There has been a lot of favourable comment about J D Alt's videos on money on this blog over the last day or so.
I rewatched this one last night and recommend itrewatched this one last night and recommend it. Its relevance has never been greater:
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
It may be worth mentioning, JD Alt gave us (the old UK MMT google group) the original copy of his slides used to make that video, with permission to make a UK “translation”.
I completed this nearly 2 years – in terms of changing the necessary Fed -> BoE, £ -> $ references etc, as well as changing some of the examples of government spending benefiting society to be more in tune with a British audience.
All that is required is for a voiceover to be recorded for it – if there is anyone interested in helping with this, please comment below and we can arrange to get in touch.
i have seen this before a long time ago but thanks
Yes, I’d be happy to help with a voiceover for the updated video. Journalist and filmmaker, got a home studio set-up. What did you have in mind?
Awesome.
Basic steps are:
1) Write an appropriate script – that largely follows JD Alt’s originals, while making the necessary US -> UK conversions
2) Record that over the top of the slides
3) Set the trigger points in the audio so animations follow at the right points and convert to video
4) Check with JD Alt he is happy for us to use (it’s been a couple of years since he sent us the slides, so need to make sure he is happy with anything we do)
5) Choose an appropriate platform to publish
I can do largely do steps (1, 3, 4) – but having someone with a professional set-up record (2), run the eye over the finished product and suggest any edits/script changes prior to (4), and then help publish on (5) would be brilliant.
If you’re still happy to help do you want to message me to sort out? If you google my name you’ll get my uni contact details – or I’m on facebook (profile pic is me running), LinkedIn etc..
I part own a Uk ISP – I can offer a hosting platform/web site etc & would be happy to fund (within limits) the development of the site etc. let me know.
BTW – Alt’s voice over is epic & I was laughing towards the end as he competely re-expressed commonplaces such as “budget deficit” etc.
It is epic…
Hi Michael,
Is it @michaelberks ? Seen few profiles and assumed it was this one.
Cheers,
Rob
Richard, if my offer is of interest (for the avoidance of doubt – it’s free) pass my details on
It was on here ….
On LinkedIn: https://www.linkedin.com/in/michael-berks-b4b8a687/
I’m also @michaelberks on twitter but don’t really use (though will keep an eye on notifications this week).
I liked the video – very helpful. But it did not cover foreign exchange. How can that be included in the model?
At the time that de Gaulle asked to be paid the gold promised, that was the law. So, as usual, the USA reneged on it’s promise, just as, similarly, they reneged on exchanging aeronautical supersonic speed data and atomic weapon data in exchange for UK’s data. They really are not trustworthy allies!
MMT is about buying and selling currency and not trading within that currency
MMT makes clear that so long as the action of government is rooted in physical reality – i.e. what the economy can actually do, then monetary action is no threat to foreign exchange
That is as far as the model need go
I am sure that you are right but evidently I don’t understand.
If the UK government prints a lot of £ IOUs for buying American jets, they must exchange the £ IOUs for $ IOUs and spend them in America to benefit the American economy. That leaves the American government with a whole load of £ IOUs. That could either buy an awful lot of Scotch or remain as a trade imbalance. Won’t that reduce the value of £ IOUs? And then we shall starve by not being able to afford food imports.
If they’re happy to invest in the U.K. – and right now that us the norm – what is the problem? It does not seem apparent from real world data that it is
Norman, what you’re missing there is that trade imbalance is showing that someone on the US side has chosen to save those £IOUs. If they hadn’t, there wouldn’t be an imbalance! In that way, it’s similar to the way people get confused about the domestic deficit “causing inflation” – no the deficit is the accounting identity that the money is being saved, and hence not being used to trying and purchase goods (so can’t be causing inflation).
Going back to FX, the holders of £IOUs in the US in your situation can:
1) Buy UK goods (as you noted – ie buy lots of scotch, increasing demand in UK economy)
2) Save them as financial assets
3) Try and swap them back for dollars (or another currency) on FX markets
(1) results in the trade imbalance (assuming those savings are net above all else being equal).
(2) (all else being equal) increases UK exports util trade is balanced.
(3) (and only 3) puts downward pressure on the value of £s vs $s in FX markets.
So why does (1) happen and trade imbalances exist? Well (ignoring short held savings by FX trades playing the market) some of that may be private individuals wanting to save a currency they feel is safer/more stable than their own, but mostly it ends up being foreign governments that choose to save those assets, to boost demand in their own domestic economy.
So take China, their government chooses to hold large quantities of euros, dollars pounds etc which they buy with RMB (that they produce as sovereign currency issuer) on FX markets, keeping RMB at a level which gives their exporters a competitive advantage (and supplying us with the RMB we need to buy their goods – it’s all one and the same thing). So we all keep buying Chinese goods (in excess of what they buy from us given the current £/RMB exchange rate), pushing those RMB back into the domestic Chinese economy.
Why do the Chinese government do that rather than just spending those RMB directly into their domestic economy in the first place? Well that’s choice, and how a mercantilist country runs itself. In the neoliberal era that counts as sound finance (on their balance sheets, the RMG they’ve created is offset against the foreign currency they hold, even though in terms of real resources, they’ve seen a net loss from their country!). In the long run, they may want to change that approach (and there are signs they are doing so) – in which case we’d have to either accept more expensive imports, substitute their imports with our own domestic production, or accept a lower standard of material living.
But note they can’t do that immediately without trashing their own domestic economy. If they suddenly tried to offload all their holdings of foreign currency, it would trash the exchange rate of those currencies – simultaneously trashing the value of a financial asset they hold, and decimating demand in the domestic economy. They know that – probably better than we do judging by the way our leaders and “economic experts” carry on.
Ps. Just reread my post and realised I’d changed the order of options (1) + (2) when I explained their effect. Hopefully was obvious from the context what I meant.
A good model to think about the current system of money and gov debt.
I’ve have always thought that holding gov debt is a bit like a voluntary tax,(except is gets paid interest) Without it a state would have to increase its tax take,so in a way it helps keep taxes lower than they would normally be.
That said I don’t agree with it. Its a model that needs rebuilding. No government should pay interest to already wealthy citizens when it can create money independently. It is also a very nice job creation scheme for the financial industry.
No, it’s just saving
That’s all
And it would not need to increase tax
It’s always had the op[tiopn of direct monetary funding (DMF) of government spending by central banks
Richard,
Yes I know the gov could step in to do this,but it doesn’t do this currently. So holders of gov debt, as well as saving, are really are helping the gov balance its budget ,whether we agree or disagree with the gov doing that or not.
This occured to me after I read a book about President Lincoln’s issue of state money aka the Greenback dollar,which was a treasury issued note. There was much resistance to the idea by many politicans at the time ,not to mention the banks! Both of which incredibly claiming it was “immoral”.
The US gov,in dire circumstances, issued some Greenbacks but also issued war Bonds to raise money for the Civil War effort, they did this to take the pressure off the taxpayer. So in this example the gov was using bonds to reduce/ease taxes.
Maybe the UK Gov could issue Coronovirus bonds,not that I’d advocate it whatesoever,but it is the type of thing that has been done historically in times of crisis.
I disagree: that’s what they want you to think
QE shattered that
Richard,
They didn’t have QE in the 1800s.They did of course have the ability to print state issued money in the form of Greenbacks,which is,more importantly,the answer today.
No one makes me think anything ,I very much try to think about things myself, as do you, that’s why I value your thoughts on this. Besides as Keynes once said, no one other than himself and a junior clerk at the Bank of England understood how money works.
But we don’t need greenbacks
And government electronic money cannot be differentiated from other electronic money the way greenbacks could be
Richard,
I would agree with that,
I also like your savings answer earlier,thank you for the explanations.
I don’t recall the question and cannot see them when I am moderating
Just that you said holding gov bonds was just savings.
Thanks again you are now on my to read blog list : )
There are a couple of implied errors in the video. Ramsay Macdonald cut the UK gold standard in 1931 and the USA followed in 1933. President Nixon did stop foreign governments exchanging dollars for gold in 1971. It was in 1965 that President de Gaulle stated his intention to demand gold for dollars to stop France being cheated; he resigned the presidency in 1969 and died in November 1970. He might still be blamed for starting a run on US gold though.
But we all had fixed exchange rates to the dollar and so remained in effect on the GS
I think the point was that fiat currencies became the way forward after 1971. ’71 is thus seen as the watershed moment after which no nation has ventured back to using gold. Personally it is a good thing,though there are still gold bugs out there who wish to return to it.
Has anyone ever managed to audit all that gold in the USA yet?
We have experienced many changes over time to the way money works,it is an ever evolving process.
Hi Michael,
Is it @michaelberks ? Seen few profiles and assumed it was this one.
Cheers,
Rob
Thank you Michael Berks for your explanation (and the recent correction). I was again puzzled and am now more content.