MMT and the unbearable lightness of public debt slavery

Comment on Calgacus on ‘Anthropologist David Graeber, the man behind "We are the 99%" slogan, dead at 59’

Blog-Reference

I said “To recall, Debt: The First 5000 Years is about all forms of debt slavery” and referred to a post of mine.#1.

You answered, “Egmont, were it true that MMT sells children into debt slavery, I would oppose it.”

This if-my-grandma-had-wheels-she-would-be-an-omnibus counterfactual does NOT count as a refutation of my argument.

While nobody denies that debt slavery/bondage#2 is a historical fact and still practice in many countries, MMTers assert that no such thing can ever happen with the MMT policy of deficit-spending/money-creation as long as the debt is internal, i.e. not denoted in foreign currency.

Of course, purely internal debt slavery happens also but WeThePeople a.k.a. the 99-percenters normally do not realize it.

MMT policy is a two-step process:

1. According to the macroeconomic Profit Law it holds PublicDeficit = PrivateProfit. While the Oligarchy gets a free lunch, WeThePeople are taxed in real terms via a one-off unnoticeable price hike (NO inflation!). Deficit spending increases the public debt but WeThePeople does not care much because they think that this is a matter of the state. This is an error. For public debt holds WeThePeople owes the debt and the Oligarchy owns the corresponding financial assets.

2. Now, there is an interest rate greater than zero on public debt. Because the public debt is not paid off but grows continuously through deficit spending, the interest has to be paid for an indefinite time by children, grandchildren, etcetera.

At this point, MMTers apply Lerner’s Lie: “… if our children or grandchildren repay some of the national debt these payments will be made to our children or grandchildren and to nobody else.”

No, rather, the children or grandchildren of WeThePeople will pay annuity/interest to the children or grandchildren of the Oligarchy. They will pay it in the form of taxes. And this is why WeThePeople realize NOTHING. They hate the IRS and the taxman who, as a matter of fact, acts merely on behalf of the Oligarchy which owns the financial assets as the other side of the public debt.

In real terms, the disposable income of WeThePeople’s children, and thus their part of the output is reduced while the opposite applies to the Oligarchy’s children.

When the veil of money/deficit/debt/tax is taken away, the situation is not much different from the children of WeThePeople working part-time on the plantation of the children of the Oligarchy.#4 Therefore, it is economically correct to say that the deficit cheerleader Stephanie Kelton sells children into debt slavery.

Needless to emphasize that academic MMTers and their social media applause trolls stick to Lerner’s Lie and pose as progressive Friends-of-the-People. The fact is that they are merely the useful idiots of the Oligarchy.

Egmont Kakarot-Handtke

#1 Stephanie Kelton sells children into debt slavery

#2 Wikipedia

#3 Some nasty MMT surprises behind the time horizon

#4 For the broader issue of slavery/debt/interest see Leaf Garrit, British Abolition, Another Massive Taxpayer Heist

Related 'Q: How are you going to pay for it? MMT: By stealth taxation!' and 'How to pay for the war and to be bamboozled by economists' and 'How Stephanie Kelton brain-washes a lovely young English girl' and 'How Keynesians, Lernerians, MMTers make the Oligarchy great' and 'Keynes, Lerner, MMT, Trump, Biden, and exploding profit'.

Exploding the Household Fallacy

Comment on Charles Adams on ‘The household fallacy’*

Blog-Reference and Blog-Reference (Link) and Blog-Reference Nov 15

Charles Adams, a physics professor at the University of Durham, explains the Household Fallacy: “When the goverment spends, that spending is someones income and that someone pays some tax so the government immediately gets some of their money back. And then that someone spends most of their money which becomes other peoples income. And these other people also pay tax, so the government gets another fraction back. And these other people also spend which becomes the income of even more people who also give a fraction back to the goverment. And so on. If everyone spends then the government gets all its money back. Whereas when you or I spend we do not get anything back. That is a big difference. The only way the goverment can be in deficit is if the people decide to save. The goverment debt is simply the peoples savings. If at any point the people go out and spend their savings, then the goverment debt will be cleared.”

The first thing to notice is that in this story only the government sector and “people”, i.e. the household sector, appear but not the business sector. And, curiously, the word profit does not appear once. An economic story without profit is fishy, to begin with. However, having a bad smell in the nose and precisely locating its source are quite different things. So, one has to advance from storytelling to proper economic analysis.

For a start, one needs a description of the elementary production-consumption economy. This economy is constructed from scratch with the following set of macroeconomic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household sector and the business sector, which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market-clearing X=O and budget-balancing C=Yw in each period, the price as the dependent variable is given by P=W/R. This is the macroeconomic Law of Supply and Demand. For the graphical representation of the analytical starting point, see AXEC31.#1

In this elementary economy, the Central Bank finances the wage bill by creating fiat money out of nothing. The average stock of transaction money is given as M=κYw, with κ determined by the payment pattern.#2

So, the business sector spends money into the economy in the form of wage income Yw, and gets it back in the form of consumption expenditures C. The stock of fiat money is zero at the beginning of the period under consideration and zero at the end. Money is created and destroyed by the autonomous transactions between the business and the household sector. There is NO government, NO taxes, and NO deficit spending.

It is pretty obvious that this elementary production-consumption economy can run for all eternity at any level of employment. Problems arise if the households do not spend exactly their income, i.e., do not balance their budget.

Dropping the condition C=Yw yields two balances: Saving/dissaving of the household sector S≡Yw−C and profit/loss of the business sector Q≡C−Yw. It always holds Q≡−S, in other words, the business sector’s surplus = profit equals the household sector’s deficit = dissaving, and vice versa, the business sector’s deficit = loss equals the household sector’s surplus = saving. This is the most elementary form of the macroeconomic Profit Law.

Now, if the households save, the business sector makes a loss, and if this continues for a while, the economy breaks down. If the households dissave, i.e., run a deficit, the business sector makes a profit. The business sector’s deposits at the Central Bank (= money) grow in perfect lockstep with the household sector’s overdrafts (= debt). The deficit spending of the households is financed by the Central Bank, and it ends when the Central Bank puts the brake on further debt growth. In this case, C falls back to Yw, and profit falls back to zero.

Conclusion: Capitalism depends on profit, and profit depends on deficit spending, so Capitalism depends, in the most elementary case, on the growing debt of the household sector. It is NOT enough that “people” always fully spend their wage income; they have to spend more. So ultimately, Capitalism depends on a credit-creating banking system. However, here is the problem: either the households are not willing to go into debt, or the banking system is not willing to give them much credit for an extended time span.

This is where the state comes to the rescue. With the state as an additional sector, the Profit Law reads Q≡−S+(G−T). So, if the private households balance their budget, i.e., S=0, and the public households balance their budget, i.e., G−T=0, the balance of the business sector (= profit) is zero. If the government sector taxes only a part of its expenditures back, i.e., T<G, then the business sector makes a profit, i.e., Q=G−T. The minimum condition for the survival of state-sponsored Capitalism is G−T>S.

Now, the crucial difference between private households and public households is that the growth of household sector debt is limited, while the growth of public sector debt is virtually unlimited. Up to an ex-ante unknown amount, state debt is considered riskless because of the taxing power of the state.

So, the Household Fallacy does NOT come down to the economic miracle that “If everyone spends then the government gets all its money back.” No, the government runs a deficit, i.e., G−T>0, while the households spend what they get as wage income, i.e., C=Yw. The government does NOT get its spending back, and this is why the public debt permanently increases ($22 trillion and counting).#3

The Household Fallacy consists of the idea that the public sector is, in the same way, debt-restricted as the individual household. MMT is absolutely right in pointing out that this is NOT the case. However, MMT is absolutely wrong in maintaining that government deficit-spending/money-creation is a good economic policy. As a general rule, it is NOT. MMT policy creates the distribution of income and wealth that is now generally regarded as a grave danger to social stability. Economically, MMT policy amounts to the limitless issuance of counterfeit currency for the benefit of the Oligarchy.

The physics professor again gets economics badly wrong.#4 There is something rotten in UK academia.

Egmont Kakarot-Handtke


* Progressive Pulse
#1 Graphic AXEC31
#2 For details, see Criminals and the monetary order
#3 Keynes, Lerner, MMT, Trump, Biden. and exploding profit
#4 MMT and the single most stupid physicist

Related 'The sectoral balances obfuscation: stupidity or corruption?' and 'The right and the wrong way to bring money into the economy' and 'Dear idiots, it is deficit spending that creates the distribution people complain about' and 'Dear idiots, government deficits do NOT fund private savings' and 'How counterfeiters save America with an extra profit and make WeThePeople pay for it' and 'MMT undermines democracy' and 'The MMT-Yawner: Government is not a household' and 'Swabian housewife vs Wall Street loan shark' and 'Why economists always seem to lose the fight against inequality' and 'Links on Austerity' and 'A beginner’s guide to MMT' and 'From the debt economy to the gift economy: how America is brainwashed to love budget deficits'.

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#PointOfProof
Nov 14

Link missing
#EconBlocker

The decisive reason to worry about government debt

Comment on J. W. Mason on ‘A Baker’s Dozen of Reasons Not to Worry about Government Debt’

Blog-Reference and Blog-Reference

Arguments 1. to 8. and 11. boils down to unemployment being bad for multiple reasons, and government deficit-spending can effectively reduce unemployment. This is widely accepted since Keynes but tacitly implies budget-balancing over the business cycle. So, there are two cases: temporary and permanent deficit spending. Not many people worry any longer about temporary deficit spending. But the fact that the self-regulating and self-optimizing free market economy is on the permanent life support of the government tells one that the system is not sustainable over the long run. And this is the life-and-death reason to worry about growing government debt. Permanently growing debt is an indicator that the system is dysfunctional.#1 This is the real problem to worry about.#2

Arguments 9. and 10. say that with low-interest rates the growth of public debt is slower in relation to GDP growth. This is trivially true, of course, and suggests that the problem will go away by itself. This is pure optics, though, that crucially depends on the tacit assumption that GDP will grow. If it does not, the debt/GDP ratio explodes and low-interest rates only dampen the process.

Argument 12 is circular. The macroeconomic Profit Law boils down to Public Deficit = Private Profit. So, the government continuously fills the coffers of the Oligarchy, which, in turn, is looking out for some safe and juicy assets. Again, the government jumps in and offers Treasuries to consolidate its overdrafts at the central bank. This is a case of simultaneous supply/demand creation.#3

What J. W. Mason misses altogether is the distributional effects of a permanently growing public debt. Deficit-spending/money-creation benefits the Oligarchy because it increases macroeconomic profit according to the Profit Law. MMT is a free lunch program for the Oligarchy. Financial wealth and public debt grow in lockstep, and the fabulous financial wealth in the USA is roughly equal to humongous public debt ($22 trillion and counting). The Profit Law explains how billionaires are able to accumulate that much money and why they can buy all the bonds the Treasury issues and cash in the ultra-safe interest that is reliably taxed from WeThePeople as long as the debt is rolled over, which can be very long indeed. This Ponzi scheme creates the extremely skewed distribution of income and wealth, and this works as long as public debt grows. But infinite growth is impossible on a finite planet. This also holds for public debt. Eventually, debt growth slows down and even reverses, and then macroeconomic profit turns into loss, and the so-called free market economy breaks down.

This is the decisive reason to worry about government debt. What J. W. Mason is doing is doling out an overdose of argumentative placebos.

Egmont Kakarot-Handtke


#1 Just one more day: How deficit-spending postpones the breakdown of Capitalism
#2 How to pay for the war and to be bamboozled by economists
#3 Safe assets ― how the State pampers the Oligarchy

Related 'MMT undermines democracy' and 'Some nasty MMT surprises behind the time horizon'.

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REPLY to JW Mason, Arthurian, MisterMr, Unlearning, PeterT

Distribution is the problem of MMT policy and nothing else. For details see
Dear idiots, it is deficit spending that creates the distribution people complain about
and cross-references Profit/Distribution.

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#PointOfProof

Profit and macrofoundations

Comment on James Galbraith on ‘A global macroeconomics ― yes, macroeconomics, dammit ― of inequality and income distribution’*

Blog-Reference

James Galbraith observes with regard to the JEL classification codes: “Under Macroeconomics there is nothing, unless you count E25 ‘Aggregate Factor Income Distribution,’ which surely means the analysis of factor shares ― Wages, Profits, Rent ― also known as the functional distribution.” and “From a theoretical standpoint distribution is the essence of micro, of market relations and of supply-and-demand. The discipline exists, largely, to explain factor returns. If it doesn’t explain ― I don’t say ‘justify’ ― the pay of the worker and the return to capital, then the rest of what it does would not sustain it.”

What is even more remarkable: the keyword Profit neither appears under Microeconomics nor Macroeconomics. The first problem of Distribution Theory is that economists obviously do not know what profit is.

Fact is: “A satisfactory theory of profits is still elusive” (Desai, Palgrave Dictionary) and this is the most damning verdict about economics. After 200+ years, economists cannot tell the difference between profit and income. This is the present state of economics: the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal concept of the subject matter ― profit ― wrong.#1, #2, #3

Because Profit Theory is false Distribution Theory is false by logical implication.

James Galbraith identifies the point where things went wrong: “Lucas made the wrong choice. He decreed that micro takes precedence ― that the house is built on microfoundations. Godley did not have patience for this. Surely the house is better built on solid steel-and-concrete pilings, on macrofoundations, with micro-shingles on the roof?”

Indeed, that’s it. Economics needs a Paradigm Shift from false microfoundations to true macrofoundations. At this point, though, James Galbraith stops and turns to the prospects and problems of empirical research. He does not specify what the true macrofoundations are.#4, #5

From the true macrofoundations follows the macroeconomic Profit Law as Qm≡Yd+(I−Sm)+(G−T)+(X−M) Legend: Qm monetary profit, Yd distributed profit, Sm monetary saving, G government expenditures, T taxes, X exports, M imports. This reduces to the core Qm≡−Sm, i.e. the business sector’s profit is equal to the household sector’s dissaving, and vice versa, the business sector’s loss is equal to the household sector’s saving.

Macroeconomic profit has nothing to do with greed/exploitation/productivity but with growing/shrinking debt. Lo and behold, this is one of James Galbraith’s key findings: “1. There are global turning points in the path of pay inequality. They occur around 1971, around 1980, and around 2000. These correspond in each case to major shifts in the worldwide financial regime: to the breakdown of Bretton Woods, to the outbreak of the global debt crisis, and to return to low interest rates and rising commodity prices that followed the NASDAQ slump and the 9/11 attacks, along with the rise of China in world trade.”

Macroeconomic profit is an objectively given and well-defined magnitude. The first thing to notice is that profit is qualitatively different from income.#6 Loss or profit is NOT income. Distributed profit is income. Because of this, it is inadmissible to speak of ‘profit income’ because profit is the difference of flows and not a flow like wage income. Wage income and profit cannot be added together to total income and profit is not a share of total income. In their utter scientific incompetence, economists get the basics of distribution theory wrong from Adam Smith and David Ricardo onward to this day.#7, #8, #9

James Galbraith is right: “A global macroeconomics ― yes, macroeconomics, dammit” is the key to Profit Theory and Distribution Theory. Microfoundations are proto-scientific garbage since Jevons/Walras/Menger. Economics has to be based on macrofoundations. Get it: If it isn’t macro-axiomatized it isn’t economics.

Egmont Kakarot-Handtke


* Review of Keynesian Economics
#1 Profit and distribution: a primer
#2 Essentials of Constructive Heterodoxy: Profit
#3 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
#4 First Lecture in New Economic Thinking
#5 From false microfoundations to true macrofoundations (II)
#6 Macro for dummies (II)
#7 Profit and distribution: a primer
#8 There is NO such thing as a “labor share of income”
#9 Ricardo, too, got profit theory wrong

Related 'The actual distribution is unacceptable? Do NOT seek economic advice!' and 'Income distribution: No market failure but theory failure' and 'The Levy/Kalecki Profit Equation is false'. For details of the big picture see cross-references Profit/Distribution.

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Wikimedia AXEC109i

Nick Rowe’s soap bubbling about money

Comment on Nick Rowe on ‘The Parable of the Fruit Trees’

Blog-Reference

“The apple producer produces apples. The banana producer produces bananas. The cherry producer produces cherries.” The economist produces proto-scientific garbage.

What is wrong with Nick Rowe’s depiction of the economy? The subject matter of economics is, as Keynes said, the ‘monetary theory of production’. This sets the frame for the theory of money. The fact that Nick Rowe clings to a long-defunct barter parable proves that he has no idea how the economy works.

As the correct analytical starting point, the elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Y_w=WL wage income Y_w is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market-clearing X=O and budget-balancing C=Y_w in each period, the price is given by P=W/R (1). This is the most elementary form of the macroeconomic Law of Supply and Demand.

The price P is determined by the wage rate W, which takes the role of the nominal numéraire, and the productivity R. The quantity of money is NOT among the price determinants. This puts the commonplace Quantity Theory forever to rest.

What is needed for a start is two things (i) a central bank which creates money on its balance sheet in the form of deposits, and (ii), a legal system which declares the central bank’s deposits as legal tender.

Deposit money is needed by the business sector to pay the workers who receive the wage income Y_w per period. The need is only temporary because the business sector gets the money back if the workers fully spend their income, i.e. if C=Y_w. Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income.

For the case of a balanced budget C=Y_w, the idealized transaction sequence of deposits/overdrafts of the household sector at the central bank over the course of one period is shown on Wikimedia.#1

The household sector’s deposits/overdrafts are ZERO at the beginning and end of the period. Money is continually created and destroyed during the period under consideration. There is NO such thing as a fixed quantity of money. The central bank plays an accommodative role and simply supports the autonomous market transactions between the household and the business sector.

From this follows the average stock of transaction money as M=κY_w, with κ determined by the transaction pattern. In other words, the average stock of money M is determined by the autonomous transactions of the household and business sector and created out of nothing by the central bank. The economy NEVER runs out of money. There is NO such thing as “an excessive demand for one particular asset (the medium of exchange) relative to other assets.”

The transaction equation reads M=κPRL (2) in the case of budget balancing and market clearing. If employment L is doubled, the average stock of transaction money M doubles. If employment is halved, the average stock of transaction money M halves.

As long as the central bank finances the wage bill Y_w=WL with money creation out of nothing, and with wage rate W and productivity R fixed, the price P does not move one iota according to (1). The average quantity of money M increases/decreases according to (2) but there is no inflation/deflation. Money is absolutely neutral. The creation of fiat money is the correct way of bringing money into the elementary production-consumption economy.

Egmont Kakarot-Handtke


#1 Wikimedia AXEC98 Idealized transaction pattern

Related 'The futile attempt to recycle Sraffa' and 'Money: from silly stories to the true theory' and 'Primary and Secondary Markets' and 'Exchange in the Monetary Economy' and 'Getting out of the economics swamp'.

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REPLY to Nick Rowe on Jun 14

Nick Rowe clarifies his parable: “It is not an excessive desire to accumulate assets that causes recessions; it is an excessive demand for one particular asset (the medium of exchange) relative to other assets. It’s about the composition of their portfolios of assets, not about the total size of that portfolio.”

The two lethal blunders of Nick Rowe are:
• to frame elementary economic activity as barter of stocks of goods a.k.a. assets,
• to frame money as an asset.

The elementary economy is about production and consumption. Input is a real flow = labor time per period, output is a real flow = apples/bananas/cherries per period, income is a nominal flow, and so on. Money is neither a stock, nor a flow. Money is not a thing, not a real asset. Money is information. The information is stored on a medium, e.g. magnetic data carrier, clay tablet, paper, coin, etcetera. As a matter of principle, money cannot be scarce, only the physical data carrier can become scarce.

Money starts as a medium of transaction as shown in the previous post and it supports ANY level of economic activity. Problems arise if the households do not balance their budget, i.e. do not fully spend their period income, that is, if consumption expenditures C are less than wage income Y_w. In this case, the household sector’s deposits at the central bank increase, and money morphs from a pure transaction medium to a store of value.#1

Precisely at this point, money becomes an asset, more precisely a financial asset. All real assets (apples, bananas, cherries) are zero at the beginning of the period and at the end of the period. The household sector’s portfolio consists solely of deposits at the central bank. This is how the monetary economy works. Nobody barters apples for bananas.

In the elementary production-consumption economy, the household sector can increase its stock of money if C is less than Y_w. This has some obvious consequences for the business sector.

Monetary profit for the economy as a whole is defined as Q_m≡C−Y_w and monetary saving as S_m≡Y_w−C. It always holds Q_m≡−S_m, in other words, the business sector’s surplus = profit equals the household sector’s deficit = dissaving. Vice versa, the business sector’s deficit = loss equals the household sector’s surplus = saving. This is the most elementary form of the macroeconomic Profit Law.

The simple fact of the matter is: as the household sector’s deposits at the central bank rise, so do the business sector’s overdrafts. The central bank’s balance sheet is always balanced. The business sector’s debt increases, that is, its deposits at the central bank = money become very, very scarce, and THIS causes a recession. The composition of output and changes in the composition of output (apples, bananas, cherries) are absolutely irrelevant.

Now, give Nick Rowe a banana, and send him back into the barter woods.


#1 Money and time

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REPLY to Nick Rowe and other commentators on Jun 15

In the two preceding posts, it has been argued that Nick Rowe’s barter parable lacks the elementary features of the monetary economy. Barter models have always been false and will always be false because the economy constitutes itself through the interaction of real and nominal variables.#1

It has been argued that the composition of output and changes in the composition of output (apples, bananas, cherries) are irrelevant for the money transactions between the household- and the business sector and that they do not cause a recession. Only a reduction of total nominal demand causes a recession.

To see this, let us make a simple example. Imagine two firms, 1 and 2 for short. The wage rates in both firms are equal, so the total wage income is Y_w=WL₁+WL₂ and total employment is L=L₁+L₂.

In the initial period, the respective prices are equal to unit wage costs, i.e. P₁=W/R₁ and P2=W/R₂. Therefore, the profit in both firms is initially zero. The household sector spends total wage income on the two products, i.e. C=Y_w, so there is neither saving nor dissaving.

The distribution of total consumption expenditures C=C₁+C₂ between the two products determines the production of the respective quantities and the respective labor inputs L₁ and L₂. It holds C=C₁+C₂=W(L₁+L₂)=WL=Y_w.

So, if the household sector wants more of product 1 it spends more on it and less on product 2, such that C₁ goes up and C₂ goes down and C remains unchanged. Accordingly, the business sector employs more workers in firm 1 and less in firm 2, such that L₁ goes up and L₂ goes down and total employment L and total income Y_w remain unchanged.

The relative price, i.e. the exchange relation between the two products remains unchanged, i.e. P₁/P2=R₂/R₁.

So, changes in the preferences between the two products are mirrored in changes in the distribution of labor input between the two firms. This configuration can go on forever. Problems arise only if the household sector reduces total consumption expenditures C, such that saving Sm≡C−Y_w is now greater zero. In this case, the business sector makes a loss and the economy goes into recession.


#1 The irreparable unreality of all ‘real’ models

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REPLY to Nick Rowe on Jun 16

The lethal flaw of The Parable of the Fruit Trees is the obsolete concept of direct barter. In the monetary economy, barter is indirect. In methodological terms, barter economists commit the Fallacy of Insufficient Abstraction.

In the monetary economy, agent 1 does not produce product 1 and barters directly with agent 2 who produces product 2.

In the monetary economy, agent 1 works in firm 1 which produces product 1 and gets the wage income Yw1 which is paid with a transfer of deposits at the central bank.

Analogous for agent 2.

Agent 1 then spends part of his income on product 2. Analogous for agent 2 who spends part of his income on product 1. This is how INDIRECT barter happens. By buying the other firm’s output, agent 1 barters “his” product with agent 2 and vice versa.

Indirect barter presupposes the existence of money which is used (i) to pay the wage bill, and (ii), to buy the products. Money is created and destroyed in the process. The cycle can be repeated ad infinitum. Transaction money is NOT a stock and NOT an asset. It is zero at the beginning and the end of the cycle.

Changes in preferences lead to changes in output and production and the allocation of labor between the two firms. Total spending and total employment and the relative prices do NOT change in the process. Production adapts quantitatively to preferences.

Put simply, if agents want more of product 1 and less of product 2 more labor input has to be allocated to firm 1 and less to firm 2. The change in the composition of output has NO effect on the monetary transactions. Total income and total consumption expenditures remain unaffected.

Only if the household sector saves, which gradually increases its “stock of money” = average amount of deposits at the central bank, problems arise in the elementary production-consumption economy. Changes in the composition of output do not, they only lead to a reallocation of labor input.

Needless to emphasize that normally the two processes, growth/shrinkage of total production/output/average stock of transaction money and change in the composition of output are mixed. Analytically, though, they have to be strictly kept apart.

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REPLY to Henry Rech on Jun 16

You say: “There has to be money to start the transaction cycle. Money is needed for a purchase.”

Money is created in the act of transaction. Either the business sector creates an IOU and hands it over as wage payment to the household sector, or the central bank creates uno actu deposits for the wage receivers and corresponding overdrafts for the firms. The purchase of the output destroys money = deposits at the central bank. This is how fiat money works. The transactions themselves create/destroy money.

At the logical beginning of economic activity, there is neither a stock of goods nor of money. All physical stocks have to be produced and money is produced (or ‘created out of nothing’) by the central bank/banking system. The economic analysis starts at zero. And this holds also for the theory of money.

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REPLY to Matthew Young on Jun 18

You say: “Simultaneous is a relative when money moves faster than fruit.”

The purpose of a parable is to make one point as clear as possible. For this purpose, the situation is radically simplified. Needless to emphasize that simplification and idealization are legitimate tools of analysis. However, as always, there is the possibility that the tool is misapplied and that the dilettantish scientific craftsman hits his thumb instead of the nail.

The problem with simplification/idealization is that it erroneously abstracts reality away instead of all the details that are indeed irrelevant for the question at issue. One of the most prominent examples of the Fallacy of Insufficient Abstraction is simultaneity. This is to eliminate time and this is sufficient to relegate any model/parable into the Dancing-Angels-On-A-Pinpoint category.

Nick Rowe’s Parable of the Fruit Trees, too, falls into this category. Its lethal defect is long known as the Hahn problem: “The Hahn problem reveals three things. First, a perfect barter GE solution always exists in any ‘monetary’ model erected on Walrasian GE microeconomic foundations. Second, inessential monetary features are easily attached to perfect barter microeconomic foundations but as easily removed, leaving the perfect barter solution intact. Third, attaching such inessential additions leads to logical error; the misuse of language that produces invalid conclusions.”*

Nick Rowe and Matthew Young have not gotten the point that in the monetary economy barter is indirect and that therefore the discussion of direct barter is pretty much a revival of the Dancing-Angels-On-A-Pinpoint disputations of the Middle Ages.


* Colin Rogers, Review of Political Economy

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REPLY to Nick Edmonds on Jun 19

You say: “One problem we have translating your parable to the real world is that asset prices are generally highly flexible (and arguably asset markets can be much more easily cleared by price movements than goods and labour markets).”

Not at all! The real problem is that economists have after 200+ years still no clue how the price- and profit mechanism works.

To begin with, there are TWO fundamentally different types of markets.#1 In the elementary production-consumption economy one has the flows of labor input and product output (apples, bananas, cherries per period). The quantity produced is, for a start, equal to the quantity sold and consumed. So the stock of products is zero at the beginning and the end of the period. The primary markets (e.g. product, labor) deal with flows.

If part of the output is not consumed in the same period then there remains a stock of durable goods = real assets, e.g. houses. This is how the secondary markets come into existence.

The point is that the primary and secondary markets run on entirely different principles and that they can by no stretch of the scientific imagination be described with the barter parable nor with supply-demand-equilibrium. What Leijonhufvud has called the Totem-of-the-Micro has always been nincompoop-economics.


#1 Primary and Secondary Markets

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REPLY to Nick Rowe on Jun 20

Nick Rowe concludes: “If we see recessions as a cluster of symptoms, that usually (but not always) go together, it’s not obvious how we define a ‘recession’, and whether we define it in terms of symptoms or of causes. And what’s true by definition and what’s true/false as a statement of fact. Bit like defining different illnesses.”

There is science, and it is binary true/false with NOTHING in between. Truth is well-defined for 2300+ years by formal and material consistency. And there is the large swamp of cargo cult science where, as Keynes said, “nothing is clear and everything is possible.”

In the swamp, vagueness, indeterminacy, inconclusiveness, confusion dressed up as complexity, unresolved contradictions, storytelling, filibuster, gossip, finicky scholasticism (Popper), known/unknown unknowns, and the Humpty Dumpty Fallacy are the prevailing components of communication.#1, #2, #3

This, of course, has not gone unnoticed: “The currently prevailing pattern of economic theorizing exhibits the following three characteristics: (1) a syncopated style of argument fluctuating back and forth between literary and symbolic modes of expression, (2) naive translation, or the loose paraphrasing of formulae into sentences, and (3) loose verbal reasoning for certain aspects of theoretical argumentation where explicit symbolic formulation is lacking.” (Dennis, 1982)

From Nick Rowe’s Parable of the Fruit Trees nothing can be learned about how the price- and profit mechanism works. This does not matter, though, because the purpose of economics has never been to clarify matters and to advance science but to keep everything and everybody in the swamp of inconclusiveness.

Vagueness and inconclusiveness protect the scientifically incompetent and secure the status quo because:
• “... you cannot prove a vague theory wrong.” (Feynman)
• “With enough fog emitted, almost anything becomes possible.” (Mirowski)

One will not find one single scientist in the swamp.#4 The swamp has always been the habitat of parable-tellers and cargo cult scientists.

Egmont Kakarot-Handtke


#1 It is better to be precisely right than roughly wrong
#2 “This is a tough question to adjudicate on scientific grounds since the issue is largely definitional and, as Lewis Carroll pointed out, everyone is entitled to his own definitions.” (Blinder)
#3 “’When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’ ‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’ ‘The question is,’ said Humpty Dumpty, ‘which is to be master — that’s all’.”
#4 Getting out of the economics swamp

The Third Way: Towards the Happy Zero-Tax Economy®

Comment on Tom Hickey on ‘From Wicksell to Le Bourva and MMT’

Blog-Reference

Communism is down the drain, and the ― entirely justified #1 ― widespread feeling is that Capitalism will follow next. Quite naturally, there is a lot of discussion about what the core problem is and how the situation can be fixed. New Economic Thinking is all the rage. MMTers are one of the many politically active groups, and they have a strong selling point: (almost) all economic problems can be solved with money-creation/deficit-spending. This soapbox economics resonates well at the street level.

No doubt about it, rethinking economic theory is indispensable because Walrasianism, Keynesianism, Marxianism, and Austrianism are axiomatically false and materially/formally inconsistent. Neither right-wing nor left-wing economic policy guidance has ever had sound scientific foundations.

However, MMT is not a real breakthrough; it is bad science and bad policy just like all the rest. Bad science because it is materially/formally inconsistent and bad policy because it claims to promote the cause of the ninety-nine-percenters but in fact promotes the cause of the one-percenters.#2, #3

Yet in all their scientific and political corruption, MMTers have intuitively grasped a fruitful, transformative idea, i.e., to use fiat money for the construction of an economic system that works better than obsolete communism and capitalism.

All that is needed to make things happen is a well-informed Legitimate Sovereign. There is no use in defining the Legitimate Sovereign here in greater detail. This is not the task of economics but of political science.

The Legitimate Sovereign is in full control of the process of money creation and destruction.#4, #5 The closed economy is, for a start, in the state of full employment with the macroeconomic budgets of the household sector and the government sector all balanced. The macroeconomic Profit Law for this simplified economy translates from the general Q_m≡Y_d+(I−S_m)+(G−T)+(X−M) to the specific Q_m≡−S_m+(G−T) with S_m=0 and G=T. Legend: Q_m monetary profit/loss, S_m monetary saving/dissaving, G government spending, T taxes.

In the first step, the Legitimate Sovereign simply creates some extra money for continuously buying shares on Wall Street and successively taking over the control of all big corporations.

In the second step, the Legitimate Sovereign cuts all taxes and creates the money for government spending G out of nothing. So, T=0, and G remains unchanged.

Now, two things happen:
(i) The disposable income of the household sector, i.e., Y_w−T, increases because of T=0. If the households fully spend this extra money, the price goes up a little (NO inflation) and the household sector as a whole gets the SAME total real output O under the conditions of market clearing and unchanged employment.
(ii) The profit of the business sector increases because of Q_m1=C₁−Y_w in comparison to Q_m0=C₀−Y_w=0, with C₁ greater than C₀. The difference between C₁ and C₀ is the amount G, i.e., the deficit-spending/money-creation of the government sector.

The real situation of the household sector remains unchanged because the price hike exactly counteracts the nominal demand increase. The situation of the business sector as a whole improves, i.e., monetary profit Q_m rises from Q_m0=0 to Q_m1=G. In other words, Public Deficit = Private Profit.

The real situation of the household sector as a whole does NOT change at all. The whole act is called stealth taxation#6 because the price hike reduces the real quantity that wage income receivers can buy with their increased disposable income. What happens is that the former taxes T are replaced by a one-off price hike. In real terms, the household sector is taxed as before, but does not realize anything provided the price hike is small and indistinguishable from a random fluctuation.

Because the greatest misfortune in the life of most people is that they feel to are unjustly forced to pay taxes, it can be safely assumed that human happiness increases enormously with the abolition of taxes and the replacement by money-creation/deficit-spending.

Being the Legitimate Sovereign means that the money that has been created out of nothing has to be destroyed eventually. Because the Legitimate Sovereign owns all corporations in the business sector, this is an easy task. All that has to be done is to distribute the full amount of monetary profit, i.e. Q_m=G, to the shareholder, which happens to be the Legitimate Sovereign. It is by profit distribution = dividend payment to the state that fiat money is again taken out of circulation and destroyed. In a formula: taxation is fully replaced with full profit distribution.

Needless to emphasize the Legitimate Sovereign decides how the total amount of government spending G is allocated to social, military, administrative, and other purposes.

There remains only one thing to do: to consolidate the existing public debt overhang. Needless to emphasize it cannot be redeemed. So it has to be converted into perpetual bonds with an interest rate just a little above zero percent or into current deposits with zero interest.

Egmont Kakarot-Handtke


#1 Mathematical Proof of the Breakdown of Capitalism
#2 MMT: The one deadly error/fraud of Warren Mosler
#3 MMT: Money-making for the one-percenters
#4 The ultimate ― analytical ― origin of money
#5 How money emerges out of nothing ― the functional account
#6 MMT, money creation, stealth taxation, and redistribution

Immediately preceding Neoclassics and MMT ― much like pest and cholera.

***

Notice: The concept of a Zero-Tax Economy is protected by Copyright © and Trademark ®.
See Economics: A pointless left-right wrestling show.

***

REPLY to Tom Hickey on Jun 7

You say: “One reason the so-called US left is not winning is lack of vision and a popular presentation of the vision and plan for actualizing it that is clear, concise and precise enough to avoid the usual objections. … Ultimately, the goal has to be get buy-in by both enough voters to pass the legislation and politicians that understand the plan well enough to present it coherently and convincingly and defend it against objections.”

The subject matter of economics is to figure out how the economy works. Period. Nothing else. Period. The subject matter of economics is NOT to sell MMT to voters and lawmakers.

What the public has, first of all, to clearly recognize is that there are TWO economixes: the real thing and the look-alike. There are theoretical economics and political economics. The main differences are: (i) The goal of political economics is to successfully push an agenda; the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics, anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

Political economics has produced NOTHING of scientific value since Adam Smith/Karl Marx. What the Classicals have to be credited for is naive honesty. They called themselves Political Economists; that is, they presented themselves as agenda pushers. Naive honesty was the historical epoch before the War Ministry renamed itself to the Defense Ministry, and a military offensive was re-framed as pre-emptive self-defense. It was the epoch before Orwellian newspeak became the norm.

The fact of the matter is that economics defined itself 150+ years ago as a science, but it is still political agenda pushing. The clear separation of the political and the scientific spheres never happened.

Economics consists of the main approaches ― Walrasianism, Keynesianism, Marxianism, and Austrianism ― which are mutually contradictory, axiomatically false, materially/formally inconsistent, and which got the foundational concept of the subject matter ― profit ― wrong. What we actually have is the pluralism of provably false theories.

MMT is just another instantiation of political economics, a.k.a. agenda pushing. Note well: it does NOT matter whether one pushes a right-wing or a left-wing agenda. From the scientific standpoint, it is roughly the same proto-scientific garbage, only dressed up for different target groups. The whole right-left discourse is a ridiculous Zombie wrestling show of useful political idiots in Circus Maximus.

All that comes under the label of economics is scientifically unacceptable. Because of this, economics has nothing to offer in the way of scientifically well-founded advice: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

The fact is that MMT is NOT the true theory but just another political fraud.

The most pressing problem of economics is how to clean the Augean Stable of the gigantic heaps of axiomatically false models, how to get rid of all failed/fake scientists, and how to advance from a 200+ years old cargo cult science to genuine science.

Make no mistake, Dante’s famous motto above the Gate of Hell, "Lasciate ogni speranza, voi ch’entrate" [Abandon all hope, you who enter here], applies to the political economics of ALL denominations and also to MMT.

***

REPLY to Andrew Anderson on Jun 7

You say, “In the Bible, profit is good but profit taking (and usury) isn’t good.”

Your exegesis is not up to date. What the Bible really says is that profit distribution to private persons is bad, profit distribution to the Legitimate Sovereign is good.

The Bible never ever contradicts the axiomatically correct macroeconomic theory. Believers should know this.

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REPLY to ANC Driver on Jul 8

You say: “This is probably the reason why economics will never be treated as a science because it will reveal the truth.”

Economics is not a science because Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, etc. are mutually contradictory, axiomatically false, and materially/formally inconsistent ― in two words: provably false.#1

As long as economists do not realize this, they are stupid. As far as they realize it and spread their crappy stuff nonetheless, they are corrupt. To this day, economics is a cargo cult science. The “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a deception of the general public.#2

The policy guidance of economists NEVER had sound scientific foundations.#3 The stupidity and fraud of economists are destructive to society. This is known since Napoleon: “Late in life, …, he claimed that he had always believed that if an empire were made of granite the ideas of economists if listened to, would suffice to reduce it to dust.” (Viner)#4

All this is not a question of right-wing or left-wing. Economists in general and MMTers, in particular, will never be accepted as scientists but forever be regarded as stupid/corrupt useful political idiots.#5


#1 Economics: 200+ years of scientific incompetence and fraud
#2 The real problem with the economics Nobel
#3 Economics: a hereditary mental disease with scientific incompetence as father and political fraud as mother
#4 Economists and the destructive power of stupidity
#5 For details of the big picture, see cross-references PoliticalEconomics

***

Twitter/X, February 4, 2025  A Wealth Fund could be a practical way of establishing a Zero-Tax Economy®: print money ― buy all shares ― put them in the Fund ― distribute all profits/dividends first to the Fund and then to the State ― because of public deficit = profit = distributed profit, the budget is automatically balanced

Twitter/X, Aug 26, 2025  "In the first step, the Legitimate Sovereign simply creates some extra money for continuously buying shares on Wall Street and successively taking over the control of all big corporations." see above

Twitter/X Aug 26, 2025

Poor Wicksell — abused as a testimonial for MMT

Comment on Lars Syll on ‘MMT — the Wicksell connection’

Blog-Reference and Blog-Reference

Lars Syll summarizes “In modern times legal currencies are totally based on fiat. Currencies no longer have intrinsic value (as gold and silver). What gives them value is basically the simple fact that you have to pay your taxes with them. That also enables governments to run a kind of monopoly business where it never can run out of money. A fortiori, spending becomes the prime mover and taxing and borrowing is degraded to following acts. If we have a depression, the solution, then, is not austerity. It is spending. Budget deficits are not the major problem since fiat money means that governments can always make more of them.”

That much is, of course, true: Wicksell envisaged a pure fiat money system run by the central bank (= giro system). This does not mean, though, that he was in any way a promoter of MMT’s claims or policies.

Wicksell certainly did not subscribe to patently false MMT propositions as

• the value of money depends on taxation,#2
• the Central Bank is the State’s department for arbitrary money creation,
• deficit-spending/money-creation is the cure for all economic and social problems,#3
• public debt does not matter.#4

With regard to the theory of money, Wicksell, Keynes, and MMT are superior to DSGE/RBC/ New Keynesianism, and the rest of Orthodoxy. However, all three approaches failed to integrate the Theory of Money into a consistent macroeconomic framework or what Keynes called the ‘monetary theory of production’.#5

Egmont Kakarot-Handtke


#1 Going beyond Wicksell, Keynes, and MMT
#2 The creation and value of money and near-monies
#3 Deficit-spending/money-creation is ALWAYS a bad deal for WeThePeople
#4 Deficits matter for distribution
#5 Reconstructing the Quantity Theory

Related 'How Wicksell and the rest got inflation/deflation wrong' and 'Wicksell’s misplaced critique of mathematics' and 'Stephanie Kelton’s legendary Plain-Sight-Ink-Trick' and 'The clock runs down on economics' and 'The sectoral balances obfuscation: stupidity or corruption?' and 'The Emergence of Profit and Interest in the Monetary Circuit' and 'The Axiomatic Unity of Circuit, Money, Price and Distribution' and 'Criminals and the monetary order' and 'The state of MMT? Stone-dead!'. For the full-spectrum refutation of MMT see cross-references MMT.

For more about macrofoundations see AXECquery.

***

Wikimedia AXEC152

***

billmitchell.org Mar 30, 2023,  For clarification of the history of the Theory of Money and the correct attribution to the original authors (KnutWicksell, Axel Leijonhufvud, Basil Moore, Marc Lavoie, Augusto Graziani, Wynn Godley) see William Mitchell - Modern Monetary Theory, When mainstream economists arrive at ideas 50 or so years late and pretend to be contributing to knowledge

The creation and value of money and near-monies

Comment on Clint Ballinger on ‘Of Bitcoins and balance sheets: the real lesson from Bitcoin’

Blog-Reference

Clint Ballinger argues: “The national government creates the numeraire for the system (the “Dollar” in the US, the “Pound” in the UK, etc.) and in addition to spending directly into the economy in that numeraire, the government allows a public/private system (publicly regulated private banking system) to operate with the same numeraire. This creates a single system for the public but in fact, arises from two separate but linked balance sheet expansions.
But why do the tokens from either of these balance sheet expansions have and maintain value?
The government maintains the value of its balance sheet tokens by demanding that some of its tokens, once a year, must be paid back to the government. This guarantees that everyone in that nation will accept and value the tokens from the national balance-sheet expansion.
The tokens that arise from the public/private bank balance-sheet expansion maintain their value analogously ― by the obligation to repay bank loans.
Together, the obligation to pay taxes and the obligation to repay bank loans maintain the value of a currency. Note that both of these rest on the government/legal system of a nation.”

The claim that the value of money depends ultimately on the taxing power of the state is, of course, plain MMT nonsense.

Time to finally settle the theory of money. Because economics is a failed science it has to be reconstructed from scratch. Walrasian microfoundations and Keynesian macrofoundations have to be scrapped.

As the new analytical starting point, the elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Y_w=WL wage income Y_w is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market-clearing X=O and budget-balancing C=Y_w in each period, the price is given by P=W/R (1), i.e. the market-clearing price is equal to unit wage costs. This is the most elementary form of the macroeconomic Law of Supply and Demand. For the graphical representation see Figure 1.#1

The price is determined by the wage rate, which takes the role of the nominal numéraire, and productivity. The quantity of money is NOT among the price determinants. This puts the commonplace Quantity Theory to rest.

The real value of money is ultimately given by productivity. From (1) follows W/P=R, i.e. real wage = productivity. The value of money has NOTHING AT ALL to do with the taxing power of the state. In the production-consumption economy with budget balancing and market clearing, the wage income receivers always get the whole output O=RL.

Monetary profit for the economy as a whole is defined as Q_m≡C−Y_wand monetary saving as S_m≡Yw−C. It always holds Q_m≡−S_m, in other words, the business sector’s surplus = profit (deficit = loss) equals the household sector’s deficit = dissaving (surplus = saving). This is the most elementary form of the macroeconomic Profit Law. Under the condition of budget balancing, total monetary profit is zero.

What is needed for a start is two things (i) a central bank which creates money on its balance sheet in the form of deposits, and (ii), a legal system that declares the central bank’s deposits as legal tender.

Deposit money is needed by the business sector to pay the workers who receive the wage income Y_w per period. The need is only temporary because the business sector gets the money back if the workers fully spend their income, i.e. if C=Y_w.

Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income. This time sequence is no problem for the central bank because the temporary overdrafts vanish with wage payments.

For the case of a balanced budget C=Y_w, the idealized transaction sequence of deposits/overdrafts of the household sector at the central bank over the course of one period is shown in Figure 2.#2

The household sector’s deposits/overdrafts are ZERO at the beginning and end of the period. The business sector’s transaction pattern is the exact mirror image. Money, that is, deposits at the central bank, is continually created and destroyed during the period under consideration. There is NO such thing as a fixed quantity of money. The central bank plays an ACCOMMODATIVE role and simply supports the AUTONOMOUS market transactions between the household and the business sector.

From this follows the average stock of transaction money as M=κY_w, with κ determined by the transaction pattern. In other words, the average stock of money M is determined by the AUTONOMOUS transactions of the household and business sector and created out of nothing by the central bank. The economy NEVER runs out of money if the central bank does a good job.

The transaction equation reads M=κY_w=κPX=κPRL in the case of budget balancing and market clearing and this yields the commonplace correlation between the average stock of money M and price P for a given employment level L, except for the fact that M is the DEPENDENT variable.

Money comes into existence on the balance sheet of the central bank as soon as the central bank enters an overdraft for the business sector on the asset side and a deposit of an equal amount on the liability side (step 1). This deposit is then transferred to the household sector as wage payment (step 2) and returns in the form of consumption expenditures (step 3).#3

Now commercial banks are introduced. They can create and destroy ‘money’ technically exactly in the same way as the central bank except for the fact that it is bank money and not central bank money. The crucial condition for the functioning of the two-monies system is that the business sector and household sector accept bank money as practically identical to central bank money.

To be sure, in the strict sense bank deposits is NOT money, only central bank deposits are money. This becomes clear as soon as the households/firms try to exchange huge amounts of bank money for central bank money. This is known as a bank run. In this case, the central bank has to step in and help the banks out with the one and only genuine money. The best way to prevent bank runs from ever happening is the unconditional guarantee of the central bank to exchange bank money anytime and in any amount into central bank money.

So, the private sector = banks can create near-money that works under the appropriate institutional conditions just as central bank money. The real value of near money is the same as central bank money. Acceptance and the real value of money and near-money do NOT depend on the state’s taxing power.

Problems arise if money is not in the right way brought into circulation. Roughly speaking, as long as the central bank or the private banks or whoever else finances the wage bill Yw, and the wage rate W moves exactly with the productivity, the price P remains according to (1) absolutely constant. The real value of money/near money rises and falls ultimately with productivity.

However, if the money is brought into circulation at the demand side such that the household sector takes up credit and spends it on consumption goods things are radically different. The market-clearing price rises and this reduces the real value of wage income. The output is now redistributed between income spenders and credit spenders, i.e. P₁=(C+C_cr)/O > P=C/O with C=Y_w and O=X.#4

Secondly, the business sector now makes a profit, i.e. Q_m=C_cr. It holds that the household sector’s deficit (dissaving) is equal to the business sector’s surplus (profit). If the money is brought into circulation by the government’s deficit spending it holds Public Deficit = Private Profit. Hence, MMTers as champions of state money creation and deficit-spending are ultimately ― knowingly or unknowingly does not matter ― agenda-pushers for the one-percenters.#5

With regard to Bitcoin follows that it is not even remote money, like a traveler’s check for example, because the issuer does not guarantee to exchange it back at any time one-to-one into bank money or central bank money. The value of Bitcoin depends alone on the expectation that another private person will eventually exchange it for money or near-money or a financial or real asset.#6

Egmont Kakarot-Handtke


#1 Wikimedia AXEC31 Elementary production-consumption economy
#2 Wikimedia AXEC98 Idealized transaction pattern, household sector, balanced budget
#3 Basics of monetary theory: the two monies
#4 MMT, money creation, stealth taxation, and redistribution
#5 MMT is ALWAYS a bad deal for the 99-percenters
#6 Primary and Secondary Markets

Related 'The ultimate ― analytical ― origin of money'.

For more details about money see AXECquery.

***

REPLY to Matt Franko, Tom Hickey Dec 30

In the political realm, there is rhetoric, storytelling, and obfuscation. In the scientific realm, there is axiomatization, consistency/proof, and clarity.

In the political realm, Humpty Dumpty rules: “‘When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’ ‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’ ‘The question is,’ said Humpty Dumpty, ‘which is to be master — that’s all’.”#1

In the scientific realm, Aristotle rules: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.”

Economists never got above the level of proto-scientific storytelling and political agenda pushing.#2

Money is clearly defined and measurable with the precision of two decimal places. Money (liability side of the central bank’s balance sheet) is different from bank money, near-money, remote-money, pseudo-money, quasi-money, counterfeit money, crypto money, clay tablets, bullion, IOU, etcetera.

Needless to emphasize that the representative economist in general, and the MMTer in particular, have until this very day NO clear idea of the basic concepts of his subject matter, e.g. profit, income, money, and so on. But he has a lot to blather about democracy, the mob, and liberalism.


#1 Humpty Dumpty is back again
#2 Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist

***

Specifics of the creation of E-Money/eMoney, cryptocurrency, etc.

Twitter Aug 21, 2021

Twitter Jan 28, 2022 #CryptoIsCrime

Twitter Nov 11, 2022

Twitter Nov 18, 2022

Twitter Nov 19, 2022 Media promotion of crypto and FTX

Twitter Nov 22, 2022