ATTN: Real Progressives (those wearing the ‘taxes don’t fund spending’ floaties in the mmt kiddie pool):
What Ellis is still not grasping is the difference between surplus spending (a ‘swap’ where there is no addition of dollars, or Net Financial Assets, going into the banking system) v. deficit spending (where there is an ‘outright’ addition of dollars, or Net Financial Assets, going into the banking system).
More specifically, #FAKEMMTers love the ‘there is no financial constraint’ part of the Modern Monetary Theory, but hate the ‘there still is a political constraint’ part of the Modern Monetary Formality.
The Fed is the federal gov’t ‘swap’ desk. The Fed can create dollars only if it receives something in return, like Treasury bonds or Mortgage-Backed Securities (like during ‘QE’ which did not add NFAs to the banking system); or another example, the Fed can only create dollars if it receives some collateral, like toxic assets (like when the Fed loaned dollars to AIG in setting up the ‘Maiden Lane’ holdings which also did not add NFAs to the banking system). So, similar to any other bank that can create dollars only if it receives a signature on an IOU, the Federal Reserve Bank cannot create dollars if it is not a ‘swap’.
The Treasury is the federal gov’t ‘outright’ desk. If the Fed is not getting anything in return, then the Fed must be instructed by the Treasury (like when the Fed handed over $125B to the banks to bail them out, the Fed was instructed by the Treasury to ‘outright’ create those TARP dollars which did add NFAs to the banking system).
@28:15: “Let me show you where the money comes from Stephen. Right here, you see this little keyboard? This is where the money comes from. ‘How are you gonna pay for it?’, this keyboard, right here”—Ellis Winningham
(No, that’s #FAKEMMT. The dollars come from federal taxation or Treasury bond sales and without either taxes or bonds, no keyboard can prevent a government shutdown. Those are the only two ways that the ledgers of the Daily Treasury Statement accounts, where all federal spending is drawn from, gets filled with entries of dollars. That’s the law. Operationally, it DOESN’T NEED to be that way. That’s the Pure MMT.)
“The money the gov’t is collecting in taxes is being deleted, that’s it, it’s not paying for anything.”
(The money that is collected in taxes is debited from the money supply and is credited to the Treasury, or in other words, taxes are ‘funding’ the same Daily Treasury Statement account at the Treasury where all federal spending is drawn.)
“The Treasury will debit that account, the taxes are removed, the net money supply will drop just a bit.”
(…while an equal and opposite amount of dollars that is credited to the Treasury causes their reserves to increase just a bit, meaning that there is no change of Net Financial Assets in the banking system.)
“The Federal Reserve goes to the Treasury’s operating account and types the number into that account.”
(and because the Fed is the ‘swap’ desk, they cannot do that without knowing, or being instructed by the Treasury, that the same amount of taxes was received.)
“But the problem is there’s nothing in that Treasury account that counts towards the stock of money because it’s not money.”
(but those reserves in the Treasury account ARE still NFAs, they ARE still dollars in the banking system.)
“The gov’t has to spend it to become money, so the Treasury then credits an account and the Federal Reserve creates brand new liabilities by typing a number, they emit currency.”
(There you go again, whether you call them ‘liabilities’, or ‘money’, or ‘reserves’, still doesn’t change the fact that from the point of federal taxation to the point of federal spending, they are all Net Financial Assets, they are all dollars in the banking system.)
“By authority of gov’t the Treasury is giving instructions to the central bank to inject reserves into the banking system.”
(In other words, the Fed is only a swap desk, the Fed can only ‘outright’ inject reserves to the banks after the Treasury, the ‘outright’ desk, instructs the Fed that the Treasury has been injected with taxes)
“All gov’t spending is money creation, all national gov’t taxation is money destruction.”
(Surplus spending is a ‘swap’, meaning no change in Net Financial Assets from the banking system; deficit spending is an ‘outright’ addition of NFA, an increase of dollars in the banking system; and only when taxation goes towards paying off national bonds is there a ‘destruction’ of NFA.)
“There’s no taxation proceeds funding anything.”
(The federal gov’t is funding us and we are funding them right back…MMT isn’t ‘taxes don’t fund spending’…MMT is that, unlike the gold-standard era, the gov’t doesn’t NEED our taxes first…MMT is that, in the post-gold standard, modern monetary system, federal taxes are NOT NEEDED to fund spending—not that they don’t.)
P.S. Don’t just take my word for it: “I DON’T LIKE TO SAY ‘TAXES DON’T FUND SPENDING’ because the word fund is ambiguous, it means different things to different people and even though you can be right, you can be dead right, but it’s better to say the gov’t DOESN’T NEED your money to be able to spend…not that it DOESN’T FUND IT…taxes ARE NOT NEEDED to be able to spend.” Warren Mosler, at the MMT conference, September 24, 2017. ATTN ELLIS: What Mr. Mosler meant by saying “the word ‘fund’ means different things to different people” is that, beyond the MMT kiddie pool, ‘fund’ means more than just ‘finance’ (to people like bankers, lawyers, accountants, policymakers and other experts in the field).
The long awaited return of Ellis Winningham comes at the perfect time as we head into a season where progressives must understand economics and how to get past the objections lobbed by neoliberals and neocons who despise progress.Please help our Real Progressives efforts and become a monthly donor!At PayPalpaypal.me/RealProgressives/25At Patreonhttps://www.patreon.com/realprogressivesWrite for Real Progressiveshttp://www.realprogressivesusa.com/pages/submission-guidelinesLike our pagesFollow us on Facebook: https://www.facebook.com/RealProgressiveFollow us on YouTube: https://www.youtube.com/c/realprogressivesusFollow us on Periscope: https://www.periscope.tv/RealProgressUS/Follow us on Twitter: https://Twitter.com/RealProgressUSFollow us on Instagram: https://www.instagram.com/realprogressives/#RealProgressives#LearnMMT#EachOneTeachOne#ItsInOurHands#WeAreTheMedia#WeAreTheRevolution
Posted by Real Progressives on Sunday, July 1, 2018