I have an article under the above title in The National newspaper in Scotland this afternoon.
As this is an article I was paid to write I cannot share it here. But the link should work.
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Here are the additional references I promised for the first post I made on Christine Desan’s work Richard.
“References for post on ‘Christine Desan’s Work In Relation To MMT’ ”
In expanding the references for location purposes I quote the relevant sentence then the web link references.
(Installment One)
“As MMTer’s we should all be familiar with these three tasks for money, collective and private with savings, there is, however, one other very important need necessary to accompany them and that is any money created must hold its value for as long as possible.”
See page 8 in Desan’s paper “The Monetary Structure of Economic Activity”:-
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3557233
“Desan quotes the work of Gary Gorton (also a professor at Harvard University like her) and other colleagues. Gorton asks the question what constitute safe-assets. He argues there needs to be two essential factors information-insensitivity and good collateral.”
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2770569
“In the 19th century and early 20th when cheques were being used there were often problems of them bouncing at banks down the line or customers being able to withdraw savings from the bank for lack of reserves. It may, of course, been too many bad loans that resulted in lack of reserves.”
Read Walter Bagehot’s classic 19th century book “Lombard Street: A Description of the Money Market” for other causes of bank runs.
See also Andrew Odlyzko’s paper “Bagehot’s giant bubble failure”
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3445450
(Installment Two)
“Desan tells us that the long history of societies and nations using specie money, gold and silver, is that if there’s a collapse of civilisation or another society or country takes over yours there’s always the possibility the coinage can be melted down and sold as bullion either within your own territory or abroad.”
See Desan’s book “Making Money: Coin, Currency and the Coming of Capitalism” for this general theme throughout the book.
“It’s believed that in the Western world coins were first invented by Greeks in Lydia (now part of Turkey) sometime in the 7th century BC.”
https://en.wikipedia.org/wiki/Coin
“The use of silver coinage was a central part of the Roman Empire.”
Here are various articles and papers to help get some feel for the Roman’s use of money (Warning historians of the Roman period are not unanimous in how Romans used money):-
“Rendering to Caesar and to God: Paying Taxes in the Roman World”
https://www.elca.org/Home/JLE
“The Financial Crisis, Then and Now: Ancient Rome and 2008 CE”
https://epicenter.wcfia.harvard.edu/blog/financial-crisis-then-and-now
The Roman coin “sestertius” made of both silver and brass:-
https://en.wikipedia.org/wiki/Sestertius
“A Revisionist View of Roman Money” (Scroll down list to find download)
https://columbia.academia.edu/WilliamVHarris
“Indeed unlike the Romans England allowed private citizens to bring silver or gold bullion along to Royal mints and have coins created.”
See Christine Desan’s book “Making Money: Coin, Currency and the Coming of Capitalism” and page 15 on Desan’s paper “Money as a Legal Institution”:-
https://modernmoneynetwork.org/sites/default/files/biblio/Money%20as%20a%20Legal%20Institution.pdf
(Installment Three)
“Whilst English governments could create coinage using Royal Mints starting in Anglo-Saxon times in 886 AD in the Tower of London monarchs used other means of raising money such as the issue of assigned and unassigned tallies.”
https://gimms.org.uk/2019/03/08/history-english-tally/
(Installment Four)
“TECHNOLOGY”
“… at the end of the 16th century mass paper production began in England and together with the 15th century development of the printing press in Europe which spread to England this opened up a massive opportunity for cheaper production of printed material leading to largish scale production of bank notes beginning at the end of the 17th century.”
https://www.british-history.ac.uk/vch/middx/vol2/pp195-197
“TRUST”
“In the case of religion it’s probably not remembered that the opposition to usury was still strong in the Catholic faith in the 17th century in England. Indeed Thomas Clifford who is believed to have been the adviser to Charles II that resulted in The Stop of The Exchequer in 1672 was somewhat of a fanatical Catholic opposed to usury.”
See page 149 of Moshe Arye Milevsky’s book “The Day the King Defaulted: Financial Lessons from The Stop of The Exchequer.”
“There were two specific incidents if not three that created strong distrust amongst the wealthier members of English society. Merchants and gold-smiths were used to using the vault at the Royal Mint in the Tower of London to store valuables such as coinage and bullion. At the start of the Civil War Charles I temporarily impounded this wealth. There is a view that Charles II did the same when he was attempting to get gold-smith bankers and wealthy merchants to lend him more money.”
See page 144 of Moshe Arye Milevsky’s book “The Day the King Defaulted: Financial Lessons from The Stop of The Exchequer.”
(Installment Five)
“FINANCIAL INSTRUMENTS”
“In May 1667 Downing was made secretary to the commissioners of the treasury and he took part in the management and reform of the Treasury. It was Downing who was responsible for promoting the idea of Treasury Orders which paid 6% interest. These were the forerunners of what we now know as treasury bonds or gilts.”
The whole of Chapter 5 in Moshe Arye Milevsky’s book “The Day the King Defaulted: Financial Lessons from The Stop of The Exchequer.” is devoted to explaining George Downing’s Treasury Orders invention. Milevky calls them The Stop of The Exchequer murder weapon!
(Installment Six)
“THE 1672 EXCHEQUER STOP”
The information in this section comes from Moshe Arye Milevsky’s book “The Day the King Defaulted: Financial Lessons from The Stop of The Exchequer.”
Background to the conflict between monarchy and Parliament in 17th century England can be found in the following web link:-
https://en.wikipedia.org/wiki/Early_modern_Britain#17th_century
“THE BANK OF ENGLAND 1694”
Information for this section was taken from Christine Desan’s book “Making Money: Coin, Currency and the Coming of Capitalism” and Moshe Arye Milevsky’s book “The Day the King Defaulted: Financial Lessons from The Stop of The Exchequer.”
(Installment Seven)
“LESSONS TO BE LEARNT”
The core of this section is framed around the Keynesian argument that real resources are not fixed, or rather the productive capacity of an economy is not fixed, and the ability to create money, utilise it in both small to large amounts (as modern day banknotes and coins and electronic currency now allows), and equitably distribute it boosts economic growth without automatic and excessive inflation. This is in contradistinction to the Quantity Theory of Money:-
https://en.wikipedia.org/wiki/Quantity_theory_of_money
I will post these as a blog tomorrow
Thanks Helen
Here is the Postscript Richard I promised to do on my first post on “Christine Desan’s Work In Relation To MMT.” I’m posting it in five parts.
Postscript to “Christine Desan’s Work In Relation To MMT”
(Also how the invention of money as a technology can in itself undermine the social contract and social justice)
(Part One)
“INTRODUCTION”
I promised that I’d write this postscript in response to the comments and arguments I received on my lengthy post “Christine Desan’s Work In Relation To MMT”. The comments and arguments I thought were both excellent and thought provoking – opening up areas worth exploring further. In particular I liked the theme which Richard periodically reiterates that there doesn’t seem much point in being interested in MMT if you’re not also interested in pursuing social justice. Although I didn’t really touch on it in any detail I also believe achieving social justice underlies Christine Desan’s interest in the evolutionary design of money. The studying she had to do for her two degrees, the first in the sociology of religion and the second a law degree, is why I believe you find in her work the argument that the creation of money through injection and its retirement mainly through taxation isn’t neutral in terms of its benefits and disbenefits for members of a nation or community.
There are therefore two main themes here that need to be unified together the design of money and social justice. This task is not an easy one given there are many aspects to delve into but it seemed the same approach of splitting it into topic areas as I did with my original post on Christine Desan’s work seemed to make sense and to try my best to limit the number of topics in order to make the link between the two themes as simply understandable as possible. Here are the topics, there are four in number:-
Volatility — Mutuality — Mobilising — Trust
Before I start writing about these I need to explain the subtitle of this Postscript Post. I came across an article by Doctor Nicholas Dorn, a lecturer in sociology at the Institute of Advanced Legal Studies, University of London, in which he explores a topic not really touched on by Christine Desan or indeed any writers on MMT to my knowledge. He writes the following in response to Randall Wray stating “taxes drive money”:-
“… Wray’s dictum can be modified as follows: political relations defining sovereign credit plus jurisdictional enlargement drive money. However, although money as a sovereign credit delivery mechanism facilitated the credit relation in a practical sense, monetization also diluted the relationship between the sovereign and the subjects upon which the credit relation stood. I’ll unpack this at the end of writing about the four above topics.
“VOLATILITY”
The choice of this word is expressly designed to do more than the choice of the word “change” it’s to emphasis that life including that of human beings can suddenly be subject to dynamic or rapidly occurring change not just gradual change. The other characteristic of volatility is that it can be regarded as having both negative and positive outcomes.
So obvious negative effect examples are the Earth suddenly gets hit by a giant meteorite or asteroid, or there’s a major volcano eruption all of which can have climatic and ecological effects. There are, of course, as we’re currently well aware of pandemics from deadly contagions, indeed there’s even some argument these may be linked to climate change. Man-made examples are obviously wars and monetary liquidity suddenly undermined as financial bubbles burst or a consequence of fraudulent financial instruments.
The positive examples of volatility are ones we don’t really associate with the word. For example, competition in the marketplace with better products or services as well as new ones can suddenly change customer choice and spending patterns usually improving well-being in some shape or form. The well-being can of course consist of products or services that are more environmentally friendly. Then there’s the advent of democracy which allows voters to literally change a government overnight and with that change usually a switch to different policies.
(Part Two)
“MUTUALITY”
Three and half billion years ago the first forms of life to occur on this planet immediately found themselves under stress because of the need to obtain energy to stay alive. Later as life moved onto land there were further stresses from climate change both rapid and slow, and because the planet had a molten interior land would move up and down, split apart, and pressure relieved through volcanic and thermal venting. To deal with all these stresses meant life forms needed to “pilot” themselves.
Up until the end of the last century biologists held a reductive or very narrow view in regard to this “piloting” with a major emphasis bias on competition in which it was kill or be killed to meet energy needs with the other two factors of climate change and terrain change being subsidiaries. It was considered the pure luck of random mutation gave an edge in competition and therefore got selected for future gene transmission. This reductive view is known as Neo-Darwinism or the Modern Synthesis.
https://en.wikipedia.org/wiki/Neo-Darwinism
The emphasis on random mutation competition chimed in with the enormous growth in capitalism of the British Industrial Revolution in which a few got very rich at the expense of inflicting misery on a significant portion of the population. It also chimed with a desire to get rid of the moral grip of the Catholic Church which condemned usury, the lending out of money for profit, which of course helped fuel the Industrial Revolution as goldsmith bankers expanded to become banks as we know them today. Once the Bank of England had been established in 1694 and started issuing banknotes private banks began to issue their own banknotes with settlement taking place through the Bank of England and brokers.
The idea of random mutation, of course, fitted in nicely as “code” for wealthy capitalists being individuals who were “exceptional” in their talent to grow the Industrial Revolution and sufficient numbers of the population were gaining some benefit from the revolution not to baulk at what amounts to excessive ideological spin on the “piloting” life requires as I’ll explain.
During the course of the later part of the nineteenth century and during the twentieth century there were scientific developments that challenged the Newtonian concept life was created entirely out of matter which followed rigid mechanistic laws. This challenge came initially from the work of Albert Einstein with his Theory of Relativity which led onto Quantum Mechanics theory all of which told us that life involved not just matter but energy too. Following on from these developments in the last twenty years of this century there have been two important further developments. The first was the product of work by the American microbiologist James A. Shapiro who became an expert in bacterial genetics. Shapiro established three insights that bacteria cooperate in communities to deal with the stresses thrown at them and to do this their cells have developed the ability to engage in genome engineering mainly through Horizontal Gene Transfer and this is facilitated through the use of a “Read/Write Genome.”
https://shapiro.bsd.uchicago.edu/Shapiro.2013.How%20Life%20Changes%20Itself-%20The%20Read-Write%20(RW)%20Genome.Physics%20of%20Life%20Reviews.pdf
The second important 21st century development has been from a group of scientists augmenting Shapiro’s insights with the development of “hologenomics” which is the insight that from the very early days of life formation on this planet life forms have cooperated symbiotically and therefore species including ourselves are as a general rule multi-genomic relationships or Gene Regulatory Networks. This extract from the following web link puts it well:-
“What we had thought was a monogenomic individual is actually a consortium on the anatomical, physiological, developmental, immunological, and even behavioral levels.”
https://works.swarthmore.edu/cgi/viewcontent.cgi?article=1548&context=fac-biology
What you may now be thinking has all this got to do with creatures like ourselves “piloting” our ways through the stresses thrown at us. Well simple really it ought to now be clear “piloting” involves making choices. Having a “Read/Write Genome” involves making choices what to store on it and what not, what to pull off it to activate gene modification. Very obviously if the laws of nature were entirely mechanistic or robotic there would be no mistake in passing on genetic information so no random mutation mistakes.
Being a multi-genomic creature means exercising constant choices what creatures to partner with and what to rebuff. Put another way this means as “Consortium Individuals” we have to care. We need to care who we “consort” with and having “consorted” care about all our “consorts” (consortees) because that’s a consequence of engaging in symbiotic behavior to deal with stresses. If you don’t like the word care then try value.
https://mountainscholar.org/bitstream/handle/10217/39368/Care-on-Earth.pdf;sequence=1
Does this mean random mutation theory is thrown out? No not really because a Read/Write Genome can still make errors as we know full well as human beings with our DNA defects. We might still allow harmful viruses through which kill many of us but some have immunity to the harmful effects and then go on to “cannibalise” any useful components of the virus. Analysis of the human genome early on this century reveals parts of ancient old viruses still reside there.
Recognising that life is no longer just a “chance contingent” world relying on random mutation but also one of “choice contingency” begs the question of how the latter arises. There appears to be no evidence that a pre-biotic soup of chemicals enthused with energy generates a “Read/Write Genome” or sophisticated means to discriminate who we consort with in our hologenome. Does this mean “choosing mechanisms” come from an extra-terrestrial or a divine source? No at this stage of human history we just don’t know where they come from!
https://www.researchgate.net/publication/223903491_Self-Organization_vs_Self-Ordering_events_in_life-origin_models
What therefore can the latest thinking in biology be telling us about life’s ability to “pilot” itself through the stresses it encounters? It appears to be saying life can engage in mutual or “social contract” engineering as part of that “piloting” and consequently it’s not entirely at the mercy of the whim of fate. What’s more this started 3.5 billion years ago with relatively simple prokaryote cells progressing through to eukaryote cells.
https://royalsocietypublishing.org/doi/pdf/10.1098/rstb.2019.0750
This is all quite a turn-around from arguing that natural selection is entirely dependent on random mutation. There’s a lesson in this story in regard to money creation!
(Part Three)
“MOBILISING”
It now seems obvious that if societies or nations are to “pilot” their way through any stresses that confront them they’ll have to mobilise resources in some shape or form. Clearly, for example, if you’re threatened by other societies or nations, need bridges to get across rivers in your territory, need to police yourselves and need to ensure no one starves then a mutual commitment to provide artifacts, commodities, and labour to a ruler, democratically elected government, or stakeholder as Christine Desan’s uses as a neutral term, is necessary to organise them. However, the problem quickly becomes apparent that public need clashes with the private needs of self and family in terms of time and division of labour, some of which needs to be assigned full-time to meet public need. A “work-around” to resolve this clash but still maintain mutual support for public goods and services was needed and the development of a money technology became the solution. A contribution in-kind was monetised! Christine Desan writes a lot about this solution in her various papers and her book “Making Money: Coin, Currency and the Coming of Capitalism.” (First chapter after the Introduction). Here in a 2016 contribution “The Constitutional Approach to Money: Monetary Design and the Production of the Modern world” (link below) she does the same and two sentences stand out in regard to engineering and mutuality:-
“… societies engineer money rather than discovering it.” (page 5)
And
“Money is, at an elemental level, a governance strategy.” (page 6)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2724108
In modern day times, however, we have two versions of money creation. Christine Desan explains fairly frequently in her work there’s the Neo-Classical argument in which money just “popped” into existence to solve the barter problem of double coincidence of wants. Then in more detail she again frequently goes on to explain there’s the government engineered one which she argues has much more plausibility to it and she calls Public Credit whilst acknowledging there’s a Private Credit that operates alongside it. A big part of that plausibility we should note comes from the amount of “trust” that’s built into either the public or private credit creation version. We should note there’s precious little in the way of “trust” elements built into the Neo-Classical version, not least a Lender of Last Resort role. We need to take a look at the elements of trust that are built into public and private credit versions.
(Part Four)
“TRUST”
It seems all very well that human beings have engaged in mutual engineering to create money as a solution to the clash between public and private needs but what makes it a reliable solution, one that a society or nation can trust? When you start looking into it there are a lot of factors that determine trust in money and what’s interesting about Christine Desan’s work is she tries to explain as many of them as she can possibly with the exception of current global trade. I’ve not seen anything by her on this other than some comment on the Gold Standard.
“1. Maintaining money’s value for as long as possible”
Clearly a ruler but especially a democratically elected government has a great deal of power to secure the value of money for as long as possible. Because either have legal authority or brute force or both they can enforce tribute which in modern times is largely exacted through taxation. Because modern day government is usually the biggest spender for goods and services in a nation it can get to choose its payment device which coupled with retirement through taxation of that device and mandating its device is used in contracts and court fines and settlements all work to secure money value.
All of this helps to explain the power of Public Credit and we know from MMT that Private Credit basically piggy-backs off Public Credit. What though does this “piggy-backing” mean? I think it can be said that a ruler or democratically elected government maintains Public Credit money’s value through “Discretionary Value Securement” processes and Private Credit through “Non-Discretionary Value Securement” ones. This simply means because a government has to also satisfy the private sector’s desire to save it normally cannot retire all the money it creates. Private Credit money creation on the other hand not only has to be fully retired any loan spent into the society or nation’s economy is also subject to retirement through taxation and other government charges, a double retirement process if you like.
“2. The role of ‘safe-asset’ money”
Christine Desan helps to explain why Public Credit money is the safest asset in terms of maintaining value for the longest possible time. See page 8 in her paper “The Monetary Structure of Economic Activity”:-
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3557233
Modern day governments will issue treasury bonds as a form of saving which are eagerly snapped up because of their best quality “safe-asset” quality due to the government’s ability to both create money and secure its value by modulating its retirement. Treasury bond “safe-asset” quality is used by government to act as Lender of Last Resort to the Private Credit issuing sector for payment settlement purposes and when the finance sector gets into trouble. The Great Financial Crash of 2007/2008 stemmed from the fact governments were issuing too few treasury bonds and the private sector finance sector attempted to create more of its own, greed undermined this process! Public Credit therefore has a role to play in mitigating the negative non-mutual nature of some individuals. Finally in consideration of “safe-asset” money we should note how government “future use” money in the form of “safe” treasury bonds is turned into “current use” money for government spending through the QE process of government creating “safe” money (backed by government taxation retirement and other charges) to buy the bonds. Clearly this elaboration is there to mask the fact government created money is the “safest-asset” money or form of liquidity. An economically counter-productive game is being played!
“3. Having clear authority to both create and retire money.”
As we’ve seen from the history of England in the 17th century authority in regard to the creation and retirement of money was split. This caused a wide variety of problems not least because the widespread use of specie money by European nations was one of the causes for triggering wars to secure gold and silver resources to mint the money. Parliament never really gave the Stuart monarchs the ability to provide for the country’s defence or fight wars. This was exacerbated by these monarchs and their advisors not really understanding money creation. The mentality of tax first then spend became endemic rather than the reverse.
We can see this from James I (a Stuart monarch) in 1604 undermining the use of tally sticks a long standing form of government money creation simply because on the face of it they didn’t appear to understand a tally stick was a medium of exchange just like specie coinage. James took a decision to contract out the collection of customs duties to ‘Customs Farmers’ in return for an annual rent (the Crown later began paying interest on this annual rent). This meant James could anticipate specific annual revenues flowing into the Royal Treasury and bypass recourse to parliament. The Custom Farmers began to advance money to the Crown’s creditors (no doubt some discounting was involved) the side effect, however, was to instigate a hoarding process and reduce the more usual widespread use of tallies as money. The use of tallies amongst citizens began to decline in favour of specie money and the first forerunners of treasury bonds introduced in 1667 which were called Treasury Orders because there was an ordered sequence of interest payment and loan redemption based on a number inscribed on each Treasury Order :-
https://gimms.org.uk/2019/03/08/history-english-tally/
“4. Needing to use monetary instruments which have clear convenience advantage and maintain it.”
Christine Desan makes much in her writings about a country’s medium of exchange having a “cash premium” by which she means it’s easy to use. In 17th century England it gradually dawned amongst those who thought about monetary mechanics that there was a variety of difficulties in the use of specie money as the nation’s medium of exchange. Whereas there was a safety margin in the use of specie money in times of severe disruption (some value could be salvaged from its meltdown and sale as bullion usually in another country or in an internal black market) this “safety margin,” however, simply wasn’t applying in only disruptive periods but was a general market operation at all times. If the price or value of bullion rose higher in another country your own country’s coinage or medium of exchange tended to disappear and so too did its convenience or “cash premium.” The “work-around” that developed at the end of the century was the establishment of the Bank of England which began to issue banknotes but still retaining the option to convert these to specie coinage. Clearly you couldn’t melt down banknotes and gradually with private sector banks being allowed to create their own banknotes for a period (using the Bank of England for settlement purposes and conversion to specie money) convenience as a medium of exchange was boosted.
In terms of foreign trade bills of exchange were used but these were underpinned by conversion into gold coinage (gold because the trade sums singly or accumulated bills were for large sums). Gold was therefore regarded as the touchstone of global trade. Furthermore given that the convenience currency of banknotes was underpinned by the right to convert them into specie money a trust linkage was developed that also encompassed global trade as well as the state of domestic affairs in your own country. This resulted in domestic currencies being linked to a set Gold Standard value to reinforce trust. This wasn’t a particularly well-thought out policy, much like the use of specie money wasn’t, since trying to peg your currency to a particular international value for gold meant that when your currency’s balance of trade went into deficit a policy of trying to drive workers’ wages down to lower production costs also deflated your economy promoting protest by the workers, even revolution, who didn’t trust the economic system being operated!
“5. Nothing promotes trust in your country’s economic system than it promotes well-being for all.”
With her support for MMT with its money as Public and Private Credit understanding of money’s origins Christine Desan’s explanation of the above “work-around” being introduced in England in the late 17th century emphasises this kicked off dramatic growth in the economy which we now call the Industrial Revolution. This monetary “work-around” historical lesson now appears to be lost in the UK although it can be argued it was only ever understood by a few. The role of money in the UK economy therefore still isn’t well thought out. I’ll make a few statements to illustrate what isn’t understood.
As far as businesses are concerned they don’t discriminate in accepting money created from nowhere whether it’s government or private bank created.
Demand is demand no matter where it comes from and it results in the drawing down of business inventories, increased use of machinery and labour, promotion of competition through new more efficient businesses and the introduction of innovative goods and services not previously seen in the market place.
The influx and refluxing of money both to establish demand for the convenience of a single currency and to modulate deflation and abnormal inflation has to also take place within the context of satisfying the desire to save which balance sheet accounting shows only government created money can do.
Historically savings are the so-called National Debt but in reality this is private sector “black-ink” currency the government hasn’t yet seen a need to reflux through taxation for fear of deflation.
“6. In terms of global trade the valuing of national currencies has to be linked or associated together.”
We should all be familiar with the issue of currency rigging in which certain nation’s, particularly China, force foreign exchange to take place through government owned banks and some value of a foreign currency “sucked” out which is then used to buy the treasury bonds of target export countries. This then has the effect of boosting their currency values enabling the purchase of more exports from the currency rigging country. This breakdown in trust caused by failure to allow currencies to float freely on foreign exchange markets has been a principal cause of the USA undermining the WTO which it sees as failing to tackle this fundamental global trading issue. Of course there’s been some hypocrisy in this in that the USA government has failed to stop American companies engaging in “Barge Economics”:-
http://thomaspalley.com/?p=87
Things may be changing now in which the new American president Joe Biden appears to want countries friendly to the United States to “pact” together and agree quotas for each country to be able to manufacture their own particularly goods especially strategic ones (presumably this policy could also be extended to certain services). Countries like China would not necessarily be cut out but would have to agree to their allocated quota.
https://asia.nikkei.com/Politics/International-relations/Biden-s-Asia-policy/US-and-allies-to-build-China-free-tech-supply-chain
Such a “pacting” policy would clearly put more trust into internal relations.
“7. We need to constantly keep watch trust in government’s money creation ability isn’t undermined.”
A constant factor that undermines a society’s or nation’s ability to use government’s money creation powers for mutual good particularly in modern times is right-wing media trying to destroy trust in government. The main arguments used to destroy trust revolve around how much “red ink” the nation is going to allow the government to have on its books because there’ll either be abnormal inflation and/or damage to the economy. It’s notable that exactly what that “damage” will be is never spelt out! All this would strongly suggest there’s a problem with media balance in many countries.
(Part Five)
“SUMMARY”
I hope in considering the content I’ve put into the four topics it becomes clear the origins of money actually go back three and half billion years and the beginnings of life on this planet. This is so because in part some of the stresses human beings have to cope with are self-inflicted, particularly “out-of-the-blue” attack. Mutual collaboration together with the invention of money technology allowed a society or nation to have the edge over competition for resources. In the same way issues in regard to achieving social justice can be handled by the same combination mutuality and sensible money deployment. I think MMT would better reflect this reality by being renamed Mutual Money Theory.
“AND NOW FOR AN EXPLANATION OF HOW DR. NICHOLAS DORN’S PAPER IMPACTS THE SOCIAL CONTRACT (MUTUALITY) AN SOCIAL JUSTICE AND ASSUMPTIONS IN MMT”
In Installment Six “THE 1692 EXCHEQUER STOP” of my post “Christine Desan’s Work In Relation To MMT” I wrote the following:-
“Charles couldn’t mint much in the way of extra money because there was insufficient bullion coming in also the knowledge that tallies could be created to top up spending appears to have been lost.”
I didn’t elaborate on this statement at the time of writing but Dr. Nicholas Dorn’s paper sheds more light on why the Stuart monarchs and indeed monarchs before them resorted to borrowing:-
http://financeandsociety.ed.ac.uk/article/view/3017/3999
In a nutshell the arguments contained in the paper are two-fold. Firstly, as human kingdoms or nations increasingly moved away from the base hunter-gatherer condition both in terms of population and size of governed territory the social contract weakened in the sense that an increasing number of citizens had little understanding what issues the monarch or government was having to deal with, in other words a communication problem developed. Secondly, the monetisation of the ancient practice of tribute in kind to deal with the stresses the kingdom or nation had to deal with meant that not really understanding in much detail how their “monetised tax tribute” was being spent because of remoteness resulted in increasing resistance to paying taxes. This resistance was one of the strong factors that triggered monarchs or governments starting to borrow and paying interest on that borrowing.
So here we are in 21st century Britain where mutuality, or the social contract if you prefer, has morphed into the rigidity of the mantra “government must operate its spending like a household budget” and no amount of MMT explanation is going to shift what seems to amount to a gut or highly emotionally charged instinct. This gut instinct is believed despite anybody bothering to find out if there’s any legislation to this effect. Indeed if anybody did make the effort to do a legislative trawl they’d discover the opposite:-
“Exchequer and Audit Departments Act 1866”
https://www.legislation.gov.uk/ukpga/Vict/29-30/39/section/13
13 Payment out of Consolidated Fund: standing services.
(2)The Comptroller and Auditor General shall, on receipt of a requisition from the Treasury, grant the Treasury a credit on the Exchequer account at the Bank of England (or on its growing balance).
and:-
“An Accounting Model of the UK Exchequer — 2nd edition”
https://gimms.org.uk/2021/02/21/an-accounting-model-of-the-uk-exchequer/
Add to this the fact that hardly anyone understands how money is created from nowhere:-
https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy
In a nutshell the Achilles Heel of money (currency) as a social contract (a mutuality) is actually the retirement or refluxing of it!
This was why David Cameron was able to talk like an idiot in Parliament and poke fun at Richard’s book “The Joy of Tax.” It’s why the City of London enriches itself by helping the rich and businesses avoid paying tax using British law and a string of British protectorate tax haven countries.
So here’s the problem MMT needs to address. Given the communication difficulties of citizens understanding in any great detail why they’re being taxed in the amounts that they are and the fact the social contract’s been monetised from yesteryear as the National Debt is it possible to restore any “mutuality reasoning” to ensure better economic well-being for the nation? Is this just a problem with a solution whereby taxation has to be masked to make it more palatable and masked in a way that is non-regressive? Is it possible to even do this? Is it workable? Is it even ethical? What is the solution where the majority of voters persistently seem reluctant to look into the detail of how their country’s monetary system really works and how it can be better used for mutual well-being? The old MMT conundrum!
Thank you muchly Helen and to Richard.
Is there any way that we can shame Parliament into to telling us the truth about money and taxes? (All politicians seem to be infected by money supply fictions).
Could an FOI be put in to the Treasury about the 1866 Act?
What would we ask if we did this?
1). ‘Can you confirm that the Treasury can leave the BoE with liabilities (money produced or ‘debt’) and that under the Act the BoE has no means of recovering that from the Government or from the taxpayer?’
2) If this indeed the case, are the amounts merely just a record of money being spent and not actually ‘debt’ since the Government nor the tax payer has such liabilities?’
Could we use a crowd funded legal approach under FOI?
Just an early morning thought.
Even where is the legislation that shows the government must balance its books at all times come hell or high water?
In one of my posts on another of Richard’s posts today I try to explain that currently the government is playing the role of “income stream supplier of last resort” because of pandemic furlough, etc. so the politicians daren’t implement this legislation it would collapse the whole show!
But of course all this raises the question why pretend this is a “special occasion” role when clearly there’s always an optimising the country’s productive capacity (Green of course) role to be played?
Obviously that role isn’t just for a deflationary situation its also one where there’s abnormal inflation since both damage a nation’s productive capacity.
The answer to these questions is of course the long held view of Michael Hudson that the UK amongst other countries is being held to ransom by its finance sector aided and abetted by their corrupt politician gophers.
After spending time with Helen’s post, I’m minded to say that what we really need rather than the ‘Welfare State’ (a term I hate BTW) is:
‘The Wealth Fair State’ – where wealth is more fairly distributed.
I am struck by a major element of Helen’s input: it is those who have lots of money who seem to cause most of the problems with money. They just don’t seem to learn. This market chaos has been going on forever it seems.
I’ve been arguing that we ought to get rid of the word “Modern” in Modern Money Theory since it serves no real useful descriptive purpose and replace it with “Mutual” although today with it being so called “Budget” Day I’m thinking it should be Social Contract Money Theory.
So despite a social contract being present in early life forms 3.5 billion years ago there appears to be little recognition in either the Conservative or Labour parties that it needs to be present in UK currency creation or indeed how to make it effectively so.
I really don’t understand why both these two parties don’t understand human use of money technology is an extension of the social contract. Perhaps the key problem is we don’t teach this as core syllabus in schools and we ought to because it feels as though it doesn’t get taught in many homes these days!