This is good:
We need a UK version....
I'll be working on it.
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Tax Research UK Blog is written by Richard Murphy unless otherwise stated and published by Tax Research LLP under a Creative Commons Attribution-NonCommercial 3.0 Unported License.
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” Currency issuers are unique, they should not behave like currency users. If you can grasp that , you are already further along than most of our politicians”.
OK – why is that? We are happy with people running our countries with no education/induction courses on the nuts and bolts when they turn up for their first term in office? Beggars belief!! No wonder lobbyists and ‘advisors’ can run agenda-driven rings around most of them. Not enough to include in school education although that wouldn’t do any harm. MPs need higher level than the basics when they are managing billions of our money.
Otherwise yes, good effort – and go for it Richard let’s see your version some day.
Needs the right voice, this one is not capturing me.
This was one of the videos I have watched a couple of times on YouTube which I had in mind recently when I suggested you develop your own channel and initially start by creating play lists incorporating existing material available on YouTube.
Agreed…
The guy behind, Geoff Coventry, also created a really nice and simple ‘myth busting’ website to go along with the video here…
https://modernmoneybasics.com/
Great video! I like the explanation for the role of taxes creating demand amongst the domestic currency user base and thus limiting inflation. I feel what is missing from these videos is understanding what creates demand on the international stage.
E.g. why on earth would China (or any other country) accept pieces of paper printed by another country in exchange for their valuable natural resources? Using these reserves to buy bonds essentially just leads to the accumulation of more pieces of paper (or numbers on a screen) from the currency issuer so what’s the point?
In my experience conversations about MMT tend to turn towards it being a tool for geopolitics / US imperialism / petrodollars etc etc at this point so a simple and non-political answer as succinct as the role of tax for domestic currency users would be ideal. Maybe this simply is not possible as all international transactions are motivated by some form of political agenda?
The desire is for liquidity: the ability to pay
So countries are forced to hold currency in the most liquid currency – the dollar
And hundreds of millions in gilts too, by the way
It’s simply having access to foreign exchange that matters
It buys security
At a very high price
Sovereignty = sufficiency (enough money that we need).
I’ve seen that and, yes, it is very clear. He’s on Twitter as @gladkiwi and seems like a really decent guy. Perhaps you could hook up?
A few additional things which might be worth covering for the layman (like me):
1) If govt spending is limited by available resources – whether labour or material – how does a govt buy resources from abroad? How does that fit with MMT? Or what is the relationship between spending at home and spending abroad? I understand that some countries like the US, China, Russia, etc, have huge natural resources, but what about those which have to import resources for (f. ex.) infrastructure works?
2) What steps might a country, such as Greece, need to take in order to take advantage of MMT, or is it pretty much a closed shop for those countries which already produce their own (fiat?) currency?
3) Does MMT, as potentially already practised, depend on the existing imbalances of distribution of natural resources, such as those taken by the US/Europe from disadvantaged developing nations, such as those in Africa/Asia? Or is this immaterial?
4) Is there a desirable ratio of govt sector to private sector spending or is this dependent on circumstances or purely a policy decision?
Apologies if any of these questions are outside the scope of this website. I did search for them, but without success (or rather, didn’t necessarily trust the resulting websites). I confess that I’m yet to read ‘The Courageous State,’ but it’s next on my list.
This is complex and I cannot do it all here
If you have a reserve currency this is easy – you pay with Your own currency
If you don’t you have to earn the reserves
BUT this does not undermine MMT – it just says there is foreign exchange
And MMT says that the rate should float and reserves should not be wasted supporting it
I will try to do a fuller treatment sometime
“…2) What steps might a country, such as Greece, need to take in order to take advantage of MMT, or is it pretty much a closed shop for those countries which already produce their own (fiat?) currency?…”
To take advantage of what MMT explains is possible, Greece would need to either have it’s own currency (as of course it did before adopting the Euro) or belong to a political and currency union which looked after the interests of all its member states rather better than the EU does presently.
The bailouts ‘given’ to Greece in the aftermath of the 2008 financial crisis didn’t touch the Greek economy they went straight to bailout foreign banks – notably in Germany and France, but these days banks are largely international so the national labels may be misleading. The Greek economy is to a large extent is at the mercy of the ECB which has policy objectives which don’t prioritise Greek interests highly.
Interesting video that did not address the way in which credit created by private financial entities swamp currency creation by governments in normal circumstances (which those private credit issuers irrational exuberance convert into financial disasters with monotonous regularity that result in governments ability to create currency being employed to bail out the instigators of our economic problems instead of allowing the over-zealous acquisitives to be removed from the economy). National governments (of whatever hue) have for decades presided over the consolidation of financial power within their jurisdictions into the custody of a handful of privately run international banks whose national and international trading losses they now have to address themselves; one major bank’s failure would compromise the solvency of all the remaining banks because of their interconnectedness and collapse the international and national business payments systems. It is a situation that arises because the banking sector in all territorial States is concentrated into so few international PLC banks, in the UK only five, as a result of decades of bias by ideologues at the head of national governments who oversaw the virtual elimination of middle ranking national banking organisations and building societies and which disproportionately favoured the interests of international investment banks and a minuscule financial elite. They sold out their nations for thirty pieces of silver.
The present banking system’s fundamental strength for the speculator and weakness for equitable governance is open-ended private bank credit creation that is not based on the creditworthiness of the banks but of States which have no control over bank credit creation [there are limits but the money market only observes them after ‘irrational exuberance’ has peaked], The virtual nature of bank credit as articulated in Bank of England (BoE) bulletin Q1 2014 pointed out a truth about the world banking system that William Paterson had stated when he first promoted his scheme for the BoE over three centuries ago; “The bank hath benefit of interest on all moneys which it creates out of nothing.” [Making a private companies paper created out of nothing equivalent to both government paper (backed by taxation) and specie (of intrinsic value) — undermining and eventually outstripping governments’ monopoly over money creation] Nothing that is but belief in the creditworthiness of the bank, from the first day of the BoE’s formation the incentive and means existed to create excessive bank credit, invented money that was a claim on real property; it allowed settlement of today’s borrowers’ creditors demand for payment to be met by real (earned) money repayments [that eventually amounts to the bank credit approved (invented money) plus the interest charged on it] by yesterday’s borrowers (as long as they continued to pay) — a minimally collateralised (by the bank) speculative system not a fully collateralized intermediary one which would force the banking sector to seek savings from the population it presently takes for granted as a captive market for debt creation.
Thanks
Thank you to both Richard and Andrew for taking the time to respond.
I hadn’t intended these as questions to be addressed here, as such. I guess I was asking can these sorts of questions be answered by the theory? If that makes sense.
I imagine that, to most people – like me – economics is pretty opaque, which puts us at a disadvantage when trying to understand our governments’ motives. So I can only be thankful that there are people attempting to communicate these ideas in a more easily digestible form.
Again, thanks to both of you for explaining things more fully. Andrew, that was my understanding re. the Greek bailout, but I appreciate your simplified explanation.
Hopefully, I can read a bit more and begin to answer some of these questions for myself.
Best, Matt