Now if you say ‘printing money’ the #FAKEMMTers get triggered as well

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,

P.S. Don’t take my word for it. In this ‘60 Minutes’ interview, former Fed Chair Ben Bernanke discusses the Fed’s emergency rescue lending to banks (support for auto loans, student loans, money market funds, mortgages, short-term lending for small business loans)—the first $1T of Fed money creation undertaken early in the credit crisis:


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 )


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