Possibly one of the best initial overviews of MMT written so far:
Debt, Deficits, and Modern Monetary Theory
Good comment as well:
"Every dollar spent is somewhere saved." The important thing is to maximize the number of pit stops that dollar makes (in whole or, inevitably, fractionated form) before coming to rest as [long term] savings (ie reserves).
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8 comments:
OK, I think I need some help understanding something...
I've read this paper by Stephanie Bell, Can taxation and bonds finance Government spending, but I didn't quite get why is it impossible for taxes to finance anything.
Because the causality is in the other direction.
It's the financing that causes the taxes.
Have a look at my earlier post about the spending cycle
Once you realise its a circle, that means when you decide to describe it in a straight line you can start at any point.
Oh, I got that part, what I didn't get is how taxation/bonds destroy money.
That's the effect on the consolidated balance sheet of the government sector.
Government sector spends by marking up bank reserves
DR Other Assets, CR Commercial Bank Reserves
Taxation marks down bank reserves
DR Commercial Bank Reserves, CR Other Assets
Government sector has a balance sheet like a bank,and like all banks it spends by expanding its balance sheet and 'repayments' like taxes shrink the balance sheet.
So Government spends in the same way banks give out loans? That looks a lot like Innes.
Have you come across this chap?
http://www.forbes.com/sites/johntharvey/2011/05/14/money-growth-does-not-cause-inflation/
I think you might find him interesting.
I am convinced you are doing excellent work and hope you keep it up.
All the best
Simon Jenkins
Yes. John T Harvey is the 'go to' man when it comes to how the exchange rate system is likely to work in reality.
I've been reading his papers over the weekend.
Right. It's the velocity, stupid.
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