How should the US handle its debt?

[The Artist formerly known as Sappho]

However, if it is to do with floating the dollar and not having a gold standard then it seems to me that what that enables is that all floated currencies are relative to one another and are bought and sold(as they have varying relative values). However what can be bought with a US dollar or an aussie dollar or a yen or euro is still going to be related to the amount of the curr4ency in circulation. so there is still a sense in which there is a limit to printing currency or creating credit or whatever you call it because relative value and purchasing power is real.

As that is the case, it still makes more sense to tax productive industry to provide the social/economic good necessary to support productiev activity in an economy, even in a MMT scenario.

Floating exchange rate - System in which a currency's value is determined solely by the interplay of the market forces of demand and supply (which, in turn, is determined by the soundness of a country's basic economic position), instead of by government intervention.

http://www.businessdictionary.com/defin ... -rate.html

So that; GDP, labour costs and financial mechanism (properly regulated) determine the amount of currency to be spent into existence and so satisfy supply and demand.

Now, where it is that a MMT government, without a tax system, needs to produce a common good, labour and resources are required to satisfy that need. Government supplies the currency by spending it into existence according to the demands made by the common good to be satisfied. If it is a significant common good such as creating a green energy supply an increase in the supply of currency can cause inflation and so devalue the currency. To zero out that inflationary influence, the government can increase labour costs, which in turn inflates the cost of consumables.

Getting technical: Increasing monetary inflation is offset by increasing cost push inflation which causes demand pull inflation with the net result being zero inflation. Remember, GDP would also increase to account for this increase in money supplied, labour costs and consumer costs because there is a nation building project driving this.

The Yen should have no problem countering this localized shift in currency value, the Euro however, because it is not a national fiat currency, could not and may devalue.

But still, no tax required.

[Rainbow Moonlight]

i dont think i follow your argument here.

Tax isn't required but I think that your way of dealing with the consequences of just spending it into existence shows why it is desirable. ( I don't think that it fixes a devalued currency to put up wages and prices - that just pushes purchasing power down further.)

I agree that if the project is a good investment it will eventually add to gdp.

[Rainbow Moonlight]

I suppose I would argue for a careful combination of both measures.

[The Artist formerly known as Sappho]

i dont think i follow your argument here.

Tax isn't required but I think that your way of dealing with the consequences of just spending it into existence shows why it is desirable. ( I don't think that it fixes a devalued currency to put up wages and prices - that just pushes purchasing power down further.)

I agree that if the project is a good investment it will eventually add to gdp.

'Spending currency into existence' is MMT terminology, as it pertains to fiat currencies, and not my idea at all Rainbow. The currency isn't devalued because you will very quickly add to GDP. Creating a national green energy system requires real production of real materials which are reflected in GDP immediately and not eventually. It could devalue purchasing power if labour costs were not pegged to currency creation. It could cause inflation if labour costs were not pegged to currency creation.

The outcome of all of this is a higher wage, higher costs, more currency and a larger GDP. The ratio relationship between those four measures however remains the same.

Problems occur where it is that currency is created, costs are inflated, GDP stagnates and wages do not keep up, such as we have in the current second speed economic system.

[The Artist formerly known as Sappho]

PS: I forgot to mention, the idea of the fiat currency being pegged to labour costs, came from one of the links that Monk posted in this thread on MMT. I just assumed that Monk and Leftwinger knew what was in the links that Monk was posting and so knowledgeable and capable of discussing same. Turns out that I was wrong. I should never assume that people know what is in the links they are providing I guess.

[Leftwinger]

Way too many posts. Let's start slowly. First Wile E said:

With what Annielaurie? Your government is broke.

If what you say is true, then why is there a debt ceiling? Why is the govt. taking money which is allocated to age pensions, retirement and disability? Why don't they just add some more digits to their books as you claim they can? WTF is that article about if all they need do is update their accounting books with digits and endless zero's behind them?

But then he said:

Therefore, now is not the right time to be putting the printing press into overdrive.

...and further quoted:

The Fed (as an arm of the government) can expand its account instantaneously, what we refer to as 'money printing' (although all of us are way that this is an electronic transaction and not a physical one. They are not actually running the printing presses when they do this. But the metaphor is apt).

So first he says that the US government is broke but then he concedes that they can spend as they see fit. Since you can't in reality be both broke and able to spend as you see fit at the same time - which one is it?

[Jovial Monk]

PS: I forgot to mention, the idea of the fiat currency being pegged to labour costs, came from one of the links that Monk posted in this thread on MMT. I just assumed that Monk and Leftwinger knew what was in the links that Monk was posting and so knowledgeable and capable of discussing same. Turns out that I was wrong. I should never assume that people know what is in the links they are providing I guess.

Translation:

“I have no fucking idea what I was crapping on about there.”

What sort of teacher/communicator blames the stupidity of her class/audience rather than her skill at teaching/communicating? A really, really bad one.

[Leftwinger]

I said, and Wile E quoted me as saying:

Government never spends by "printing money", it spends by crediting bank accounts.

Wile E then said of that:

Just dealing with little nonsense statements such as that above whilst collecting appropriate quotes together that will form my response.

Wile E then quoted:

The Fed (as an arm of the government) can expand its account instantaneously, what we refer to as 'money printing' (although all of us are way that this is an electronic transaction and not a physical one. They are not actually running the printing presses when they do this. But the metaphor is apt).

In his over-zealousness, Wile E failed to notice that I had said exactly what he later qouted and subsequently proceeded to argue that I hadn't understood what I had said. In calling what I said a "nonsense statement", he has overlooked the fact that he has seconded my statement by then quoting something that means exactly the same thing.


And he has yet to answer the question of what he means by currency being pegged to the market value of unskilled labour. I'm sure that since he wants to make his arguments clearly understood, he will come forward with an explanation instead of continuing to give the impression of avoiding the question.

[Leftwinger]

Translation:

“I have no fucking idea what I was crapping on about there.”

Seconded.

[The Artist formerly known as Sappho]

Translation:

“I have no fucking idea what I was crapping on about there.”

Seconded.

I think you are being very unfair with me. I am genuinely trying to have a discussion with someone who claims to understand MMT/FFT but you won't act in good faith and engage that discussion. Instead you take random quotes out of context for the purpose of point scoring, claim I am misunderstanding MMT without ever seeking to rectify that by engaging the discussion and that I don't know what is meant by pegging unskilled labour costs to the fiat currency, which I have answered and explained through an example as being a control on inflation.

I really don't know what to make of this except to say; Am I not welcome here? Would you rather I go away?