FUNDAMENTALS: Monetary Sovereignty and Affordability

[@jackdavis8596]

Great explanation of MMT concepts.

[@ast453000]

4:32 So I don't see how any new money has entered the economy. Gary printed a bond worth ten garys. It is a promise to pay the holder ten garys (setting aside interest for clarity). And his mother printed ten garys. They exchanged the garys and the bond (through intermediaries). But after a while the exchange has to be reversed, no? Because Gary's bond was a promise to pay ten garys. If that's right, I don't see how any new money (garys) have entered the economy. I must be missing something. What am I missing?

[@Troy_KC-2-PH]

King Gary of Garyland issued currency (coins etc) and commanded his soldiers to visit all of the townsfolk and farmers that they would have to donate some labor refurbishing the castle walls and to build new motes, bridges and roads and to maintain an army to defend against the Mongol invasion etc etc. The towns people and the farmers said ... bah! no way am I going to GIVE my labor! Then King Gary said ... oh no? Well I am going to make you PAY a TAX! You will donate your labor for which I will pay you in Gary Coins and at the end of the year I will collect 1 coin out of every ten Gary Coins that you have. If you do not work you cannot pay, no pay = you go to jail or you will be executed. Later on as this society developed and modernized they didn't have to OVERTLY threaten people nor did they have to actually use "coin" (which at one time in Garyland's history was pegged to the amount of Gold that old King Gary had stashed away) after about the 1970s Garyland and most other countries got out of or did away with the gold standard. Garland now has to use currency NOT in excess of Garyland's REAL RESOURCES (gold, oil, land, agriculture, timber, healthy workers, scientists, time limitations etc) Now Garyland has vast lands and filled with resources and so it SEEMINGLY has unlimited resources as compared to Billterra or Larryvania but ... of course, it is not unlimited. For now Garyland can spend 700 billion (in USD worth) of Gary Coins (now just keystroked into existence via Garyland's Central Banking Authority (the Fed) as instructed by Garyland's Parliament (congress) and no one bats an eye. No one asks "But how ya gonna pay for that" and the people of Garyland felt free and proud to have a growing military presence in the world ... but ... there are rumblings amongst the citizens of Garyland, asking ... hey? oy? we just spent 700 Billion Dollars worth of Gary Coins on our military just last year ... but my grandma is having a difficult time, as well as my 2 uncles and 5 cousins, and what's up with all these potholes? Our Airports suck compared to Billterra and Larryvania but Garyland Parliament says we have no money? But ... we just spent 700 Billion ... ugh ... never mind. What was I thinking? We always have money for the Military Industrial Complex .... it just magically appears and is never NOT affordable ... but don't ask for stuff for the rest of us ... that just can't be. Sorry for me being crazy thinking we could have stuff for the people of Garyland. Yeah, I'd like to talk more but I have to make some porridge for my 16 hour shift and I don't know how I'm gonna pay the light bill for my shack ... but man ... we do have a bad ass military don't we? I'm Proud to be a Garylander because at least I know I'm Free!

[@aaronmyrick655]

The ending interested me. A currency is strong in a floating market as long as the foreign investors perceive that government to be infallible(as is the case with the U.S.) What will the U.S. do when it is exposed to be insolvent not to the money but to the value of the debt.

[@jabmorris]

Actually, that's incorrect. As long as the public of said country is required to pay taxes in only that currency, Faith will still be there

[@aaronmyrick655]

I'm not sure if this is accidentally or purposefully disingenuous but it is in fact deceiving in that it extremely downplays the down sides to monetary sovereignty. It proposes that the solution to all economic crises would be to have a floating currency that is sovereign. However, the problem that a country faces in any floating currency is that you relinquish all value that currency has. It instead becomes speculative based on the market. A country may be able to produce more money but it can't magically produce more value. When others begin to realize that a countries currency isn't backed by any physical object then they realize it has no inherent stability or reliability. It is completely speculative. While it is true that a country with monetary sovereignty may experience economic failure differently, more likely to suffer hyper-inflation if it's economy is based on trade with countries who cannot produce the same currency. The only time that monetary sovereignty can remain stable and floating is when all operations are done within the country. It's reliability wouldn't be based on a physical object but rather the governments ability to force you to accept its currency(presumably by threat of life or jail). A country involved in sharing a floating currency with other countries is more likely to face the problem of not being able to pay back debts due to the unfounded belief in the reliability of the other countries. Effectively you are just exposing yourself to more risk. The problem with the solution proposed is that it gives up all of the economic( and potentially social) freedom of a country and places the burden of management of much larger assets on a much smaller entity. Any lover of social freedom should see the problems associated with giving large power to a minority. The true solutions are thus(if you wish to have economic stability). Either have a floating currency and completely isolate yourself from global trade(which has its own drawbacks) or have a fixed currency(such as one based on an object like gold). Due to natural imbalances of all natural assets (i.e. Saudi Arabia has much more oil than say Liberland) I suggest the route of trade being limited to the confines of a single country to minimize government and overhead and allow for more diversity and experimentation. When a small country fails it fails alone but when a one world government fails(which it eventually would as is the fate of all governments) the whole world fails.

[@djrychlak4443]

Money has no intrinsic value. You still operate on a gold-standard, small government understanding which is entirely inapplicable to Monetarily Sovereign countries. edit-sp

[@autumnb7135]

Aaron Myrick MMT proposes to anchor the value of the currency to labour hours.