J.D. Alt has put together an accessible video explaining fiat money, intended for a general audience. (Hat tip to jrbarch in the comments.) For additional background, comments and links see J.D’s post at New Economic Perspectives.
Note: Content-wise the video is very good apart from a minor quibble. (See the first comment.)
“Lerner’s argument is impeccable but heaven help anyone who tries to put it across to the plain man at this stage of the evolution of our ideas.” (Keynes to Meade, April 1943)
“The need to balance the budget is superstition … a myth. It’s like a religious doctrine that is used to get people to believe a certain thing.” (Paul Samuelson)
Election time serves as a reminder of how difficult it is to break through the popular illusions clouding public debate. Try as we might – and this goes for anyone seeking to dispel prevailing neoliberal dogmas – the public perception, if it budges at all, appears to do so painfully slowly.
A global search to uncover the World’s Biggest Idiots has succeeded almost before beginning. It’s barely dawn as these words are written and, already, it is mission accomplished! Take a bow, Australians, with a special nod to three thousand Herald Sun readers. The extent of our idiocy leaves the rest of the world not completely in the shade, yet somewhat humbled.
Part of the opposition to MMT, at least when it comes from the left side of politics, seems to stem from a desire to believe that taxes actually finance government spending. When confronted with the observation that, as a matter of logic, taxes (and government bonds) do not – and cannot – finance the spending of a currency-issuing government, many appear to recoil. In terms of framing, and as a way of “giving taxpayers their due”, perhaps it is worth highlighting that we, as taxpayers, do indeed pay something for the functions and expenditures of government. It is just that what we pay does not finance the government’s spending.
MMT makes clear that a currency-issuing government can always spend sufficiently to ensure full employment alongside low, stable inflation. It can always purchase what is available for sale in its own currency. The point – which, on a little reflection, should be obvious – is that the availability of real resources, not revenue, is the constraint on a currency-issuing government’s fiscal policy. Or, put another way, inflation is the constraint.
GUEST POST by jrbarch: There is a longing inside of every human being that we do not know how to label consensually. We call it the search for joy, contentment, clarity, knowledge, divinity, wholeness, truth, love-wisdom. No matter the label assigned, it is the same thing. But we cannot clarify the meaning this label masks. Mind jumps in, and like a used-car salesman announces, brashly: “Boy have I got a solution for you”. In this day and age, the solution is the political-economy, science, entertainment, and materialism – and there is nothing wrong with any of these, if manifest in harmony with and background to, existence. But mind has never been able to solve our quest. Our societies have never been able to fulfil our quest. Because it is the heart that needs to be fulfilled – not the mind. Mind will always be restless, creative, inquisitive, and have more questions than answers. The heart seeks but one answer, its focus is singular; and within that one answer, all other questions are resolved.
I believe myself to be writing a book on economic theory which will largely revolutionise … the way the world thinks about economic problems. When my new theory has been duly assimilated and mixed with politics and feelings and passions, I can’t predict what the final upshot will be in its effect on actions and affairs. But there will be a great change, and in particular the Ricardian foundations of Marxism will be knocked away. (Keynes to George Bernard Shaw, Jan 1, 1935, as quoted by Geoffrey Pilling)
While sorting through old papers earlier today – or perhaps it was last week – the final play of a little known writer of considerable critical acclaim surfaced. If memory serves, it had been read while at high school, rather than watched, for reasons that will become apparent. If the recollection is accurate, the work of Morris Minor – there is no connection to the automobile of the same name – was encountered at about the same time as a children’s story involving farm animals.
Readers who infer from the title of this post that silliness is to follow would do well to heed the wisdom of their own inference and get out now if silliness is not their thing. Readers hoping for economics might likewise flee to the mountains to avoid persecution of their senses. Readers reaching this particular sentence of the post’s introduction are assumed to be as ready for silliness as its author and can be under no illusions as to what follows. To those of you remaining, congratulations: you are the heart and soul of what makes Heteconomist what it is.