This is well worth watching, and is brand new:
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Very good – including the slightly menacing musical accompaniment – and MMT wasn’t mentioned once!
Thanks. Definitely worth sharing with anyone who might be or should be interested. A good primer for students too.
Oversimplifies to the extreme though admirable. The behavioural issues underlying resistance to the logic is where the problems lie. There are many, from our muppet Parliament to poor understanding of what circuits are in general, let alone money as one. I’m in favour, though find it worrying some find a panacea in this. Questions I ask my students include imagining MMT in global scarcity situations like doctor recruitment. All could floop money into existence to get the staff. This doesn’t kill MMT in any way, just widens the debate we should be having.
‘The behavioural issues underlying resistance to the logic is where the problems lie.’
By this do you mean the depiction of the national economy economy as a household economy?
I still think that we should try to distribute this amongst our own digital networks to see how it gets on.
After all, it is the repetition of lies that has got such a gross misunderstanding about the creation of money in the first place.
Not quite mate. Yes, but then it gets complex quickly beyond the household ‘dawning’. Systems obviously get gamed. but it difficult to establish quite how we get what counts in the new accounting we need, especially once we realise “groaf” on a world basis would need 5 planets if all raised to US levels. This suggests much more behavioural change other than fund, do, recover or prime again.
Oh it’s lovely – not too heavy at all. It covers much of what we have discussed here before. It’s good to hear them spoken and not written for once.
Let’s spread it around eh?
Good, but I think it misses an essential point – balancing out. The conventional view, even in enlightened circles, is that tax is there to mop up thin air money. But at the same time as the Government is mopping up money, it is creating new thin air money. The two processes almost balance out. This means that the main purpose of tax is NOT to mop up money, but to redirect the flow of money, to use it more productively. Similarly, the Bank of England did not print £50 billion of new money after the last crash. It simply replaced the £50 billion that the banks had converted into thin air through bad loans. It only restored the amount of money in the system. The questions that we need to address are : How does money fall out of the system and fail to be used productively? and How does money disappear back into thin air?
I am sorry to say I think you are wrong aboit tax cancelling money.
Hiw it does it, and whose money it cancels, is vital, however.
Michael Green..I disagree with you about money disappearing into thin air and the government just replacing it, money in the economy goes somewhere every time always changing hands it never disappears , it may be unseen for a while but that’s just because it’s on a balance sheet somewhere not actually being used.
We as individuals love to have money that is on a balance sheet in credit to our name even if we never ever use it .
Many people are not content that they have money they actually want to ensure that other people do not have money so that they can maintain the gap between themselves and others.
Climb the ladder , if you see others following pull up the ladder.
Terence
You are wrong
Money is continually created and destroyed
Your belief that it is tangible is, I am afraid, wholly untrue
The BNk of England agree
Richard Murphy
I know money is continually created and destroyed but it does not disappear into thin air unless you are referring to the notes that are collected and burned by BofE from time to time.
Money is hoarded, wealth is hoarded and when this discussion began I think it is wealth rather than the actual paper notes that was the point of the discussion.
Wealth is hoarded and most importantly kept from people to prevent the gap between rich and poor shortening.
There are many people in the world who would rather destroy money/wealth than see it go to or used to benefit others, unfortunately governments around the world do this too because they are controlled by those types of people.
I support the EU because I think it is possible that it may be able to do something about business that moves around the world to avoid taxes and it may be able to do something about people that hide money/wealth in places around the world to avoid taxes.
In the context of this discussion I see money and wealth as the same.
Money is just a ledger entry
It is only wealth if it represents something
And if the ledger entry does not disappear (as it can)
I think you have the wrong end of the stick here – and money and wealth are emphatically not the same thing. One is at best an inadequate measure of the other.
Richard Murphy..
I agree with what you say and I understand that money is an entry in a ledger.
just making the point that whether it’s an entry in a ledger or paper money it doesn’t just disappear into thin air , I understand the point that entries in the ledger etc disappear once used or moved but I reckon it’s a poor description in this discussion to say it disappears into thin air giving the impression that nothing came of it whereas in reality it just changed from being an entry in a ledger to being something else, a paid up mortgage or a car o food whatever…
Expired the Pen
It comes to the same thing – there is no debt left
And all money is debt
I don’t understand the role of bonds. Is it to soak up excess money to avoid inflation?
It is a formalisation of excess spending
It satisfies the demand for saving in the economy
And the reality is that as the creator of money the government will ways have to accept depositis i.e. run deficits if that is what the ec0onomy demands
Bonds structure that
Do I think all the deficit need be covered by bonds/ No. Indeed, it is not. About 25% of them are owned by the government. So that is effectively the same as a Bank of Engloand overdraft
But do I see the reason for bonds to provide financial stability to markets? Yes, I do
And that is the reason for them. They underpin pensions and inter bank loan arrangements (I summarise, grossly, the repo market)
I think the best way to conceptualise money is to see it as points in a game.
Money only exists as sets of imaginary, shared symbols in the imagination of those playing the ‘game’ of economics.
The ‘economy as household’ fallacy of composition comes with the concomitant misconception that money represents some precious physical object.
Sorry for my ignorance about MMT. I am sure you will have explained this.
When you say all money is debt.
The £10 note in my pocket. Who owes me £10 or to whom do I owe the £10 to?
The government owes you £10. It says so in it. It repays it by accepting it for tax payment.
So I sent the link of the video to my Father-in-Law, [ex senior banker who retired some 20 yrs ago] and this is his response via e-mail.
Just wondering if he watched it all the way through and what your response would be, if any.
“Although his arguments seem feasible, nevertheless he forgets certain economic facts .First of all deposits with banks are regarded as debts in a bank’s Balance Sheet, whilst loans are regarded as assets. Banks are not allowed to lend more than the value of their deposits plus share capital. When there are crises such as a major recession, depositors tend to withdraw funds causing a run on the bank and if this continues either the bank has to raise more capital, such as Barclays did in the last recession by raising funds in the Middle East if I remember correctly, or the Government has to step in to provide guarantees as in the case of Lloyds. If a country creates too much money in circulation then this can lead to hyper inflation and the currency can become more and more worthless as in the case of a number of S. American countries and and also the case of the German “Weimar Republic” Thus a country dare not risk creating limitless amounts of money or its currency will become worthless”.
Regards
Max
The same old, same old
Di d our bail our of banks cause hyper inflation?
No
Did it save his pension?
Yes
Why is he complaining about bail outs using public funds then?
I have no idea
Does he appear able to appraise economic facts rather than fictions?
It appears not
Feel free to share with him
See what his response is
Richard
A great video, thanks for posting it. I like that it accurately describes BOTH government created money AND bank created money. I am often frustrated that the Positive Money campaign tends to ignore the former, while MMT-related campaigns almost always ignore the latter. We need a campaign that brings both together!
I have two comments on a first exposure to this.
1) Relates to the final payment a mortgage or loan where the speaker says this clears the bank’s liability. My understanding says this is wrong and that the final payment wipes off the bank’s asset. Which means the bank has to go in search of a new borrower to create a new asset for the bank. (obviously the process is on-going and involves hundreds or thousands of similar arrangements being created and terminated as a constant stream)
2) There is a tacit acceptance in discussions about money that having a gold backed currency is somehow, philosophically, a different system. I don’t believe it is. This is gold standard mythology, surely (?) The gold is no more ‘real money’ than paper money. Gold is only a token of wealth; its real utility is of minuscule value as any other usable metal or commodity. It is only a convention, albeit of long standing, that gold is inherently ‘valuable’.
The practical, material difference between gold and ‘paper’ money is that gold is inherently scarce whereas paper (or digitally created) money can be created to meet the needs of economic activity in society. It is precisely that flexibility that makes fiat currency useful.
I don’t think those points, (even assuming my understanding is correct) invalidate the presentation, which I reckon has a lot going for it. And I agree with the comment above that it is interesting to hear rather than see written argument. This will surely make a useful contribution to the overall discussion by including people who are capable of reading but don’t habitually do it from choice.
Thans
I Learn something every day but this is not easy on my mind because we have been given different information for so long we still are being given different information by the government the banks big business in fact just any where else you care to look you find a different explanation of how money government spending debt deficits etc work
It’s so sad that people cannot trust their governments to tell the truth about how they use our money
You have to remember this understanding is relatively new