This is great! I've actually been writing some short posts on a personal blog to help me understand mmt better myself but also to give me better clarity when trying to discuss it with others.
I'm finding it quite hard to decide how in depth to get, for example the full funding rule in the UK seems highly relevant but I can imagine eyes glazing over if I start to discuss fiscal conventions that were introduced in the 1980s!
Hi Adam, Thanks. I agree it is very difficult to figure out how to put accross what can be quite complex topics in a way that makes sense to non-economists. And as you say - also difficult to know just how much detail to go into. Just be free to experiment - there's no wrong way - different people learn in different ways.
I agree it's an important point Doug. It's one I plan to cover in a future post on 'MMT tools for sceptics'. I just need to come up with a simple way to explain it that non-economists can uderstand. :-)
Thank you and yes, my wife was getting worried I belong to a cult😂. However Laura k on Sunday morning mentioned some MMT views so Deb is seeing things through our lens👍.
Hi Adpyork, LOL - we're all in the MMT cult. My wife Pat edits all of my writing so I guess she's now part of the cult to. I didn't know that it was mentioned by Laura K on Sunday - that's interesting. I don't watch any BBC news - I don't want to be influenced by their nonsense. Having said that, it's good when MMT gets a mention on a mainstream news outlet.
Good article, the only thing I would add is taxes and bonds are denominated in the currency of the issuer. Taxes can only be paid and bonds can only be purchased with the currency of the issuer. Attached is a link to a one page currency issuer thesaurus I developed and use to explain the same.
I don’t know about you but I am inherently frustrated with the continual use of the language of the enemy when talking about MMT, we need to consciously avoid that.
Another point of frustration is the lack of focus on private bank created real credit-based debt. If the work of Steve Keen is accurate, we should be worried.
The thing that will flip the coin IMO will be the realisation of average individuals that they would be a lot better off if currency issuing government paramount focus was the good public purpose. One of the better explainers is the attached video that is a few years old now by an organisation called Getup, but it never got the exposure/traction. I would value your thoughts.
Thanks for writing this, it clarifies a lot. It's really insightful how you frame these concepts for everyday conversations. I wonder how these principles scale when considering currency unions like the Eurozone?
Thanks Rainbow Roxy, All of the countries that use the Euro are - of course - currency users. And that restricts their policy options as a country. As far as I'm concerned it's madness to give up your currency: as Greece found out to its cost. Here's my article on the Eurozone: https://mmt101.substack.com/p/the-introduction-of-the-euro-a-catalyst
One constant argument seen in the media and by online commentators is that even if reserves and bonds are an asset swap, the govt has to pay interest on its debt and we are now spending more on interest payments than on defence. This is unsustainable the country is going bankrupt etc. Is it a strong counter-argument just to say the currency issuer can always pay its debts?
Exactly Chris, any debt in the government’s own currency is just a number on a ledger. It’s a number that can stay on the ledger forever - with no effect on current or future spending.
Maybe worth suggesting that the bonds the commercial banks have bought are like deposit accounts, and their reserve accounts are like current accounts. So a bank “selling” bonds to the BoE is just shifting money from its deposit account to its current account. ?
You are talking here about State / Central Bank created money, but I understood that the majority of money is actually created by licensed banks when they make loans. Presumably it is possible that some of this money may be used to purchase gilts. In which case it complicates the picture, doesn't it?
This is great! I've actually been writing some short posts on a personal blog to help me understand mmt better myself but also to give me better clarity when trying to discuss it with others.
I'm finding it quite hard to decide how in depth to get, for example the full funding rule in the UK seems highly relevant but I can imagine eyes glazing over if I start to discuss fiscal conventions that were introduced in the 1980s!
Hi Adam, Thanks. I agree it is very difficult to figure out how to put accross what can be quite complex topics in a way that makes sense to non-economists. And as you say - also difficult to know just how much detail to go into. Just be free to experiment - there's no wrong way - different people learn in different ways.
Great stuff.
For me, and in my conversation with others, the fact that a government deficit is actually a private sector surplus is a significant point to take in.
I agree it's an important point Doug. It's one I plan to cover in a future post on 'MMT tools for sceptics'. I just need to come up with a simple way to explain it that non-economists can uderstand. :-)
Here you go— I am the government, you are the private sector. I give you $10 to build a bridge. I am now in deficit by $10, but YOU are in surplus!
Thank you and yes, my wife was getting worried I belong to a cult😂. However Laura k on Sunday morning mentioned some MMT views so Deb is seeing things through our lens👍.
Hi Adpyork, LOL - we're all in the MMT cult. My wife Pat edits all of my writing so I guess she's now part of the cult to. I didn't know that it was mentioned by Laura K on Sunday - that's interesting. I don't watch any BBC news - I don't want to be influenced by their nonsense. Having said that, it's good when MMT gets a mention on a mainstream news outlet.
Good article, the only thing I would add is taxes and bonds are denominated in the currency of the issuer. Taxes can only be paid and bonds can only be purchased with the currency of the issuer. Attached is a link to a one page currency issuer thesaurus I developed and use to explain the same.
https://www.dropbox.com/scl/fi/69wjclw6hpbyqkhy80e0m/Currency-Issuer-MMT-Thesaurus.jpg?rlkey=fs7qt09bsylcc81fk9b0m10on&st=r6hijbmp&dl=0
Exactly MIchael, I guess I missed the obvious point on that one - so thanks. And thanks for the curreny issuer thesauras - you pull no punches.
Happy to share.
I don’t know about you but I am inherently frustrated with the continual use of the language of the enemy when talking about MMT, we need to consciously avoid that.
Another point of frustration is the lack of focus on private bank created real credit-based debt. If the work of Steve Keen is accurate, we should be worried.
The thing that will flip the coin IMO will be the realisation of average individuals that they would be a lot better off if currency issuing government paramount focus was the good public purpose. One of the better explainers is the attached video that is a few years old now by an organisation called Getup, but it never got the exposure/traction. I would value your thoughts.
https://youtu.be/smIZS6T-XSI?si=PjT0HzsTrsWNJJ3v
Thanks Michael, I agee. I'm listening to the video as I type. I recognise the message: because I say the same things on my MMT introductor training course: https://www.udemy.com/course/mmt101-modern-monetary-theory/?referralCode=30F3C23DB6874A186027
Thanks for writing this, it clarifies a lot. It's really insightful how you frame these concepts for everyday conversations. I wonder how these principles scale when considering currency unions like the Eurozone?
Thanks Rainbow Roxy, All of the countries that use the Euro are - of course - currency users. And that restricts their policy options as a country. As far as I'm concerned it's madness to give up your currency: as Greece found out to its cost. Here's my article on the Eurozone: https://mmt101.substack.com/p/the-introduction-of-the-euro-a-catalyst
One constant argument seen in the media and by online commentators is that even if reserves and bonds are an asset swap, the govt has to pay interest on its debt and we are now spending more on interest payments than on defence. This is unsustainable the country is going bankrupt etc. Is it a strong counter-argument just to say the currency issuer can always pay its debts?
Exactly Chris, any debt in the government’s own currency is just a number on a ledger. It’s a number that can stay on the ledger forever - with no effect on current or future spending.
Maybe worth suggesting that the bonds the commercial banks have bought are like deposit accounts, and their reserve accounts are like current accounts. So a bank “selling” bonds to the BoE is just shifting money from its deposit account to its current account. ?
Good point Hillary. I'll add that - thanks. :-)
You are talking here about State / Central Bank created money, but I understood that the majority of money is actually created by licensed banks when they make loans. Presumably it is possible that some of this money may be used to purchase gilts. In which case it complicates the picture, doesn't it?