I just saw Finding the Money and 2 questions came up that I don't think were answered adequately. I'm clearly a layman at this topic so I'm hoping someone in this group can enlighten me. I tried searching for answers in this sub but didn't find answers...but feel free to direct me to other threads.

1. Where does the money/currency for the government or the public come from to pay the interest on bonds or loans?

2. The movie says the trade imbalance with foreign countries is actually a benefit because productive assets have more value than the currency itself. But...

a) all assets depreciate (likely faster than inflation). Ex: the consumer electronics we buy from Asia have a relatively short useful life, while the currency maintains most of its value. b) a lot of the products inported from china don't have much productive value and therefore are really assets. c) what about trade that gets consumed like oil and food or intangibles?

You can watch Finding the Money on Kanopy, a streaming site partnered with public and university libraries for digital access to their collections. All you need to sign up and access their content is a library card from a US locality or university.

Hello all. I have concerns with mmt just being pure abstraction. Yes I believe MMT is correct. But only if energy and resources can maintain re-useable.or infinite Like energy demand is only ever increasing due to China and India wanting the western lifestyle. Like keynseanism was great at saving capitalism from itself but it’s hitting its limits. For example

1. Overpopulation
2. Overfishing
3. High yield fertilizer( uses fossil fuels)
4. Record energy consumption and demand.

How does MMT Really solve these issues?

Also with the rise of bitcoin and the development of central bank digital currencies. It seems like MMT will be a new policy tool to control market inefficiencies by the central bank digitally. Allowing policymakers full control. But this will only create artificial demand making inflation higher and higher and increase demand further.

Is this really sustainable?

Is there is a book, booklet, ppt, or any other type of document, which introduces mmt in its all glory?

Even if you look at the central bank website, how do you know what they publish is correct and not manipulated?

MMT framework often points out that main driver behind adoption of any fiat currency is necessity of using them to pay taxes. Is "demand for currency, created by taxes" not understood literally? Does that suggest that fiscal policy is also imperfect in controlling money supply, because raising taxes (even if it's not a primary tool of goverment control) would urge businesses to hike up prices to offset unforeseen losses (so-called "profit spiral")? Or that even current level of taxation contributes to inflationary pressure?

Also, a side question (or just a separate question, I don't want to make another thread for it): how does endogeneity of money relate to goverments being sole issuers of currency? Are these two not in contradiction?

So lets say, tomorrow, the fed takes the number inside of every treasury-security account and switches that number to a reserve account. The security holder would then receive their principle in the form of a deposit at their bank. No more national debt crisis!

At that point, current "monetary policy" would involve paying 5% interest on basically all of the net financial assets of our economy. However, that interest would just pile up in these fed reserve accounts, instead of paying out to wealthy people or pension funds who had previously bought these treasuries. Wouldn't this effectively remove the interest income channel, because it is only banks who are getting paid in reserves? Like, the government is still paying an interest income to the private sector, but - unless people are suddenly inspired to convert their bank deposits to cash - its propensity will be precisely zero.

I think that this just demonstrates the insanity of the government manufacturing these above-zero interest rates in the first place. It just doesn't make sense.

From what I gather, MMT focuses heavily at promoting idea of direct financing, considering bond markets to be an obsolete inertial institution. How does MMT address local and state-level budgeting? Does every single state and local goverment now also get to spend however much they want? It seems to me that MMT thinking is too unitary.

Hi MMT folks, perhaps you could help unstick my brain on this issue. How do we square the existence and functioning of the Treasury General Account, particularly one that we don't currently allow to run a negative balance, with the MMT framework? It certainly appears that bond proceeds and tax revenues top up the TGA and that expenditures reduce it and that if the deficit expands, more bond proceeds are required to keep the balance positive. Do my tax payments not ultimately top up the TGA, rather than being "destroyed"? Does my tax rebate (or any government spending) not originate from the TGA, rather than being credited into existence? I feel like if I could sort this out, my MMT debates around the trading floor would be on much firmer ground.

Hey MMT folks, perhaps you can help me out here, and thanks in advance.

When someone gets a home loan from a bank, and that money is keystroked into existence, what is the interaction between the loaning bank and the federal reserve (or appropriate government entity) like? I imagine this currency creation is cleared/registered? Does the bank then "owe" the government? Does the bank have liability to payback the government, if the loan is defaulted on?

From his latest newsletter: https://www.bloomberg.com/opinion/articles/2024-04-29/a-paramount-merger-will-be-tricky?srnd=undefined

"interest rates were low for a very long time, which meant that discount rates were low, which meant that a dollar in the distant future was pretty much as good as a dollar right now"

it stands to reason that this well understood truth about discount rates applied to investments indicate the reverse as well: that high interest rates means that a dollar in the distant future would be worth a lot less than a dollar today. Essentially the definition of inflation.

Hi friends! I hope someone might be able to explain the cadence of government actions on the deficit and debt. Specifically, is there any specific reason, obligation, law, etc. which mandates that (I'm from the U.S. so I'm thinking of the U. S. government) the government must issue debt when deficits occur? Or that all spending must have matching "pay-fors" that balance the budget? Another way to put this might be, why doesnt the government simply spend into deficit and not plan out any "pay-fors" invluding debt creation? Is it simply out of convention, or are there rules which obligate the government, or anything else? Thank you to whomever can clairify!

An MMT understanding of monetary operations has showed that government net spending G-T injects net reserve liquidity into the banking system.

A mainstream misconception is that this increased net spending (gov deficits) increases interest rates due to financial "crowding" out, lowering supply of "loanable funds" because they think the government has borrowed currency from the private sector in order to net spend. This is of course wrong.

But I was thinking, since we are in a framework of excess reserves, far and above the day to day settlement requirements of the commercial banking sector, would rates actually get pushed down at all with increased government net spending? Or would they simply remain unaffected?

The below figure is from a Fed article explaining the current monetary policy environment (in the US but applicable to all excess reserve monetary systems). The reserve supply is such that increasing it further has no effect on the rate. The rate is solely modulated by the adminstered rates indicated and set by the Fed and NOT by the level of reserves.

Am I right in thinking this?

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https://preview.redd.it/bbqld98tyswc1.png?width=703&format=png&auto=webp&s=6b4d249b910b842225d1c683db7b0d3aa5e33484

This is my take away - because the weimar government was paying high prices for goods in the context of the exchange rate, their currency was being rapidly devalued and this necessitated a constant demand for money that could not catch up with the prices the government were paying to provision itself with. Were these goods the government was buying for imports? Like where did this come from, was it strictly transferring money to the allies because of the war treaty?

This is really an open question/prompt for discussion.

Under MMT's framework of understanding, sectoral balances must balance. I.e. in a closed two-sector economy (government G and non-government NG), any deficit or surplus in one sector must be reflected by a surplus or deficit in the other sector, respectively. This is encapsulated in the below accounting identity (I hate that Reddit doesn't seem to natively support Latex):

FA_{NG} - FL_{NG} = -(FA_G - FL_G)

which states that the financial equity of one sector must equal the negative of the financial equity of the other sector. I.e. if the non-government sector has net financial claims on the government sector, the government sector is in net financial debt to the non-government sector.

Likewise, the flows of these stocks are conserved between sectors, with the change in financial equity of one sector being the change in financial equity of the other. This change in net financial assets is also equal to the net government spending (spending G less any taxes collected T).

\Delta(FA_{NG} - FL_{NG}) = -\Delta(FA_{G} - FL_{G}) = G - T

And ultimately, across the entire economy of both sectors, all financial equities at any one moment sum to zero. The residual total Net Worth (NW) is then made up of only real assets that form the basis of our production and society.

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However, here's my question.

I believe the above accounting analysis is restricting the definition of financial assets and liabilities to state-issued credits and debts (base money (cash and reserves) primarily), and any state-issued debt instruments denominated in the state unit of account (i.e. Treasury securities). Do you agree?

But the entire world of stocks and shares - equities in companies - also constitute financial assets to the non-government sector without a corresponding increase in financial liabilities.

I could start a new company today using an invention or innovation of mine which uses a few inputs such as my labour and tools to transform a relatively useless selection of raw material into something useful to others. I could offer this product in exchange for state or bank credits and be profitable. I have created new real assets in the process that contribute to the material wealth and net worth of the society.

My products could become so popular that I would like to expand my operations. I need investment for this. So I offer a 50% ownership stake in my company in exchange for, say £1M of credits which I can use to purchase capital goods to increase my productivity.

I have now created a new financial asset, have I not? The 50% ownership stake is owned by someone who gave up state or bank credits to hold it as their new financial asset. There was no financial liability created at the same time to match it. That has a value as a financial asset, not a real asset. It certainly reflects the underlying value of my real production but as we know with the stock market, that's not the only determinator of its value.

What this equity stake can't do is be used as currency to redeem the investor's tax obligation to the government. But it is generally a highly liquid financial asset that can be sold to obtain the required credits to do just that.

This 50% equity stake financial asset, if the new equipment I purchased with the investment credits I was given improves production, could also well increase in value if a 3rd party fancies part of the action of potential future profits.

So not only have I created new net financial assets within the non-government sector without the need for a government deficit (G-T), but, like government debt instruments, it can fluctuate in value denominated in the state unit of account, potentially growing substantially over time.

I guess my main point is that we must be careful when defining terms and quantities, and statements such as "Only government deficits can create net financial assets in the private sector" is misleading since "financial assets" is too broad a term when used in this context since equity stakes in new companies certainly contribute to the net financial wealth of the private sector without government intervention.

I certainly still think the accounting identities above and the insight derived from them are still highly relevant to macroeconomic analysis, it's just that they refer only to "money" or "money-like" state-issued credits and not other types of important financial assets created internally to the private sector.

Do you agree? Disagree? Am I missing something or just overthinking it?

https://findingmoneyfilm.com/

Stephanie Kelton worked to get this movie to happen. And while I have my own issues about what the ramifications of what MMT means for capitalism, I cannot argue that most should probably watch this movie to at least have some clue about what Warren Mosler and Kelton state regarding policy.

Hey, everyone. I have seen some MMT economists claim that if the US government paid off its debt through fiscal surpluses, there would be no dollars left in the economy. I don’t understand why. If the government used money raised by taxation to purchase back all existing Treasuries, the holders of these Treasuries would end up with dollars given by the government in exchange for these Treasuries. So, it's Treasuries that would be destroyed, not dollars, if the govt paid off the debt, right?