Ok then, If it ain't MMT ....

[JohnfrmClevelan]

I buy something and then sell it at a profit. I won't argue about drawing from the economy to buy it. When it sells the value of the product increases and I can spend the difference. I don't have to draw from the economy to spend the profit. The act of earning a profit was all that was necessary. Perhaps that isn't money by your definition but it sure works for me. I pay all my bills from business profits.

This is the same line of argument that was used by ludin in Credit Growth Drives the Economy, so I'll give the exact same answer:

If your investment "grows" without new money, then it is just coming out of somebody else's pocket. The same income is being redistributed - to you, your investment grew, but to everybody else, they have a little less money. Example: everybody makes $50,000. You "invest" in a new product that costs $1000, and everybody buys one. For you, your investment has paid off handsomely. But the rest of the economy, which used to collect $50,000 from every person, now only collects $49,000 from every person. Demand hasn't increased, it has only been redistributed.

Without credit, or some other injection of demand (net exports or federal deficit spending), the economy does not grow. If the national income is $15 trillion, and we spend every cent of that $15 trillion domestically on consumption and investment, then our national income will remain at $15 trillion. No growth.

 

[JohnfrmClevelan]

I'm saying that most money isn't printed. It is electronic book keeping. I earn a profit. I spend the profit. There was no involvement at all by the government or the banking system. I created money all by myself.

No, you didn't. It doesn't matter what form money is in - either the government created it (MB), or bank loans created it (M1). If MB goes up, that means that the government has increased it's debt, and if M1 goes up, that means that the private sector has increased its debt. Either way, it took credit to get there.

 

[fmw]

This is the same line of argument that was used by ludin in Credit Growth Drives the Economy, so I'll give the exact same answer:

If your investment "grows" without new money, then it is just coming out of somebody else's pocket. The same income is being redistributed - to you, your investment grew, but to everybody else, they have a little less money. Example: everybody makes $50,000. You "invest" in a new product that costs $1000, and everybody buys one. For you, your investment has paid off handsomely. But the rest of the economy, which used to collect $50,000 from every person, now only collects $49,000 from every person. Demand hasn't increased, it has only been redistributed.

Without credit, or some other injection of demand (net exports or federal deficit spending), the economy does not grow. If the national income is $15 trillion, and we spend every cent of that $15 trillion domestically on consumption and investment, then our national income will remain at $15 trillion. No growth.

But I didn't say anything nor suggest anything about growth. I was simply talking about money creation. If I can spend it, then it is money to me.

 

[JohnfrmClevelan]

But I didn't say anything nor suggest anything about growth. I was simply talking about money creation. If I can spend it, then it is money to me.

Well, then that's not money creation. You are just using some already-existing dollars.

Banks create money through loans. You take out a home mortgage for $100K, and the seller gets paid. You are in $100K of debt, and the seller has $100K to spend. That is new money. That is money creation.

When the seller buys a TV from Best Buy by using cash or writing a check, he is just using dollars that he has earned. Then Best Buy has money to spend, etc., etc., and it all came from your mortgage loan. No new money was created in any of these transactions.

 

[Celebrity]

This is the same line of argument that was used by ludin in Credit Growth Drives the Economy, so I'll give the exact same answer:

If your investment "grows" without new money, then it is just coming out of somebody else's pocket. The same income is being redistributed - to you, your investment grew, but to everybody else, they have a little less money. Example: everybody makes $50,000. You "invest" in a new product that costs $1000, and everybody buys one. For you, your investment has paid off handsomely. But the rest of the economy, which used to collect $50,000 from every person, now only collects $49,000 from every person. Demand hasn't increased, it has only been redistributed.

Without credit, or some other injection of demand (net exports or federal deficit spending), the economy does not grow. If the national income is $15 trillion, and we spend every cent of that $15 trillion domestically on consumption and investment, then our national income will remain at $15 trillion. No growth.

How does scarcity generate growth? Federal deficit spending means making sacrifices elsewhere in discretionary spending, or raised taxes to accommodate demand .

 

[JohnfrmClevelan]

How does scarcity generate growth? Federal deficit spending means making sacrifices elsewhere in discretionary spending, or raised taxes to accommodate demand .

No, federal deficit spending is a pure addition of demand. If it came out of taxes, it wouldn't be deficit spending. It is merely the government creating dollars and spending them into the economy, over and above what it collects in taxes.

 

[Celebrity]

No, federal deficit spending is a pure addition of demand. If it came out of taxes, it wouldn't be deficit spending. It is merely the government creating dollars and spending them into the economy, over and above what it collects in taxes.

Yes, although borrowing money one doesn't have means someone has to pay it back. You're right, it's not the same thing as taxation. I am not meaning to jump to conclusions. If the government creates money from debt, where will interest paid on the principle come from?

 

[JohnfrmClevelan]

Yes, although borrowing money one doesn't have means someone has to pay it back. You're right, it's not the same thing as taxation. I am not meaning to jump to conclusions. If the government creates money from debt, where will interest paid on the principle come from?

From more government-created dollars. The government has no trouble at all meeting any and all of their dollar-denominated obligations.

The government doesn't borrow dollars from banks (although I suppose they could) - they have the power (via their central bank) to just make and spend dollars. There are practical limits to this; too much spending could swamp our economy's ability to meet demand, and that would result in inflation. But there is no limit to the number of dollars that the government can create, and at no real cost. How much to deficit spend, or whether to do so at all, is a question of policy.

 

[Celebrity]

From more government-created dollars. The government has no trouble at all meeting any and all of their dollar-denominated obligations.

The government doesn't borrow dollars from banks (although I suppose they could) - they have the power (via their central bank) to just make and spend dollars. There are practical limits to this; too much spending could swamp our economy's ability to meet demand, and that would result in inflation. But there is no limit to the number of dollars that the government can create, and at no real cost. How much to deficit spend, or whether to do so at all, is a question of policy.

Well, I'm sure the executive branch has the power to print money in a US Mint, although Congress has to pass a spending bill for deficit spending. But that doesn't really address to what extent the subsequent inflation is a virtue. If the government creates a symbolic currency with a mint, what is the value of that money?

Where else does the money come from, if it's not just a piece of paper? I think it's clear that the American people are represented in Congress. As long as America is making money, then Congress should be providing the legislation to make it so.

 

[JohnfrmClevelan]

Well, I'm sure the executive branch has the power to print money in a US Mint, although Congress has to pass a spending bill for deficit spending. But that doesn't really address to what extent the subsequent inflation is a virtue. If the government creates a symbolic currency with a mint, what is the value of that money?

What subsequent inflation? The increased spending elicits new production that would not otherwise have happened. More spending means more demand, and more demand leads to more production.

Where else does the money come from, if it's not just a piece of paper? I think it's clear that the American people are represented in Congress. As long as America is making money, then Congress should be providing the legislation to make it so.

Yes, the government doesn't spend money without Congressional approval. They give the order to spend, and together the Treasury and the Fed make it happen. If there are insufficient tax receipts in Treasury's account at the Fed, then Treasury will issue bonds and deposit the proceeds in its account. And sometimes, it's the Fed that (indirectly) buys those bonds.

Most money, though, is created by bank loans. The vast majority of the money in your bank account originated from business loans and home mortgages.

 

[Celebrity]

What subsequent inflation? The increased spending elicits new production that would not otherwise have happened. More spending means more demand, and more demand leads to more production.

At a national level maybe. I don't think new production happens remotely before inflation from the increased "demand." Hyperinflation can occur locally before or with the demand increase.

Yes, the government doesn't spend money without Congressional approval. They give the order to spend, and together the Treasury and the Fed make it happen. If there are insufficient tax receipts in Treasury's account at the Fed, then Treasury will issue bonds and deposit the proceeds in its account. And sometimes, it's the Fed that (indirectly) buys those bonds.

Most money, though, is created by bank loans. The vast majority of the money in your bank account originated from business loans and home mortgages.

Well, if that's where the money comes from, then this how it dies:

Even the IMF Now Admits Neoliberalism Has Failed - Fortune

 

[JohnfrmClevelan]

At a national level maybe. I don't think new production happens remotely before inflation from the increased "demand." Hyperinflation can occur locally before or with the demand increase.

We have been deficit spending for the great majority of our years as a nation. So do many other countries. Where is this hyperinflation that you speak of?

Well, if that's where the money comes from, then this how it dies:

Even the IMF Now Admits Neoliberalism Has Failed - Fortune

That is where money comes from - but I don't get your point here. Could you explain, please?

 

[fmw]

Well, then that's not money creation. You are just using some already-existing dollars.

Banks create money through loans. You take out a home mortgage for $100K, and the seller gets paid. You are in $100K of debt, and the seller has $100K to spend. That is new money. That is money creation.

When the seller buys a TV from Best Buy by using cash or writing a check, he is just using dollars that he has earned. Then Best Buy has money to spend, etc., etc., and it all came from your mortgage loan. No new money was created in any of these transactions.

I dig in the ground and find some semi precious stones. I take them to a broker and sell them. That is new money. No bank.

 

[JohnfrmClevelan]

I dig in the ground and find some semi precious stones. I take them to a broker and sell them. That is new money. No bank.

Where did the broker get the money from? Old money.

 

[fmw]

Where did the broker get the money from? Old money.

I apply to the bank for the 100K mortgage. Forget the interest. The bank buys the house from the seller with old money. That swaps one asset (cash) for another (house.) No change. The bank writes a mortgage contract, has me sign it and turns the house over to me. That swaps one asset (house) for another (note receivable.) No change. In my case I use old money to pay the mortgage until the contract is satisfied. I have the house now. I bought a house that came from old money from the bank with my old money. The seller swapped his asset (house) for another (cash.) I completely lost the new money.

Back to the interest. The bank took a risk by writing the mortgage and earned a profit (interest) by doing so. That is the change. It is the only thing I can see economically changing for the entire transaction. The real estate transaction itself had nothing to do with it that I can find.

On the other hand, if I dig up some valuable rocks, I have gained an asset without spending anything other than my effort. I have brought some new wealth (if not money) into the economy. I have something new that wasn't there before. The economic change of bringing a new asset into the economy seems intuitive to me. Not to you?

 

[JohnfrmClevelan]

I apply to the bank for the 100K mortgage. Forget the interest. The bank buys the house from the seller with old money. That swaps one asset (cash) for another (house.) No change. The bank writes a mortgage contract, has me sign it and turns the house over to me. That swaps one asset (house) for another (note receivable.) No change. In my case I use old money to pay the mortgage until the contract is satisfied. I have the house now. I bought a house that came from old money from the bank with my old money. The seller swapped his asset (house) for another (cash.) I completely lost the new money.

Banks don't collect and lend out old money. That's just not how they operate. When you apply for a mortgage, the bank marks up your account by $100K, and you execute a $100K+ promissory note; bank assets and bank liabilities have both gone up by $100K, and so have yours. Then, the bank also has to adjust both its reserve balance and its capital account balance up by $10K.

You pay your mortgage payment with old, pre-existing money - money that was borne of somebody else's loan at some earlier point. Maybe your employer takes out loans in the normal course of business. Anyway, as you pay off your loan, your loan amount decreases, so bank liabilities decrease, and the number of bank-created dollars decreases. When your loan is paid off, M1 is back to what it was before. Of course, other loans are being made and paid down every day, so we always have a supply of bank-created dollars that stays fairly steady.

Back to the interest. The bank took a risk by writing the mortgage and earned a profit (interest) by doing so. That is the change. It is the only thing I can see economically changing for the entire transaction. The real estate transaction itself had nothing to do with it that I can find.

The interest is just extra money that you pay the bank for the benefit of getting the loan. The net of your loan is that once your loan has been extinguished, M1 has not changed, and some old money has moved from you to the bank. That is their profit.

On the other hand, if I dig up some valuable rocks, I have gained an asset without spending anything other than my effort. I have brought some new wealth (if not money) into the economy. I have something new that wasn't there before. The economic change of bringing a new asset into the economy seems intuitive to me. Not to you?

You digging up some valuable rocks is no different than if you worked and earned money from your employer. Your work is still paid for with old (to you) money.

The economy benefits from the simple act of you working and being paid for it. That's commerce, and wealth is created - a house gets built, you dig up some diamonds, farmers grow food, etc. But the whole point of the conversation is that if you earn $50K, the most you can spend (without credit) is $50K, and this is true of the nation as a whole. Without credit, you are maxed out at $50K of spending. With credit, you can spend, say, $55,000, and the extra $5000 becomes income for other people and businesses. If lots of people and businesses also use credit, you have the opportunity to earn more than your normal $50,000. That is how economies grow.

 

[Moderate Right]

From more government-created dollars. The government has no trouble at all meeting any and all of their dollar-denominated obligations.

The government doesn't borrow dollars from banks (although I suppose they could) - they have the power (via their central bank) to just make and spend dollars. There are practical limits to this; too much spending could swamp our economy's ability to meet demand, and that would result in inflation. But there is no limit to the number of dollars that the government can create, and at no real cost. How much to deficit spend, or whether to do so at all, is a question of policy.

Isn't dollar devaluation a cost?

 

[ludin]

Isn't dollar devaluation a cost?

what devaluation.

mmt says there is no risk just print what you want.
which is one of the major criticism from key Keynesians which have their own issues.

MMT does not take into account currency devaluation or inflation.

 

[JohnfrmClevelan]

what devaluation.

That's what I say - what devaluation? Inflation is very low, and it certainly isn't due to us having too many dollars in our pockets.

mmt says there is no risk just print what you want.

False. We always maintain that inflation is a risk. Which it is, if the government creates and spends too much. Do you think that our economy is stretched to its productive limits?

which is one of the major criticism from key Keynesians which have their own issues.

So cite some of these key Keynesians, and we can discuss their concerns.

MMT does not take into account currency devaluation or inflation.

See above. Of course we do. If that is your best argument against MMT, you lose.

 

[ludin]

That's what I say - what devaluation? Inflation is very low, and it certainly isn't due to us having too many dollars in our pockets.
False. We always maintain that inflation is a risk. Which it is, if the government creates and spends too much. Do you think that our economy is stretched to its productive limits?
So cite some of these key Keynesians, and we can discuss their concerns.
See above. Of course we do. If that is your best argument against MMT, you lose.

there is an entire thread on this already. in fact a paper was cited by key economist (who cited other economists) with the issues with MMT
and their criticisms. you refused and frankly dishonestly ignored the paper.

it isn't just my argument it is the argument of major economists against mmt.
you are free to actually go read that thread there is no point in repeating something
over again.

 

[JohnfrmClevelan]

there is an entire thread on this already. in fact a paper was cited by key economist (who cited other economists) with the issues with MMT
and their criticisms. you refused and frankly dishonestly ignored the paper.

it isn't just my argument it is the argument of major economists against mmt.
you are free to actually go read that thread there is no point in repeating something
over again.

No, there certainly is no point in repeating the nothing that you have previously come up with. Maybe you can make up a quote that supports your position and attribute it to a real economist again. And after that, you think that I am the one not reading the papers???

 

[ludin]

No, there certainly is no point in repeating the nothing that you have previously come up with. Maybe you can make up a quote that supports your position and attribute it to a real economist again. And after that, you think that I am the one not reading the papers???

thank you for admitting your dishonesty.
again you failed to read the paper that is not my problem.
go read the thread and the paper.

it cites all the issues with MMT and why it is not a valid theory.

one of the biggest criticism is that it fails to consider inflation consequences and devaluation
of money with all the printing.

it is all in the paper that you said you read. I don't need to cite something that has already
been cited. go read the paper that you said you read that you clearly didn't.

 

[Celebrity]

Isn't dollar devaluation a cost?

:thinking

 

[Celebrity]

We have been deficit spending for the great majority of our years as a nation. So do many other countries. Where is this hyperinflation that you speak of?



That is where money comes from - but I don't get your point here. Could you explain, please?

No, I'm not making any point about deficit spending, just thought it was worth mentioning. Sorry if this belongs in another thread.

Hyperinflation isn't a problem here. Sometimes I wonder if anything less than hyperinflation is just a controlled burn. Isn't it only a matter of time before the dollar builds up a velocity enough to exit orbit? :hitsfan:

What's stopping new production from spinning out of control and exceeding demand, for example?

 

[JohnfrmClevelan]

No, I'm not making any point about deficit spending, just thought it was worth mentioning. Sorry if this belongs in another thread.

Hyperinflation isn't a problem here. Sometimes I wonder if anything less than hyperinflation is just a controlled burn. Isn't it only a matter of time before the dollar builds up a velocity enough to exit orbit? :hitsfan:

What's stopping new production from spinning out of control and exceeding demand, for example?

Businesses don't produce without the requisite demand. If they did, they wouldn't stay in business for long.

Hyperinflation isn't caused by too much money; hyperinflation is normally caused by a sharp drop in production, like during/after wars. Prices jump up when there is little on the shelves to buy, especially food. Sometimes, it's caused (or exacerbated) by debts in foreign currencies, which take real resources to pay off.