I would humbly add our modern phenomenon of exploitation of crises (manufactured or real) and the effects of monopolization (greedflation) as substantial factors in overall inflation beyond simply the actual availability of materials in comparison to money supply.
The failure to understand the monopolization and consolidation aspects has, IMHO, led us (both in US and UK) into our current dilemma. It’s partially a media failure and partially a result of intentional (and, unfortunately, highly effective) propaganda campaigns.
Thanks Paul, You are exactly right. Greedflation and companies taking advantage of 'expectations' of inflation - drives up prices further - exploitation is the word. When it comes to it: it's not in the interests of the status quo to understand how the monetary system works. They are 'doing fine, thank you very much'.
This is a fantastic and much-needed perspective. You've perfectly articulated why, through the lens of Modern Monetary Theory, cryptocurrencies fall short of the fundamental definition of a currency.
Focusing on the role of the sovereign issuer and the power to tax as the source of a currency's value makes the argument so much clearer than just talking about volatility or adoption. It cuts to the core of what money actually is in the modern world.
Thanks Daniel. It's always good to read a positive comment. MMT exists in a world where the default view is a misunderstanding of how the monetary system works. So, more often than not - I get stick for writing about how things actually work in practice. Thanks. :-)
Jim, great read and so much resource to be given, many thanks.
I recently resigned from SNP and want to concentrate my energies on studying MMT etc and your resource is so valuable.
Lots of people immediately bring up the “inflation” angle. So why does UK Gov not decide to pay (printing money)for building as many new houses as possible. This would increase employment in Building sector, increase GDP and Growth etc. it would only be inflationary if we couldn’t find enough builders, raw materials…..and space to build them?
Good question Alex. UK Government politicians don't understand how the monetary system works - that's why they think there's a 'black hole in the finances'. That's why they are ineffective at getting anything positive done for the citizens who voted them into power.
I’m in Coldstream, Scottish Borders, so not near you. I’m already enrolled to your training podcasts which I am enjoying, need to catch up with them soon and book more.
After resigning from SNP as Convener in Berwickshire, I want to continue learning of MMT.
You may recall we met, albeit briefly, at the session with William Thomson had I Glasgow about 2 months ago.
Ah right. I actually thought we may have met - but I didn't want to mention it in case I was speaking to a different Alex Thomson (I looked you up on Facebook to check to check). LOL
(i) Crypto is not a system of debits and credits, so is also not a currency in that sense either (IOU of the issuer).
(ii) "Value" of crypto is not merely faith-based. Partly due to artificial government austerity in tax credits black markets are created, some good (serving the poor), some bad (drugs, prostitutes-unwilling and child traffic). The needs of the black marketeers to evade tax is a huge reason crypto will likely never fall to zero value. In this respect, crypto is like a modern Swiss or Caymans bank account, but for particularly scummy people.
(iii) To eliminate all the waste involved in crypto, the government has to supply enough tax credits conventionally so people can meet their savings desires after paying the tax.
And, I would say, prevent black markets by legalizing the goods for sale and regulating them instead of criminalization. In the case of sex and child trafficking something there has to still be illegal (since not the libertarian case of "what I do to my own body is not the State's concern [unless you soak up public healthcare resources as a consequence!]") — but a good partial remedy is to not put women and children in danger in the first place, which means providing plenty of public service jobs with decent wages and public services and social protections (like street lights, after school care, income support for solo parents, and whatnot).
The first two attributes are public goods. As a unit of account and as the means of exchange, commerce is simplified. However, we run into problems with the third function because it is at odds with the other two. As a store of value people will choose to withdraw the means of exchange from the economy leading to all sorts of negative consequences such as deflationary spirals. Because they refuse to spend what they’ve earned, they also inflict a cascade of austerity or inflation into the rest of the economy. Men like adam Smith I believe had some sense of this because they despised rent; their idea was to have a rent free marketplace.
Wealth inequality and economic consolidation withers the flow of money in the economy, destroying the velocity of money and causing asset inflation. The orthodox economists have a point that too much money does cause inflation, but they fail, of course, to recognize that wealth, inequality and economic consolidation inflict these problems. The nature of the economy would be entirely different with a flatter wealth distribution. It would reduce the pressure on governments to deal with economic precarity.
And here I have as much irritation with people in MMT and in the heterodox economic faction that they too choose to ignore the role of economic consolidation in economic dynamics.
If we do not bring wealth inequality in the size of corporations down to size, they will kill us. You have only to look at the state of affairs in the political economy of the United States or even the UK.
Thanks for your efforts.
I would humbly add our modern phenomenon of exploitation of crises (manufactured or real) and the effects of monopolization (greedflation) as substantial factors in overall inflation beyond simply the actual availability of materials in comparison to money supply.
The failure to understand the monopolization and consolidation aspects has, IMHO, led us (both in US and UK) into our current dilemma. It’s partially a media failure and partially a result of intentional (and, unfortunately, highly effective) propaganda campaigns.
Thanks again. All the best.
Thanks Paul, You are exactly right. Greedflation and companies taking advantage of 'expectations' of inflation - drives up prices further - exploitation is the word. When it comes to it: it's not in the interests of the status quo to understand how the monetary system works. They are 'doing fine, thank you very much'.
This is a fantastic and much-needed perspective. You've perfectly articulated why, through the lens of Modern Monetary Theory, cryptocurrencies fall short of the fundamental definition of a currency.
Focusing on the role of the sovereign issuer and the power to tax as the source of a currency's value makes the argument so much clearer than just talking about volatility or adoption. It cuts to the core of what money actually is in the modern world.
Thanks Daniel. It's always good to read a positive comment. MMT exists in a world where the default view is a misunderstanding of how the monetary system works. So, more often than not - I get stick for writing about how things actually work in practice. Thanks. :-)
You have a talent for explaining concepts clearly, Jim. I appreciated the description of cryptocurrency.
Thanks. I appreciate you taking the time to comment. :-)
Jim, great read and so much resource to be given, many thanks.
I recently resigned from SNP and want to concentrate my energies on studying MMT etc and your resource is so valuable.
Lots of people immediately bring up the “inflation” angle. So why does UK Gov not decide to pay (printing money)for building as many new houses as possible. This would increase employment in Building sector, increase GDP and Growth etc. it would only be inflationary if we couldn’t find enough builders, raw materials…..and space to build them?
Plenty space in Scotland.
All the best, Alex
Good question Alex. UK Government politicians don't understand how the monetary system works - that's why they think there's a 'black hole in the finances'. That's why they are ineffective at getting anything positive done for the citizens who voted them into power.
If you wanting to study MMT can I suggest a good starting point is my MMT training course - where you will learn all of the basics: https://www.udemy.com/course/mmt101-modern-monetary-theory/?referralCode=30F3C23DB6874A186027
Hi Jim,
I’m in Coldstream, Scottish Borders, so not near you. I’m already enrolled to your training podcasts which I am enjoying, need to catch up with them soon and book more.
After resigning from SNP as Convener in Berwickshire, I want to continue learning of MMT.
You may recall we met, albeit briefly, at the session with William Thomson had I Glasgow about 2 months ago.
Catch up on another occasion,
Alex
Ah right. I actually thought we may have met - but I didn't want to mention it in case I was speaking to a different Alex Thomson (I looked you up on Facebook to check to check). LOL
Good to hear you are enjoying the course. :-)
Couple of other points.
(i) Crypto is not a system of debits and credits, so is also not a currency in that sense either (IOU of the issuer).
(ii) "Value" of crypto is not merely faith-based. Partly due to artificial government austerity in tax credits black markets are created, some good (serving the poor), some bad (drugs, prostitutes-unwilling and child traffic). The needs of the black marketeers to evade tax is a huge reason crypto will likely never fall to zero value. In this respect, crypto is like a modern Swiss or Caymans bank account, but for particularly scummy people.
(iii) To eliminate all the waste involved in crypto, the government has to supply enough tax credits conventionally so people can meet their savings desires after paying the tax.
And, I would say, prevent black markets by legalizing the goods for sale and regulating them instead of criminalization. In the case of sex and child trafficking something there has to still be illegal (since not the libertarian case of "what I do to my own body is not the State's concern [unless you soak up public healthcare resources as a consequence!]") — but a good partial remedy is to not put women and children in danger in the first place, which means providing plenty of public service jobs with decent wages and public services and social protections (like street lights, after school care, income support for solo parents, and whatnot).
Where do you even start with crypto..
Money has three attributes that we care about:
1) unit of account
2) means of exchange
3) store of value
The first two attributes are public goods. As a unit of account and as the means of exchange, commerce is simplified. However, we run into problems with the third function because it is at odds with the other two. As a store of value people will choose to withdraw the means of exchange from the economy leading to all sorts of negative consequences such as deflationary spirals. Because they refuse to spend what they’ve earned, they also inflict a cascade of austerity or inflation into the rest of the economy. Men like adam Smith I believe had some sense of this because they despised rent; their idea was to have a rent free marketplace.
Wealth inequality and economic consolidation withers the flow of money in the economy, destroying the velocity of money and causing asset inflation. The orthodox economists have a point that too much money does cause inflation, but they fail, of course, to recognize that wealth, inequality and economic consolidation inflict these problems. The nature of the economy would be entirely different with a flatter wealth distribution. It would reduce the pressure on governments to deal with economic precarity.
And here I have as much irritation with people in MMT and in the heterodox economic faction that they too choose to ignore the role of economic consolidation in economic dynamics.
If we do not bring wealth inequality in the size of corporations down to size, they will kill us. You have only to look at the state of affairs in the political economy of the United States or even the UK.