Comment: Tarullo is saying that private label safe assets are not really safe and that financial institutions need to hold more capital.

Mosler: Capital is more about pricing risk. Regulation is for safety/public purpose.

Comment: As you always say, Warren, human capital is the only capital that doesn't depreciate. Appreciates, even.

Mosler: For me, promoting human capital serves public purpose, but that's just my own (political) bias... ;)

Mosler: Regulation and supervision presumably ensure its all to advance public purpose ;)

Mosler: 'Bail in' means bank deposits are part of the bank's capital structure and therefore are subject to getting priced accordingly.

Comment: I know. That is why it is utterly unacceptable. It also unnecessary. Just theft. That is all.

Mosler: Bank deposits are not the place for market discipline. It's entirely contra to public purpose, and ridiculous ;)

Comment: Jobs are sent overseas by corporations & pay is stagnant for US workers.

Mosler: And a tax cut or spending increase, then, serves public purpose, not protectionism.

Comment: 10-year real rate is back below zero. In a rational world we'd be building infrastructure.

Mosler: You build infrastructure when that infrastructure serves real public purpose, regardless of interest rates.

Comment: Important point buried in this. Digital currency potentially increases likelihood of out-of-control bank runs.

Mosler: There's no operational constraint on available CB liquidity and no public purpose in not funding a fully capitalized bank.

Comment: Margaret Thatcher compared the national debt to household debt. Should we care about national debt?

Mosler: Good, but risk free assets per se aren't needed by the financial sector for public purpose.

Comment: Put it this way: nothing immoral about rolling over bonds when holders are indifferent between them & cash.

Mosler: and it's all voluntary ;)

Mosler: Larger question: does it serve public purpose? ;)

Comment: Fannie Mae and Freddie Mac shouldn’t remain under Government control.

Mosler: I proposed fixed rate funding at tsy rates with tsy eating the convexity best serves public purpose of promoting ownership.

Comment: Do u have opinion on automated financial settlement tax? It eliminates inc tax, takes .5% all fedwire, swift,chip,swift,ach,etc

Mosler: I propose transactions taxes when reducing the volume of those transactions serves public purpose.

Comment: It goes further @stf18. Full employment in MMT is a living wage job for everyone who wants to work providing the hours they want to work.

Mosler: The pursuit of defined goals characterizes those aspects of our society. It's about creating public infrastructure for public purpose.

Comment: Would stay at home mums qualify for Job Guarantee & BI in an ideal MMT world? Or are we not "Employment ready"?

Mosler: For me supporting moms is investment that well serves public purpose. My proposed support is separate from my proposed transition job.

Comment: This is the job of the democratic process, to ensure accountability.

Mosler: For me, it's to promote via representative government all that so deemed public purpose encompasses.

Comment: This is about govt doing what the private sector has no desire to do because of their own self interest.

Mosler: Gov is about public infrastructure for public purpose.

Comment: When they go negative again! How do we determine a socially acceptable rate of return on a risk-free investment?

Mosler: For me it's always 0, which serves further public purpose as well.

Comment: But this is just language. There is no economics here.

Mosler: I agree it's semantics within this particular twitter discussion. But seems to me, public purpose would be served by changing the language?

Comment: Given that the sole purpose of banks is to make profit for themselves and that service to its users is barely secondary and almost provided with contempt. I would say greedy and selfish was a more accurate description.

Mosler: I call it shameless self interest, so it’s about regulation and supervision serving public purpose by specifying what's permissible.

Comment: In his historical work on U.S. bank panics during the U.S. National Banking Era, Gary Gorton reports that depositor losses were typically minuscule--suggesting collateral generally good (problem was with liquidity).

Mosler: It's about whether it serves public purpose, not whether it's 'safe'. Gov is there to serve public purpose via 'public infrastructure' broadly defined. Banks are the creation of the Federal Reserve Act, presumably to serve public purpose.

Comment: But the U.S. economy is a long way from that extreme. Economists such as @wbmosler and @StephanieKelton argue that government spending is not only essential to economic growth but a moral imperative to provide Americans with necessary services to keep America strong.

Mosler: That is, it serves public purpose as decided by the electorate.

Comment: If people think the invisible hand of the market is justly rewarding the hard work/talents of the 1%, it feels wrong to say the money has ended up in the wrong hands. But if you explain how the 1% uses their own hands to scoop up more than their fair share, it feels right.

Mosler: When the economy is not working to serve public purpose, it's necessarily a failure of government and its institutional structure, and only remedied by same.

Mosler: And see my proposals to eliminate said incomes at source: 0 rate policy, insured pensions can't buy equity, narrow banking, attach public purpose strings to limited liability status, etc.

Comment: Exactly! I wrote about this regarding IP from Job Guarantee labor, but logic also applies more broadly. If research in science and useful arts is financed by public money, the fruits of that research should be made available to the public.

Mosler: The JG serves public purpose as a superior ("anti inflation") price anchor vs unemployment while removing most of the negative externalities of unemployment.

Comment: Why does a mega-corporation worth almost a trillion dollars, led by the richest man in the world, need our $3 billion in subsidies? That’s what I asked Amazon execs yesterday. This seems like vulture monopolistic capitalism at its worst.

Mosler: Gov institutional structure puts state and local govs in an absurd and disastrous race to the bottom to attract businesses. Another failure of the federal gov to recognize and promote public purpose.

Comment: YES. The currency issuer has no cost of capital, by definition, so does not need to generate cash flows from its investments in order to make further investments. It should desire social return. To think that a society can't evaluate outcomes w/o putting $ on them is insanity.

Mosler: I see the state functioning to provide public infrastructure (in the broad sense) that serves public purpose.

Comment: If stability is destabilising, then that means something is wrong with the financial regulation regime. We should not let finance dictate how stable our economies are.

Mosler: And the question of whether stability per se serves public purpose.

Comment: Yes, Democrats are the party of fiscal responsibility. But that will (and should) change.

Mosler: Or defined as fiscal policy that serves public purpose... ;)

Comment: Efficiency isn't a value-free term, by definition, as a criterion for judgment of alternative policies. NTM, good luck defining it w/ any precision in a social context unless you just assume everything else away. It's mostly hand-waving to sound like you know something.

Mosler: The public sector is about public infrastructure for public purpose.

Comment: McDonald's has spent $22 billion on stock buybacks, Its CEO makes more in an hour than the avg McDonald's worker makes in a year. It made over $6 billion in profits in 2018. Its low wages cost taxpayers $1.2 billion a year. It can afford to pay all of its workers at least $15/hr.

Mosler: Public purpose is better served by a $15/hr JG or even an increase in the Federal min wage.

Comment: Robert Hockett on the Accountable Capitalism Act introduced by U.S. Senator Elizabeth Warren.

Mosler: How about businesses be required to show how they will serve public purpose before given limited liability status?

Comment: Of course, many years ago Summers was a proponent of financial transactions taxes, he was very much on the mark on that one. Great tax -- raises revenue by reducing waste in the financial sector.

Mosler: For me, the public purpose of a transactions tax is to reduce transactions, not to raise revenue per se. Success is measured by how little revenue is raised. Also, institutions are pass throughs, so to the extent pension funds, IRA's etc. pay the tax, it can be highly regressive.

Comment: Again, as I noted in the piece, bank accounts are distinct from e-cash wallets, legally and operationally. A public digital currency system should offer both. If people believe commercial banks should retain dominant position in payments system, burden is on them to justify why ;)

Mosler: Efficiency. The infrastructure is already there, they are already entirely agents of the same Congress, fully regulated and supervised. Congress can direct that existing infrastructure to any public purpose it desires.

Mosler: My point is, for me efficiency most often serves public purpose, so I'm mindful of setting up new govt. infrastructure when an existing one can just as easily be adjusted to serve that intended public purpose. ;)

Comment: Seriously disagree regarding Trump and Omar but fair enough. So if you understand MMT, then you agree that its job guarantee is not just a good thing, but absolutely critical?

Mosler: The JG is the base case for analysis, and so far I've not heard of a way to run a monetary system that better serves public purpose... ;)

Comment: Bernie Sanders on Israel’s decision to deny entrance to two elected U.S. officials: “If Israel doesn’t want members of the United States Congress to visit their country…maybe they can respectfully decline the billions of dollars that we give to Israel.”

Mosler: Presumably members of Congress understand that Congressional spending is about serving US public purpose... :(

Comment: Commercial banks are a state-subsidized system: They get their money creation capacity as a result of a public grant. Fed backs them up, FDIC insures their deposits, they get liquidity assistance that rest of us doesn’t get, and they get explicit charters from governments to fulfill a public purpose of allocating investments. Those are not entities in some private market untouched by anything else; they’re a State subsidy system, because we think that these entities channel credit and purchasing power in productive ways.

Mosler: Very good. Let me add that the way I see it, 'collateral repo systems' don't serve public purpose.

Comment: Private banks are legal persons in private law, and of course regulated by the state. Their purpose is profit, like with any other private business, which in certain situations can conflict with public interest. But they also provide the benefits of competition.

Mosler: Yes, the state can create entities and bestow them with profit incentives, again, presumably because public purpose is thereby served.

Mosler: Banks are regulated agents of the state presumably created to serve public purpose.

Comment: Well who wouldn't want to avoid Uncle Sam with a gun, "in a closed room"?

Mosler: Tax incentives are presumably established to promote public purpose.

Comment: Profits are the engine of capitalism. SOVEREIGN profits are the engine of socialism.

Mosler: Capitalism is about the state building the institutional structure/public infrastructure within which private markets operate for public purpose. Socialism is about the state owning the means of production.

Comment: Freedom means I can choose Coke over Pepsi.

Mosler: Capitalism exists and functions within the context of public infrastructure (presumably) for public purpose that can include defense, legal system, payments system, M4all, free education, JG, etc. and limits and rules for private markets.

Comment: I feel dumb. Just saw that replying to N Marxism. Never mind. Good grief. Sigh...

Mosler: No worries! I probably should have said 'presumably for public purpose'... ;)

Comment: Getting an education isn't a crime. We need to cancel every penny of student debt.

Mosler: What you mean is that you see education as public infrastructure that served public purpose, and not as an individual's consumption expense. ;)

Comment: How is inflation measured under MMT? In the early 1980s, the measurement of inflation included energy and food. Now it doesn't. The measurement of inflation has never included house price inflation. Should it? What else should be included or excluded?

Mosler: It's a political question. The definition is meant to serve to further public purpose. Not to forget the 'price level' is a function of prices paid by gov when it spends, so inflation is the continuous increases in price paid by gov, etc.

Comment: > We're talking about social entrepreneurship and how 'it's possible to make a financially viable company that works toward social change'. What they don't tell you is that perpetual growth is not compatible with making meaningful social change.

Mosler: True under current institutional structure which Congress can amend at will, to instead promote public purpose.

Comment: Warren, @wbmosler, how important is the survival of private sector from this monumental shock, for the good of economy? Private sector is an integral part, isn't it?

Mosler: Yes. And in an institutional framework that directs it towards serving public purpose.

Comment: Kelton's lessons from Walter Mosler are so brilliant. When interest rates are near 0, you should invest wisely in your future.

Mosler: With the economy a net saver of over $20 trillion (=public debt), I call a positive Fed policy rate, basic income for people with money, which isn't my idea of wise investment. So I propose a permanent 0 rate policy + efficient public infrastructure that support public purpose.

Comment: Wow. Does this get us one step closer to @farmerrf vision of the Fed targeting an index of asset prices?

Mosler: It's about pricing risk. The distinction is commercial banks and other private lenders price risk based on return on equity, while public banks price risk for further, politically determined, public purpose.

Comment: American taxpayers spend $107,575,000,000 more on police than public housing. Pass it on.

Mosler: I see adequate defense and public safety as highest order essentials that come first in the allocation of real resources serving collective public purpose, not to be thought of as 'tradable' in the way you suggest.

Comment: Thank you and I agree. The Job Guarantee aims to fit "jobs to people" befitting their needs and skills. One of the goals is to support people with disabilities and provide suitable employment opportunities for those who would like to work.

Mosler: I've also proposed that it serves public purpose to give disabled people priority for regular public sector employment, as it would increase total real output for the nation.

Comment: FDIC board has voted to finalize Volcker Rule 2.1 (Gruenberg votes no, McWilliams, Brooks and Kraninger vote yay).

Mosler: FDIC is concerned only with financial soundness of banks. Regulations regarding public purpose come from Congress.

Comment: I don’t support the job guarantee on the basis of how it might benefit the private sector. So I prefer placing the benefit on people at the forefront of my priorities.

Mosler: Agreed! Taxation causes unemployment, so Gov can then hire them to fully provision itself as mandated to serve public purpose. If unemployment remains after said Gov hiring, they need to transition back to the private sector, which doesn't like hiring unemployed. Enter the JG! :)

Comment: Elon Musk: There shouldn’t be another government bailout to help the American people. Tesla: We received government aid to remain profitable last quarter. The hypocrisy of America’s billionaires never ceases to amaze me.

Mosler: The trick is to harness that force for public purpose.

Comment: Public purpose jobs meeting community needs, providing a living wage alternative to unemployment.

Mosler: How about the state hiring who it needs with regard to overall public purpose at normal gov pay scale?

Comment: Bill Barr should have resigned a long time ago. We need an Attorney General whose loyalty lies with our Constitution—not with the president.

Mosler: And we need legislators who can make laws that provide incentives that serve public purpose to that effect…

Mosler: My base case for analysis/clean sheet of paper model includes/begins with a permanent 0 rate policy, no Treasury securities, and a JG to provision the state, and from there subsequent modifications are considered.

Mosler: From there you could consider replacing the JG with unemployment like we do today. Personally i don't see how that might serve public purpose so i don't recommend it.

Comment: I’ve never really understood what it means for government to be “fully provisioned.” If gov hires more workers to do more projects, do those extra workers more fully provision government?

Mosler: As deemed serves public purpose. It's a political decision/trade off. See my 7dif book thanks.

Comment: “Government says it has no duty to secure food supplies in a no-deal Brexit (nor any other crisis)”

Mosler: They don't believe it serves public purpose???

Mosler: As I explained in 2008/9 to senior Fed staffers (who completely agreed), public purpose isn't served letting US banks contract in LIBOR, set at 10am by foreign octogenarians in bowties sipping sherry on the Thames, that resulted in the high risk Fed swap lines.

Comment: Tax only land not the capital part of real estate. They are 2 separate factors of production. Capital needs constant repair and renewal - land does not.

Mosler: Capital that serves public purpose can be exempt, but seems today over development, etc. is more of a concern?

Mosler: I've proposed taxing real estate, including buildings, etc. (with exemptions when deemed to serve public purpose). I haven't read the literature that defines and uses the term 'land value tax' sorry!

Comment: OUR Gov as the monopolistic issuer of OUR currency, has a responsibility to insure that OUR currency is used only in ways that serve the public interest. Profit can be had but not if it hurts the public interest. Let’s see if my mentors agree.

Mosler: Yes, the way I say it is, that Gov (collective action) is there to support public infrastructure that promotes public purpose.