Comment: Corporations Sitting On Their Asse(t)s.

Mosler: And that's a good thing- makes room for more public services or lower taxes. ;),

Comment: If Trump wins consequently our domestic prices rise more than our real earnings, negatively altering our standard of living. AKA reduced real terms of trade etc.

Mosler: A tariff is a transactions tax that tightens fiscal and the higher prices also reduce domestic demand. Import volumes also slow, as total global demand is reduced.

Comment: Here are six things you might like to know about the Congressional Budget Office’s 2018 Long-Term Budget Outlook, which was released on Tuesday.

Mosler: The public debt is nothing more than the $ spent by gov that haven't yet been used to pay taxes. They sit in the economy as cash and as $ in reserve accounts and securities accounts (tsy secs) on the Fed's books. It functions as the net money supply.

Comment: Having trouble following this thread but seems to have started as some semantic thing about money vs net financial assets. My view is taxes destroy "money", surpluses destroy "net financial assets". Now have to get back to family TV viewing :)

Mosler: Tax payments are debits (reductions) to a member bank's reserve account at the fed, and ultimately) credits to the tsy's account at the fed. Tsy is part of govt so it's balance is accounting information of no consequence to the economy.

Comment: We discussed this once before. The reason why there’s an acceptance of bank deposits is illustrated in this article: Why banking works one big confidence trick. So, saying governments are beholden to the banking systems isn’t entirely true’. The banks rely on sovereign’s liabilities.

Mosler: CB member banks are agents of the CB which is an agent of the state that legislates that said bank deposits will be accepted for payment of taxes.

Comment: This sounds similar to Abraham Lincolns Greenback dollar. A question to clarify : Where does the money come from? - it isn't taxes, it came from someplace before even that, right?

Mosler: In the first instance the $US is a tax credit.

Comment: A pure “free market” system cannot generate full employment. One of the best features of the JG is that it creates a stock of employed people, rather than leaving a buffered stock of unemployed, where social capital depletes rapidly, & long-term social pathologies develop.

Mosler: Except a pure free market economy has no state currency or taxation and therefore no unemployment. Not that I’m proposing this! ;)

Comment: It’s true to say that MMTers do not regard money as *merely* a veil. Neoclassical economics is inclined to regard money as merely a veil (i.e. to disregard entirely the role of banking and debt.) This is one of MMTs main strengths over NC econ.

Mosler: They don’t recognize it as a tax credit. ;)

Comment: So they're spending future tax receipts not yet collected.. and why do we need taxes again?

Mosler: Without taxes, tax credits are useless.

Comment: I wonder what @wbmosler actually believes? If only there was a way to (re)search it. Guy has been advocating permanent ZIRP for nearly a decade. Golly.

Comment: He has always held that near 0% interest rate is his policy preference. He has not changed his mind.

Comment: Correct. And AFAIK, he never claimed raising rates *is* expansionary. Only that there’s an income effect (and perhaps other effects) that tends to get overlooked, making it possible that hiking is pro cyclical.

Mosler: Rate reductions can be contractionary. Depends on inst. structure, debt to gdp, issuance policy, propensities, etc. 0 has always been my preferred policy rate.

Mosler: That is, I favor a tax cut or expanded public services over a rate hike. ;)

Mosler: MMT simply adds the assumption of a state utilizing taxation payable in state tax credits to mainstream economics.

Comment: This is how it’s done. Making *separate cases* for (carbon) tax and (climate) spending.

Mosler: What about carbon rationing rather than a tax?

Comment: This is a very good victory for the @USProgressives. Now, it's time to put PAYGO on ice to end the other roadblock against MedicareForAll, CollegeForAll, GreenNewDeal, and a JobGuarantee.

Mosler: This 'victory' is to allow the tax hikes they believe will be required to 'pay for' their agenda.

Comment: Where does inflation come from? thanks!

Mosler: The price level is necessarily a function of prices paid by gov when it spends or collateral demanded when it lends, because the gov (and its agents) is the sole supplier of what it demands for payment of taxes. Simple case of monopoly...

Mosler: With coercive taxation there can be no semblance of said neutrality.

Mosler: Federal Taxation (for Dummies).

Comment: Indeed. Money is nothing but an exchange medium. If you try to make it more than that, you create trouble.It is a neutral intermediate commodity, nothing more.It has no inherent value.

Mosler: It's a tax credit, and taxation is coercive, thereby obviating neutrality.

Comment: We already have an ownership stake. It’s called democracy. The rest is gimmicky.

Mosler: Taxation can also be considered an ownership position.

Mosler: Responses to 'how are you going to pay for it?': 1. The Tsy instructs the Fed to credit the appropriate account. 2. The $ to buy bonds or pay taxes comes only from the gov and its agents, so gov spends first, and then taxes are paid or bonds paid for.

Mosler: 3. So gov borrowing supports rates, it doesn't fund expenditures. 4. Likewise interest is paid by instructing the Fed to credit the appropriate accounts, and likewise those $ are paid first, and then taxes are paid or bonds are paid for.

Mosler: What about inflation?' The funds to pay taxes come only from gov or its agents, so gov is necessarily 'price setter', and the price level is a function of prices paid by gov when it spends. And don't confuse a relative value story with an inflation story thanks!.

Mosler: Thought exercise- if all prices go up and the gov doesn't pay those higher prices, gov spending goes to 0 and the price level deflates until gov spending is sufficient for tax payments due. Not that it's 'good policy' to do that, but to reveal the source of the price level!

Comment: We don’t need the tax money from rich men & women...we just need them not to have so much power and ‘stuff’. #MakeTheRichIrrelevant.

Mosler: And note that a tax that does not reduce private spending does not 'make room for' public spending and therefore functions only in regard to 'social equity'.

Comment: Gov borrowing supports rates, it doesn't fund expenditures.

Mosler: The public debt is the $ paid by gov that haven't yet been used to pay taxes and remain outstanding as cash, balances in reserve accounts at the Fed, or balances in securities accounts (tsy secs) at the Fed until used to pay taxes.

Comment: "The reality of money is of the same type as the reality of centimeters, grams, hours, or lines of longitude. Money is a way of measuring wealth but it is not wealth itself." - ALAN WATTS.

Mosler: Except it's a tax credit while those other things are not.

Comment: I'm in favor of no payroll tax for small business owners and startups, as a way to ease their transition into a living wage model. Big business can afford it today... that's one way to deal with inequality.

Mosler: Not to forget that corporate taxes are in general ultimately regressive, and most often have high real compliance costs that remove real wealth from the macro economy.

Comment: The disagreement is also methodological. Has anyone taken a standard macro model and seen what happens when you relax assumptions to be in line with #MMT? Probably not. Microfoundations aren't a thing in heterodox circles.

Mosler: You don't relax assumptions, you simply add the assumption that the currency is a state monopoly, the source of that which it demands for payment of coercive taxes, and the rest follows.

Comment: Willingness to hold government liabilities, interaction between bond market and other financial markets, effects of changes in exchange rate, determinants of inflation, among others.

Mosler: Willingness to hold gov liabilities is expressed in prices the gov. has to pay. That is, deficit spending equals savings desires. No?

Comment: Your answers are all in the book. Maybe a quick re-read of the first half?

Mosler: You agree 1. the state and its agents are the only legal source of that which it demands for tax payment? 2. Therefore the price level is a function of prices paid by the state? That is, monopolists are price setters?

Comment: ECB Prez Draghi pretty much endorsed market expectations for no ECB rate hike until 2020. Says that expectation shows the market understands the bank's reaction function.

Mosler: Maybe at some point they wake up to the fact that negative rates are just another deflationary tax, etc... ;)

Comment: Yes. It's terribly unfortunate. Spending is a tax.

Mosler: Yes, the real tax is collected at the point of public spending. It's all in my book.

Comment: No need. Each theory presumes that money creation is the path to some economic end. No, it's not. Money is the effect of actual production for it enabling exchange of wealth, store of wealth, and investment in the creation of future wealth.

Mosler: The $, yen, euro, etc. Are just tax credits.

Comment: While the ruling class may have the money, we have something that is even more powerful on our side – the people. Our government belongs to all of us, and not just the one percent.

Mosler: 'The money' is just government tax credits, Bernie, which the government creates and controls at will. ;)

Comment: IMHO "MMT" is about as realistic as "rapture" and is definitely a low-quality idea (I might concede some people may be using it in good faith, but same may be true for some cases of people blathering about divine intervention).

Mosler: Core MMT understanding: The currency itself is a public monopoly- the thing needed for payment of taxes comes only from the state or its agents. (The rest follows.)

Comment: BREAKING: The deal is dead. We killed the Amazon deal. NYC is NOT a city where we reward and welcome exploitative companies who hand out candy but wreck communities. Amazon has always been a company that disrespects workers and small biz.Congrats organizers. This is YOUR win.

Mosler: Federal law etc. has put us all in a 'race to the bottom' where states and municipalities must compete to attract corps and individuals with lower taxes, etc. to survive. And this can only be and need be addressed at the Federal level.

Comment: Warren Mosler says “dollars” (pounds in the UK) are a government monopoly - rather than “money”. Commercial bank deposits are measured in (say) dollars, but are not the same as govt dollars. Sorry if I’m misrepresenting you, @wbmosler, but I believe that’s the MMT line.

Mosler: Dollars and pounds are state tax credits. Commercial banks are regulated agents of the state and their deposits are tax credits.

Comment: This is now my go-to example when people ask, "Why do the critics of MMT say it's difficult to pin down what their actual position is?"

Mosler: Yes, tax increases cool demand. However, inflation is more often caused by things other than excess demand, in which case taking measures to cool demand wouldn't be my first choice for addressing it.

Comment: Are you implying that in your models for money creation you include commercial banks as being agents of the govt? So when u say govt creates “tickets” ($) first, you are saying govt & commercial banks? What about the shadow system? My Point is $ creation is broader than govt.

Mosler: It's not a model. $ to pay taxes come only from Gov and it's agents.

Comment: Here is the real and correct depiction of US employment situation. your so called PhDs will never be able to explain why emp took so much time to get back to pre crisis level! And your reply clearly shows that you too hav solution for these 16mn.

Mosler: Unemployment, as defined as people seeking paid work who can't find it, is necessarily the evidence that state spending is insufficient to cover the need to pay taxes and the desire to save. And all as a simple point of logic... ;)

Comment: There are 18 countries with negative bond yields ... in the 10th year of a global economic expansion.

Mosler: As previously discussed, with gov a net payer of interest to the economy, negative rates function as a tax, removing those funds from the economy, positive rates do the reverse. CB's all confuse the brake pedal and the accelerator pedal.

Comment: MMT is a perspective, a job guarantee is a policy proposal. MMT doesn't force people into anything apart from changing the way they view and describe the monetary system.

Mosler: Unemployment and the jg are Govs policy responses to those that its tax has shifted from the private sector.

Comment: Why do you claim:-The currency is a public monopoly-The US government, as sole supplier of those $USWhat about all the $US created by private banks when they make loans?

Mosler: Banks are agents of the fed, fully regulated and supervised, and tax payments ultimately debit reserves which come only from the fed.

Comment: Negative bond yields >10trn. Q: Is global growth that gloomy? Will it get worse? Wut if it isn't? (The Fed turned ZIRP into PIRP - look at US yields - all above zero but that caused some violence in risk assets). What will the NIRP into PIRP exit look like.

Mosler: Add previously discussed, negative rates are an asset tax....

Comment: This brings further trouble to the idea of the natural rate of interest, as the direction that interest rates work in depends on very specific conditions.

Mosler: With gov a very large net payer of interest, neg rates function as a wealth tax....

Comment: Warren - recently you circulated a white paper draft where you suggested abolishing all individual and corporate income taxes - doesn't that conflict with your previous writings that it is the taxes, and our obligation to pay them in dollars, that defines the currency?

Mosler: All 'replaced' by a real estate tax.

Mosler: The progressive tax structure via inflation= fiscal contraction that shrank the 'real' public debt causing the recession that cut oil demand (helped some by the dereg of nat gas) too large for Saudi output cuts to counter caused oil to collapse from approx $40 to $15.

Comment: Would it be fair to say money is not a store of value but a store of productive capacity? Money traditionally described as unit of account, means of payment & store of value.

Mosler: It's a tax credit... ;)

Comment: Thanks. Seems like rational expectations is the core difference? Hard to see (for me) how other assumptions affect empirical predictions of MMT vs FTPL.

Mosler: The core difference is that MMT alone recognizes that the currency itself is a public monopoly that begins with coercive taxation.

Comment: "Kalecki’s Marxian analysis survives in Modern Monetary Theory,a once-fringe flavor of economics for which liberal Democratic politicians such as Senator Bernie Sanders of Vermont and Representative @AOC of New York have developed a taste".

Mosler: It's that the Fed has the interest rate thing backwards, and as rates go lower a larger fiscal deficit is needed to sustain demand. Fortunately lower taxes or more public services are 'good things.' Unfortunately Congress doesn't get it... ;)

Comment: If you were trying to create a way to foment social unrest, amplify populism on the far right and left, you'd be hard pressed to beat this. Good work. Have any of these people ever had a job outside govt/academia? Any friends outside these echo chambers?: How can central banks set up a system that would make deeply negative interest rates a feasible option?

Mosler: Negative rates at the macro level are just a tax on the economy.

Comment: On not seeing anything yet, we don't even see an uptick in capital goods orders. This means companies don't even plan to get new equipment in the next 3-9 months: Fun fact: supply-side tax cuts don't work. Today's version: despite 100% expensing, corp tax cut, high corp profs, cheap capital, biz inv as share of GDP is meh in historical terms.

Mosler: Tax cuts financed an unsold inventory boom... ;)

Mosler: President Trump and his team seem to have no idea that the trade deficit creates fiscal space for the likes of his tax cuts. Nor do the media, business professionals, main stream economists, etc. seem to get it???

Comment: CDU will #Grundsteuer wie Vermögenssteuer beerdigen. Trick 17: Einnahmeausfälle der Kommunen wird Union dann über Mehrwertsteuern rein holen. Kassiererin zahlt dann für den Villenbesitzer. Linke will verfassungsfest reformieren & Umlage auf Mieter stoppen.

Mosler: How about a large (10% maybe) property tax that's also a tax credit vs all other taxes paid to the national gov, including vat and income taxes? ;) Makes property less attractive to non residents, etc.

Comment: Trump takes dig at Japan for 'substantial' trade advantage and calls for more investment in US.

Mosler: Seems the president still doesn't know this is producing the fiscal space for his tax cuts.

Comment: Good piece on currency values and the trade deficit. Treasury overlooks the true culprit behind US dollar strength.

Mosler: Net imports that reduce US agg demand create the fiscal space for the likes of the tax cuts and a Green New Deal. This global trade war is dimming the future for all of us, and with no pushback from the politicians, economists, and business press who all have it backwards.

Comment: But he does refer to himself as a “Tea Party Democrat”. Figure that one out if you can.

Mosler: For the size of gov we had back then we were grossly over taxed- Taxed Enough Already- TEA. They subsequently evolved in other directions...

Comment: So miniBOTs may appear to be money but they're really a special-purpose money (cf. company scrip, frequent-flyer miles), and there's a power imbalance betw issuer and recipients.

Mosler: They are euro denominated tax credits, as are 'normal' euro.

Comment: Or if you artificially control the labor markets, you get unintended consequences like corporations owning your health insurance rather than free markets determining price and quality. BTW real wages are currently increasing albeit maybe at a pace that you don't like.

Mosler: Coercive taxation obviates any notion of 'neutrality of money', etc. and markets function within state established institutional structure, in which game theory has application.

Mosler: Likewise to the first candidate to recognize that a permanent 0 rate policy eliminates gov interest payments, downsizes the financial sector, and is a deflationary bias, all of which 'replaces' the need for tax hikes as it all 'makes room' for the progressive agenda.

Comment: A few more ways to gain traction:- Support a Federal Jobs Guarantee- Bailout Student Debt- Legalize Marijuana & Explore Reparations, Baby Bonds.

Mosler: The first candidate to recognize Medicare for All is a deflationary event that not only doesn't beg a tax increase, but, to the contrary, is what 'pays for' the rest of the progressive laundry list, leapfrogs to the head of the class.

Mosler: I support free higher education and student debt relief. But making the ultimately false analogy of 'trillions for bank bailouts' undermines implementation, just like (inapplicable) proposed tax hikes for Medicare for All have kept it from being implemented.

Comment: A) Most people have no idea yet, how scandalous this situation really is and how contemptuous of us all this government is! The UK government is not wasting ‘taxpayers’ money’ - that isn’t possible! It is spending newly created ‘public’ money to try and...

Mosler: Yes, in that taxpayers return money to the gov. That's why we call it a tax return. ;)

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: I think @wbmosler consistently says that taxes function to create demand for and anchor the value of currency.

Mosler: I say taxes function to create sellers of goods and services allowing the state to provision itself by spending its otherwise worthless currency.

Comment: I appreciated the focus on a threshold under which the transactions are anonymous & comparable to cash purchases. A digital currency that fulfills both cash usage and transactions otherwise makes a lot of sense. Having a public means to do that is far preferable to, say, Libra.

Mosler: Banks can be allowed to offer "numbered accounts" to ensure cash like privacy. States have tended to not allow them over concerns about tax dodging, but it can all be revisited as desired... ;)

Comment: Switzerland’s experiment with negative interest rates is beginning to take hold in the mortgage market, with some local lenders saying they’re effectively paying people to borrow money.

Comment: Please come to America negative interest rates!!! I want to be paid lots of money every month by the bank when I mortgage an expensive house!!

Mosler: Proponents of financial wealth taxes should support negative rate policies, which functionally do much the same thing, but are widely perceived as pro growth... ;)

Comment: No. I just don’t want to continue the greater of two evils. There could be a better plan by far.

Mosler: Yes, now when you turn 65 you can sign up for Medicare if you want to. Just lower that age to 0 and leave the rest alone. And let the CBO score it for inflation. If it doesn't increase inflation (I suspect it will be scored as deflationary) there's no point in a tax increase.

Comment: Yesterday, I noted the tally was around $14.5 trillion. Now, we've topped $15 TLN. If anyone besides @TheStalwart thinks this is normal, good for them. Actual facts/data show we've never seen anything like this interest rate environment in 5,000 years of recorded history.

Mosler: Negative rates are, functionally, just a tax on those deposits...

Comment: Agreed the so called "bleeding hearts" suddenly care more about "prices" rathen then people having a productive job to shelter, feed, cloth, and educate thier family with dignity. Hard to pay less for something if you don’t have a job!

Mosler: Trade deficit= a productivity increase= fiscal space to lower taxes or increase public services to sustain full employment levels of aggregate demand. Imports are real benefits, exports are real costs- the problem is the policy response that turns a good thing into a bad thing.

Comment: Thank you for the link. Read I b4. No disagreement on rates natural rate is 0. Big disagreement that Govt will set wages, Govt give jobs, Govt give healthcare, Govt will make it all green, Govt will control production, Govt will control inflation via suppression of wages tax.

Mosler: As currency monopolist via coercive taxation, it's necessarily been that way all along, whether anyone knows it or likes it or not...

Comment: Because it is so much more efficient, Medicare-for-All works like a tax cut for 95% of the population. An average break of ~$3,000 per family.

Mosler: And a whole lot more if you don't increase taxes to 'pay for it' ;)

Comment: Also a major boon for private employers, especially small ones.

Mosler: And even more so if taxes are increased to 'pay for' it... ;)

Comment: Interpreting #MMT saying "money is a unit of measurement for resources" as if it also means that "production and actual resources are meaningless" is like Interpreting a parent saying, "I love my older son" as if they also mean, "I don't love my younger son."Compartmentalize!

Mosler: The dollar is simply a tax credit, and the gov (and its agents) are single supplier= the 'price level' is a function of prices paid by gov when it spends and collateral demanded when it lends. And only MMT seems to understand that?.

Comment: “The ECB has learned not one lesson of decades of BOJ easing, no bond can be negative enough and bank profitability can’t suffer enough. Scary s**t.”

Mosler: Negative rates= a tax on those deposits.

Comment: Income tax isn’t the only kind of tax.

Mosler: True, and an income tax doesn't, first order, 'drive the model' unless there is a tax on imputed income which is highly problematic.

Comment: U.S. Weighs Selling 50- and 100-Year Bonds After Yields Plummet I get that we’d get lowest borrowing costs in history of country. But this is seriously something our feckless politicians should have been doing throughout the entire post crisis cycle.

Mosler: Tsy secs are the net money supply, the equity that supports the credit structure, dollars (tax credits) spent by gov not yet used to pay taxes. Etc.

Comment: I know, but I still feel that is more fair to other nations, like China, to have a balance trade with the US. let them use their full resources rather than send it to us in exchange of $ that they will not use.

Mosler: Unspent income in general gives us the 'fiscal space' to implement the likes of the Green New Deal, public services in general etc. without tax increases (or to reduce taxes). It's about confusing a productivity story with an unspent income story....

Comment: Central banks’ negative interest rates were supposed to increase spending, stop deflation and stimulate the economy. They may have done the exact opposite.

Mosler: Right, negative rates are an asset tax.

Comment: Money is:1. a creature of centralized governance2. public prior to private3. created by law4. structurally hierarchical, nested & asymmetrical5. produced endogenously all the way downNo contingent legal feature of the Treasury, Fed, etc. changes any of this.

Mosler: Not to mention it's a tax credit. ;)

Comment: Yep. NIRP is just another example of policymakers saying "we'll do anything to create jobs and income EXCEPT directly create jobs and income."

Mosler: Negative rates are just another tax... :(

Comment: If we contract healthcare spending from 17% of economy to 8%, that's a massive recession. No one talks about huge job losses during transition.

Mosler: I do... ;) That's why you don't 'pay for it' with tax hikes, like all the candidates propose, which, ironically, is why it hasn't happened.

Mosler: I was just trying to make the point that taxes don't drive the currency. You seemed to object to that.If the US government stopped taxing tomorrow, the dollar would be fine.

Comment: Not (assuming no state and local taxes either). The dollar is just a tax credit.

Mosler: That it's, the state is entirely capable of hiring the unemployed it created with it's tax... ;)

Comment: Thoughts On My (upcoming) MMT Conference Panel Talk.

Mosler: For PK's ergodicity was the answer to the question of why people use money and money contracts. However MMT recognized that today's currencies are tax driven, and that ergodicity relates to why people save in money and money contracts.

Comment: MMT clearly is printing money. In a world where increased efficiency should cause prices to go down any printing pushes inflation up. Even from negative to zero the direction is up i.e. inflationary.

Mosler: Gov. spending is the awarding of tax credits. If you call that 'printing money' then taxing is 'unprinting money' as it is the redemption of those tax credits. So if you're looking for redemption, pay your taxes... ;)

Comment: Question: What do people mean by "capital flight" in this context? They can't mean the departure of paper money (which is replaceable at zero cost). Do they mean the departure of human capital (w/ no scope of importing their brilliant services produced from abroad)?

Mosler: As an aside, a negative policy rate is, functionally a wealth tax... ;)

Comment: Why does the US Treasury have US$314.189bn on deposit in the Treasury General Account at the Fed? It seems to tax and borrow in advance of spending. When that account and any amounts held with commercial banks hits zero, it stops spending. By law.

Mosler: It's about the govt. or its designated agents, like the Fed, from inception, have to spend or lend first, before taxes can be paid or bonds purchased.

Comment: Not to pick on this individual. But this logic -- that job growth is only robust because now because we're imposing a national debt burden on our children -- presupposes that children would be better off with unemployed parents today. That seems crazy to me.

Mosler: Public debt per se is not a burden. It's just the dollars spent by gov that haven't yet been used to pay taxes.

Comment: Same 100% crowding out (of Investment) if you assume G is a perfect substitute for private I.But you get crowding *in* (and even bigger multipliers) if instead you assume G is a *complement* for private C or I. It all depends. It's tricky. Macros sweep this under the rug.

Mosler: Said another way, for a govt. with a floating fx policy that necessarily spends first, thus providing the funds that can be used to pay taxes and (voluntarily) buy govt. securities, said crowding out is inapplicable... ;)

Comment: On a serious note: Very happy that this week @NPEjournal published online “The Myth of Market Neutrality”, co-authored with @Clemfon. This is just in time for the 2019 Jackson Hole conference, where central bankers debate the future of unconventional monetary policy.

Mosler: Do they mention that coercive taxation obviates neutrality?

Comment: The Government of India must run a deficit and accumulate debt so that private sector desire for secure and risk-free savings can be met.

Mosler: And we define the evidence that deficit spending is insufficient to meet the need to pay taxes and the desire to net save as unemployment.

Comment: It comes from keystrokes at the Central Bank and its value comes from taxes. Maybe you would find Modern Monetary Theory interesting, for example “Modern Money Theory” by Randall Wray.

Mosler: Please read my 7dif book. The currency is worth whatever the gov makes us do to get what's needed to pay our taxes.

Comment: Paul, you hedge with language taking about things like, “people are still willing to lend to the US,” I haven’t heard you say in uncertain terms that the only restriction on US federal spending is potential inflation. Full stop.

Mosler: In fact, from inception, with $ to pay taxes coming only from the gov or its agents, gov necessarily spends first, and then taxes can be paid and bonds purchased. In Fed speak, you can't do a reserve drain without a prior reserve add. So 'willing to lend' is inapplicable.

Comment: Interesting. I like the analogy to the LTV. Money = labor and a minimum $ is generated proportional to labor power.

Mosler: The economy needs the gov's $ to pay its taxes (and to net save $), so the gov tells the economy what it has to do to get those needed $. That's called a monopolist setting price. And the prices paid define the 'value' of the $- aka 'the price level' etc.

Comment: So why this hang-up on "spending precedes taxation", as if if it is not a simple policy choice but a necessity? It's not fundamental.

Mosler: The football stadium has the policy choice of collecting the tickets first and then selling them? As a point of logic, from inception, in Fed speak, you can't do a reserve drain without a prior reserve add/the non counterfeit $ to pay taxes come only from the gov. or its agents.

Comment: "A model can retrieve the same results as Keynes but still that was not what Keynes had in mind. He is pretty clear that the unemployment problem is not to be found in frictions in the labor market." It’s not clear to me that Keynes knew what Keynes had in mind. Here is a quote from his 1937 QJE article: "There are other criticisms also which I should be ready to debate. But tho I might be able to justify my own language, I am anxious not to be led, through doing so in too much detail, to overlook the substantial points which may, nevertheless, underlie the reactions which my treatment has produced in the minds of my critics. I am more attached to the comparatively simple fundamental ideas which underlie my theory than to the particular forms in which I have embodied them, and I have no desire that the latter should be crystal [p.212] lized at the present stage of the debate. If the simple basic ideas can become familiar and acceptable, time and experience and the collaboration of a number of minds will discover the best way of expressing them. I would, therefore, prefer to occupy such further space, as the Editor of this Journal can allow me, in trying to reëxpress some of these ideas, than in detailed controversy which might prove barren. And I believe that I shall effect this best, even tho this may seem to some as plunging straight off into the controversial mood from which I purport to seek escape, if I put what I have to say in the shape of a discussion as to certain definite points where I seem to myself to be most clearly departing from previous theories."

Mosler: Yes there can be persistent unemployment without monop (and other frictions)/labor market won't clear due to issues in the monetary system he described but failed to label as a govt monop where the gov and its agents are the sole supplier of funds to pay taxes and net save.

Comment: Neither. Unemployment is defined as "not employed and engaged in active job search." So search frictions give rise to unemployment. Bargaining power influences recruiting intensity, but could also have demand effects. At least, that's what modern labor market theory tells us.

Mosler: It's the currency monopolist/govt. restricting supply of that which is needed to pay taxes and desired as net savings.

Comment: The idea that money has value because it is mandated as a way of paying taxes has a long history in monetary general equilibrium theory dating back to Ross Starr.

Mosler: Doesn't recognize that as sole supplier of money to pay taxes gov and it's agents are price setter?

Comment: Knowing how the money moves doesn't equate to knowing how the money should be spent. Only the free market can efficiently allocate scarce resources. This should be obvious to you.

Mosler: The currency itself being a public monopoly supported by coercive taxation obviates "free market" as per your school of thought, no?

Comment: Here's the issue. Free trade and an increasing reliance on imports is a demand drain for a domestic economy. This destroys jobs and growth.

Mosler: Yes, and said demand drains are good things that create fiscal space for lower taxes or increased public services to sustain full employment and increased personal income.

Comment: Because demand expansions will push out the current account deficit further.

Mosler: And that's a good thing= lower taxes or more public services. At the extreme, if you export everything and don't import you have nothing and die. You are arguing to kill the goose laying the golden eggs.

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: Your whole Tesla career has been built on a government stimulus package.

Mosler: And the defense industry along with most everything as a consequence of collective action/coercive taxation/gov spending. Get over it! ;)

Comment: Mostly I'm just pointing out that @ErikVoorhees's figures include big $ transfers. As for neutral money, yes if you at full employment; but no (in a good way) if not. (That was the "positive sum" part of my tweet!)

Mosler: Doesn't coercive taxation and the gov's agents the sole suppliers of $US required to pay those taxes obviate any semblance of neutrality of the $US?

Comment: Warren Mosler isn't here right now. Let's fix that, shall we? Hey @wbmosler! Can you come out to play? David's obsessing about you like a teenage girl would over a Teen Beat magazine! Can you come over and have a talk with him?

Mosler: Yes, the monetary part is from me. Yes, I've done some selective funding over the last 25+ years. And yes, I don't like paying taxes and don't know anyone who does. ;)

Comment: Semi-annual Reminder #4Makes no sense for public sector to minimize internal costs, like private firms. They are assigned a public purpose, and evaluated on if and how they achieve it. They can be cost-effective, but the goals are set independently by political decision.

Mosler: Not to forget that minimizing real costs allows 'fiscal space' to 'go further' allowing for that many more public services (or lower taxes).

Comment: Just need to keep saying this: For the United States, the public debt is not a constraint on public spending.

Mosler: It's just how we account for the net money supply in the economy- $ spend by gov that haven't yet been used to pay taxes.

Comment: I'm done listening. Now I want evidence that tax rates control inflation. Ready? Go.

Mosler: Taxes regulate aggregate demand. The price level is a function of prices paid by gov. Take it from there?

Comment: I'm done listening. Now I want evidence that tax rates control inflation. Ready? Go.

Mosler: Taxes regulate aggregate demand. The price level is a function of prices paid by gov. Take it from there?

Comment: I'm done listening. Now I want evidence that tax rates control inflation. Ready? Go.

Mosler: Taxes regulate aggregate demand. The price level is a function of prices paid by gov. Take it from there?

Comment: More likely lower, as adding to the public debt (net money supply) doesn't involve an indefinite stream of gov. interest payments which are net interest income for the economy that add to aggregate demand.

Mosler: And a lower multiplier is a good thing as it means the fiscal adjustments- increased pubic services or lower taxes- are both good things.

Comment: Labour makes a mistake with the "tax pays for things" sound bites. Multinationals should be taxed...but we don't use tax money to fund programs. The government could easily fund relief programs and housing programs if it wanted to.

Mosler: And in general corporate taxes are pass throughs from consumers.

Comment: So much nonsense is being spewed on public regarding "debt deflation".

Mosler: Debt deflation is a good thing- means we can have more public services/lower taxes.

Comment: The ECB could guarantee new issues of member nation debt rather than buy it, for example.

Mosler: Not to mention that lower long term rates are further deflationary, which is a good thing- creates fiscal space for larger fiscal deficits/more public services/lower taxes, etc.

Comment: ... if you are claiming gold should be used as money, that means you need to have enough gold to conduct all your transactions using gold. The size of the economy is such that if you adjust for inflation the purchasing power of gold today is less than on a gold standard. 2/3

Mosler: The question would be something like 'should taxes be denominated in quantities of gold' ;)

Comment: Is money without collateral (such as credit) really an asset?

Mosler: Tax credits are assets.

Mosler: It's more about whether you get your 'after tax' fair share than it is about paying your fair share. I suggest thinking in terms of net incomes to address this issue.

Comment: The GOP Senate has adopted a fiscal stance that is functionally pro-recession.

Comment: Spot on. Also a perfect illustration of how silly the MMT critique "that the Fed might lose its independence" is. The Fed is begging (rightfully) for more fiscal support, the GOP wants to be "independent" to do nothing and let the economy drown.

Mosler: The Fed's 0 rate policy is helping to keep inflation and aggregate demand down, opening the door to a fiscal adjustment- increased gov spending/lower taxes.

Comment: Greenspan: Our government can always pay its debts because it just prints money.

Mosler: He never did understand monetary operations, nor as his senior staff would say, 'you can't do a reserve drain without a prior add'- that is, gov spending precedes tax payment and Tsy security purchases; the $ to pay taxes/buy Tsy securities comes only from gov and its agents.

Comment: I'm so sick of "jobs jobs jobs!" The stark reality is we live in a world where there are fewer & fewer jobs. There will never be enough for all unemployed. We need the rich to pay more tax and a universal basic income.

Mosler: Wrong!!! There is always a lot more to do than there are people to do it. Unemployment is necessarily a monetary phenomena. It's the evidence that gov spending is insufficient to cover the need to pay taxes and the desire to net save. …

Comment: Can I point out that money isn't a natural resource. It's an abstract concept, digits in digital space, an agreement we're all part of. The government creates it out of thin air then pays it into the economy.

Mosler: It's just a tax credit.

Comment: I earnestly expected more from you, but am satisfied with your response nonetheless.

Mosler: Tax credits are nominal. Much like a 'get out of jail free' card, etc.

Comment: Thread Alert. The @ecb Preseident Madame @Lagarde drops yet another BOMBSHELL on the market neutrality principle. Twitter-review, especially in context of green transition and role of the ECB as a market-maker and shaper:"In the face of what I call the market failures" we have to ask "whether market neutrality should be the actual principle that drives our monetary policy portfolio management?"

Mosler: Neutrality is obviated by coercive taxation.

Comment: Money isn't real. It only exists because we believe in it and act as if it is real. Money is a magic belief. Especially now most of it doesn't exist in our hands, purses and wallets any more. It's just numbers on a screen now.

Mosler: Today's moneys are tax credits.

Comment: I’ve followed MMT since 2010 and Bitcoin since 2011. I credit @wbmosler’s “7 Deadly Innocent Frauds of Economic Policy” book for helping me understand why Bitcoin’s success is inevitable. MMT requires governments to have a monopoly on money issuance. Bitcoin breaks the monopoly.

Mosler: The gov's monopoly is on that which can be used to pay gov taxes.

Comment: I'm agreeing with you that money creation happens at the level of the central bank via the creation of reserves / settlement money and at the level of commercial banks via deposits. I do not understand the MMT argument that the government first creates money and then taxes it.

Mosler: The Fed debits reserve accounts when tax payments clear.

Comment: Different paper monies come and go, until in our current period, money is not backed by a metal but by the assets on the balance sheet of the central bank, for settlement money, and by the assets on the balance sheet of commercial banks, for deposits.

Mosler: The $US is a tax credit.

Comment: 7- These normative pronouncements often interweave the descriptive elements of MMT into them. For example:“Because govts who borrow in their own currency can (technically) never run out of money, they *should* use these powers to provide healthcare and fight climate change.”

Mosler: It's more because the funds to pay taxes and buy bonds come from gov spending.

Comment: 12- This answer ignores Erik’s point about inflation being a (stealth) tax. Merely saying that “every deficit is good for someone” is misleading...When the government taxes Peter to give to Paul, surely that’s good for Paul. But what about Peter??

Mosler: Depends on the tax. For example income tax on a gov employee misses the point that the salary is the net compensation.

Comment: As usual, spot on. Automation concentrates income in those (the asset owners) with resulting high surplus and low marginal propensity to consume. There are solutions to this (as you have noted), but they often create conditions that lead to corruption.

Mosler: Unspent income 'funds' tax cuts or increased deficit spending for public services. ;)

Comment: China took 20, 30, 40 years of its production and stored it in $USD via loans to the US Treasury. In my book that's quite a problem for China. Not so for the US Treasury. As an example.

Mosler: I'd say stored it in the form of US tax credits. ;)

Comment: How? This is to prevent the @ecb from engaging in monetary financing, which is prohibited in the treaty.

Mosler: The ECB could instead take a step back and simply purchase newly issued tax credits from all member nations on a per capita formula, no strings attached. Start with maybe 10% of euro zone GDP for openers. It's fair to all, reduces national indebtedness, minimizes new issues, etc.

Comment: The 7 Deadly Innocent Frauds of Economic Policy.

Mosler: Most are born into an institutional structure that, by design, dictates their life be a quest for tax credits... :(

Comment: Just a question of time before a desperate state pays vendors & civil servants w/ script and then states that script may be used to pay taxes, & that stores & businesses that accept script as payment can use that script to pay taxes they will, in effect, create a local currency.

Comment: Am I missing something? could this work?

Mosler: Most are born into an institutional structure that, by design, dictates their life be a quest for tax credits... :(

Comment: Finally, should we have a fiscal target and if so, what should it be? For this we need a view on g - r. About two thirds of the last 150 years it has been positive, meaning you can run a primary deficit (deficit excluding interest) and still have stable debt.

Mosler: The public debt is just the $ spent by gov that haven't yet been used to pay taxes, resting as cash+reserves+Tsy secs=economy's net financial assets=net money supply. It's an accounting residual. Would you like a briefing?

Comment: By the way, CBO projects that in 2050, the 8.1% of GDP spent on interest will be the largest federal expenditure, and consume 44% of all tax revenues.The budget deficit will be 12.6% of GDP (4.5% primary + 8.1% interest) and growing fast. Does anyone consider that sustainable?

Mosler: Yes, operationally. Please read my short, free online 7dif book, thanks. The public debt=the economies net financial assets= $ spent by gov that haven't yet been used to pay taxes, etc. Just an accounting residual.

Comment: They just did this in WA state. A progressive Excise Tax on Real Estate transactions.

Mosler: I wouldn't tax transactions.

Comment: Alas-theft by any other name is still theft & fiat does not equal real value.

Mosler: Taxation is coercive/confiscation which differs some from theft. ;)

Comment: Andrew Neil says on Good Morning Britain today that if 25% of UK national debt is owned by the government why are we obsessing about repaying it? Piers Morgan agreed. It's actually 40% @afneil but at last the penny is beginning to drop.

Mosler: The debt already is "the money"- pound balances in securities accounts at the BOE. At maturity the BOE shifts those balances back to reserve accounts- no tax payers or grandchildren are involved.

Comment: Wrong again. I am talking about dollars. US currency. Every dollar in existence, all come from one source. There is only one, :)

Mosler: (every dollar accepted for tax payment). ;)

Comment: *Assuming a competitive market, no search costs, no inverse work supply, etc.

Mosler: Yes, and coercive taxation with the currency/tax credit itself a public monopoly obviates 'competitive market.'

Comment: Please do not concede on the notion that public debt is a “burden on future generations”. It is not. The kids won’t have to pay any interest. Comparing public debt to private debt is never a good idea.

Mosler: The public debt is simply the net money supply. It's the money spent by the gov that hasn't yet been used to pay taxes, and stays in the economy until it's used to pay taxes. This money supply isn't a burden and the idea of paying it back isn't applicable.

Comment: I love it when people explain neoclassical economics to me, as though didn't teach it for decades and been thoroughly indoctrinated by it from the early 80s for about 20 years. It's not that I don't understand you. It's that I reject the axioms on which your thinking is based.

Mosler: Mainly, they don't include coercive taxation in their models ;)

Comment: Sorry - completely wrong and MMT fails every cause when it says ignore progressive taxation - and so plays into the hands of the right wing. Deeply disappointed to see you suggest such a thing.

Mosler: I have pointed out the real costs of transactions taxes, such as VAT and income taxes, disproportionately lower the standard of living for those with the lowest incomes, making those taxes, functionally, highly regressive= one more thing the political debate has backwards. :(

Comment: It also leaves us with a deeply inequitable society - and a crusted state sector. There is no way LVT could ever equitably deliver the tax revenue required by a state embracing MMT and wanting to control inflation. If you want to say goodbye to the NHS and more, do this.

Mosler: My proposed real estate tax along with proposals to cut off problematic income at source, permanent 0 rate policy, JG, narrow banking, etc. and sufficient aggregate demand via fiscal policy can do the trick. Institutional structure is causing the problems and can be modified. ;)

Comment: UK chancellor's wife is a shareholder in a restaurants business that funnelled investments through a letterbox company in the tax haven of Mauritius.Opacity & tax avoidance are the only reasons for using tax havens and the Chancellor knows that.

Mosler: An issue-and one of many- that goes away if you only tax real estate... ;)

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: There's a narrative in the Euro zone that @ECB has done all it can and it's now down to fiscal policy. No! Real 10-year rates in Italy and Spain are -0.4% and -0.9% vs -1.5% in Germany. Monetary conditions in Italy and Spain are tighter than Germany. That's for the ECB to fix...

Mosler: The opposite, in fact. Negative rates are a tax.

Comment: Serious question Brian: Would it be better if we just started saying the fed gov doesn’t borrow money? This seems to be a sticking point with all these people because the idea that “you have to pay back what you borrow” is so DEEPLY ingrained into all of our psyches.

Mosler: Tell it like it is- the Fed Govt. necessarily spends first, and then taxes are paid or bonds paid for. That is, it borrows AFTER it has already spent the $, and not to get the $ to spend. That's because those $s come only from the gov and its agents, or else they are counterfeit.

Comment: Stop Worrying About National Deficits

Mosler: More simply when it's realized gov necessarily spends first and only then can taxes be paid or gov bonds purchased, and that rate hikes cause inflation, notions of gov solvency, debt burdens, etc, become entirely inapplicable.

Comment: The current Federal Debt held by public is equivalent to: + 10 years of (non-recession) Federal income tax revenue or + $50,000 per person or + $141,000 per household.

Mosler: Those are the $ spent by gov that haven't yet been used to pay taxes, and remain outstanding as the economy's net financial assets until used to pay taxes= currency in circulation + reserve balances at the Fed + Tsy secs ($ in securities accounts at the Fed).

Comment: How bad is the US debt and deficit situation? A Serious Question for Twitter by @ProfJAParker MIT and NBER Abstract: Debt and deficits are huge and the Fed is hiding funding costs. Is the US already unable to finance itself?

Mosler: Not applicable for floating fx policy where the gov and its designated agents necessarily spend first and only then are the funds available to pay taxes and buy gov securities.

Comment: Can you elaborate, Warren?

Mosler: The public debt is the $ spent by gov that haven't yet been used to pay taxes, evidencing 'savings desires', and remain outstanding as cash+reserves+tsy sec until used to pay taxes. Regardless of ongoing tax receipts.

Comment: By 'be mindful' I mean, return the favour of not abusing the accumulated reputation for not abusing the privilege of being able to raise money cheaply, and respect therefore the fiscal limits, a long way off and uncertain though they may be.

Mosler: Gov (and its agents), single supplier of that which it demands for tax payment, necessarily spends first, and then taxes are paid and gilts paid for. It also sets the interest rate. (And it currently has the rate thing backwards, unfortunately).

Comment: Not really, The economic concept behind collecting taxes is that there is a surplus of currency in circulation & some cash needs to be removed from circulation. Unfortunately, the removal by tax is unequitable with poorer people taxed more.

Mosler: $ taxes work to cause the population to sell things to get $.

Comment: $27.4 trillion in savings! US can always afford compassion

Mosler: Tax advantaged savings created by Congress-pension income/contributions, corporate reserves, etc.- drive the 'need' for net spending/public sector debt. It starts with the 'we need savings to have money for investment' myth, etc.

Comment: There are three sentences here. The first is, at the very least, neutral with respect to MMT. I presume Stephanie Kelton would say that affordability is never an issue. She can correct me if I’m wrong on that. The second appears to be ... 1/n

Mosler: Think sequence- spending from single supplier of that which is required for tax payment adds the $ that subsequently pay taxes/buy tsy secs, so (nominal) 'affordability' and 'debt burden' inapplicable.

Comment: The euro-area trade surplus is back near record highs.

Mosler: If you believe the numbers. There have been reports of underreporting of imports to dodge the tax bite.

Comment: You're confusing the function of money/currency for what money really is. It is absolutely a social construct. There is no other way.

Mosler: It's a tax credit.

Comment: Yes to this, but can you explain “savings desires”? Don’t follow you there.

Mosler: A $ spent by gov- paid to voluntary sellers of goods and services- by the end of the day has been used to pay taxes or not used to pay taxes/'saved.' Without a desire to so save, evidenced by sellers seeking $ to save, (net/deficit) spending can't happen.

Comment: Real yields on U.S. 10-year debt turn the most negative since early September, at negative 1.05%, heading back down to the record low.

Mosler: Negative rates=a tax on those deposits= deflationary/contractionary. Positive rates=basic income for people who already have money=inflationary/expansionary but highly regressive so not my first choice for public policy=I like permanent 0 rate policy+full employment fiscal+JG.

Comment: And they started manipulating it now/yearXYZ, whereas previously they did not manipulate it? And manipulation in this context means something different than creation and destruction?

Mosler: The currency is a public monopoly- $ to pay taxes come only from state agents. It's therefore necessarily a case of continuous 'manipulation'.

Comment: Most of the debt is owed to ourselves. The SSA is the largest single holder of government bonds. American insurance companies, banks, and other investors own a lot of bonds. Foreign governments hold some of the debt. A more critical question is the Debt to GDP ratio.

Mosler: The chart locates the $ spent by gov that haven't yet been used to pay taxes.

Mosler: Why would anyone/ the government care if you traded in their currency or not? The government only cares that it can provision itself with its currency by demanding it for payment of taxes to force sellers of the good and services they want to obtain.

Comment: Most of the QE is not printing money and it is definitely a tax. A tax deletes money. So what do you do with bloviators that speak past their understanding?

Mosler: functioned as a tax with a positive yield curve. Check out Fed profits...