First it was saying ‘federal taxes fund spending’, then it was saying ‘federal taxpayer’ or ‘federal tax dollars’ and now if you say ‘printing money’ the #FAKEMMTers get triggered as well…
Agreed that, as per Ellis Winningham, “a misinformed public believes ‘printing money’ will create inflation”, or even worse, “a misinformed public believes that when the government ‘prints money’ it will eventually create hyperinflation”, but that doesn’t mean you should reprimand them for saying ‘printing money’. Although Ellis does acknowledge that “the US gov’t does in fact print paper cash”, he insists that paper cash is only based on consumer demand and “has absolutely nothing to do with funding federal spending.” Which isn’t entirely accurate since banks CANNOT convert bank ‘IOUs’ to paper cash to dispense to consumers without having the ‘IOUs’. Where does a bank get the ‘IOUs’? “All federal spending is merely the crediting of bank accounts with IOUs,” as per Ellis Winningham.
When the federal gov’t deficit spends, meaning that when there is an addition by the federal gov’t of net financial assets, of dollars, being added to the banking system, this ‘net issuance of currency’ (Ellis’s preferred way to say it) ADDS TO AN OUTSTANDING FLOAT OF FIAT DOLLARS. That is the paradigm difference since 1971, that unlike before, during the gold-standard era, when federal gov’t deficit spending added to an actual debt denominated in (a limited amount of) gold-backed dollars; now, federal gov’t deficit spending instead adds to an outstanding float denominated in (an unlimited amount of) fiat dollars. Granted that this deficit spending DOES NOT have the same dilution that can be measured with the same precision as a net issuance a stock does to all the rest of the current stockholders, but printing money does have an inflationary BIAS. The key word there is BIAS because that inflationary (dilution of fiat dollar) bias of newly-printed money, unlike newly-printed stock, can evaporate on impact (as an aging demographic all worldwide now well know). Rather than scolding people for saying ‘printing money’, the MMT enlightenment is that what the mainstream should be more worried about is NOT ENOUGH money being printed by the federal gov’t, or wrongly thinking the federal gov’t should be surplus spending, which would have a deflationary bias, or even worse, thinking we should have sustained federal budget surpluses, which would cause hyperDEFLATION….
Until that day comes when society is 100% cashless (it’s coming), you are only insulting people’s intelligence and hurting the MMT cause by saying things like “We don’t print money anymore! You need to catch up to the 20th century!” (ATTN Geoff: You need to catch up! We’re in the 21ST century!). Sure, these days, the amount of currency in cash, in printed Federal Reserve (bank)Notes, is only about 3% of the money supply; and most of it, about 97% of it, is in the form of electronic entries over a computer, but 3% is not 0%. Imagine how ridiculous you would sound saying “we don’t print money anymore” to one of the two thousand employees of the US Bureau of Engraving and Printing. Instead of over-seasoning their MMT lectures, these ‘academics’ should perhaps keep it simple and try this approach:
In the post-gold standard, modern monetary system, since the federal gov’t (any monetary sovereign) is now spending its own fiat currency (since it doesn’t need to be funded anymore), when the gov’t is ‘printing money’ (deficit spending), it only now means that they are ‘supplying’ a growing economy with more currency needed to accommodate that growth. Same as you constantly needing to add more cans of oil to your hard-working car every 3 months to keep all those moving pieces inside the engine lubricated otherwise they will seize up. The big difference is that today, the federal gov’t creates its own ‘Fiat Brand’ oil instead of borrowing someone else’s ‘Gold Standard Brand’ oil (under the guise of still going into ‘debt’ to ‘borrow’ it).
Thanks for reading,
Aside from the Modern Modern Formality that the federal gov’t can shut down because there isn’t enough tax revenues to fund spending (the ‘political’ constraint), another thing that really frustrates the Modern Monetary Theory community is hearing anyone say ‘printing money’.
“Printing is a word that goes back to the gold standard. It meant the ratio between the printed money and the gold supply, it’s no longer an applicable term. When you have a non-convertible currency and a floating exchange rate, the spending is operationally independent of the taxing, so all government spending is merely changing numbers in banking accounts—there’s no operational constraint by revenues.”—Center for Economic and Public Policy’s Warren Mosler on Fox Business News with Stuart Varney discussing further government spending to improve the economy, May 7, 2011
To be fair, anyone dismissing your pet prescription MMT policy (like Stuart Varney did) by uttering ‘Oh you just want to print more money’—instead of debating the merits of the proposal itself—isn’t making a good-faith effort to understand your perspective.
That said, anytime anyone says ‘don’t say print money’ is borderline Fake MMT.
Anyone with a basic knowledge of American history knows that ‘printing money’ goes back before the gold standard (and why they won’t fall for that ‘Don’t say printing money’ meme as easily as the MMT community does). Those ‘Continentals’ were NOT backed by gold (backed by the ‘anticipation’ of tax revenues), nor were those original ‘Greenbacks’ (at first no convertibility to gold as an ’emergency’ war measure), so ‘printing money’ actually refers to the days before the computer age, before ‘keystrokes’. We all still say ‘printing money’ just like we all still say how much ‘horsepower’ a car has, or how much ‘shipping’ charge we have to pay to the person driving the brown delivery truck. The words ‘printing money’ (if not used sarcastically) simply refers to ‘deficit spending’, aka an addition of net financial assets, that is increasing the amount of $$$ in circulation (that is expanding the money supply)—what Fed Chair Eccles referred to as ‘High Powered’ (which is another thing that the MMT community gets completely wrong). Most people today (correctly) associate ‘printing money’ with conjuring up money out of thin air—as opposed to using existing $$$ (as opposed to ‘surplus spending’).
For example, if you are paying for a restaurant tab with money out of your pocket (paying with existing $$$), then that isn’t ‘printing money’; but if you are instead, paying with a credit card, if you are deficit spending, you are ‘printing money’.
That newly-created little piece of paper, printed with $$$ signs on it, that you sign, that the restaurant retains, think of THAT as the financial asset, that you just created, which is a ‘notes receivable’, your ‘promise’, your ‘bond’, an ASSET, that increases NFAs; while in addition, that printed receipt, that you keep whenever paying on credit, whenever printing money, is the ‘notes payable’, the liability, that nets-out the creation.
The federal gov’t is not the same as a household using a credit card. The Pure MMT insight is that, operationally, borrowing or tax collection is not needed to fund federal spending, BUT those formalities remain to maintain the Constitutionally-enshrined Power of the Purse of policymakers—only Congress can sign the ‘receipt’. Furthermore, where the MMT community goes over the cliff is thinking that all spending is newly-created money (instead of knowing that all spending is newly-created money, yes; net additions of $$$ going into the banking system, no).
It’s Pure MMT to explain that the newly-created (newly-printed) dollars (assets) that you just added into money-supply circulation to pay for that lunch at a diner probably won’t cause hyperinflation and destroy the economy; however, telling folks—especially the 2,000 employees at the Bureau of Engraving and Printing—not to say ‘printing money’, isn’t.
NOTE: In the video, Chair Bernanke was referring to the initial bailouts, early in the credit crisis, where the Fed lent newly-created (newly-printed) money to troubled banks in exchange for their toxic sub-prime assets, for the so-called Maiden Lane loans. The Fed did this so that these banks, suffering from a liquidity problem, would have the $$$ to spend into money-supply circulation—to pay their bills—to stay in business. In a follow-up 60 Minutes interview in 2011, Chair Bernanke explained that QE wasn’t printing money because, unlike the bailouts, QE was not about toxic bonds / changing the money supply, QE was about AAA bonds / changing long-term interest rates.
Fed Chair Bernanke: “It’s much more akin to printing money more than it is to borrowing.”
Scott Pelley: “You’ve been printing money?”
Fed Chair Bernanke: “Well, effectively, yes…we need to do that because our economy is very weak and inflation is very low.”
( at 7:31 https://www.youtube.com/watch?v=odPfHY4ekHA )
“The gov’t essentially prints money each time it authorizes new unpaid programs [programs unfunded by taxes].”
“No, I do not get ‘triggered’ (a dumb, asinine word by the way) when a layperson or student uses the term ‘printing money’ in discussions with the public on social media and elsewhere. The notion is patently absurd and quite laughable really, and, more than likely, such a conclusion stems from the failure of the individual making the statement to fully digest what I’ve written on the subject – I hope that is the case. So let’s clarify…
Mosler: If government spending is printing money, then taxation is the ‘unprinting’ of money.
An undeniable fact.”—Ellis Winningham
Taxation IS NOT the ‘unprinting’ of money. That is another deadly, innocent, fraudulent MMT misinterpretation that confuses a dollar ‘drain’ (paying federal taxes) with a dollar ‘destruction’ (paying off Treasury bonds).
Don’t take my word for it, here you go:
“Don’t say that ‘federal taxes don’t fund federal spending’. It’s better to say that federal taxes are not needed to be able to spend, not that it doesn’t fund it.”—Warren Mosler, MMT conference closing remarks, 09/24/17
“Don’t say ‘federal taxes don’t fund federal spending’. Instead say, ‘federal taxes do not need to fund federal spending’. Translation: Don’t tell me that I am an asshole. Instead say, I don’t need to be an asshole.”—Ellis Winningham, 09/06/18
Even though it would certainly sound so, to be fair, Ellis Winningham probably doesn’t think that Warren Mosler is an asshole for saying that ‘it’s better to say federal taxes do not need to fund federal spending’ (because Ellis wouldn’t know Mr. Mosler’s pure MMT insight if he tripped over it); and that’s why Ellis Winningham is affectionately known as the ‘Toofless Dentist of Fake MMT’ (because the free candy that Ellis is dishing out at his MMT kiddie pool is fine—until it isn’t).