In 1943, the chairman of the NY Fed backed Modern Monetary Theory: "Taxes for Revenue Are Obsolete"

Originally published at: https://boingboing.net/2019/07/16/spend-then-tax.html

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Only governments are allowed to issue money, after all, so it follows that all money enters the system when the government spends it into existence.

This is not true; the majority of money is created by banks. I suppose if you only consider cash it’s true, but only a small fraction of US dollars are cash.

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It just underscores how little we actually know about large economic systems that people are quoting sources from 1943 to support their economic theories. Imagine a website quoting a scientist from 1943 and saying “he really knows the truth about magnetism, the truth the powers that be won’t tell you!”

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MMT distinguishes between “credit money” and “government money” and has different ways of accounting for each, but the existence of fractional reserve money is an important part of MMT.

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No one is citing a paper from 1943 as a primary support source for MMT; rather, it’s being cited as evidence that the ideas have been present in macro theory all along, and that neoliberals’ claims that these are wild fancies that dropped out of the sky yesterday are ahistorical.

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I loosely remembered as much (MR terms its analogs as inside money and outside money), but that particular fact has been beaten into my head so many times I reflexively correct people when they just say money when they mean something more specific.

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Sort of eliding the fact that the USSR contributed to the defeat of Nazi Germany and its economy was somewhat different from the USA’s…yet it managed to field a few tanks, guns, and soldiers.

Starting to think the people who run this simulation have a real problem with equality and fairness.

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Neoliberals advocating for austerity basically ignore the existence of Keynes, so it’s hardly a surprise they shoot down everything else, too.

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MFW people quote Isaac Newton’s crazy old theories from the 1600’s shudder

God forbid we use those for anything useful.

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Not when arguing that the current scientific belief system is wrong they don’t

but people do quote Linus Pauling about vitamin C.

Physicists use F=ma all the time. That’s from the 17th century. They’ve been citing it for so long that no one bothers with a formal citation.

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sigh see above

If you view the economy as a set of accounting entities, each with its own set of books, you wind up with something like MMT. The problem is that economists loathe accountants, most likely for class reasons. Accountants are middle class. Economists are upper class.

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Interestingly, this seem to relate to articles I’ve read on the [myth of the original barter economy](The Myth of the Barter Economy - The Atlantic https://www.theatlantic.com/business/archive/2016/02/barter-society-myth/471051/) and the notion of money as being invented to solve its logistical problems long propagated by economists. Much like the old ‘ontogeny recapitulates phylogeny’ long passed along as fact in schools which ultimately proved to have no scientific basis, when anthropologists and historians have looked for evidence of a precursor barter economy, they find little evidence of it. Early barter was limited to special goods and long distance exchange that worked within its logistical limitations.

What actually preceded monetary systems was open reciprocity and gift economies, because communities around Dunbar’s Number tended to treat everyone as extended family and early people were all raised with the diverse skills needed to produce most of their own needed goods. Thus there were no problems with barter for money to solve, no great compulsion for production specialization.

So, it turns out, its invention --by rulers-- was chiefly for the purpose of collecting taxes and paying for war and large public works. Distant rulers had no use for people’s spare produce and simple trade goods anymore than today’s governments are likely to conscript your labor to build fighter jets. It was a mechanism to collectivize the productivity of large dispersed societies by compelling people to exchange some portion of their productivity for that currency to pay those taxes, and then using this more freely fungible form to pay soldiers or laborers and buy resources needed. It was a way for rulers to create generic capital for their own use. Thus the currency was always ultimately the property of rulers, hence --probably-- their inclination to stamp their own faces on it. Its role later evolved, of course, as rulers, their demand for luxury goods, and their centers of operation became urban nexuses of market economies. But in rural areas the reliance on open reciprocity and use of money chiefly for paying taxes sometimes persisted to the start of the industrial era.

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Last summer I read Debt: The First 5000 Years, which goes into this in detail. I highly recommend it.

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At the same time, apparently there are a lot of factual errors especially in the later chapters. So read with caution, and verify; Graeber has apparently been more interested in advancing his thesis than focusing on accuracy.

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Thanks. Always good advice regardless of source. Any word on how much the errors undermine the overall thesis?

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