so desired (e.g. to lower the debt burden of cities and the tax burden of their inhabitants). </span></div>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">So, are you ready to allow yourself to hope in our nation's future again? Are you willing to say to our children that they can have it better than us? I am. In fact, I'll go so far to say that this generation is the generation of hope. I am convinced that they will rebuild and restore and regenerate and reinvent: leaving the world a better place than what we gave them. I suggest we get our old flawed paradigms out of their way because they have their priorities heading in the right direction! </span></div>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What follows is a starter list for investing in a great future. Add your own ideas. Start the conversations and begin to influence the influencers. Ask your elected representatives what investments they think are important for their children and whether they are willing to begin promoting them. That's what national currencies are for!</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Let me add here that I reject the Conservative-Liberal, Republican-Democrat bifurcation of issues and solutions. I don't belong to any political party. My desire is to promote solutions that are based on shared human values and that achieve our stated objectives. For me, they are heavily influenced by the life and teachings of Jesus (Isa or Yeshua to some), but each of you will have your own. We will find that there is much in common when we get the understanding of sovereign money right and then put people and our natural environment at the fore as we sort out our objectives and priorities. </span><br />
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What follows is not a political party message but simply what makes sense to me as the right way to run a national currency. I've grouped them into two categories: developing human capital and developing other national capital. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">I'm sure many of you will have even better ideas - let's hear them!</span></div>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><b><u>Developing Human Capital</u></b></span></div>
<div>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">It's always starts with the youth - they are our future. Fund education and make it work for all. Train our future work force; our future scientists, physicians, musicians, teachers, and entrepreneurs. An educated people is essential to the progress and sustainability of any nation. Ensure we attract good educators with good pay and good schools. Remove the financial barriers so any aspiring person can learn what they need to succeed and contribute without going into debt. Let's get every mind we can educated and every skilled hand trained.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Invest in research and costly, long-term development of technologies and knowledge. Nations should employ every research scientist they can. By closing labs and de-funding research, what is the cost in terms of delayed medical breakthroughs, un-invented productivity gains, lack of solutions to energy and other sustainability challenges, and lost first-mover advantages for our workers? </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Provide work for all. A fully employed nation is a productive and learning nation, building knowledge, skill, and passing it on to others. There is never an excuse to have people being unproductive and losing employable skills through long-term unemployment. A well designed <a href="http://e1.newcastle.edu.au/coffee/job_guarantee/JobGuarantee.cfm" target="_blank">job guarantee</a> is essential to avoid the disastrous waste of human lives and potential good they would otherwise do for the community, not to mention the positive impact it has on lowering welfare dependency, crime, and a host of other social ills.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Help working parents, especially those raising children alone or on low-incomes. Funding childcare makes a lot of sense to help the "working poor" and single parents to earn a good living and hold down a job while also providing their children with an opportunity for early pre-school development.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Fund medical care for all. Health is essential to the pursuit of happiness and the advance of productivity and prosperity. Why would we reserve it for only those of means? We don't say only the wealthy can drive on the roads or appeal to the courts. Investing in the health of our people should be a priority for all. There are ways to do it without degrading the level of care.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Fund the arts. Creativity, beauty, and free expression enhance the sciences and protect democracy. S.T.E.M. to S.T.E.A.M. (adding arts to science, technology, engineering and math) is proving to be a wise approach to education and innovation. The greatest civilizations advanced the arts and the arts advanced knowledge and enriched the people. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">If it starts with the youth, it ends with the wise. Provide for the elderly. Period. Everyone has a mother, father, grandparents. It is a shame to any society not to care for their elderly. What an amazing resource they can be for a society: mentoring the next generation, advising businesses, volunteering in not-for-profits, supporting the arts and public facilities. We have made a promise to provide income to them in their retirement years, but there are always those seeking to undermine this promise and give the financial industry control over it. Social security should be provided at a living wage along with adequate provision for housing, health services, quality food, and personal care. We can afford it. We are morally obligated to protect it. And it is a wise investment in our future. </span></li>
</ul>
</div>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><b><u>Developing National Capital</u></b></span></div>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Banks create money when they lend, ideally to enable the creation of new productive assets. The requirement for bank lending is that there are future cash flows generated by the asset or borrower that will be sufficient to repay the loan plus interest. But what about capital assets they banks won't fund but are still valuable for a nation? What if the risks are too high or the rate of return too long or the cash flows non-existent or insufficient? Do we just live without? </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Gladly, no! Again, this is why we created sovereign currencies. We have the ability to simply create (issue) money to develop the kinds of national capital that private equity and banking won't finance. In some cases we simply deem such investments undesirable for the private sector to fund and own (perhaps because doing so would support monopolistic rent-seeking). </span><br />
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Research and development. </span></li>
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Governments that fund labs and research centers can invest in lengthy and expensive research projects that are beyond the ability of profit-seeking firms and their investors to manage. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">An incredible amount of scientific and technological breakthroughs have occurred via the government sponsorship of research, and it should be high on the list of any nation to create an environment for their best and brightest minds to stay home and advance knowledge that can become part of a nations capital. </span></li>
</ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Infrastructure. </span></li>
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What separates nations that advance and those that don't, aside from political stability and the rule of law? </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It is always in the national interest to build and invest in ports, navigable rivers, roads, bridges, rail, airports, electricity, communications fiber, hospitals and schools: all the real physical capital that enables the most efficient forms of productivity, expands the boundaries of commerce, and facilitates the transportation of goods and people. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">There is no reason sovereign nations should let their infrastructure degrade. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Nor should developed countries think they can't afford to invest in the next generation, state-of-the-art infrastructure that will move their economy forward or benefit their people. </span></li>
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">National high speed rail networks? </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Fiber communications in every city and town? </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Updated water purification? </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Mass transit for our cities? </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It's only a question of whether it is beneficial to the people, and whether the nation has the labor and real resources to build them.</span></li>
</ul>
</ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Environment. </span></li>
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">People are part of nature: m</span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">arkets are man-made. </span></li>
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It seems strange to even say those words, but we've lost touch with the way all life is sustained by the planet we share. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We've come to think of the economy as a "natural" force and nature's resources and unlimited production inputs to be consumed. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">The toll is mounting and it's not a game we can win. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Our job as stewards of the remarkable gifts of life, knowledge, and consciousness is to be deliberate in designing our economy in a way that ensures all our life-giving systems are maintained and even rejuvenated. </span></li>
</ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">But here's the good news: we can afford to change. </span></li>
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can afford to invest in different forms of energy production, transportation systems, and recycling systems. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can afford to set aside national parks on land and in the oceans. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can reshape the incentives in our economy to maintain economic growth while reducing consumption of resources. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Investing in a our environment is building national capital: clean water, fresh air, diverse wildlife, healthy soil. </span></li>
</ul>
</ul>
</ul>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Of course, we've only scratched the surface here. We could expound on each of these, and go on to designing the future of livable and sustainable cities, national defense, distributed clean energy infrastructure, energy-efficient building codes, and more. </span></div>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">And we should. </span></div>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">This is what a nation's fiscal planning process should look like. Political debates should be over what investments are most in the interests of the public they represent, and what most helps the growth of the economy and the health of the land. </span></div>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Putting it all together</span></h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">So now we know that to run a sovereign currency, we should: </span><br />
<br />
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">understand how it works and then get the language right so we know what we're doing;</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">establish a tax system that creates universal demand for our sovereign currency;</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">implement other taxes as desired to achieve objectives in our economy and for the good of the people, environment, and economy;</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">determine what investments in people and other capital are needed or desired for our shared future; and</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">direct our government to issue whatever money is necessary to effectively and efficiently meet these objectives.</span></li>
</ul>
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">This isn't about "big government", but about using the nation's money for the good of the people, the economy, businesses, and the environment. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Whenever we have unemployed people, underutilized capital, and businesses aren't investing, it is evidence that the the private sector is experiencing insufficient sales. Businesses in the aggregate are not selling all the output so they can't keep paying for all the inputs (including labor) and don't see a reason to invest in growth.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Since all national money is connected on a giant network of balance sheets (literally through the banking system), and every transaction has two sides to it, we realize that just as exports increase sales in the private sector, so too can reducing taxes (if some of the money not taxed is then spent domestically), and also increasing government investment (people are given incomes through direct employment or businesses have increased sales). </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><b>It becomes very clear that the ability to balance our economy and help the private sector thrive is <u>completely within the control of a sovereign currency-issuing nation</u>. </b></span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><b><br /></b></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><b>There are no more excuses. </b></span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><b><br /></b></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can certainly <u>choose</u> not to use the system well, but let's not pretend then that we also care about ending unemployment, reducing poverty, providing for the needs of our elderly, or caring about the impacts of climate change. By not adding flows of money into the economy when its needed, we are deliberately affecting human lives and futures. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">There isn't an alternative way, despite our decades of failed attempts at finding one. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Let's also not pretend that we really want a robust economy, with thriving businesses and entrepreneurs if we leave the private sector in the sorry state we have for the past seven years, doing nothing to fill the massive gap in incomes and spending.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">If we did, we'd do something about it because we have the ability to do whatever we have the human ability and real resources to do. And in reality, most of us do care. Most of us do hope. Most of us do seek for a prosperous and healthy future for all children. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">The incredibly good news is that mankind has innovated a most remarkable solution to compliment capitalism for the benefit of all: a sovereign currency that is of and for the people. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Let's use it!</span></div>
</div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-59107943864737469332015-01-25T14:31:00.000-06:002015-01-28T12:51:12.212-06:00How to run a currency Part IV: Developing national capital<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjnXyHg65-Wc1NNFBbBPLqGn3fdeX0I2ceGuTlrqwCiiV5rzRgWl38mwrnEj5g7Q3fa_qzf9i4rEP4WX2DElUnvPEnISzbjjiOO0sHYkRWKowdLj2Kt0nYQ-51aWJ6GehmnfMTI5_jSsvo/s1600/gov_investment.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjnXyHg65-Wc1NNFBbBPLqGn3fdeX0I2ceGuTlrqwCiiV5rzRgWl38mwrnEj5g7Q3fa_qzf9i4rEP4WX2DElUnvPEnISzbjjiOO0sHYkRWKowdLj2Kt0nYQ-51aWJ6GehmnfMTI5_jSsvo/s1600/gov_investment.png" /></a></div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">A nation's capital is comprised of its resources that are available to be used productively to generate wealth and "the pursuit of happiness". The concept of capital, versus consumed resources, is that they can be used repeatedly to produce other goods, services, or otherwise provide value to the people. I use the phrase "the pursuit of happiness" to broadly encompass concepts like liberty, justice, and security which can be seen as necessary or desirable to its achievement. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">A highway or an airport is national capital: used for a nation's commerce or the public's pleasure. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">An educated and trained adult is part of a nation's "human capital": providing a life of productivity, invention, service, or artistry that contributes to society.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">A navy and air force is capital: used to defend the nation's shores, protect its civilian or commercial shipping, or provide assistance during natural disasters. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">A national park is capital: providing a wealth of enjoyment to the people and the preservation of vital ecological systems that nurture the environment and sustain life. </span></li>
</ul>
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">In our previous posts in this series, we have set out to rediscover how sovereign-state money actually works. We exposed the poor use of <a href="http://itsthepeoplesmoney.blogspot.com/2015/01/how-to-run-currency-part-i-getting.html" target="_blank">misleading terms</a> like "debt" and "deficits" that don't apply to sovereign governments, and defined new terms that are more useful to us as we seek how to apply our national currency for the greatest good.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">This led us to taxation. After dispelling the notion that taxes fund currency-issuing governments, we <a href="http://itsthepeoplesmoney.blogspot.com/2015/01/how-to-run-currency-part-ii-taxation.html" target="_blank">outlined the principles</a> that should guide a people-centric tax policy and then applied this framework to come up with <a href="http://itsthepeoplesmoney.blogspot.com/2015/01/how-to-run-currency-part-iii-tax-reform.html" target="_blank">new approaches</a> to our out-dated tax policies. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We're now ready to learn the final part of running a modern sovereign currency in a way that is of and for the people.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Bid adieu to Tax and Spend!</span></h4>
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Tax and spend. These words have been drubbed into our minds so often, we just accept them as fact. They always go together, taxes must come first, and spending must be limited by taxing and debt. Right? </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><b>Wrong!</b> It makes no sense at all when you stop and think, but who's going to take the time to do that? Even the "non-partisan" Congressional Budget Office is stuck on stupid and <a href="http://itsthepeoplesmoney.blogspot.com/2014/07/the-myth-of-loanable-funds.html" target="_blank">perpetrates myths</a> that are learned and repeated by all our elected representatives. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We desperately need to reorient our thinking, and it's going to take a bit of collective work from all of us to educate a new generation and overthrow the mountain to politicized economic garbage that is served up every day in the media, in town halls and throughout the blogosphere. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What makes our re-education challenge harder is that for regional and local governments, or even some nations that have given up their sovereignty by using a currency they don't issue, taxing actually does fund their spending. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">So it's true in some cases but not in others... yeah, I know, no one said this was going to be easy! But then again, who said liberty and justice ever come easy? Let's get it right so we have a fighting chance!</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We've covered taxing in some detail, and we now know it now has nothing to do with funding government. Federal government "budgets" need to be a thing of the past. We must separate our fiscal decisions into their respective categories and debate their merits independently. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Tax for tax reasons alone with no consideration to "paying for" anything. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Separately, debate and establish national objectives and invest accordingly.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Pay attention to the <u>effect</u> each action has on the economy to avoid unwelcome inflation or market distortions.</span></li>
</ul>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Honestly, it's not all that hard once we get the best minds focused on the right problems. </span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">So now you may be wondering why this final post isn't about <u>spending</u>. After-all, that is the final piece we're missing to run a currency, right? Well, is it?</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<h4>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Why do we have a national currency?</span></h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Let's try to go back to the beginning: to the birth of a nation. What are we trying to accomplish, and how does a form of national money fit into it? </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">A group of people, perhaps of common language, seek to live in freedom, improve their lives, protect their domain from those who might seek to conquer or take advantage of them, and sustain this so that future generations can build upon it for their own futures. </span><br />
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsp5PUGsV1bRYNtL742x_THAd4fbBfpKCodt-Amw70-HZDrn4hX1JZKoawGP4Ujnr018LAwxP_NH_TXe7bZ8eBcKmWX0Eh00qhlAEF3_uHQgbs3XNlx2GkIzGYhDVCA5XmQO7G7CjJWVk/s1600/government.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsp5PUGsV1bRYNtL742x_THAd4fbBfpKCodt-Amw70-HZDrn4hX1JZKoawGP4Ujnr018LAwxP_NH_TXe7bZ8eBcKmWX0Eh00qhlAEF3_uHQgbs3XNlx2GkIzGYhDVCA5XmQO7G7CjJWVk/s1600/government.jpg" height="200" width="200" /></a><span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">They desire to live in peace, prosper and pursue happiness - whatever that means for each individual, family, or social unit. To get there, they must establish rules for their society, rules for their commerce, rules for good conduct: hence the establishment of representative government that is of and for the people. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">But there's more: they need to accomplish certain things together to improve their lives, protect their land, expand their commerce, expand their knowledge, and lift the next generation on their shoulders and encourage them to reach higher still. They aspire to achieve great things together, while still protecting the rights and liberties of each one.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">And that's where the national currency comes in. It was invented to enable a people, through their representatives, to accomplish their collective goals without the dictator's whip and sword. The use of State money enables a nation to engage the wheels of commerce to build up that nation's capital stock for the betterment of all. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">How? Simply by issuing the nation's money in payment to business or individuals. Once the currency has become established in the country (<a href="http://itsthepeoplesmoney.blogspot.com/2015/01/how-to-run-currency-part-ii-taxation.html" target="_blank">remember Part II</a>), it can be issued on demand to deploy resources for the common good. Ideally, it is largely deploying underutilized of unemployed resources, but in critical circumstances, it might need to take resources that are productively employed (such as in WWII).</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Generally though, the issuance of new money to deploy resources is geared toward the improvement of the nation and a better future for its people: in other words, <b>developing national capital</b>. When done well, the new money creates future productivity or other forms of value desired by the people.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We've become used to language of givers and takers; of the productive and the unproductive. But we tend to create the world we speak of, and so we destroy rather than build up. Our language becomes self-fulfilling. That's why I don't consider government "spending" to be the right final piece to our currency puzzle. Spending doesn't explain what we are trying to accomplish. We are investing in our present and our future: investing in ourselves and our descendants. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">I don't see providing income to our elderly as welfare, but as an investment in our society. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">I don't see providing work and skill training to the unemployed as welfare but an investment in national human capital and future productivity and societal well-being.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">I don't see paying workers to repair roads as government waste, but as an investment in infrastructure capital.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">I don't see providing health services to all as a burden on the economy but rather a stimulus to it, as more people are healthier, happier, productive, and able to spend, save and invest.</span></li>
</ul>
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Why did we stop investing?</span></h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It's quite simple, really. We just got scared by big accounting numbers and a very clever marketing strategy. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Some very wealthy people with a certain agenda began to spend a lot of money to convince the world that the accumulation of new government money in an economy inevitably leads to horrible outcomes such as national insolvency or hyper-inflation. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">They added up the amount of government money that people have saved and that sits in interest-earning accounts at the Central Bank, and they called it "unsustainable debt", forgetting it was the people's desire to save that led to it being there in the first place. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">They built "national debt clocks" to scare the populace, and developed "think tanks" (propaganda special units) to push the message far and wide under the guise of sound economics and a pretense of academia. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">They wave their arms about screaming "Weimar" and "Zimbabwe" whenever the government injects more money into the economy, forgetting that our nation has enormous underemployment and underutilized productive capacity that needs to be deployed - in stark apposition to the plight of those nations.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Myths became facts; lies became truth. </span></li>
</ul>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What happens when we take off the blinders and realize that we have no fiscal challenges? That our nation can never go bankrupt? That "the economy" and "free markets" don't rule us? That we don't have to choose between a sustainable, life-giving planet and a robust economy? That we're not second-fiddle to China when it comes to building our nation's future infrastructure? That we don't have to beg Wall Street for the money to repair a bridge, build new sewer and water treatment plants for our cities, or invest in state-of-the-art mass transit systems. </span></div>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What do we demand of our elected representatives when we <a href="http://neweconomicperspectives.org/2010/04/paul-samuelson-on-deficit-myths.html" target="_blank">end the deceit</a> and simply tell the people, "we can afford whatever we can do with the resources we have"?</span></div>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It starts with removing the self-imposed constraints in our minds and our politics, and defining our shared objectives: then let's put our sovereign currency to use to solve our real-world problems and invest in the rapid development of national capital.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What do you think that could look like? Give it some thought as we save that for our <a href="http://itsthepeoplesmoney.blogspot.com/2015/01/how-to-run-currency-part-v-restoring.html" target="_blank">final post</a> in this series! </span></div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-50119753150266787922015-01-19T14:47:00.003-06:002015-01-20T08:28:36.415-06:00How to run a currency Part III: Tax reform that's of and for the people<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">There is a lot of discussion these days about tax reform, and there are plenty of folks ready to parade out their solution to the problem of funding government and tax "fairness". <br /><br />Wait, did we say funding a sovereign currency-issuing government? What do taxes have to do with that? Well, as we've gone over already, absolutely nothing! <b>Which is probably why we tax almost everything wrong! How many of our economic and societal troubles stem from bad tax policy?</b> I hazard a guess that it's not an insignificant quantity.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br />When you start with an outdated and obsolete understanding of how our national currencies work, then you end up with counterproductive (at best) or outright destructive policies that hurt the economy and society as a whole. It seems to me that there is no cohesive economic framework (</span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">but there's no shortage of ideology) </span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">behind the ideas currently being debated by our politicians and political interest groups. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br />All parties approach the subject from the faulty perspective of raising money for the government to spend, and much less thought is given to: </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<ol>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">what </span><u style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">objectives</u><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"> we are trying to achieve with each and every tax; </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">what </span><u style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">effects</u><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"> our tax policies have on the decisions of individuals and businesses;</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">how do these effects fit into the picture and </span><u style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">health of the entire economy</u><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">, considering the net flows between the private sector and the government, our trade balance, and the levels of private debt; and</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">what are the </span><u style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">impacts to society</u><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"> and the maintenance of our liberty and democratic ideals.</span></li>
</ol>
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">The <a href="http://itsthepeoplesmoney.blogspot.com/2015/01/how-to-run-currency-part-ii-taxation.html" target="_blank">previous post</a> attempted to reorient our thinking about why we tax and what principles should guide us as we think about tax reform. These principles are based on a careful understanding of how our monetary system functions in the real world, so that we can understand the implications on the economy of our current and proposed approaches to tax policy and tax rates. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Applying taxes to the real world</span></h4>
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Remember that our approach to what to tax and how much to tax is guided by our real-world objectives: the will and desires of the people; the health of the economy; the stewardship of the land we inhabit; the availability of real resources; the development of national capital. Simply m</span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">aximizing the number of its own IOUs the government collects back from the people (e.g. the concept behind the so-called Laffer Curve) is irrelevant and counterproductive to achieving our priority objectives.</span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">What are our national objectives?</span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">A sovereign currency that provides maximum policy space for our nation?</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">An economy that provides meaningful work at a living wage for all who desire it?</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">An economy that doesn't disproportionately favor the rich and powerful to the detriment of the poor and weak?</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">An economy that provides incentives for innovation and entrepreneurs?</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">An economy that grows and rewards productivity and progress that benefits all?</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">An economy that is in balance with our environment and that sustains & rejuvenates life in all its diverse forms?</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">An economy that encourages giving?</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">An economy that encourages saving?</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">An economy that protects the democratic process and the voice of the people?</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">An economy that respects other nations and seeks trade arrangements that are mutually beneficial?</span></li>
</ul>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"></span><br />
<div>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span></span></div>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">
We could go on... the point is that defining collective objectives should be part of our public discourse and political process.</span><br />
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Once we have our objectives, we can determine whether the way we tax is helping or hurting our ability to successfully realize our goals. </span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">I am (thankfully!) no expert in the intricacies of the tax code. But let’s try to apply our principles and see how we would rethink our tax system to achieve certain goals*.</span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<h4 style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Social Security taxes and Trust Funds</span></h4>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Here we have a classic "pay for" error. We have implemented a tax on incomes under the guise that we can collect government money and hold it for the future so that those who worked hard today can get some income after they retire. There were political reasons why Roosevelt did this at the time, but I suggest it's time we remove the veil of deception. The greatest assurance of its protection isn't pretending that the people put in the money to pay themselves back later, but rather that the government never has any excuse that it can't afford to pay. </span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
</div>
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Our objective is to provide adequate incomes for retirees so that our elderly are not living destitute or in poverty. Fine - we can always credit bank accounts with whatever amount of newly issued money we deem adequate for the purpose. We don't need taxes for that. Not today and not 40 years from today.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What is the effect of our payroll tax? It reduces the income today of all our workers, which means they have less money to spend or save or give away, and this also means businesses have less customers and sell less product.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What could we do differently? Eliminate the Social Security taxes and the so-called Trust Funds, and replace it with a constitutional promise: the government will guarantee all future social security payments forever. Period. And we can make sure the amount paid adjusts as needed to ensure it is adequate for the needs of our elderly.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What is the effect of this change? People have more income to spend, which means businesses will expand and more jobs will be added to the private sector. The Government's positive fiscal flows will increase and the net financial savings of the private sector will also increase.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">The same concept applies to Medicare taxes.</span></li>
</ul>
<br />
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<h4>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Income taxes</span></h4>
</div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Here we usually make the error of considering this as a primary source of revenues for the government. Why do we want to tax incomes? Are they "bad"? Do we need to?</span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
</div>
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">There are some possible valid objectives for income taxes: </span></li>
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">reduce the spending capacity of the private sector to give "space" for what we want the government to do so it isn't competing for scarce resources and driving up prices (the mass of unemployed and underutilized resources today tells us we have the opposite problem - taxes are too high); </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">reduce the incomes of certain sectors of the economy more than others (such as high income earners versus the poor) to avoid excessive inequalities that harm the economy, the political process, and the social structure of the nation; </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">maybe income taxes are one of the taxes we should use to create universal demand across the economy for the nation's currency; </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">it is an easier tax to collect since employers take it directly out of paychecks, whereas other taxes might be harder or costlier to enforce and collect; </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">perhaps it can be useful as part of our automatic stabilizing function since as incomes fall, tax receipts fall, which is counter-cyclical to the economy.</span></li>
</ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">The question economists should study is whether this tax is the <u>optimum</u> solution (or part of it) to the universal tax need and counter-cyclical flows, and if so, at what level.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We should also study the effects of income taxes on various income brackets to see how income taxes affect spending and investing decisions, and its impact on the poor. Progressive taxation is not about taking from the rich to give to the poor. It is about achieving objectives such as reducing inequality or placing a governor on excessive wealth concentration because due to the threat such concentrated power has to the political process, the fair representation of the people, and the health of the economy.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">How could we do it differently? We could lower the income taxes to the minimal amount needed, change the tiers by income levels, or replace it entirely with alternatives that achieve the same or better societal and economic results. Today, I believe a lower tax overall and some adjustment to the tiers would be an improvement. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">An alternative to relying on taxing income as our base tax, which could also be "progressive" in an environmental or carbon sense, would be to have a property tax based on square feet of space (or even cubic feet of space as suggested by L.R. Wray). The idea being that those that own larger living and business spaces are using more energy and producing more carbon emissions. Combine this concept with credits for energy savings and renewable energy, and ensure the minimal living income for the poor is sufficient to cover any resulting increase to their rents.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Remember, the amount the government collects is irrelevant <u>for its own needs</u> - it is the effect on the economy that matters.</span></li>
</ul>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<br />
<h4>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Business profits & Capital Gains</span></h4>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Liberals love to talk about taxing businesses more so that they "pay their fair share". Conservatives love to justify low taxes on capital gains and dividends due to "double taxation" (the business profits get taxed first and then we tax the distributed dividends). But why do we tax business profits at all? Why not just tax the distributed income or capital gains from a sale and treat it all the same?</span><br />
<br />
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">In an economy that has capitalism at the core we generally want a profit incentive. Taxing businesses disadvantages then to foreign companies and reduces their ability to grow. Why would we want to discourage profits? Eventually, all business profits have to end up being either reinvested in something or paid out as dividends. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">If our objective is to provide incentives for entrepreneurs and investments in productive businesses and technologies, then taxing profits only takes away from the ability of businesses to reward risk-taking investors and to reinvest profits into R&D or growth. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Capital Gains and dividends are often the only sources of income for the very wealthy so why does it make sense that their incomes are taxed at such lower rates than the lower-income workers that produce the gains for the capitalists? Do we want to give incentives for the growth of a "rentier class" that makes money from money without being productive or enhancing the nation's capital stock? Low capital gains and dividends tax rates versus higher income tax rates contributes to growing wealth inequality.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What could we do differently? </span></li>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Eliminate all taxes on corporate profits, and just tax all income, capital gains and dividends in the same manner.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">A carefully designed progressive tax rate or alternative concepts such as energy-based or property-based taxes could be applied to find the right incentives and disincentives based on what best produces a healthy economy and society (see income taxes above).</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">There's plenty of room to find the right balance that doesn't dampen the investment appetite for entrepreneurs, businesses owners, and capitalists. </span></li>
</ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Now businesses have more money to invest of expand, which is good for economic growth and jobs, but if they choose to distribute funds to investors, those are taxed as ordinary income. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">There would likely be additional benefits of simplifying the tax code but also bringing to light special interest group treatment: any subsidies for businesses would have to be out in the open not hidden in the tax code in the form of credits, depreciation allowances, etc.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Impact on investors decisions and portfolio choices of such an approach should be carefully studied. </span></li>
</ul>
<br />
<h4>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Gas taxes and the Highway Trust Fund</span></h4>
</div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">By now we all know that we don't need to sock money away in the trust fund drawer in order to have it available for future needs. We can always create money on demand when we need it. And taking it out of the economy today hurts the economy today. It's simply irresponsible management of the people's currency. Put it to use today for our real needs. </span><br />
<br />
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Let's separate our objectives into two parts: the trust fund and the gas tax.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We have no need to save money to pay for future road improvements, so we can eliminate this one. Let's leave that money in the economy where it can do good today instead of putting it on the sidelines.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">However, we may decide that we want the cost of gasoline to be higher than the market price to provide a disincentive: use less gasoline.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">If we take this approach, we should study whether the marginal increase in taxes on gasoline has any real impact on demand for gasoline in the economy, and secondly, how that impact is distributed over our income demographics. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Are we disproportionately taxing the poor because they spend a higher percentage of their income on gasoline and have less efficient cars? Do they have an alternative if the cost goes up or are we just hurting their disposable income and contributing to their poverty? Are the wealthy ambivalent to what they pay for gasoline at these marginal price ranges?</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What could we do differently? Obviously, eliminate the trust fund and just commit to maintaining gear roads for the nation's commerce and leisure needs. If we tax gas use, consider providing offsets to the poor and investing in alternatives such as public transportation. As an alternative, consider larger incentives for alternative transportation technologies to drive positive change rather than just punishing the use of oil. And invest heavily in public transportation systems that move away from oil dependency and provide options for the lower income and general public to use less gas.</span></li>
</ul>
<br />
<h4>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Savings</span></h4>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We have structured into our tax code all kinds of incentives for saving money, much of which ends up in the hands of money managers. 401-k retirement plans, IRAs, 529 college savings plans, pension funds, etc.</span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<br />
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What is our objective? Saving is considered virtuous and prudent by society. On an individual level, we all recognize the value of saving money. But was also know that in the aggregate, <a href="http://itsthepeoplesmoney.blogspot.fr/2014/07/money-myth-11-we-must-save-more-to.html" target="_blank">saving hurts the economy</a> unless more spending power comes from outside to make up for the reduced spending that results from our saving.<br />So it's great to provide an incentive for saving more as long as we simultaneously provide for supplementing aggregate spending in some way so that businesses can sell all their goods and we maintain full employment. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What is the effect or tax-free saving? </span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">When the portion of our income that we save is free from payroll taxes, we are deliberately driving down aggregate spending in the economy. Would prudent savers save anyway? These issues need to be studied.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Are we doing this for savers or for Wall Street? If we are driving large quantities of tax-free savings into existing stocks, we may be doing more to drive up the prices of existing assets and not contributing as much to the stimulation of new productive investments. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">What could we do differently? Firstly, we should ensure that any incentives to save don't harm full employment. The <a href="http://itsthepeoplesmoney.blogspot.fr/2014/07/the-job-guarantee.html" target="_blank">Job Guarantee</a> may be the best approach to this fallacy of composition problem. If Social Security is turned into a constitutionally guaranteed living income for the elderly, and higher education were an investment by the State in its youth, then the incentives to save today become much less critical, and we could study the effects of reducing or removing such tax incentives. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">This would have an effect of potentially increasing aggregate spending in the economy and shifting investment portfolios. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">In general, we should be increasing the incentives for new, productive investments and reducing the incentives for the exchange of existing assets (e.g. stocks, real estate) which lead to booms and busts. </span></li>
</ul>
<br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<br />
<h4>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Energy & environment</span></h4>
</div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Full disclosure, my business is developing large-scale renewable energy projects. The science of anthropomorphic climate change is quite straightforward, although the politics and corporate influences on the discussion are disappointing. Why? In my view, it comes down to economics. No politician can stay in office if they are perceived by voters as hurting the economy, and no one seems to understand that we can have economic growth while solving environmental and climate challenges.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We have many tax incentives across the spectrum of energy production and distribution, from nuclear to oil and gas, to coal, to wind and solar, to bio fuels. Most are there because of lobbying efforts, not because we have a well thought through national energy policy, and certainly not because of any environmental or climate policy or objectives.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">This needs to change. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Debates on tax policy for energy focus on issues like job creation and how it "pays for itself". As we've seen, neither of these are valid approaches to tax policy. We can make jobs out of anything, and tax incentives never need to be paid for.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">What is the effect of our policies? We continue to provide incentives for questionable investments in fossil fuel energy extraction without careful evaluation of the impacts and regulation of the activities to ensure water and air protection. We implement poorly designed and inefficient tax incentives for new energy solutions, such as tax credits, which provide above-market returns for banks and distort energy markets. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">What could we do differently? You begin to see how these issues tie together. If corporate taxes were eliminated and income taxes reduced, tax credits (which were always inefficient) become less useful. We could eliminate them entirely and just provide direct subsidies for the things we want more of, which adding taxes on the things we want less of. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><b>Remember, these are not tied together! </b>We don't tax oil companies to pay for renewable energy companies: we tax because we want to raise the cost and lower the demand for something we decide is harming us, and we provide subsidies if we think the market is not adequately stimulating the development of necessary resources or to protect businesses and consumers from the cost of such products if they are currently higher than existing ones.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">When viewed this way, subsidies can keep energy costs low while adequate investments are made to move our nation's energy portfolio to one that reduces carbon emissions and doesn't pollute the land, air or clean water resources.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Real resources need to be stewarded in a way that is sustainable and even regenerative (where we have degraded them below a healthy regenerating state). Tax policy can be a useful tool to find this balance, by redirecting investments and resources. </span></li>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">As described above, one proposed solution is to bring our primary tax policy in line with environmental stewardship, so that we encourage a sustainable relationship between human needs, economic activity, and the rest of the biosphere that provides us with life and health. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Moving toward a tax based on carbon-based, non-renewable, and polluting energy use makes a lot of sense, but should also be carefully constructed to avoid being regressive in nature and a burden to the poor.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">In a capitalist system, incentives can often be more effective than disincentives, and we must always caution against thinking of taxation as a means for paying for things - it is just a means to an objective.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Investing in the "goods" should be emphasized at least as much as taxing of the "bads" - <b>let's focus our nation's political energy on the right investments that build our shared future, not the tearing down and demonizing of past decisions</b>. </span></li>
</ul>
</ul>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<h4>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">States, Counties and Municipalities</span></h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Finally, a brief word about those parts of our government that are not currency-issuing but are rather currency-using. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">In the United States, much is made of the importance of State and local governments, and the need to keep the federal powers to a minimum and drive as much as we can to the local level. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">However, the more we push down to the local level, the more the local level has to potentially fund, and since they don't issue their own currencies, they have to tax or borrow in order to pay for what they are required to do for the people. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Shifting the burden to the States or municipalities or counties adds a tax burden to the people, and creates a strong disincentive for appropriate funds to be spent on important priorities such as roads, regional infrastructure, city services, education, and more. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">For example, if we say states should have responsibility for health care, then they must raise taxes to pay for it. If the federal government had the responsibility, new money could be issued to pay for it without additional taxes. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Across our nation we have aging city water and sewage systems, inadequate urban mass transportation infrastructure, and many other areas where we could all agree improvements could and should be made for our children's future. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">There's an alternative.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">There is no reason there has to be a direct link between the federal government paying for something and the federal government doing something. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We could very easily direct some portion of funds to the various local governments, perhaps on a per-capita basis, and perhaps by simply making certain major infrastructure projects the fiscal responsibility of the federal government. All planning and decisions could be made locally, but the burden of taxation and funding is lifted from the local governments, freeing their budgets up for the truly local and discretionary government decisions. </span></li>
</ul>
<br />
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We've obviously just scratched the surface. Tax reform is greatly needed, but not for the reasons most are talking about, and certainly not in the manner in which it is being proposed. Start with the right framework of how money functions, and then we can rethink our entire tax policy in a way that balances our national priorities. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><b><br /></b></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><b>Separate taxing from spending. Place the people and the environment at the top of our priorities. We can then solve for a prosperous economy. </b>Reversing the order: making "<a href="http://itsthepeoplesmoney.blogspot.com/2014/10/the-market-gods-are-angry.html" target="_blank">The Market</a>" our god, removing a proper investing and balancing role for fiscal policy, and leaving people and the environment to suffer the consequences, can only be detrimental to our future prosperity. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Let's build the national awareness and corresponding political process where we can use the people's national currency to fund all the things that we know will make for a better nation and world for the next generations; challenging them to outdo us when we pass the baton.</span><br />
<b style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></b>
<b style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></b>
<b style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Notes</b></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><span style="font-size: x-small;">*The ideas presented here are intended to provoke discussion on how to use the tax system in an appropriate way, based on how it actually works. While some of these ideas I do support, some have not been researched enough for me to say I would recommend them versus other approaches. Let's get tax experts and economists studying these to find optimal solutions. </span></span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<h4 style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Credits</span></h4>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif; font-size: x-small;"><i>My writing is based upon the work of leading economists and scholars in the field of modern money, including (but not limited to) Randall Wray, Warren Mosler, Stephanie Kelton and Bill Mitchell. I don’t claim to originate the ideas contained herein, but hope to contribute to the dissemination of them to a broader audience. I will undoubtedly have statements that are near quotes of their works, for which they deserve full credit. I would include them if I could find them, but I write as an amateur from my thoughts collected over years of reading and listening – alas, I am not a disciplined academic footnote-keeping author. Any errors in fact or logic are my own. Comments and feedback are always welcome, especially if they help find the new and constructive ways to bring others along the journey of discovery.<o:p></o:p></i></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif; font-size: x-small;"><i><br />I urge all readers to participate in helping educate others in this remarkable and hope-filled vision of a shared prosperous future for all. This generation will see a transformation in economics – be a part!</i></span><o:p></o:p><br />
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif; font-size: x-small;"><i><br /></i></span></div>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif; font-size: x-small;"><i><br /></i></span></div>
</div>
</div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-24238644276103967452015-01-17T11:25:00.000-06:002015-01-20T09:39:16.560-06:00How to run a currency Part II: Taxation for dummies<div class="MsoNormalCxSpFirst" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">In <a href="http://itsthepeoplesmoney.blogspot.com/2015/01/how-to-run-currency-part-i-getting.html" target="_blank">Part I</a>, we summarized the basics of how monetary systems
actually work in the real world, and in doing so, found that we needed a new
glossary of terms to describe many of our familiar government monetary/fiscal
operations so as to avoid confusing ourselves. Our old familiar terms simply
don’t make sense and make us think that our monetary system works in ways that it
really doesn't (they made more sense when we were on a gold standard or perhaps
for nations using the Euro).<o:p></o:p></span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Sovereign currency-issuing nations are very different from “non-sovereign”
nations (“non-sovereign” in the sense that they have given up their national
currency or promise to exchange their currency at a fixed rate to, or otherwise
created fiscal dependency on, a currency or commodity they cannot produce at
will).<o:p></o:p></span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">If we were to consider an “ideal” sovereign nation (like
<a href="http://itsthepeoplesmoney.blogspot.com/2014/11/freedonia-moronia-sovereign-currency.html" target="_blank">Freedonia</a>), it would have a government that is “of the people and for the
people”, but also a currency that is “of the people and for the people”. <b>In other words, the ability to issue that
currency at will for public purpose.</b> Neither the government itself nor the
nation’s money should be separate from or not under the direction of the will
of the people. It’s <u>theirs</u> to use for their collective needs and desires,
via their representatives in government. <o:p></o:p></span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
</div>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">It’s not the banks’ money.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">It’s not the politicians’ money.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">It’s not “The Economy’s” money.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">It’s the people’s money! </span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"> </span></li>
</ul>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<h4 style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">So how do they do it?</span></h4>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">After a sovereign nation is formed, a monetary unit is
defined so as to be used throughout the nation to account for all debts, obligations,
contracts, valuations and transactions in the country (e.g. “<a href="http://itsthepeoplesmoney.blogspot.com/2014/11/freedonia-moronia-sovereign-currency.html" target="_blank">Liberties</a>” in
Freedonia, or a Dollar in the US). The people then grant their government a monopoly
on the <u>issuance</u> of money that is denominated in that unit. Note: the
people don’t have this money so it can’t be first taken from them by the
government – it is created and flows into the economy when the government pays
for things. <o:p></o:p></span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Why? For the expressed purpose of providing the nation with
the ability to afford things it otherwise couldn't! The very reason we invented State money is
<u>to enable the nation to afford things</u>! We can recruit and pay soldiers to fight off
invaders, invest in big infrastructure projects, pay for government employees like judges and air traffic control workers, build
schools and universities, fund costly science research, and whatever else the
people determine is in their interests.<o:p></o:p></span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Now the trick is to get the population to accept this newly
created money when the government wants to buy something or pay wages for
labor. That’s where taxes come in, at least from a historical perspective. Why
would Freedonia accept Liberties? Why would US citizens accept Dollars? These State currencies would all be essentially worthless*
until the people of these nations imposed upon themselves, through their representative
government, a sufficient form of <b>tax
that could only be paid</b> <b>by returning
to the government some of its newly issued money</b>. Voila! A national
currency has been born! As long as the government maintains some taxation,
there will be need for the government’s money. <o:p></o:p></span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Economists like to say “taxes drive money” – they create the
sufficient condition for a brand new currency to take over and become the
nation’s sole form of money. And once it circulates businesses will accept the new
government money for products, services, or contracts, and people will accept
it for wages and other payments. Each time this happens, new money is created
and flows into the economy mostly via credits to bank accounts done through a
computer. It’s that simple!<o:p></o:p></span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<h4 style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">The rest all follows from there</span></h4>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<blockquote class="tr_bq" style="margin-bottom: 0.0001pt;">
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Nations direct some portion of their real resources (labor,
goods, etc.) because they wish to </span><b style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><u>invest</u></b><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">
in their nation and people: to develop the nation’s “human capital”, to develop
productive capital and infrastructure for commerce and leisure, and to ensure the
protection and well-being</span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"> of the land. Continual investment is essential for a
nation to advance, grow, and prosper in a sustainable way.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">This is accomplished when the people </span><b style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><u>authorize</u></b><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"> their governments to hire people, procure
resources, perform research, build expensive projects, provide incomes for
elderly, preserve nature, and much more; all of which is done via the </span><u style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">issuance
of the nation’s money</u><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">, not by taking money first from the people. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">In responsible and well run
governments this authorization should happen via an open and accountable </span><b style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><u>fiscal
planning process</u></b><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"> to ensure that the money is being invested prudently
and that proper controls are in place to ensure that the effects of the
government’s procurement of resources and labor don’t have negative
consequences that outweigh the desired outcomes. And there’s plenty of room for
debate and compromise in the rough-and-tumble of democratic processes: it’s
unlikely that fiscal planning ever achieves perfection or optimization, but
with transparency, accountability, and fair representation the people can have
their influence on the outcomes.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The government’s spending/investing/paying create </span><b style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><u>positive fiscal flows</u></b><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"> of new
money into the economy, building up the nation’s capital while providing
incomes to businesses and individuals.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Since the people desire to save some of the government money
for future needs, the government allows some to stay in the economy and it
accumulates there in banks as </span><b style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><u>net
financial savings</u></b><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"> of all the people and businesses in the nation (and
other countries through trade).</span></li>
</ul>
</blockquote>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<h4 style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">So what about taxes? </span></h4>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Some of the government-issued money,
of course, is required to be taken back by the government in taxes, as
explained above, to drive the universal demand for and acceptance of the State money as and when it is issued. <i>Note, taxation simply takes back what was <u>first injected</u> into
the economy. It is NEVER used or needed to fund the government’s investments. </i><o:p></o:p></span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<blockquote class="tr_bq" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="background-color: #f3f3f3; font-family: Trebuchet MS, sans-serif;"><b>There may be no greater
invention than the sovereign currency-issuing government. </b>It provides a society
with the most remarkable of powers: the ability to organize their nation’s labor
and resources to do ANYTHING that is feasible. If the people are available
to work and have the necessary skills, and the required real resources are
available in that nation, the government can ALWAYS issue the money required to
pay for the thing to be done. It doesn't mean we should use it for anything and
everything, but it means the limitations on our needs are <span style="text-decoration: underline;">never a question of affordability</span>, but rather relate to the availability of real resources.</span></blockquote>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Think about how this changes how we view our national
choices and the kind of future we can build and legacy we can leave for our
children’s children.<o:p></o:p></span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<h4 style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Rethinking taxation</span></h4>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It should be clear by now that a sovereign government never
taxes to obtain money. Sovereign government don’t have “income” or “revenues”. These terms are unhelpful vestiges of the days of gold standards and mercantilism. <o:p></o:p></span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Money is simply the governments IOU that they issue into the
economy via spending, and they promise that IOU be returned in payment for the
tax obligations imposed upon the people. Payment of taxes is simply a return of
the IOU. It’s not income. New IOUs can be issued whenever they want to, so
those collected back have no value other than to “warehouse” and re-use to save
printing costs (as in the case of paper money).<o:p></o:p></span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">A sovereign government <u>never</u> needs taxes to cover its investments,
spending, retiree payments, interest on bonds, etc. (Of course, any
non-sovereign government such as municipalities and states must still tax or
borrow to cover their expenditures). <o:p></o:p></span></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<br /></div>
<br />
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">So how should we think about taxation? The following are
some general principles to guide us.</span><o:p></o:p></div>
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
</div>
<ol>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">First, let’s get
the language right.</span></li>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Break all the
links between taxing and spending! No more “trust funds” for Social Security or
Transportation.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">End references
to governments saving their own money units.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Eliminate the
words “taxpayer-funded” from our lexicon when referring to the national
government.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Remove the
concept of “pay for” from the discussion of what we should and shouldn’t do
with fiscal policy.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">End the “budget
scoring” process. There is absolutely NO reason for government decisions of
taxation to be part of discussions of what to invest.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">This will take
some effort to re-train our minds and politics, but it’s essential to restoring
a right approach to using our currency and running a government of and for the
people.</span></li>
</ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Set policy and
economic goals, and then solve for the right fiscal policy.</span></li>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We have made
fiscal policy about foolish accounting methods that have no application to
sovereign currency-issuing nations. Toss it all out.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We are not
balancing taxes with spending – we are balancing the economy as a whole,
solving national challenges, investing in our nation’s future, preserving our
land and resources, and fostering a prosperous, safe and happy future for our
people.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Fiscal policy
is about the government representation of the people using the currency to
efficiently and effectively implement the people’s desired outcomes.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The starting
position is to define the desired outcomes, then set the tax policy that best
achieves them.</span></li>
</ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Recognize that
some form of universal or at least very broad taxation in a nation is what
drives the demand for and universal use of the government money in an economy.</span></li>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Maintaining taxation
of some kind is important, even if we have progressed so much that the currency
is very widely adopted.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The key
question then becomes what is the best type of tax for this purpose.</span></li>
</ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Taxation is
just one part of the total net inflows or outflows of money from the government
into the nation’s economy, along with how we authorize government to make
payments.</span></li>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Usually the
amount taxed is a bit less than the amount injected. We usually call this the
“budget deficit” – I prefer to say </span><b style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">positive
fiscal flows</b><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"> so we don’t get hung up with the wrong metaphor again and link
taxes and spending like households – remember, governments have no income.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">These flows directly
impact the private sector economy – if the positive flow increases the private
sector sees a gain. If they drop or become a negative fiscal flow (what we call
a government “budget surplus”), the private sector has to see some other area
grow or its economy will stop growing or enter recession.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">If we tax too
much or have too small of a net fiscal flow, there will be unemployment and the
economy will lose productivity and fall below its potential.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">So the total
level of taxation matters. Economists should be paying much more attention to
the net fiscal flows and how they can be optimized for the health of the
economy rather than fretting over relatively meaningless accounting ratios like
debt-to-GDP ratios and imaginary concepts like trust fund account balances.</span></li>
</ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Taxation has an
effect on the economy. </span></li>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The questions we should be asking in determining
taxation are: i) what is the effect of the tax? ii) Is the effect desired? iii)
If not desired, is the effect understood and permitted for the sake of achieving
some other outcome.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Since taxation reduces
disposable incomes it affects the amount of spending power in the economy, for
both individuals and businesses.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Changes in
spending will vary across types of businesses and individuals in different
income brackets since their propensity to spend varies considerably.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Taxation can cause
shifts in investments & portfolios as investors evaluate the after-tax
yields or returns.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Taxation can
affect the level of savings and the how that varies by age and demographics. </span></li>
</ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Taxation can be
a useful tool to direct or redirect resources in the economy that may be in the
public interest but that are not being recognized appropriately through market
economic forces. They can be structured to provide incentives and disincentives
for spending and investment decisions.</span></li>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">For example,
the US currently provides significant tax incentives for various capital investments
which benefit the very wealthy, while the taxes on the wages of the average
worker reduces their spending power and ability to save or invest.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Increasing taxes
on “bad” things and reducing them on “good” things is a generally accepted
principle to help in issues of public health and safety, environmental
concerns, or to address societal and economic inequalities.</span></li>
</ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Political
processes are not optimized for tinkering with the economy.</span></li>
<ul>
<li><span style="color: #666666;"><span style="line-height: 107%;"><span style="font-family: Trebuchet MS, sans-serif;">It can be difficult for a political process to
be counted upon to make necessary adjustments in a frequent manner to help the
economy in the way the Central Banks believe they can. </span></span></span></li>
<li><span style="color: #666666;"><span style="line-height: 107%;"><span style="font-family: Trebuchet MS, sans-serif;">Political processes may
not come up with the best answer and they may not be able to react very
quickly. </span></span></span></li>
<li><span style="color: #666666;"><span style="line-height: 107%;"><span style="font-family: Trebuchet MS, sans-serif;">This suggests that much careful analysis should go into designing
approaches to fiscal policy, especially taxation but also certain types of spending,
to enable the net fiscal flows of the government sector to automatically adjust
in a counter-cyclical way to the private sector economy. </span></span></span></li>
<li><span style="color: #666666;"><span style="line-height: 107%;"><span style="font-family: Trebuchet MS, sans-serif;">Such a “buffer” will
result in less taxation and increased spending/investment during times of
economic downturn, and vice versa. </span></span></span></li>
<li><span style="color: #666666;"><span style="line-height: 107%;"><span style="font-family: Trebuchet MS, sans-serif;">This does happen already to some degree (tax
receipts go down when incomes and profits fall), but much more can be done to
achieve a better outcome.</span></span><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 107%;"> </span></span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Many of us would suggest that the primary desired outcome is that the economy
maintains full employment of workers, but other outcomes can also be designed
in.</span></li>
</ul>
<li><b><i><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">And one more
time for good measure: not one taxation principle here relates in any way to paying
for government spending, financing government, or raising funds to balance
budgets. </span></i></b></li>
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Throw away that textbook and let’s focus on a balanced economy!</span></li>
</ul>
</ol>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><a href="http://itsthepeoplesmoney.blogspot.com/2015/01/how-to-run-currency-part-iii-tax-reform.html" target="_blank">Next</a>, we will put this into practice by rethinking our approach to many of our common tax policies.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Notes</span></h4>
</div>
<div>
<h4 style="margin-bottom: 0.0001pt;">
<span style="font-weight: normal;"><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif; font-size: x-small;">* Some nations
did create money pieces that could circulate in the country out of
commodities such as gold and silver coins which may have helped give confidence to
the people that the new money had real value, especially when the nation was
young, the government weak, and the imposition and collection of sufficient taxes
was insufficient or deemed undesirable. The appearance of a link between a
commodity and a currency’s value in history is, in fact, much more dubious and
has given rise to much confusion. See the references under "More reading on the history of State money" at the bottom of </span><a href="http://itsthepeoplesmoney.blogspot.com/2014/05/once-upon-time-money-fairytales.html" style="font-family: 'Trebuchet MS', sans-serif; font-size: small;" target="_blank">this link</a><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif; font-size: x-small;">.</span></span></h4>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<h4 style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Credits</span></h4>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif; font-size: x-small;"><i>My
writing is based upon the work of leading economists and scholars in the field
of modern money, including (but not limited to) Randall Wray, Warren Mosler,
Stephanie Kelton and Bill Mitchell. I don’t claim to originate the ideas
contained herein, but hope to contribute to the dissemination of them to a
broader audience. I will undoubtedly have statements that are near quotes of their
works, for which they deserve full credit. I would include them if I could find
them, but I write as an amateur from my thoughts collected over years of
reading and listening – alas, I am not a disciplined academic footnote-keeping
author. Any errors in fact or logic are my own. Comments and feedback are
always welcome, especially if they help find the new and constructive ways to
bring others along the journey of discovery. <o:p></o:p></i></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif; font-size: x-small;"><i><br />
I urge all readers to participate in helping educate others in this remarkable
and hope-filled vision of a shared prosperous future for all. This generation
will see a transformation in economics – be a part!</i></span><o:p></o:p></div>
</div>
<br />
<div class="MsoNormalCxSpMiddle" style="margin-bottom: 0.0001pt;">
</div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-5557741230098372612015-01-11T12:50:00.003-06:002015-01-20T09:40:50.112-06:00How to run a currency Part I: Getting the words right<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">By now, many of you have grasped (or are at least wrestling
with) the key concepts behind how monetary systems actually work in the real
world. It’s time to begin rethinking how to use it properly – redefining what
responsible fiscal policy looks like for modern sovereign nations. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">First, a quick summary.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We've uncovered many of the <a href="http://itsthepeoplesmoney.blogspot.com/p/the-money-myths.html" target="_blank">myths about money</a> that have
clouded our vision and that of our political leaders and economic pundits. Our
ethical and moral values have been applied in destructive ways to our economy
and our national interests because we've misunderstood how the monetary system
actually works. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">To recount, we now know the following:</span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can’t run out of money. </span></h4>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We now know that sovereign
nations can never go broke as long as they i) issue their own currency, ii)
have their own central bank to control interest rates, iii) do not borrow money
in another currency, or iv) never promise to convert their own currency into
something they don’t control (i.e. gold or a larger country’s currency). This
is the core distinction between nations that run into financial trouble and
those that don’t (setting aside the extreme cases of civil wars, rampant
corruption, regime change, etc.) We can’t run out of money but we can use it
poorly.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Currencies are a creation of governments, not us. </span></h4>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We now
know that sovereign nations are the monopoly issuer of their <a href="http://itsthepeoplesmoney.blogspot.com/2014/05/where-does-money-come-from.html" target="_blank">own currencies</a>.
They create money when they credit bank accounts of businesses and citizens in
the economy and they remove it when they tax. Money proceeds first from the
government and later returns to it (like any redeemable token), while some gets
left in the economy for us to save. Government money doesn't first originate in
the private sector to be later taken by the government via taxation. This
sequence is the opposite of how most of us were taught and the implications are
profound.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Taxes don’t give governments money to spend. </span></h4>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Since money is
created when the government credits bank accounts, the private sector can only
get government money AFTER it has first been spent into existence. Hence, taxes
are never needed to fund government spending. In fact, it is the opposite: the
private sector needs the government to “spend into existence” the money that we
must obtain in order to then pay our taxes. Taxes then generally serve the
purpose of creating demand in the private sector for the money units that the
government chooses to issue so that we will accept those money units when the
government pays us for the resources or labor it has been authorized to obtain.
This dramatically changes how we think about what and how to tax. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Bank money isn't like government money. </span></h4>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Banks can also
create new <a href="http://itsthepeoplesmoney.blogspot.com/2014/05/what-about-bank-money-cant-private.html" target="_blank">bank money</a> out of thin air when they issue new loans. Bank money is
often made to be exchangeable for government money and called by the same name
(e.g. Dollars or Yen), but it never adds to the net financial wealth of the
private sector because for every bank dollar created there is a corresponding
financial debt owed. For every bank-money saver, there is a bank-money debtor.
Government money gets added to the economy as a net financial asset for the
private sector but bank money never does. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Deficits are really net money injections. </span></h4>
<div class="MsoNormal">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNIZUH6511loOorLNcgCqBWfizRRuYkNMcP10h2KzwNrSviy0N7Pf4b7b-snJw94Q7-NNBPsN1-dEKBnBo1_pdnW4Ul6SmwgzGlm8nnzrXDPZo6Wu6HYoNm3jUOMiIKpz_TrNKbXTu99k/s1600/sectors.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNIZUH6511loOorLNcgCqBWfizRRuYkNMcP10h2KzwNrSviy0N7Pf4b7b-snJw94Q7-NNBPsN1-dEKBnBo1_pdnW4Ul6SmwgzGlm8nnzrXDPZo6Wu6HYoNm3jUOMiIKpz_TrNKbXTu99k/s1600/sectors.png" height="311" width="320" /></a><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">All money flows
are connected in a <a href="http://itsthepeoplesmoney.blogspot.com/2014/05/deficits-create-financial-savings.html" target="_blank">giant balance sheet</a> for each nation, and it helps to think
of this balance sheet divided into three sector balance sheets, all summing to
zero: the Government, the Private Sector and the Foreign Sector. What happens
in one sector of the economy must, by definition, affect another sector. If
imports rise, the private sector (or government) is sending the national currency
to the foreign sector (e.g. US Dollars held by China is simply a result of
mutual trade decisions). If the government spends more into the economy than it
taxes back out, the private sector is gaining money and businesses or
individuals gain income. As we will see, this has important implications on how
to approach the issue of government fiscal policy.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Sovereign “debt” isn't debt. </span></h4>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Money that the government
creates via crediting business or individual accounts usually ends up sitting
in the banking system. Banks, of course, don’t need to keep that money in order
to lend it out to new borrowers since we know that they simply create new bank
money every time they issue loans. So the money is sent back to the Fed in the
form of excess bank “reserves” (banks only keep a little in their vaults for
cash withdrawals). This injection of government money that floods the banking
system with excess reserves would cause the inter-bank interest rate to
collapse to zero. How does the Fed “suck up” the excess? Simply by converting
the reserves into interest-earning government bonds, like moving money from a
checking account at the Fed to a fixed-term CD at the Fed. The sum total of all
these is what we call the government “debt”. Note that there is always exactly
enough excess money already in the banking system to buy up every <a href="http://neweconomicperspectives.org/2013/10/former-dept-secretary-u-s-treasury-says-critics-mmt-reaching.html" target="_blank">Treasury bond</a>
issued since the issuance of Treasury bonds happens after the government first
injected new money into the economy and, ergo, the banking system. So this isn't debt in any real sense of the word. An issuer of a currency can never be
in debt for the money thing they alone can issue in unlimited quantities. It is
simply a means of managing interest rates between banks and also a policy
choice to provide interest to bond holders.<o:p></o:p></span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<h3>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">A New Money Glossary</span></h3>
</div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Words matter because they are the images that create metaphors and perceptions in our
minds. We can see now that we have a very inaccurate glossary of terms when
talking about government money. These words and metaphors are a troublesome vestige of the
gold standard, and unfortunately, they cause us to think and behave as though
we were still under its rule. When we use words like “debt” to describe
something that isn't anything like debt, we fool ourselves into thinking we
have constraints and problems that are not actually there. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">A new glossary of sovereign money can help us appropriately
define what it means to be fiscally responsible with government money. We shall
see that in doing so, we will upend some bad moral metaphors. Setting the
metaphors right-side-up will give us a positive language with which to move
forward and inform the public opinion. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">National Investment/Net Savings (not national debt)</span></h4>
<div class="MsoNormal">
</div>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">“Debt” implies a burden of earning future income to repay
what is owed. This simply doesn't</span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"> apply to sovereign currency-issuing
governments, so let’s stop using the word to describe government bonds.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The total accumulation (or stock) of money that has been
invested/injected into an economy by the government has a corresponding balance
sheet identity as the net financial savings of the non-government sectors.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Net investment in the economy (or some may prefer to say net
injection of money into the economy) is a much clearer and more positive
description of what’s going on.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Sovereign governments are never in debt! Let’s stop
pretending they are. (In fact, they don’t have to issue it at all but we’d have
to solve some other problems before making that shift).</span></li>
</ul>
<br />
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Interest Rate Maintenance (not debt funding)</span></h4>
<div class="MsoNormal">
</div>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We observe the Treasury issuing bonds and it looks to the
public as though the government is going to the money market to borrow so it
can fund its spending for the month. It looks as though we are at the mercy of
whether banks, funds, and other nations will lend us our national money. In
fact, the government has already made its investment/injection of new money
into the economy when it turns around to issue bonds.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The sale of bonds is used to clear out excess reserves from
banks so the Central Bank can hit its interest rate target. It has nothing to
do with raising funds. And since the overnight interest rate is established and maintained by the Central Bank, "bond vigilantes" have no mechanism to pressure sovereign governments with rising interest rates. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">These interest-bearing accounts at the Fed effectively "vacuum up excess
reserves" so the inter-bank interest rate doesn't collapse to zero.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Simply put, sovereign governments don’t borrow their own
money. Let’s stop saying that they do.</span></li>
</ul>
<br />
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Positive Fiscal Flows (not deficits)</span></h4>
<div class="MsoNormal">
</div>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">When the government invests/injects more money than it
taxes, there is a flow of new money into the economy.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The word “deficit” is a negative term that implies the
government is in a hole and needs to get back out of it. It isn't and it doesn't</span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The net accounting position after the government is done
with its investments, purchases, payments, and taxation is a positive or
negative flow of money to the economy.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Positive Fiscal Flow is a more accurate way to describe
“deficit spending”, and Negative Fiscal Flow is a better way to describe the
so-called “surplus”. Note how this reverses (appropriately) the moral framing
of the position. Positive flows into the economy are good for the economy; good
for capitalism; good for the private sector!</span></li>
</ul>
<br />
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Fiscal Planning (not budgets)</span></h4>
<div class="MsoNormal">
</div>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We need responsible and efficient government. We don’t want
governments that squander resources, waste money, corrupt bureaucracies, or
create perverse incentives in government of the private sector. We deserve
better government that what we have.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We do need a government that functions well and that
performs the tasks and makes the investments that we collectively need to
progress and prosper as a nation.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">A process that sets goals for the government, allocates
costs, and holds them accountable for the results is appropriate – even
essential – for good fiscal responsibility. It doesn't have to be annual but it
does need to be regular and required.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">But it isn't a budget!</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Budgets are for households and businesses that have to
balance their incomes and expenses. Sovereign governments don’t have “incomes”
and they create their own money when they need something.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Congress should debate and keep a fiscal plan that i) authorizes what the people have requested that the government to do on their behalf, and ii) defines the type and level of taxation that maintains demand for the currency, directs resources in the interests of public purpose, and maintains price stability where possible (given that inflation is significantly a result of commodity supplies/prices, there are limits to what monetary & fiscal policy can do during supply shocks).</span></li>
</ul>
<br />
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Balance the Economy (don’t balance the budget)</span></h4>
<div class="MsoNormal">
</div>
<ul>
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMIl23Fs6oJILoFEyD-odNYgNcdKydiDgQ7S-jb4jA7qNZ59x-Wtuuy0PbqrauQe7AaUbB_7Dd-Snq-oE3-mCxYmwxYM0pV-civB2qVwcEEjA0PB3ir5qpaZalcWYwJbB_Vl1OZQgBOrE/s1600/US-sectoral-balance-graph-deregulation.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMIl23Fs6oJILoFEyD-odNYgNcdKydiDgQ7S-jb4jA7qNZ59x-Wtuuy0PbqrauQe7AaUbB_7Dd-Snq-oE3-mCxYmwxYM0pV-civB2qVwcEEjA0PB3ir5qpaZalcWYwJbB_Vl1OZQgBOrE/s1600/US-sectoral-balance-graph-deregulation.jpg" height="195" width="320" /></a>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">By now it should be crystal clear that requiring that the
government removes all the money that it invested/injected into the economy
every year is an incredibly foolish way to operate a national monetary system.
Those promoting such approaches to fiscal policy are promoting a highly
destructive economic policy that will end quickly and tragically (as it always
does).</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">What really matters are the goals set before the nation by
the people (e.g. via the Fiscal Plan), and the effect such net flows have on
the economy and on real resources.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">If the economy is growing, people are fully employed and
prospering, and resources are being used appropriately and in a sustainable manner, the
account balances and metrics economists and politicians love to scare us with
(such as debt-to-GDP ratios) are completely irrelevant.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We need a balanced, healthy, and sustainable economy, and
the flows of government money in and out of the private sector can and should
be used to that end, with no thought given to annual budget balances.</span></li>
</ul>
<br />
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Citizen-Authorized (not tax-payer funded)</span></h4>
<div class="MsoNormal">
</div>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">If there was one term we could banish from the policy
debates of sovereign nations, it would be “tax-payer funded” (of course, it still applies to all state & local governments since they are users, not issuers, of their currency). </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Unfortunately, the clear message
behind the term is that all federal government investment/injection of money into the
economy first came from some hard working citizen who had their money taxed
away by the government. This drives a sense of moral outrage and leads to views that the best government
as the smallest government since government can only do something by first taking from the people.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Of course, we now know that word-frame is all up-side down.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">What we should be talking about are the actions,
investments, and services we desire our government to perform. What is in the
public interest? What can or should the government do that will help the
citizenry and private sector and economy? We can then direct our government to issue whatever amount of money is necessary to achieve the goal, after careful consideration to the effects on the economy for doing so. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Fiscal plans should refer to citizen-authorized government
monetary and fiscal operations, and end the damaging and erroneous meme of
“tax-payer funding”. </span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The decisions on what and how much to tax are completely unrelated.</span></li>
</ul>
<br />
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Investment (not spending)</span></h4>
<div class="MsoNormal">
</div>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We've implied this throughout, but it warrants repeating for
emphasis. Spending is a word that has connotations of using up, exhausting, and
maybe even wasting. In fact, when used in reference to government, we often
hear of “wasteful spending”, or “spending like a drunken sailor”, or
“out-of-control spending”.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Very often, the moral outrage driving the use of these
phrases stems from the confusion above. I.e. the mistaken belief that the government has too much
“debt”, “deficits” are too high, and spending more simply means taking/taxing
more.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We now know better.</span></li>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We no longer fear accumulations of savings in the economy.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We recognize that positive fiscal flows help the economy
when it is struggling.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We recognize that we can authorize our public representatives
to tackle important economic, environmental, national security, and social
tasks that benefit the people without burdening them in counterproductive ways
through higher taxes.</span></li>
</ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Investing implies taking excess money stock and deploying it
in a way that is productive or beneficial, in ways that are economic or social
or simply for general well-being. People invest in their education, their health, their
pleasure, or their future. Nations can and should do the same, especially investing in their people and capital (i.e. resources that can be used to create more resources).</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">When we have idle resources, human or otherwise, we can authorize our government to invest the necessary amount of money that will employ these idle resources to
meet the people's needs and desires and to develop the national capital stock. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">And when we have resources that need to be preserved for the
common good, such as national parks, city commons, clean water supplies,
biological systems, and other natural resources, we can direct our national
monetary system to find creative ways to best preserve and sustain our nation’s
natural heritage.</span></li>
</ul>
<br />
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">So with a correct understanding of our monetary system and a
new language to provide the appropriate positive metaphors, we can now apply
our moral values to the challenges ahead and find new hope-filled solutions. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
</div>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We can design a responsible fiscal plan that provides for
employment to all our citizens.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We can design trade arrangements that don’t suppress other
nations to benefit our own.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We can look at the increased automation of the workforce and
smile, knowing we never need to leave our people unemployed, and we can unleash
a world of creative possibilities of how to take this gain in productivity and
make it benefit all.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We can invest in our children’s education, including the
education and training of the next generation of workers through advanced
degrees and skill development.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We can afford to move to a sustainable energy supply through
the right investments and incentives, while keeping costs to consumers and businesses down.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We can find ways for everyone to access and afford health
services, and restore the relationship between physicians and their patients, without burdening businesses with higher taxes and mandates.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We can change our tax system to provide the right incentives
and disincentives that are in the public, economic, and environmental interest,
without ever burdening the poor or stifling innovation and entrepreneurialism.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We can look to the future and make wise and bold investments
for future generations, building state-of-the-art national transportation
infrastructure, communications systems, beautification and art projects, and
much more.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">We can steward the beautiful land we have the privilege of sharing together, and restore and regenerate the ecosystems that our industrialization processes has harmed, while still providing for strong national economic growth and prosperity.</span></li>
</ul>
<br />
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We are only limited by our imaginations, our creativity, our
frame of mind, and our real resources. Never by money.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">This is the road that leads to hope-filled economics. Jump
on board!</span><o:p></o:p><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Up next, <a href="http://itsthepeoplesmoney.blogspot.com/2015/01/how-to-run-currency-part-ii-taxation.html" target="_blank">Part II: Taxation for dummies</a>.</span></div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-39974916009807902372015-01-08T21:20:00.000-06:002015-01-09T08:37:12.584-06:00Save our sacrifices for when we really need them<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhph-BA450rKPZZnNvV_ANpMDco40FLhYg4RJX49MvNT43fN9-PLjQ2WQiAX9O3aET8sw5GY31RrrVNOTjZKkTwEXf96xk4EdQzZji37FPKTPKuKiyyzwjFySZrruLVUTh5KocNaV-LsmE/s1600/oilration.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhph-BA450rKPZZnNvV_ANpMDco40FLhYg4RJX49MvNT43fN9-PLjQ2WQiAX9O3aET8sw5GY31RrrVNOTjZKkTwEXf96xk4EdQzZji37FPKTPKuKiyyzwjFySZrruLVUTh5KocNaV-LsmE/s1600/oilration.jpg" height="187" width="320" /></a></div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Austerity, rationing, and "shared sacrifice" belongs to the realm of <u>real resources</u>, not to money or the readily-available things that money can procure.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">If we run out of oil, we'll need sacrifices to ration oil until there are alternatives, such as more electric vehicles and public transportation.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">If we have drought or disease that creates food shortages, we may need to ration and sacrifice to share the food until the next harvest.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">If we run out of peace, we may need to sacrifice to restore freedom, as in World War II. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">But we have created rationing arbitrarily based on a perceived lack where none really exists, or where it can be easily remedied through the right incentive structures and funding. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">For example, there is a prevalent idea that we don't have the resources to provide health care for all citizens, so we have to either ration economically (i.e. only the rich get it), or via the government choosing who gets it.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">But why do we say we can't train enough doctors and nurses to care for everyone? Are there not enough people who desire this career or is it just that we don't provide the path for them to get there or the incentives to make it worthwhile? </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Remember, a sovereign nation can always create the money necessary to pay for the full deployment of resources within that country. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It's our narrow thinking and allegiance to bad economic ideas that clouds our vision and leaves huge segments of our society living as paupers when we have abundance all around us.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">So how can we provide health care for all?</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can pay for the education of as many doctors and nurses as we need if education costs are the reason for a lack of trained care givers.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can provide salaries at a level needed to attract them to the field.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can build medical facilities in under-served areas of cities and states.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can credit health savings accounts for all citizens with money to pay for health care.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can underwrite the costs of expensive and critical care.</span></li>
</ul>
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">The same applies to the unemployed in all fields. We say there isn't the money to employ them because the private sector hasn't found them jobs, but it isn't as though we have nothing productive for people to do in society. And it isn't as though we can't credit bank accounts with money from our national monetary system that was created for this very purpose. We have simply chosen not to because our outdated economic ideas tell us we shouldn't. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Money is <u>never</u> scarce for sovereign nations. We can always afford whatever is for sale in our currency, including all kinds of labor. Even doctors and professors. Scarcity is for real resources - never for money. We certainly may need to sacrifice, ration, and share if we run into constraints of real resources, but let's save the austerity for then (and work hard to develop the alternatives and protections now so that we can prevent such scarcity in the first place!)</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It is the height of folly to hold a nation in economic poverty while its real resources lie idle.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">If it makes sense, then spread the word. Ignorance is a cruel master that must be overthrown with truth. </span>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-86770593642025913532015-01-06T07:33:00.004-06:002015-01-06T09:01:33.153-06:002015: A year to learn hope-filled economics<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLSDYxX8Z-MVD3eM3mZ_upJ4UN4Bpg8RMU22CL6w3tAGPBpnBPPSdXjKLzLxqvuzJy8CT43usFtXWl58YFottka0fPqWa-vr2SuWExkl5TqXn5_J6t7JS8l0ZcJ_1eIiao8vLDMR1ZpGw/s1600/forkinroad.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLSDYxX8Z-MVD3eM3mZ_upJ4UN4Bpg8RMU22CL6w3tAGPBpnBPPSdXjKLzLxqvuzJy8CT43usFtXWl58YFottka0fPqWa-vr2SuWExkl5TqXn5_J6t7JS8l0ZcJ_1eIiao8vLDMR1ZpGw/s1600/forkinroad.png" height="320" width="255" /></a></div>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Conservative economics has forgotten that spending equals income.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">One business's income is another person's spending. In the aggregate, income = spending. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">If spending falls, income falls. If income falls, businesses cut investment and costs and lay off workers.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Conservative economics has taught that we must reduce spending even more to grow income... Huh???</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">...all because of tragically mistaken concepts of how money works. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Such as the mistaken belief that governments only spend what they first take from the private sector. This has not been true since we left the gold standard and stopped having what was essentially a fixed exchange rate by tying our money supply to the availability of a somewhat rare commodity. That made as much sense as tying our drinking water supply to the amount of dinosaur fossils we could find.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Government spending is also simply another business's income. It is a net increase in private sector wealth. The government can buy and deploy otherwise unutilized resources. It can spend when sales/incomes are needed to avoid contraction.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It is essential whenever the economy lacks sufficient spending to purchase all the output of a fully employed society.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We need to rethink what we think we know. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Redefine what it means to be Conservative or Liberal based on a correct view of money, and a world of possibilities will open up to us. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">A path to prosper while solving our nation's social, economic, and environmental challenges. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can afford to put people back to work. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can afford to shift our energy to a sustainable supply. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can help other nations prosper without harming our own. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We don't need to go to war over resources.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can afford to educate our children and working adults without burdensome debt. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can afford to provide health care to all our citizens and help doctors return to a focus on patient care.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Greed (an apt word to describe Western capitalism) is <u>not</u> good, Gordon Gekko. </span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Selfishness does not provide a sound platform for economic prosperity and societal well-being.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Exponential growth through resource extraction at lowest cost is not a sustainable or just system.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Free trade for the poor and protectionism for the wealthy is not a righteous or sustainable global economic system.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Unemployment for the youth is not a solution to an economic crisis, nor will it bring nations back to prosperity and growth.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Reduced investment in public infrastructure, research, and education will not lead a nation forward to a prosperous future.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">I met a fork in the road between Western capitalism and Marxist socialism, and I realized I was on the wrong road. The highway to sustainable prosperity is found on a different track entirely. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">When presented with two false choices, the "lesser evil" is still just evil. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">2015 is a year to learn hope-filled economics. It will take all of us to bring the changes we all desire, but they are there for the taking.</span>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-22581619381153712472014-12-01T17:59:00.002-06:002014-12-01T17:59:30.260-06:00Angst in Freedonia: are there no alternatives to austerity?<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">As neighboring countries, the Kingdom of Moronia and the republic of Freedonia could not have had more <a href="http://itsthepeoplesmoney.blogspot.com/2014/11/freedonia-moronia-sovereign-currency.html" target="_blank">different monetary systems</a>. What wasn't apparent at first was just how significant those differences were when it came to how they could deal with both difficult and prosperous economic times. </span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<br />
<h3>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Moronian austerity</span></h3>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Moronia, with its gold-based money, was constantly at risk of the depletion of their reserves of gold. This occurred especially when the nation desired to import more goods than it exported (since it had to pay for them in gold) - and this almost always happened when Moronia was at war (Moronians often waged war). To stem the outflow of gold, wages would plummet, rations would be imposed, imports would be minimized, and after a painful adjustment they would start exporting again to restock the gold reserves. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Over time, the people of Moronia noticed that every time this happened, the large industrial business owners would end up with more and more profits, while the workers never recovered their wages from the downturn. They weren't too happy with all the wars and falling incomes. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAoykDVpHA1mlGRf_nKXmNkCNYm_39vaxGQAV2mfDJrcM_8WFE4xD6S37Yt9j09BEyzEuDZ-op_MIAyvMsZuXvKbyO9ZynofIUazmyfyfIbtWW8Ih0h9Uc6COumaM2Na9HYslJmiM9WUA/s1600/austerityTINA.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAoykDVpHA1mlGRf_nKXmNkCNYm_39vaxGQAV2mfDJrcM_8WFE4xD6S37Yt9j09BEyzEuDZ-op_MIAyvMsZuXvKbyO9ZynofIUazmyfyfIbtWW8Ih0h9Uc6COumaM2Na9HYslJmiM9WUA/s1600/austerityTINA.png" height="236" width="320" /></a></div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">To avoid revolt, the king of Moronia consulted his advisers and business leaders, and they came up with a clever strategy: they would broadcast repeatedly through all possible media the message that "There Is No Alternative" (they called the propaganda campaign TINA, which was <a href="http://itsthepeoplesmoney.blogspot.com/2014/10/tina-youre-breaking-my-heart.html" target="_blank">later satirized by a popular folk band</a>). </span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The message was harsh, but (so it went) the alternative would be much worse. The only way to survive and compete in a global economy is with lower wages and higher productivity (i.e. longer hours and worse worker conditions) in order to keep the nation's economy strong. </span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The Moronians, who were accustomed to suffering (many believed it was virtuous), thought the logic was irrefutable and they dutifully accepted the King's meme. They held out hope that perhaps one day they would join the ranks of the wealthy if they just worked hard enough.</span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<br />
<h3>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Freedonia</span></h3>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Meanwhile, Freedonia was experiencing a very different dynamic. The had set up their currency (the "Liberties") based not on a promise to convert to gold (a promise they knew they could never keep permanently, especially if they were forced into war -- Freedonians hated war), but on the simple notion that a tax imposed on the population would drive demand for the newly created currency (you can read that story <a href="http://itsthepeoplesmoney.blogspot.com/2014/11/freedonia-moronia-sovereign-currency.html" target="_blank">here</a>).</span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Freedonia traded with other nations (even Moronia), but they always preserved their sovereign right to protect national interests by limiting trade when necessary. Rather than using gold, goods and services were bought and sold at the going currency exchange rate between them and their trading partners. Other nations had followed their lead in forming their own national money of account, and each currency would fluctuate in relation to the others based on a variety of factors. Usually, this took the form of Freedonia's national bank holding onto currency reserves of the nations they sold goods (in selling them goods, they were "buying" that nation's currency), and the reverse would hold for nations they mostly imported from.</span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Over time, Freedonia became prosperous and also a net importer. They were sending more Liberties abroad than they were receiving back. Their trading partners were holding more and more Liberties (usually in the form of interest-earning government bonds). It looked like they had a mountain of debt owed to other countries but they understood that it simply represented their trade partners' desires to hold their currency in exchange for selling them products. Of course, this also meant that Freedonia was able to keep more of their nation's resources and production for their own enjoyment, in addition to receiving the work product of other nations.</span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">But then came the big recession. </span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Banks were in trouble, and the economy was hurting. People were losing their private sector jobs as businesses tightened their belts (fortunately, most found temporary work & a basic income through the national job guarantee program). Businesses stopped investing, and there were some saying the government should also pull back on many of its ambitious projects, especially the national high-speed electric rail system powered mostly be renewable energy. To many, stopping spending just seemed to be the logical response when times are tough. At least, that's what businesses and households do. </span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Do sovereign nations with their own currency have to behave this way too?</span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<br />
<h3>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The export debate</span></h3>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Like all freedom-loving peoples, Freedonias had a lot of opinions across a wide spectrum of values and ideals. One such group, which after the crisis became a fairly vocal minority, emphasized the values of discipline, hard work, & self reliance. Many of them had started their own businesses and had succeeded, or had overcome obstacles in their lives and moved on to success in various fields. They looked over at Moronia and began to wonder if they had something right. </span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Perhaps what was needed, they proposed, was to lower wages, work harder, and boost exports to <i>earn</i> the way back to prosperity. They began to question whether the job guarantee should be taken away since it provided a base wage that the private sector couldn't really go below. Seeing an opportunity to lower costs and boost profits, some of Freedonia's leading CEOs and business organizations joined the chorus. </span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">TINA was a hot topic of debate in bars across the land. </span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Many others in Freedonia were more concerned about the darker side of the policies across the border in Moronia. Since the great recession, unemployment had skyrocketed and was taking a very long time to recover. Wages were falling and more and more people were losing their life savings just to stay afloat. Many were no longer able to provide an adequate living from the jobs that were available, and were relying of food pantries and donations for assistance. Crime, domestic abuse, and even mental illness were on the rise. Youth were dropping out of universities because they couldn't afford to stay in school. This wasn't the land of liberty the people of Freedonia wanted. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Was there really no alternative, they wondered?</span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">So they turned again to study how their monetary system could be used to help them recover from the recession and grow their economy. Did they really need to take the austerity path in the hope their suffering will lead to more exports and, one day, higher wages again?</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What they discovered surprised them.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<h3>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Comparing exports to government purchases</span></h3>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">They decided to run an experiment. Freedonia was very good at making trains, so they compared what would happen if:</span><br />
<br />
<ol>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">a new train was exported to Moronia, or </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">a new train was bought by the Freedonian government.</span></li>
</ol>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgbH1OhuTRp3afQKbqREniwxEPGL3j_jzPyJwx7my0VZdwfcfnVn0KSYTiwZq2MlI6yvzxD16Ehm_IDZWT-iltEEEsmoqWqKoP3SGWt6udrc7gvp529MlgYxL55Y4EJxUK9yYd4DQkqI2g/s1600/632_EurostCrp2.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgbH1OhuTRp3afQKbqREniwxEPGL3j_jzPyJwx7my0VZdwfcfnVn0KSYTiwZq2MlI6yvzxD16Ehm_IDZWT-iltEEEsmoqWqKoP3SGWt6udrc7gvp529MlgYxL55Y4EJxUK9yYd4DQkqI2g/s1600/632_EurostCrp2.jpg" height="97" width="320" /></a></div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Option 1: </span></h4>
<br />
<br />
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Moronia places an order for a train with a large train manufacturer in Freedonia</span></li>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Moronia only has gold, but the businesses wants Liberties to pay suppliers and employees, so the Bank of Freedonia takes the Moronian gold and then issues new Liberties by crediting the bank account of the train manufacturer. </span></li>
</ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">A number of businesses in Freedonia work together to make the train (there are many small and medium businesses involved in the supply chain)</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">These businesses have to hire additional good paying jobs</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The businesses see profits increase</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Finally the train is shipped off to Moronia</span></li>
</ul>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
The end result is that there is a <u>NET INFLOW</u> of Liberties into the economy from outside the Freedonian domestic private sector economy.</span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Great, this is exactly what the supporters of the Moronia Austerity Plan predicted!</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Option 2: </span></h4>
<br />
<br />
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The Freedonian government places an order for the same train. </span></li>
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">In this case, the Government simply credits the bank account of the train manufacturer with newly created Liberties, which only the Bank of Freedonia can issue. </span></li>
</ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The same manufacturer and suppliers make the train.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The same number of new, higher paying jobs are created.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The same profits made and workers paid. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">The train, however, stays in Freedonia to the benefit of the people</span></li>
</ul>
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">So once again, the end result is still a <u>NET INFLOW</u> of Liberties into the economy from outside the Freedonian domestic private sector economy.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What's the difference? </span><br />
<br />
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">In money terms, there is none! Fiscal policy has virtually the same effect as foreign trade in stimulating the economy.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">In "real" terms, one could argue that the Freedonian's are actually better off having worked to produce a train they use themselves rather than one that is sent to help Moronians (especially since Moronian trains are mostly powered by non-renewable energy, which has been causing pollution in the neighboring regions of Freedonia!)</span></li>
</ul>
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Some still worried about the so-called "national debt"? It seemed to be a big issue for Moronia with their gold-based money. So once again, they set out to evaluate the two scenarios to see how they impacted Government Bonds. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Option 1:</span></h4>
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Moronia used gold to pay for the train so the Bank of Freedonia now has a stock of gold as an asset on its balance sheet, but it also issued new Liberties (a liability in accounting terms) to the train manufacturer. All just entries in a computer - keeping track of money units. <br /><br />If the buyer was another nation, the Bank of Freedonia would hold an account of that nation's currency instead of gold. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">In some cases, the buying nation might already have Liberties accumulated from selling goods to Freedonia. In this case, those Liberties would have been converted into a government bond so they earn interest. That nation would then s</span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">ell some of its stock of Government Bonds to make the purchase. Who will buy those Government Bonds? Quite simply, the train sale caused bank accounts in Freedonia to increase. This causes bank reserves to increase, and banks prefer to earn interest on excess reserves, so they buy bonds in equal portion to the injection of Liberties - i.e. exactly the same number that the other nation sold to make the purchase. <br /></span><br />
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">In an economy like Freedonia where money is issued by the government, there are ALWAYS enough buyers for any Government Bonds because the money has been injected into the banking system first. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<h4>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Option 2:</span></h4>
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Well, you may have figured this out what the Freedonians discovered: the same bank accounts are credited for the sale with new Liberties, which causes the same increase in bank reserves, which creates the same demand for an interest-earning alternative to holding excess reserves, which leads to the same Government Bond being purchased as in Option 1.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">In other words, it makes no difference whether Liberties came from trading with another nation (exports) or from a government purchase (fiscal policy). </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">And Freedonians already knew that what Moronians called "government debt" was simply a record of all the interest-earning injections of money - whether initiated through foreign trade or from direct purchases from their government. I</span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">n both cases someone in the Private Sector increased their savings via an investment in Government Bonds!</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<h3>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Austerity angst abandoned!</span></h3>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Freedonia had their answer! </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">They didn't need to take away the job guarantee that was providing essential income and work for those who lost jobs in the recession. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">They didn't need to lower wages and join the austere Moronians in a race to the bottom of worker pay in order to sell exports cheaper than other nations.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">They didn't need to cut funding for education or research that were part of their vision to have Freedonians lead the world in innovative ideas and technologies.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">And they didn't need to stop investing in their important infrastructure projects that were laying the groundwork for a prosperous future.</span></li>
</ul>
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Of course, this wasn't about digging holes in the ground and filling them up to create work. The train was needed, along with so many other things. The question was whether they had to "get money" from someone else to help their economy or whether they had the ability to help themselves. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">How did the train get built? They simply created the money by crediting bank accounts, because Freedonians had a sovereign currency. And it works just as well as exporting!</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">With this debate settled, the </span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Freedonians began to think again of all the things they wished to do as a nation that they would have done of they had a booming export business and money flowing in to their economy. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">They remembered again why it was that they created the sovereign currency in the first place. It was for exactly this moment - so they could fully deploy their national resources in ways that were to the benefit of their people and that the private, profit-seeking entrepreneurs and businesses couldn't do themselves. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Rejecting austerity and carefully investing in their people and nation, through good times and bad, was the fiscally responsible thing to do.</span>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-44031118258661726722014-11-25T21:37:00.000-06:002014-11-25T21:37:06.262-06:00Living in Fearguson or Hopeville<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What we do in response to fear, is very often worse than the things we fear themselves, which are all too often phantoms of our minds and media. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">In economic terms, our response to the fear of inflation causes us to destroy jobs and with it, human lives.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Our response to the fear of deficits causes us to cut off the hand that feeds us, hurting the poor the most and ruining our future by cutting back on investment. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Our response to the fear of tyrannical government leads to the dismantling of essential protections and regulations that reign in private sector abuses and hazards.</span><br />
<br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Our response to the fear of enemies, domestic and foreign, leads to an increasing police state and global militarized presence, often with first-strike intent, often breeding more violence.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Hope has no room for fear. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Hope in people. Hope in the poor. Hope in the youth. Hope in rejuvenated neighborhoods. Hope in cities. Hope in governments. Hope in businesses. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Hope in ourselves. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Hope acts. Hope builds. Hope has vision. Hope grows. Hope restores and rejuvenates. Hope respects. Hope honors. Hope includes. Hope invests. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Hope always wins. </span>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-61408186579319718342014-11-14T18:58:00.003-06:002014-11-22T13:33:19.785-06:00Freedonia & Moronia: A Sovereign Currency Parable<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhvnI0yEnogWwcUc1leGG-9fisSiQCcwHqgG1rujwbzftgompz_XbJx1d-ngUFyVtOQWtfV0itIBXTx1HSp-srFoaKAZgkyzYVzdM3u7KMcQWkwcNBYToHcTG-7uHJWeOMoZL68phv1fMg/s1600/flag.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhvnI0yEnogWwcUc1leGG-9fisSiQCcwHqgG1rujwbzftgompz_XbJx1d-ngUFyVtOQWtfV0itIBXTx1HSp-srFoaKAZgkyzYVzdM3u7KMcQWkwcNBYToHcTG-7uHJWeOMoZL68phv1fMg/s1600/flag.jpg" height="200" width="142" /></a></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">In the emerging but scattered country of Freedonia, the people decided one day that they
wanted to band together to protect their freedom as a nation, their individual rights,
and to grow their economy together. They establish a constitution to form a government, courts,
police, an army, and the ability to empower their government to build roads and
infrastructure needed for defense, well-being, and commerce. They also wanted a
way to provision for their elderly and needy. </span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">
<br />
With their constitution in place, they excitedly asked for volunteers to come and
perform all the work needed in the new government … but no one stepped forward. They were all too busy working to meet their own needs and run their farms & businesses. <br /><br />Freedonia's
economists convened and suggested that the government create and issue a national form
of money to pay for their needs. So they created a national currency
called ‘Liberties’ and printed the first issue of notes. Before long, they were proudly announcing the new money to
the people, promising to give it to anyone who would come and fill the government
jobs and build the roads and other infrastructure projects. Again, to their dismay, the people all declined. The
new money had no value to them and they’d rather keep working their fields and
making their goods.<br />
<br />
Now there was one wise history professor who had studied all the economies throughout the ages. She urged the new Freedonia government
to 1) create a small tax on every household (initially suggesting the amount of 100 Liberties), 2) require that the tax can only be paid back in Liberties, and 3) ensure the new tax was collected. They debated the radical proposal (Freedonians love to debate), wondering if it would work and if the people would accept it. Eventually they all agree to proceed. The people of Freedonia had followed the debate and were well informed; the new tax passed in a national vote. Most of Freedonia really wanted a functioning government with its institutions that would protect property rights and help facilitate commerce, and to accomplish their collective goals for a great nation. </span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">To their surprise, as
soon as the tax was imposed, applications for all the work came flooding in and
businesses were also willing to accept Liberties in payment for their goods and
services. Everyone was willing to work for wages in Liberties because they all
now needed them to pay the Freedonia government tax. </span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Many people even began saving lots of Liberties for future needs.</span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /><br />They noticed something else that was new... unemployment has been created! People were looking for work to earn Liberties but couldn't find enough jobs. </span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">
<br />
The government quickly got busy issuing new Liberties whenever it needed to build a road, a hospital,
or to pay judges, court staff, police, and the army. Even those not working for the
new Freedonia government now accepted Liberties as payment for goods and services
because they knew they needed them to pay their taxes, or they could exchange them with someone who did need them. Before long, everything in
Freedonia became priced in Liberties and it become the standard unit of accounting and the sole means of trade throughout the land. <br /><br />A sovereign currency was born!<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">The Freedonians marveled at the simple yet effective tool they
had created to facilitate the provisioning of their collective needs. The small tax would regularly remove some of the Liberties that the government created when it spent, but not all of them. Occasionally,
they had to increase the tax to remove more of the Liberties from the economy
when it was “overheating”, but most of the time, they had to keep the taxes
low and even spend more Liberties to make up for the amount that were being
saved by the people. </span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">They realized that since every business and
household now used Liberties, whenever too many Liberties were saved,
businesses couldn’t sell all their goods and had to lay off workers. No one in Freedonia wanted to be unemployed or to waste idle labor when there were so many things they could do, so they found endless creative ways to get their people
working again that benefited society. They simply issued new Liberties to pay for this work and to make up for
the Liberties that were being saved. Everyone was employed that wanted to work.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Now the neighboring king of Moronia, who still used gold coins in his kingdom that he dug from his mines, borrowed, or received when exporting to other countries, was amazed at the success of Freedonia
and went and met with the government to find out how their amazing new currency
worked. </span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">He had so many questions...<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><i>How did you get these Liberties to be accepted? Did you promise to convert them into gold? </i></span><br />
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">No! We simply created a small tax that could only be paid in Liberties, and that created the demand for Liberties throughout our land. </span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><i>But don't you have to borrow the Liberties from the people in
order to spend them? </i></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">No! The people of Freedonia had to first obtain Liberties
from the government before they could pay them back for taxes they owed. We
never needed to borrow because we control the creation of Liberties ourselves. Sometimes we choose to give people a chance to hold Liberties in a special account and earn interest. It might look like borrowing, but it's really a policy choice to give interest to savers and our foreign trading partners.<br />
<br /><i>
Well then, was the government of Freedonia restricted from issuing new
Liberties until the last ones have been collected back from the people in taxes? </i></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">No! We could issue as many Liberties as needed for whatever the people authorized. Remember, we are a public monopoly - the sole issuer of Liberties on behalf of our people!<br />
<br /><i>
Okay, but you could issue too many Liberties at once, right? Your currency is surely going to fail when you keep making more of them. I saw how big the number was getting. </i><br />No, dear king. It appears you can't see past your gold money. Yes, in theory we could just create endless Liberties, but we only do what is in the interest of our people. We have put in place a
budget process to make sure we only issue what the people want and to ensure our people are fully employed and the economy is productive. <br />
<br /><i>
But surely issuing more new Liberties than those you tax back from the people causes prices to rise?</i> </span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">No! A lot of people want to save Liberties for retirement and
other needs, so we have discovered that we actually need to issue more than we tax
just to keep everyone employed. We also buy goods from other countries and they receive our Liberties in exchange, which means we need to issue more back home to make up the gap and keep everyone employed. Since we pay them interest (remember how we described "borrowing" earlier), they are happy to keep saving our money in exchange for selling us their goods. </span><o:p></o:p></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Still dazzled by his gold coin collection, the confused king of Moronia hurried home, fearful his subjects would rob his vault in his absence.<br /><br />Meanwhile, the people of Freedonia had begun making plans for more schools and universities to train their next generation for the needs of the future, more hospitals and medical centers to provide care for their growing population, plans to care for their elderly with housing and income, and a new rail system that would enable them to move goods and people rapidly around the nation and facilitate trade. <br /><br />Their best days lay ahead!</span></div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-83371661432991224582014-11-11T10:23:00.002-06:002014-11-11T21:35:33.699-06:00Money lessons from the military<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-6ONbbvUvnJYraOqO3u7kJaDJau-FXoKiL03R6_3Il99ewVkHAk1Bqgm5gxdph05rDh35D6rIMWcN-4O29nCBHydJNv-foDOdvYCt9En4wnY2BSBNlZc2g9kee0x_vidnq8g3c-_5-_8/s1600/war.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="258" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-6ONbbvUvnJYraOqO3u7kJaDJau-FXoKiL03R6_3Il99ewVkHAk1Bqgm5gxdph05rDh35D6rIMWcN-4O29nCBHydJNv-foDOdvYCt9En4wnY2BSBNlZc2g9kee0x_vidnq8g3c-_5-_8/s320/war.jpg" width="320" /></a></div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It is a bit of a mystery why we treat our military and our federal government in such polar opposite ways. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">The military is granted a virtually unlimited budget, while our federal employees and programs are constantly under attack to eliminate or reduce their budgets.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">The military and its employees are considered our national heroes and held in highest esteem (and honor is certainly due for their courage and sacrifice), yet many other federal departments and employees are often derided or even despised, despite the lifelong sacrifice many give to serve us. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We are greatly exercised over the rise in size and power of our elected officials and government programs yet we often have little concern about the size and power of our military and the industrial complex that it supports. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Both are part of our "government", but we seem to love one and hate the other. We seem to have two standards when judging the separation of powers. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Why?</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Perhaps it is because the military parades its employees and hides its generals & policies, whereas the federal government parades its officials & policies and hides its workers?</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Perhaps we need to take a page from the military's playbook and push out on social media a "hero of the day" featuring our teachers, FAA engineers, court judges and staff, environmental workers, and bank regulators. Perhaps if we made them our heroes we would begin to see the good we actually do together, and we would inspire more of the best to step forward and serve.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Do we realize the sacrifice of those who give up higher paying jobs in the private sector to educate our children or expose pollution in our drinking water or fight an army of lawyers and smear campaigns to expose criminal activity in financial institutions? </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Our brave soldiers deserve our respect, and so do our public officials. Perhaps by doing so, we would elevate service and responsibility and efficiency and all the things we deserve and wish for from our government. Perhaps we reap what we sow.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Whatever the reason, a parable may help us see that what works for one can, in fact, be used for the other, opening up possibilities of national well-being and prosperity.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<br />
<h3>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Protecting freedom by sidelining the army</span></h3>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We easily recognize a foreign threat when something blows up: Pearl Harbor; World Trade Centers. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">But freedom is no less under attack when our financial system is blown up by runaway deregulated financial institutions. When 800,000 people are losing their jobs every month as was the case after 2008. When savings and retirements are wiped out or taken fraudulently. When education is out of reach financially without a lifelong debt burden. When the jobs available don't pay for the cost of living, let alone providing for our children's futures. When one medical problem leads to bankruptcy and poverty for an entire generation. Freedom is under attack and out of reach for tens of millions of Americans today.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">So what can we learn from the part of government we call the military?</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Imagine if our free land were attacked by two powerful nations from each coast, and we responded as follows:</span><br />
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<ul>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Since we are afraid of giving our military too much power, we decide not to allow it to intervene in our defense. "It's just too much power in the hands of government officials." </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We need money so we cut the military budget and have the armed forces stay on their bases.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We instead give tax breaks to citizens and businesses so they can go to the market and buy guns and ammunition to protect themselves.</span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">If enough people do this, we believe we will create strong free market-based militias to fend off the invaders, although we realize the enemies will probably have made huge inroads into our land by then. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We realize that many people in many parts of the country may never actually be able to fend for themselves but that's just the cost of ensuring that the military doesn't use the war to take over the whole country and we lose our freedoms. </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">The wealthier pockets, especially the corporations that have more resources, will be able to protect themselves. The smaller businesses and population see these safe areas and ask for help, and the corporate militias do so in exchange for taking over the small businesses.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Of course most citizens simply build bunkers, hide, or cloister together in small scattered groups and so few unified militias actually form and so the tax breaks have no effect on stimulating a strong resistance force.</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Eventually, the corporations sue for peace with the invaders, working out a way to keep growing while leaving the population under occupation. A new equilibrium forms with a relatively stable land, large scale servitude, and small pockets of freedom and excess for the wealthy. </span></li>
</ul>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Imagine the national outrage at such a response! </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">If such a military invasion occurred we would release our powerful military forces that were created for this very purpose. We would </span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">marshal every resource in our nation,</span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"> </span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">build and buy whatever we needed for the war effort, and employ every able bodied citizen in the fight until we had thoroughly defeated and repelled the invasion. </span></div>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Would we worry about deficits and national "debt"? Of course not. What matters isn't the money but our land, our people, our liberty, and our way of life. Money can and will be created at will to pay for whatever is needed to ensure our national survival and prosperity. We have, in fact, done just this with every war.</span><br />
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<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">So why do we not respond in kind to our economic plight? Why don't we release our powerful monetary system that was created for this very purpose to dispel the forces of unemployment, failing infrastructure, accessible education, and all the other threats to individual liberty?</span><br />
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<h3>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What works in war also works in peace</span></h3>
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<div>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">In fact, we can and we should use the federal budget in this very same way. It can rise and fall as needed to marshal the real resources of our nation to be utilized in such a way that provides employment for all workers, incomes for the elderly, medical care for the sick, education for the eager minds, transportation for the future energy paradigm, and so much more.</span></div>
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<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">This is actually how the system is designed to work. The term <a href="http://www.levyinstitute.org/pubs/wp272.pdf" target="_blank">Functional Finance</a> has been used to describe the proper use of the government's operations of spending, taxing, buying, selling, and borrowing. Each operation should be used ONLY with regard to the EFFECT it has on the real economy and the wishes of the public, and not with any regard to any irrelevant ratios of one factor to the other (such as borrowing and taxing in ratio to spending). </span></div>
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<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
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<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Tax because we want to take spending power away or shift resources from socially undesirable production/consumption. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Buy because we wish the government to build or own something (like roads or oil reserves).</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Spend because we want portions of our population to have more income. </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Borrow because we want to provide interest payments to savers and trading partners.</span></li>
</ul>
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<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">None of these operations need to be measured or adjusted in relation to any other. Each can be evaluated separately for its effect on the economy and on real needs and wants. This is exactly how modern monetary systems work. We just need to get out the instruction manual and start using it properly, as we always do during war time. </span></div>
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<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">And unlike the military and its industrial complex, we can actually do so without enormous centralized bureaucracy! We can use money to protect individual liberties, provide equality of opportunity, and enhance families, local communities, and states -- all without centralizing control in Washington DC.</span></div>
<div>
<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">As we remember and respect all that our military does for us, let us learn the lessons it teaches, and release ourselves from senseless financial limitations that crush our people and take their liberty. We have the most powerful monetary system ever created that can permanently end unemployment and fund any project we need to ensure our free and prosperous future, so long as we have willing people and the real resources available to deploy.</span></div>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-54477737076025908322014-11-09T22:11:00.004-06:002014-12-10T21:43:53.534-06:00A new narrative<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">I'm curious how many realize that we have recreated the same economic environment as the Great Depression. </span><br />
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It's astonishing really. </span><br />
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It feels different this time only because of the income-supporting welfare systems the West has that were absent in the 30s. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">They are a poor substitute for employment.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">As Twain said, history doesn't repeat, it rhymes - which only makes it less obvious to see when we're in it. We've done it again, but we can't seem to see what we've done or to find the clear and simple path out of this human tragedy. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Sovereign nations have the ability and responsibility to prevent depression, and to ensure people have adequate employment and income to live. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">But we don't seem to want our government to do this. Those of us with sufficient work and income are content to let others suffer rather than direct national resources toward our neighbors. The prevailing narrative says we have to leave things alone - that trying to help will only make it worse. And we've all seen that before. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We who are in the ranks of the "doing okay" control the vote and the purse strings. And we keep voting to maintain the very system that created another depression, sentencing more friends and neighbors to a life of welfare, underemployment, uncertainty, and unemployability for some. Ironically, we make our own situation more precarious by leaving our economy teetering on the edge of recession, closing down more and more of our public services, and starving off investment in public infrastructure.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We can change this - and quickly!</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We need a new narrative - one that respects our ability to have good leadership for our nation, not just the worst we've come to expect. We reap what we sow. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We need a new narrative that understands that capitalism always and only functions in the framework of public institutions, and we can make these institutions work for good. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We need a new narrative that places the dignity of all citizens as the foundation of the economy, ensuring they can work and provide for their families and grow their skills and knowledge. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We need a new narrative that recognizes that a nation's wealth is not financial; that money can always be created on demand to create the real prosperity we desire and need. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">The most stable and prosperous economy is one where the nation's currency is anchored by maintaining full employment - not by gold or central banks - and that uses money to invest in people, infrastructure, knowledge, and the rejuvenation and cultivation of our natural resources within which we all live.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">We need a new narrative that forgives, that hopes, that serves, that inspires, that believes that we can be great again. </span>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-17375703950618829802014-11-06T16:33:00.002-06:002014-11-06T16:33:38.511-06:00Confessions of a former fiscal conservative<div style="background-color: white; line-height: 19.3199996948242px; margin-bottom: 6px;">
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjiXWv6mK2M3cMsHNr_xsk92yTdzp0wICWUvQL9UDsM65C6r8fd63hAE-cO32-b-x4G6l7MilL1IxBvOxSXcAKjczI1Z-lRqgx11_xutxtxgfeHrIm1tXN07sZ5-ij-i8-hl1z7s-UAdNA/s1600/budget.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjiXWv6mK2M3cMsHNr_xsk92yTdzp0wICWUvQL9UDsM65C6r8fd63hAE-cO32-b-x4G6l7MilL1IxBvOxSXcAKjczI1Z-lRqgx11_xutxtxgfeHrIm1tXN07sZ5-ij-i8-hl1z7s-UAdNA/s1600/budget.png" /></a></div>
<span style="line-height: 19.3199996948242px;"><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Yes, I used to be so proud of the elevated moral ground I stood on when proclaiming my fiscal conservatism. I mean w</span></span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif; line-height: 19.3199996948242px;">hat can be more right than making "hard decisions" to "get our house in order", right? </span><br />
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<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif; line-height: 19.3199996948242px;">Yeah, I knew that meant the most vulnerable will probably feel the pinch the worst, but I had worked hard and it paid off for me - why couldn't they just do the same? </span><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif; line-height: 19.3199996948242px;">Ugh!</span></div>
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So why do I say "former" fiscal conservative?</div>
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It's quite simple, really. The fatally flawed premise of fiscal conservatism is that the federal government is like a business (or household if you prefer). That is, it earns revenues and has expenses, and like all of us, it has to balance it's check book or it will get in trouble. Yep - I did say fatally flawed. It's complete nonsense - and we all know it if we just sit and think for a moment about what it means to have a legal money printing press. </div>
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<span style="line-height: 19.3199996948242px;">A currency-issuing sovereign nation is <b><u>nothing</u></b> like a business. It operates on a completely different fiscal paradigm. It has been granted monopoly control of a national monetary system that provides the ability to create spending power out of thin air whenever directed to do so for the common good. What business or household has this power? None!</span></div>
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How did we come to forget this? <span style="line-height: 19.3199996948242px;">It would be funny if it weren't so tragic.</span></div>
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<span style="line-height: 19.3199996948242px;">What we think of as fiscal conservatism is, in reality, nothing less than the reckless waste of valuable resources. We fail to maintain and enhance critical infrastructure that powers our economy and serves our peoples needs; we abandon large portions of our population to live on welfare, refusing to employ and educate them so that they could enhance their own lives and those of others in the community; we let capital and businesses sit idle when they could be put to productive use; we lay off scientists and close labs that could be inventing the next medical or technological breakthrough.</span></div>
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<span style="line-height: 19.3199996948242px;">This is the height of fiscal irresponsibility. There's no moral high ground here - only a web of misinformation and folly that has entrapped western civilization in a cycle of impoverishment and inequality. </span></div>
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<b>Real fiscal conservatism in a nutshell is this: utilize fiscal policy to whatever measure is necessary to ensure that the private sector is fully employed. </b></div>
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Period. No irrelevant squabbles over debt-to-GDP ratios and arbitrary debt ceilings. No meaningless metaphors of deficit black holes, drunken sailors, or per-capita debt burdens on our descendants. No hysteria over imaginary fears of hyperinflation. It's all irrelevant.</div>
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We can and we should debate all the other government investments, programs & benefits on their merits, but never on the question of affordability or with arbitrary limits based on annual tax receipts. </div>
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So take it from a former fiscal conservative: if you want to balance taxes and government spending with zero regard for the impact that has on the economy, employment, and the lives of citizens, you are neither conservative nor fiscally responsible. Rather, you are harming the economy, people's lives, and contributing to the destruction of capitalism. </div>
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Let's redefine REAL fiscal conservatism, and return our economy to full capacity. And any time you see someone talking about balancing the federal budget, please kindly educate them about how a sovereign currency works!</div>
</span></div>
Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-63250823781640261982014-10-30T11:47:00.001-05:002014-10-30T13:09:29.793-05:00Hillary Hysteria & Job Creation<iframe allowfullscreen="" frameborder="0" height="225" src="//www.youtube.com/embed/1nbFYP3xB6k" width="384"></iframe>
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<span style="line-height: 19.3199996948242px;"><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">I have no idea what Hillary was talking about here, but the question of job creation is greatly misunderstood on all sides, and of much importance to us all.</span></span><br />
<span style="line-height: 19.3199996948242px;"><span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span></span>
<span style="line-height: 19.3199996948242px;"><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It is often said that entrepreneurs and small businesses are the "job creators" in the economy. But if all an entrepreneur does is cause consumers to shift their spending from Dell to Apple, or from Panera to Chipotle, have we added new jobs to the economy? Are we also counting the lost jobs that resulted from the shift in consumer preferences?</span></span></div>
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<ul>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif; line-height: 19.3199996948242px;">Does Tesla create jobs if GM loses them? </span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif; line-height: 19.3199996948242px;">Do robotics manufacturers create jobs if factory workers lose them?</span></li>
<li><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif; line-height: 19.3199996948242px;">Can businesses really create more jobs in the whole economy by themselves? </span></li>
<li><span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Can the government also create jobs?</span></li>
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<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif; line-height: 19.3199996948242px;">Well, of course businesses create jobs in the sense that entrepreneurs and innovators and business managers are working diligently to provide a product or service that the public wants or needs, and when they are successful and grow they can hire more people. But in the aggregate (across the whole economy), businesses don't create new jobs simply by wanting to hire people or make more stuff. There has to be <u>growing demand</u> for their product. </span></div>
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<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif; line-height: 19.3199996948242px;">For a business, new jobs can originate from two main sources:</span></div>
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<li><span style="line-height: 19.3199996948242px;">Investors or banks inject funds for the business to hire people, build a factory, make a product, etc. in anticipation of the business selling enough in the future at profit such that they get a return on that investment. Investment funding is temporary and <u>must be replaced by sales</u> or it will quickly run dry. </span></li>
<li><span style="line-height: 19.3199996948242px;">The business has sales and based on forecast growth they add staff and expand to meet anticipated or actual demand.</span></li>
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<br />
Now where do these sales and this anticipated future demand come from? The consumer's ability and willingness to spend (let's ignore exports to keep this simple). So how do sales grow?<br />
<br />1. Consumers get into debt to spend (remember the Clinton years!)<br />2. Consumers spend their existing savings ('dis'-saving)<br />3. Consumers spend more of their income and save less (living on the edge)<br />4. Consumers have more income so they can spend more while still saving (healthy growth)<br />
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<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif; line-height: 19.3199996948242px;">At the end of the day, new jobs are added and sustained in an economy not by tax cuts for corporations, but by </span><u style="color: #666666; font-family: 'Trebuchet MS', sans-serif; line-height: 19.3199996948242px;">customer demand for goods</u><span style="color: #666666; font-family: 'Trebuchet MS', sans-serif; line-height: 19.3199996948242px;">.</span></div>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">When the economy stagnates and real incomes keep falling and debt levels are already high, businesses won't invest and grow as they don't see the forecast for demand increasing. This is the situation we have been in since 2008. </span></div>
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This is where outside injections of income into the economy (we call that a government "deficit" - a poor choice of words for a positive flow of money into the private sector) are critical. This can take the form of tax cuts (ideally aimed at spendable income, not wealthy savers), various welfare payments, direct hiring of the unemployed, and direct investment in useful areas (R&D, infrastructure).</div>
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So <b><u>yes</u></b>, businesses individually might create jobs and are essential to the system of innovation and capturing/shaping consumer wants and needs...</div>
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<div style="margin-bottom: 6px; margin-top: 6px;">
...but <b><u>no</u></b>, businesses themselves don't 'create' more jobs in our economy in the aggregate - that always comes from more people spending more of their incomes (or debt) which stimulates businesses into hiring. <span style="line-height: 19.3199996948242px;">Capitalism runs on sales.</span></div>
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<h3>
<span style="line-height: 19.3199996948242px;">The Minimum Wage</span></h3>
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<span style="line-height: 19.3199996948242px;">The minimum wage seems to be a focal point of Hillary's message. She is arguing that a higher minimum wage will result in more jobs and less inequality, pointing to her husband's term as an example (never mentioning the excessive private debt build-up that fueled that economic boom, and subsequent crash). </span><br />
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<span style="line-height: 19.3199996948242px;">The usual reaction from the other side is that supply and demand 'laws' teach us that rising minimum wages will result in more unemployment as businesses can't afford the higher costs and will have to lay off low-income workers. Of course, this 'law' assumes that the "wage market" is already in perfect equilibrium, and that all prices & wages are perfectly flexible (adjusting to any sensitive movement of the other), which never occurs in the real world, but we'll ignore this for now. </span><br />
<span style="line-height: 19.3199996948242px;"><br /></span>
<span style="line-height: 19.3199996948242px;">In reality, there's some truth to both sides. </span><br />
<span style="line-height: 19.3199996948242px;"><br /></span>
<span style="line-height: 19.3199996948242px;">To the extent that current minimum wages are below a level considered livable, it may be that the current wage is lower than the equilibrium wage in the imaginary world of supply & demand curves - i.e. raising it might not lower demand for labor. <br /><br />But more importantly, to the extent wages can be raised by shifting corporate profits to workers, and the workers have a <u>higher propensity to spend</u> (which they usually do), then the economy could see an increase in total demand (savings of businesses/owners fall and consumption by low-income workers increases), stimulating growth & more jobs.</span><br />
<span style="line-height: 19.3199996948242px;"><br /></span>
<span style="line-height: 19.3199996948242px;">On the other hand, if margins are tight, profits are slim, and a small increase in wages results in more layoffs than can be overcome by the increased wages/demand, then the higher Minimum Wage law might have a negative effect on demand and jobs.</span><br />
<span style="line-height: 19.3199996948242px;"><br /></span>
<span style="line-height: 19.3199996948242px;">It's not a given either way, as the politico blog hysteria would like us to believe.</span><br />
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<h3>
<span style="line-height: 19.3199996948242px;">A false choice?</span></h3>
<span style="line-height: 19.3199996948242px;">What is always missed in this debate is that there is another, much preferred option: the <a href="http://itsthepeoplesmoney.blogspot.fr/2014/07/the-job-guarantee.html" target="_blank">job guarantee</a>. If we simply eliminated involuntary unemployment by having the federal government cover the cost of work at a living wage (locally offered & administered), we would simultaneously eliminate the Minimum Wage debate, end unemployment, dramatically reduce welfare dependency, and make the biggest dent in poverty and its related social ills we've ever seen. </span><br />
<span style="line-height: 19.3199996948242px;"><br /></span>
<span style="line-height: 19.3199996948242px;">Oh, and it would also happen to create jobs through restoring growth in the private sector economy!</span><br />
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<span style="line-height: 19.3199996948242px;">So before you argue against a Minimum Wage increase on economic grounds, consider that it's not so black & white as many claim. Rather than believing we're helping people by fiddling with this policy, we should instead all turn our attention from such endless debates and really solve the underlying problem of unemployment and living wages. </span><br />
<span style="line-height: 19.3199996948242px;"><br /></span>
<span style="line-height: 19.3199996948242px;">Ask your elected officials if they support and job guarantee, and if not, vote for those that do!</span></div>
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Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-41569386659330154382014-10-26T13:30:00.000-05:002014-10-26T13:30:05.216-05:00Time for Teachers<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQV5NWW7JdLS6Vf6zg8qK2xWqvA9wRXrdlM19wJYhnmSPciOqfSLEejPhJp2y-dRTUfyg0MpIzlKwrWGryEbfnoVnfrB-ez-_YfCwsoEuMdCWNMeb0vi8yld2TmjmRv2Kl97BRQoIdIfM/s1600/time-teachers.jpg" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQV5NWW7JdLS6Vf6zg8qK2xWqvA9wRXrdlM19wJYhnmSPciOqfSLEejPhJp2y-dRTUfyg0MpIzlKwrWGryEbfnoVnfrB-ez-_YfCwsoEuMdCWNMeb0vi8yld2TmjmRv2Kl97BRQoIdIfM/s1600/time-teachers.jpg" height="320" width="240" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><a href="http://time.com/3533556/the-war-on-teacher-tenure/" target="_blank"><span style="font-family: Trebuchet MS, sans-serif;">Time: The War on Teacher Tenure</span></a></td></tr>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Time magazine's recent <a href="http://time.com/3533556/the-war-on-teacher-tenure/" target="_blank">piece</a> has caused quite a stir among educators and the public. </span><br />
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Blogger, <a href="https://twitter.com/brianprogrammer" target="_blank">Brian Anderson</a>, responded with a series of comments on Twitter that I thought are worth repeating. He takes particular aim at the Venture Capital (VC) approach to turn education into a mass market for hi-tech products.</span><br />
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Once again, it is a mistaken belief in how a sovereign monetary system functions that gives strength to the arguments of those opposing appropriate investment in universal education for the next generation. And so we turn to alternatives, thinking we can't afford to do what needs to be done.</span><br />
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">What would a 50% increase in teacher salaries and a maximum of 15 students per class do to our quality of education? Oh wait, we don't even consider such alternatives because we think we'd have to raise taxes to pay for it. </span><br />
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><i>Thanks to Brian for permission to re-post his comments (a few minor edits were made to fix "Twitter" abbreviations). Emphasis added. </i></span><br />
<span style="font-family: Trebuchet MS, sans-serif;"><br /><br />"Let's make a list of teacher-bashing VC's, and boycott them! Why would you want to let someone make money off of your start-up who is going to use it to attack your friends, your family and your kids. I can deal with libertarians, I can do business with libertarians. Everyone is a libertarian or some kind of 'fiscal conservative'. But when you attack teachers and the public education system you make it personal. Remember that. Teacher bashers let bad logic about money and gov’t turn them into bad people. Don't be a teacher basher.<br /><br /><b>We need to move to a 100% federally funded education system, with haste.<br /><br />Just because you are born in a poor place doesn't mean you should get a substandard education.</b><br /><br />Educating your own kids is like being your own lawyer, only it’s more like being your kid’s lawyer.<br /><br /><b>It must be possible for someone to graduate high school, finance a college education, and then pay off any loans by working as a school teacher.</b><br /><br />Libertarians would have you think that is a mathematical impossibility. But they shouldn't have a say in education OR finance.<br /><br /><b>If you have to be from a privileged background in order to follow that type of career path, we must be doing it wrong.</b><br /><br />Libertarians and their neoliberal enablers see Ponzi schemes everywhere they look. That's because they don't know squat about finance. Education is not a Ponzi scheme. Not in kindergarten and not in grad school. Education is like everything else. The money to pay for it comes from gov’t spending.<br /><br />VCs seem especially interested in education these days, and I see two reasons for the trend. The first reason VCs are interested in education is because they are libertarians and neoliberals. As such, they believe that all public spending is essentially a Ponzi scheme. They believe the deficits required to provide universal free education are unsustainable and erode the purchasing power of THEIR money. They view public school teachers as takers who are getting a free ride at their expense. Because they believe taxes fund gov’t spending.<br /><br />They believe these things because they learned them from economists while they were in business school. But those economists should have constructed better theories of markets, and their students (the VCs) should have been more critical. If your best explanation of middle-class consumer capitalism has a Ponzi scheme at its center, maybe you are doing it wrong? Maybe it is not the existence of the middle class that is the problem, maybe it is your understanding of asset-pricing and accounting? Of course, I could go on about why capitalism needs deficits in order to operate a unit of account that is both liquid and stable in value.<br /><br />But I want to talk about the second reason why VCs are so interested in education these days. It is because VCs are investors who put their gov’t issued money into startups and want to get MORE gov’t issued money out. They have tried to compete with Wall St. to help the middle class invest for retirement. Mostly failed because Wall St. knows money better. They have tried hawking all sorts of ad tech gizmos at fortune 500's. That's ok for a while but they know they are bleeding a stone.<br /><br />They cannot MAKE people spend money that they don't have. They have tried turning the unemployed into unregulated cab-drivers and inn-keepers. The point is that they are setting their sights lower and lower. It is no surprise that they see education as a promising market. After all, money comes from govt. VCs see teachers making salaries and THEY want that money.<br /><br />They want to replace your kid's English teacher with a computer program that will take them through "Of Mice and Men" one page at a time. They will print out charts and graphs that tell you how many pages per minute your kid reads, and where they sit on the normal distribution. And they are going to try to convince you that this is better than having actual teachers in the schools.<br /><br />And they are going to replace public school teachers’ salaries with license fees that go directly into the bank accounts of firms they OWN. Whether they can explain it or not, VCs know that money comes from govt. That's why they are lined up at the trough. That's why they are trying to muscle the middle class out the way. To take a bigger share of the gov’t created income.<br /><br />It’s also a thriving marketplace for them. If you think test scores show a problem, you can sell all kinds of products. The marketplace for (mostly worthless) school interventions on the market is denominated in the $multi-billions. Not just VCs, Conservatives, libertarians & politicians, all know money comes from government but can't/won't explain it!<br /><br />The fact that gov’t spending creates the money that we earn, spend and save has a lot of consequences. When public spending dollars are allocated to individuals like teachers, those teachers are then able to spend, save and invest. That spending is what makes the rest of our investments profitable. It sends information about consumer preferences to entrepreneurs. But when (say) education spending is allocated directly to some Silicon Valley software company, it does nothing for the community.<br /><br />What it amounts to is a gov’t which directly allocates capital to a group of producers selected by bureaucrats. IOW, central planning.<br /><br />I want to help you visualize the difference. Imagine a map of the US with a little dot at the home of every public school teacher. Now imagine a second map where there are three big dots centered in Silicon Valley, such that the area of the three dots is equal to the combined area of all the little dots in our first map. The first map is how public education spending is distributed in our traditional system, which libertarians think is a socialist system. And the second map is how education spending would be distributed if these people get their way. So the way that gov’t spends has consequences that go far beyond the resulting change in our national debt (equity). It determines the geographical distribution of income and spending, it determines which communities are buyers and which are sellers. That's why we should reject VCs bearing better, faster, cheaper forms of education. They are the ones that need to be reeducated."</span><br />Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-12418498667415616472014-10-26T11:35:00.000-05:002014-10-26T11:40:59.283-05:00TINA, you're breaking my heart!<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhtGzJFTdQHernUv2XjUE3fvYyaR6nwOhIUHENnr8t-XGbQGHpxGQdOF4kn6ORGkQnX89LONZqqk6WqFeWXCHFa3bclwbESv_9FRs6RIaEA7wnYuLdcLjHyoC8B5quxD0391nrRdxC2dS8/s1600/thatcherTINA1.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhtGzJFTdQHernUv2XjUE3fvYyaR6nwOhIUHENnr8t-XGbQGHpxGQdOF4kn6ORGkQnX89LONZqqk6WqFeWXCHFa3bclwbESv_9FRs6RIaEA7wnYuLdcLjHyoC8B5quxD0391nrRdxC2dS8/s1600/thatcherTINA1.jpg" height="320" width="269" /></a></div>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><b><span style="border: 1pt none windowtext; padding: 0in;">"TINA"</span></b><o:p></o:p></span></div>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">TINA, you're breaking my heart,<br />
You're shaking my confidence daily.<br />
Oh TINA, I'm all out of work,<br />
I'm begging for job guarantees.<br />
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TINA, you're breaking my heart,<br />
You're shaking my confidence daily.<br />
Oh TINA, there's no place to work,<br />
I'm begging for deficits, please.<br />
Job guarantees.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br />
Unemployed in the afternoon with TINA<br />
Upload resume,<br />
I get up to find some cheer,<br />
When I refresh the page,<br />
Jobs are no longer there.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br />
TINA, you're breaking my heart,<br />
You're shaking my confidence daily.<br />
Oh TINA, I'm down on my knees,<br />
I'm begging for job guarantees.<br />
<br />
Stagflation,<br />
She loves me again,<br />
I fall on the floor of the dole.<br />
<br />
Starvation,<br />
She loves me again,<br />
I fall on the floor of food stamps.</span><br />
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<div class="separator" style="clear: both; text-align: center;">
<object class="BLOGGER-youtube-video" classid="clsid:D27CDB6E-AE6D-11cf-96B8-444553540000" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0" data-thumbnail-src="https://ytimg.googleusercontent.com/vi/a5_QV97eYqM/0.jpg" height="266" width="320"><param name="movie" value="https://youtube.googleapis.com/v/a5_QV97eYqM&source=uds" /><param name="bgcolor" value="#FFFFFF" /><param name="allowFullScreen" value="true" /><embed width="320" height="266" src="https://youtube.googleapis.com/v/a5_QV97eYqM&source=uds" type="application/x-shockwave-flash" allowfullscreen="true"></embed></object></div>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">There is always an alternative! </span><span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">A <a href="http://itsthepeoplesmoney.blogspot.fr/2014/07/the-job-guarantee.html" target="_blank">Job Guarantee</a> is arguably the most "just" policy mechanism related to unemployment for a monetized economy, and is certainly a compelling policy for a host of other social and economic reasons.</span>Unknownnoreply@blogger.comtag:blogger.com,1999:blog-688428074587369686.post-49040290736314839862014-10-24T19:03:00.001-05:002014-10-24T19:10:26.724-05:00National high speed rail network coming to USA!<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjEqf33juVzHbtsXCBew57UoTy_CHdDQ1kHTkzaIqTMZlWGwLjkCSmdM9Lxww8JL4_zzqS6E9GKTkNzKz8eJErGlYrOIysylmg6ENY6x6UvA3WL8lnO79Y76KzCcYMdeqtsA8Xc-Lr6saU/s1600/HSR.png" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjEqf33juVzHbtsXCBew57UoTy_CHdDQ1kHTkzaIqTMZlWGwLjkCSmdM9Lxww8JL4_zzqS6E9GKTkNzKz8eJErGlYrOIysylmg6ENY6x6UvA3WL8lnO79Y76KzCcYMdeqtsA8Xc-Lr6saU/s1600/HSR.png" height="206" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><a href="http://www.ushsr.com/ushsrmap.html" target="_blank"><span style="font-family: Trebuchet MS, sans-serif; font-size: xx-small;">USHSR Map</span></a></td></tr>
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Bill Gates, Elon Musk, and Warren Buffet team up to invest their billions in a new high speed electric rail system linking all major US cities. The project will transform US public transportation, dramatically reducing air travel while cutting carbon emissions and helping transition the nation to a more sustainable energy future. The project will be built in phases and is expected to be completed by 2030. </span><br />
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Exciting, isn't it? Could these three storied entrepreneurs and investors pull it off? </span><br />
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Okay, the story is totally fabricated, but we have something so much better than three billionaires at our disposal. We have a sovereign currency and a nation of incredible resources, engineers, and skilled labor - all ready to be deployed if we'd simply direct them to do it. Why would we get so excited about entrepreneurs tackling a project like this and then be disappointed that it would take our government resources to pull it off? In fact, a project of this scale can probably only be accomplished with federal backing, and can be made affordable to all by injecting the funds to build and operate it into the economy. Why would we want to burden our states and cities with this bill when they have to tax and borrow to fund it. These are exactly the kinds of initiatives for which we created our sovereign currency!</span><br />
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<span style="color: #666666; font-family: 'Trebuchet MS', sans-serif;">Why have we forgotten that we don't have to wait for Silicon Valley or the Oracle of Omaha to take bold steps forward that are in our collective interests? We used to think this way as a nation. We built a national highway infrastructure that powered an economy that was the envy of the world. We put men on the moon and invented groundbreaking new technologies that transformed society. We placed satellites into orbit and provided weather data, cosmological discoveries, and GPS services that now resides in the pockets of consumers worldwide. We did this not by waiting for private funds to be saved up in order to afford these investments. Rather, we took the initiative knowing that as a sovereign nation with vast real resources, we had the ability to issue our currency to marshal resources to tackle big problems and build big dreams.</span><br />
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It's time we began to dream again. We have the money. We have the resources. We have the people. We just need the vision, the hope, and the belief in ourselves that we can do good together.</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">It's time to do good together. </span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1xwYey5a7UHRQnXBoW2ZNO2MjSdjR_KRfqSf3Qm-iy81P2QBiO9h3kJ-jlOxjpInIAl_ne6H3MnH8kGp7uvlPz1q8guLNoFJoTnZIf5zGdZ2Mb18aJZdDdmkiCMWYr_Gt91m2gjXG8D4/s1600/632_EurostCrp2.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1xwYey5a7UHRQnXBoW2ZNO2MjSdjR_KRfqSf3Qm-iy81P2QBiO9h3kJ-jlOxjpInIAl_ne6H3MnH8kGp7uvlPz1q8guLNoFJoTnZIf5zGdZ2Mb18aJZdDdmkiCMWYr_Gt91m2gjXG8D4/s1600/632_EurostCrp2.jpg" height="97" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><a href="http://www.ushsr.com/benefits/economic.html" target="_blank"><span style="font-size: xx-small;">Image source from USHSR</span></a></td></tr>
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</span><br />
<span style="color: #666666; font-family: Trebuchet MS, sans-serif;">Check out the USHSR vision for a high speed electric rail system across the US <a href="http://www.ushsr.com/" target="_blank">here</a>. </span><br />
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<span style="color: #666666; font-family: Trebuchet MS, sans-serif;"><br /></span>Unknownnoreply@blogger.com