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Seven Deadly Innocent Frauds of Economic Policy - Warren Mosler Available here in PDF: https://moslereconomics.com/wp-content/powerpoints/7DIF.pdf https://mos
by maxime-levesque 7y ago
Seven Deadly Innocent Frauds of Economic Policy - Warren Mosler
Available here in PDF: https://moslereconomics.com/wp-content/powerpoints/7DIF.pdf https://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
Modern Monetary Theory (MMT) has a convincing answer to the question: "What gives fiat currencies their purchasing power"
Mainstream economists simply say that purchasing power of money commes from "confidence", but they don't explain where the confidence comes from. It is a circular logic: one has confidence in a currency if one beleives that others have confidence in it, ... whoever whas the first the "have confidence" must have been duped, ... or more likely the theory is flawed...
MMTs explanation of purchasing power is simply that in an economy there are mandatory transactions: taxes, and taxes have to be paid in the currency mandated by the state.
Money is not a commodity, it does not arise out of barter, it is (and always has) been imposed by states that required taxes be payed with their currency.
This has many consequences:
1. Taxes serve to generate and maintain demand for the currency (reduce inflation, or produce deflation).
2. Currency has to be spent before it can be taxed (how else can currency enter the economy?)
3. The debt of a currency issuing state is equal to the net financial assets (sum of all monetary assets, minus sum of all monetary debt)
4. Markets are monetary in essence, they are a side effect on the enforcing of money on a population. In a market, participants all purchase money with goods and services.
MMT is primarily a descriptive theory, the mainstream academic orthodoxy doesn't like it so much because it debunks many of its claims, but MMTs predictive capacity on the macro economy makes it a valuable tool on Wall Street:
https://www.nytimes.com/2019/04/05/business/economy/mmt-wall-street.html https://www.nytimes.com/2019/04/05/business/economy/mmt-wall...