- Stephanie Kelton: Are there spending constraints on governments
sovereign in their own currency?
- MMT is not the right brand---it's a misnomer. Neither non modern nor a theory.
- It is simply a description of operational realities of money without [gedanken]experimental assumptions.
- Diff between conventional economics and MMT approach.
- Conventional: things start with barter. emerges spontaneously. some entity (gold, etc) used as exchange. Money is a private system in which government has intervened.
- MMT: money *really
- comes from state obligations. Taxes are a debt imposed on the public that must be repaid via money. It is the government who makes fiat money necessary/acceptable.
- Central MMT thesis: government's power to tax and its power to create and destroy money is the right framework to think about monetary policy
- Household/gov't analogy:
- Household budget constraint: How much we can transfer in government liabilities to other entities.
- Gov't ability to spend NOT limited by its ability to tax or borrow.
- Gov't is ISSUER of currency, it must spend first.
- Any other constraint is self-imposed.
- Gov't spending
- Illusion that gov't spending is based on raised taxes.
- It is simply the scorekeeper: it doesn't have or not have money.
- Gov't cheques to private sector increase the money supply---new money. Debit Treasury account/score.
- Taxes destroy money by marking up the Treasury account.
- Why tax?
- TREASURY SHREDS CASH submitted as tax payment.
- Gov't doesn't NEED the money.
- All taxes do is maintain the demand for money. Gov't uses it for demand regulation.
- What are bonds, then?
- "Nothing more than a savings account at the fed."
- Get more money at a future date for parting with money now.
- Debt clock: a lie. Should be called "World US dollar savings account."
- Solvency: can the US gov't run out of money?
- NO! No more than a sports stadium can run out of points.
- Greenspan: Fiat money system cannot run out of money.
- PIIGS in trouble because they are in the Euro zone: they are no
longer using a sovereign currency.
- Solvency is now a legit problem for gov'ts that use Euro.
- Euro nations are now states like US states---just users, not sovereign.
- We see the same problem for all of the other countries that
converted their currency into another country's currency
(e.g. mexico, russia).
- Kelton cannot name a country with a fiat floating non-convertible currency that has these problems.
- Can the gov't spend without limit? NO!
- Spending will be needed to regulate inflation.
- But we need to loosen up now.
- Harrison from audience: What's diff between Russia and Argentina? [I didn't quite understand Mosler's answer.]
- Kelton [off of another question from Harrison]: debt-to-GDP
- Mosler: inflation is a political problem. Italy had double-digit inflation, did well in 80s.
- Tcherneva: Argentinian provinces generated their own currencies during crisis. Not needed when Argentina's currency again floated.
- Series of questions on treasury bonds: do governments need to
- General answer: only if their laws require it; otherwise, if they pay interest on reserves, no.
- Is deregulation connected to this? Deregulation of private
sector vs. extreme regulation of monetary policy.
- Desire to choke public sector due to distrust of democracy among conventional policy-makers.
- Question from journalist: did EU policymakers know about the
consequences of introducing common currency without common
- Yes, but they were hoping for political union to eventually ensue.
- Why expand Europe so much: various reasons, generally political.
- Ed Harrison: another question why we need US treasury
bonds. Liquidity? Setting fed funds interest rates?
- Mosler: bonds not necessary for that; only political. Other countries do not use that mechanism.
- Investment manager asks: fed can create currency, what is the
inflation consequence? "Democracy only lasts until the voters
realize they have access to the purse strings."
- Wray: deal with this in terms of real issues and real resources. Do we want to allocate resources one way or another? That's democracy. [As opposed to setting artificial ceilings.]
- Auerback: Do we apply affordability to defense? No. We only argue about money when it comes to eg. health care. Skewed values.
- Kelton: interest payments on debt paid by current generation, not allocation issue.
That's it for talk summaries. In a few hours, I'll write my own summary thoughts/reactions to it. In a nutshell, I liked most of what they had to say but have one or two reservations.