This Tweet, on which I commented yesterday, is doing the rounds right now in connection with Stephanie Kelton's new book. The level of very basic confusion on display as to how the government's money system works is really quite staggering.
This is so funny - the Chair of the Council of Economic Advisers to Biden very clearly has no idea how many works in the economy, but wants to condemn modern monetary theory for explaining it entirely straightforwardly. https://t.co/Ld7UU7W208
— Richard Murphy (@RichardJMurphy) May 3, 2024
Sorry - but I cannot find another way to link the video.
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For those who are not on Twitter X, you can see the clip on YouTube here: https://www.youtube.com/watch?v=RRJ7NUWYyEM
Thanks. I had to stop it half way through – I was laughing so much. The man is clearly an imbecile, he knows little but doubtless went to the right US universities & has the right connections & will not rock the bond boat. Pathetic.
In fairness, Mr Bernstein with the right clothes (tasselled hat, rattle, and a suit of colours) has a great future as somebody’s fool.
Good grief. What a succinct explanation of the US monetary system.
Viewed from the other side, and parking MMT, Jared Bernstein can’t even explain how “he thinks” the money system works.
Excruciating.
Jaw dropping doesn’t even come close!
Who and what is this guy? – I mean apart from being the Chair of Biden’s economic advisery group. This is on a level of comedy that even Bird and Fortune’s wonderful invented establishment clone the ubiquitous George Parr could not match.
I think we can safely say Jared Bernstein wasn’t in any of the teams working on the IRA Act!
https://www.youtube.com/watch?v=LGlqnHTBP3I
https://web.archive.org/web/20230207191101/http://jaredbernsteinblog.com/questions-for-the-mmters/
https://billmitchell.org/blog/?p=37751
https://billmitchell.org/blog/?p=37763
https://billmitchell.org/blog/?p=37785
Part Three of Bill Mitchell’s response to Jared Bernstein is particularly relevant to that being used by Starmer and Reeves that there is no labour slack in the economy to allow a future Labour government to spend much.
Pitiful. I wonder if Reeves or Hunt could do any better.
Shockingly and frighteningly inept. There is plenty of evidence that policy advisors and influencers closer to home are equally clueless.
Funny, but also absolutely shocking.
I remember asking you on this blog,Richard
where can i find a mainstream argument against MMT?
You said there weren’t any
that clip just confirmed it
another lesson from the clip is
don’t try and explain something you don’t understand yourself
Jonathon Portes claimns to have them…
Search his name and MMT
Also Krugman…
Also, recently, George Selgin (Cato Institute) tried: https://www.cato.org/working-paper/banks-are-intermediaries-loanable-funds#
Steve Keen provided a response: https://profstevekeen.substack.com/p/selgins-hot-air-on-bank-money-creation?publication_id=872467&post_id=144089709
I am reading them.
Steve is tweeting this
In Part 3 of Steve Keen’s response to Selgin, he points out that Selgin “does not use double-entry bookkeeping tables at all in his paper”. There is the fundamental problem of mainstream economists; they do not use, or learn, or understand how fundamental double-entry is in the money creation process. It is not in their education. They just don’t “get it”. This is systemic. You cannot cover for this stark absence by other means (and without it, you are provided instead, typically with the tortuous incoherence of the loanable funds thesis – see Steve Keen’s mangled example of meaninglessness from the literature). All they have is the maths fudge (no proofs).
Agreed
Double entry makes it impossible for this claim to be true
Richard Werner established way back in 2015 licenced banks create money from thin air!
https://www.sciencedirect.com/science/article/pii/S1057521915001477?ref=pdf_download&fr=RR-2&rr=7f18f7e14d8cdd17
And the idea is very much older
On page 365 of Werner’s paper you can see the effect of the famous economist Paul Samuelson’s failure to do joined up thinking namely where licenced banks’ reserves actually come from even though he puts them on a balance sheet! This is what Samuelson says in his famous 1948 text book, shades of the monetary illiterate “grocery shop” politician Margaret Thatcher:-
“As every banker well knows, he cannot invest money that he does not have; and any
money that he does invest in buying a security or making a loan will soon leave his bank”
So wrong…
As Keynes had pointed out only 20 years before
That is truly scary.
Slightly (only slightly) off-topic.
Does Richard know of a graphic that pictures how Government gets its money, i.e. from an overdraft at the Bank of England, and how bonds, the interest paid on them and taxation (to cancel currency that was created and avoid stoking inflation) fit in?
This on the basis that a picture tells a thousand words, etc. If such does not exist, one surely should be created, to promote the education of us poor masses?
Thanks
Start at page 409 here https://taxingwealth.uk/wp-content/uploads/2024/04/Taxing-Wealth-Report-2024-Full.pdf
Thanks Richard, wow, those graphs are indeed impressive.
To simplify for the layman, however, does this cyclical explanation (I have created a PowerPoint slide, however it will not post here) even come close to answering the question: How is UK Government spending funded?
1) Currency Creation. Bank of England (BoE) creates UK Sterling currency (GBP), which it transfers to His Majesty’s Government (HMG) and issues bonds (debt) that will be repayable by HMG with interest – this is similar to a bank overdraft
Why does the Government not just create the currency itself? Because history shows that politicians cannot always be trusted to act wholly in the national interest, rather than in their own.
2) Government Spends. HMG spends this GBP, which enters the UK banking system and general economy
3) Taxation. HMG levies taxation on a wide range of economic transactions
Without taxation, the increase in the supply of currency (its non-cancellation) would quickly create price inflation, i.e. prices would increase sharply
4) Repayment to the Bank of England. From these tax revenues, HMG pays interest on, and redeems, BoE bonds, thus cancelling the currency that was created
Any gap over time between the total value of bonds issued and tax revenue raised, will either increase or reduce the total value of HMG debt
I am interested in creating a graphic that I can use in our voluntary climate group, to help explain how a Green Deal can be effectively and securely funded.
Thanks again
I was going to take this seriously and then I read this:
“Why does the Government not just create the currency itself? Because history shows that politicians cannot always be trusted to act wholly in the national interest, rather than in their own.”
That is straightforward far-right, anti-democratic trolling.
You have also, I presume, deliberately misread the charts re bond issues – which you say are nothing like I describe, meaning you totally misrepresent me .
I can’t be bothered debating with time wasters.
Hi Richard, I am genuine, as I describe and certainly not far-right.
If I have misread anything, that is because it is not easy to get one’s head around all of this unconventional thinking.
I can appreciate that you get lots of trolls attending to you. Please, I am not one of them.
I am trying to understand how this all works, so I can explain it to others who do not see how we can afford the transition to a zero carbon economy.
Thanks, Andrew
OK
I will try again