Economics education

Were Republicans to actually believe, and were it actually true, that massive tax cuts for the rich would deplete federal coffers, Republicans would literally be bankrupting the very thing that they depend on to maintain control over the nation, to control foreign nations through military might, and to maintain their individual incomes. A bankrupt US government is an inoperable US government which could not, in any way, maintain control over the population, influence the world through foreign policy, nor even pay politicians their salaries. It is quite clear that Republicans in Congress know that the US government has no coffers to fill and that it simply cannot run out of money. Yet, they persistently state that the federal government spends the proceeds from federal tax collections; that the federal government must borrow to deficit spend, and that the national debt is dangerous. These statements are a political smokescreen – the same smokescreen used by the Democratic Party – designed to keep an unwitting public misinformed as to the true nature of the flexible currency arrangement that the US dollar enjoys. Let us clearly delineate the components of that smokescreen which both Republican Party and the Democratic Party claim to be reality. Both the Republican and Democratic Parties insist that:

With regard to just these seven points alone, there is not a dime of difference between the Republican Party and the Democratic Party. Both agree. The question then becomes, how can these parties be in opposition to one another if they both agree on the way federal spending works? The answer to that question is through policy differences.

Republicans insist that deficit spending must benefit the rich exclusively. The rich will then use the tax cuts and corporate welfare to add jobs to the economy. Furthermore, Republicans also insist that the US government must find cuts to “wasteful” social programs and initiatives whilst persistently increasing spending on military expansion. Democrats, on the other hand, insist that deficit spending is inherently dangerous at all times, and so banks must be encouraged to lend more to stimulate the economy, resulting in additional jobs and prosperity. Furthermore, Democrats also insist that the US government must find cuts wherever possible to fund other initiatives, and that the rich must be taxed to fill federal coffers in order to pay for welfare and to pay down the national debt.

So, in general terms, Republicans prefer deficit spending and Democrats prefer private debt expansion. But what must be understood by the average Democratic Party voter, is that the deficit itself is not the problem here. In reality, the federal budget deficit is never the problem; the actual problem is where the dollars from the Republican Party’s deficit spending efforts are going. We eliminate the smokescreen through the use of currency analysis.

MMT is currency analysis; it hyper-accurately describes how currencies operate. We simply look at currencies such as the US dollar, the Pound Sterling, the Australian dollar, the Euro as they are today, we analyze how they enter the economy, flow through the economy and exit the economy, and then codify their operations into a set of rules which are not subject to opinion. MMT does not need to be implemented, because MMT is not a system. It merely describes what already exists – it explains to us how things are today. We live MMT whether we know it or not. The current monetary system that you see both Democrats and Republicans manipulating is described by MMT. When you look at the European Monetary Union and the failure of the Euro, MMT describes that also. When we discuss Bretton-Woods or the Gold Standard, MMT explains it. Wherever there is a monetary economy, MMT is there. To further clarify this concept for those who are still having trouble digesting it, allow me to explain the matter in following way using statements of fact:

So, as I said, MMT is currency analysis and its findings are not subject to opinion. MMT is not based on ideology, feelings or assumptions. MMT just is: It describes the way currencies operate and there can be no room for disagreement. One could accurately describe MMT as the “Tao of Currency”. We can further clarify by saying that MMT describes how a particular currency functions, and from that description we can then derive appropriate macroeconomic policy that will result in a prosperous, efficient economy.

If we consider the US dollar today, the dollar is governed by a flexible currency arrangement which we call a free-floating, non-convertible fiat currency. It is an entirely different system to a fixed exchange regime such as the gold standard. In other words, the way the US dollar worked during the gold standard is not the way a fiat US dollar works. A free-float, non-convertible currency only works one way and is not open to interpretation, so federal spending and federal taxation can only work one way and those operations are not open to interpretation. If you then attempt to manipulate federal spending and federal taxation to operate as though the US dollar were on the gold standard, the result will be persistent idle resources and unemployment, lost output, inequitable distribution, and inefficiency. In short, the result will be a gross mismanagement of the US economy.

As long as the public believes that the federal government spends the proceeds of federal taxation, that it borrows ‘money’ to deficit spend, and that the national debt is a concern, both parties, Republican and Democratic, can continue to funnel GDP to their wealthy donors, which then guarantees a permanent income stream for both parties and politicians in the form of donations, campaign contributions, kickbacks, lobbying, speaking careers after retirement, and pensions, as well as a continued stranglehold over power in the form of a two-party system. Left-wing organizations get bogged down in the quagmire of propaganda coming from both the Republican and Democratic parties.

Briefly, On MMT and The Left’s Neoliberal-Induced Delusions
Were Republicans to actually believe, and were it actually true, that massive tax cuts for the rich would deplete federal coffers, Republicans would literally be bankrupting the very thing that they depend on to maintain control over the nation, to control foreign nations through military might, and to maintain their individual incomes. A bankrupt US government is an inoperable US government which could not, in any way, maintain control over the population, influence the world through foreign policy, nor even pay politicians their salaries. It is quite clear that Republicans in Congress know that the US government has no coffers to fill and that it simply cannot run out of money. Yet, they persistently state that the federal government spends the proceeds from federal tax collections; that the federal government must borrow to deficit spend, and that the national debt is dangerous. These statements are a political smokescreen – the same smokescreen used by the Democratic Party – designed to keep an unwitting public misinformed as to the true nature of the flexible currency arrangement that the US dollar enjoys. Let us clearly delineate the components of that smokescreen which both Republican Party and the Democratic Party claim to be reality. Both the Republican and Democratic Parties insist that:
1.) The US government has no money of its own by design.
2.) The US government spends the proceeds from federal tax collections.
3.) The US government lives beyond its means when it deficit spends.
4.) The US government must borrow from citizens, business and foreign nations to fund deficit spending.
5.) The national debt is a real debt.
6.) Social Security is funded by FICA taxes and the trust fund can run out of money.
7.) Monetary policy should be the main tool used to manage the economy.
With regard to just these seven points alone, there is not a dime of difference between the Republican Party and the Democratic Party. Both agree. The question then becomes, how can these parties be in opposition to one another if they both agree on the way federal spending works? The answer to that question is through policy differences.
Republicans insist that deficit spending must benefit the rich exclusively. The rich will then use the tax cuts and corporate welfare to add jobs to the economy. Furthermore, Republicans also insist that the US government must find cuts to “wasteful” social programs and initiatives whilst persistently increasing spending on military expansion. Democrats, on the other hand, insist that deficit spending is inherently dangerous at all times, and so banks must be encouraged to lend more to stimulate the economy, resulting in additional jobs and prosperity. Furthermore, Democrats also insist that the US government must find cuts wherever possible to fund other initiatives, and that the rich must be taxed to fill federal coffers in order to pay for welfare and to pay down the national debt.
So, in general terms, Republicans prefer deficit spending and Democrats prefer private debt expansion. But what must be understood by the average Democratic Party voter, is that the deficit itself is not the problem here. In reality, the federal budget deficit is never the problem; the actual problem is where the dollars from the Republican Party’s deficit spending efforts are going. We eliminate the smokescreen through the use of currency analysis.
MMT: Currency Analysis
You might have heard of MMT (Modern Monetary Theory) recently.
You might have heard that MMT is a bizarre, radical “theory”. It is not.
You might have heard that MMT is a right-wing plot to infiltrate the progressive movement. It is not.
You might have heard that MMT is a creative new way to redesign how the US dollar and federal spending works. It is not.
You might have heard that MMT is a progressive political movement. It is not.
You might have heard that MMT only deals with unpegged currencies Post-Bretton-Woods. It does not.
You might have heard that MMT is a proposal like Positive Money is a proposal; that MMT doesn’t currently exist, and so we need to implement MMT. Incorrect.
MMT is currency analysis; it hyper-accurately describes how currencies operate. We simply look at currencies such as the US dollar, the Pound Sterling, the Australian dollar, the Euro as they are today, we analyze how they enter the economy, flow through the economy and exit the economy, and then codify their operations into a set of rules which are not subject to opinion. MMT does not need to be implemented, because MMT is not a system. It merely describes what already exists – it explains to us how things are today. We live MMT whether we know it or not. The current monetary system that you see both Democrats and Republicans manipulating is described by MMT. When you look at the European Monetary Union and the failure of the Euro, MMT describes that also. When we discuss Bretton-Woods or the Gold Standard, MMT explains it. Wherever there is a monetary economy, MMT is there. To further clarify this concept for those who are still having trouble digesting it, allow me to explain the matter in following way using statements of fact:
A modern piano has a total of 88 keys. That is a statement of fact.
A Dodge Caravan has an internal combustion engine and requires gasoline to operate. That is a statement of fact.
A dog has four legs. That is a statement of fact.
A duck has feathers and webbed feet. That is a statement of fact.
A quadrangle is a four-sided figure such as a square or rectangle. That is a statement of fact.
A triangle has three sides. That is a statement of fact.
1 + 1 = 2. That is a statement of fact.
In the same way:
The US Government is the monopoly issuer of the US dollars. That is MMT: It is a statement of fact.
It is operationally impossible for the federal government to spend the proceeds from federal tax collections. That is MMT: It is a statement of fact.
The US Government does not borrow to fund federal deficit spending. That is MMT: It is a statement of fact.
Treasury bonds are issued by the federal government to establish and maintain a particular interest rate. Therefore, treasury bonds conduct monetary policy, not fiscal policy. That is MMT: It is a statement of fact.
The Federal Reserve uses treasury bonds to drain excess reserves in order to defend a positive target interest rate. That is MMT: It is a statement of fact.
The US national debt is the sum total all US dollars ever issued by the US government, from the founding of the nation to the present day, that the US government has not yet taxed away. That is MMT: It is a statement of fact.
US Treasury bonds are savings accounts that pay interest. That is MMT: It is a statement of fact.
First the US government spends through direct high powered money creation, then afterwards, it taxes. That is MMT: It is a statement of fact.
You cannot pay federal taxes or purchase US Treasury bonds unless the US government first spends US dollars into existence so you can pay federal taxes and buy US Treasury bonds. That is MMT: It is a statement of fact.
(G – T) = (S – I) – (X – M). That is MMT: It is a statement of fact.
Federal deficit spending is the depositing of US dollars in the non-government sector. That is MMT: It is a statement of fact.
Federal deficits are income for the non-government sector. That is MMT: It is a statement of fact.
A $2 trillion federal budget deficit will equal, to the penny, a $2 trillion surplus for the non-government sector. That is MMT: It is a statement of fact.
A $2 trillion federal budget surplus will equal, to the penny, a $2 trillion deficit for the non-government sector. That is MMT: It is a statement of fact.
A federal budget surplus in conjunction with a current account deficit will eventually result in a recession, unless the US government reverses its fiscal position to one of deficit. That is MMT: It is a statement of fact.
The federal government possesses no hard financial constraints, therefore, it has flexible policy options. That is MMT: It is a statement of fact.
So, as I said, MMT is currency analysis and its findings are not subject to opinion. MMT is not based on ideology, feelings or assumptions. MMT just is: It describes the way currencies operate and there can be no room for disagreement. One could accurately describe MMT as the “Tao of Currency”. We can further clarify by saying that MMT describes how a particular currency functions, and from that description we can then derive appropriate macroeconomic policy that will result in a prosperous, efficient economy.
If we consider the US dollar today, the dollar is governed by a flexible currency arrangement which we call a free-floating, non-convertible fiat currency. It is an entirely different system to a fixed exchange regime such as the gold standard. In other words, the way the US dollar worked during the gold standard is not the way a fiat US dollar works. A free-float, non-convertible currency only works one way and is not open to interpretation, so federal spending and federal taxation can only work one way and those operations are not open to interpretation. If you then attempt to manipulate federal spending and federal taxation to operate as though the US dollar were on the gold standard, the result will be persistent idle resources and unemployment, lost output, inequitable distribution, and inefficiency. In short, the result will be a gross mismanagement of the US economy.
As long as the public believes that the federal government spends the proceeds of federal taxation, that it borrows ‘money’ to deficit spend, and that the national debt is a concern, both parties, Republican and Democratic, can continue to funnel GDP to their wealthy donors, which then guarantees a permanent income stream for both parties and politicians in the form of donations, campaign contributions, kickbacks, lobbying, speaking careers after retirement, and pensions, as well as a continued stranglehold over power in the form of a two-party system. Left-wing organizations get bogged down in the quagmire of propaganda coming from both the Republican and Democratic parties.
In sum, progressives and left organisations believe every word about federal spending that their sworn enemies tell them to believe.

Ellis Winningham, economist (alive now, no particular connection to existing government, R, D or otherwise)

Economics education - We really need to understand

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