"I suppose a network of pipes & hoses fitted with "drain" valves might more accurately describe the circulation part. I think circulating just means spending, i.e. "velocity" of money circulating."
I like this, appeals to my Mario Bros sensibilities. On a new adventure, plumbing the financial sewers.
So the way I'm looking at it, then, the velocity of circulation is measuring how fast the money goes down the drain.
Thinking that looking at money as a stand in, like a promissary note or symbol in the barter system, makes it seem like the money is created for this function. But the money began as dead labor. Saying that the wealth that is built, stored and borrowed against began as dead labor. However big the numbers get, they are the product, and the products of products of products of this same dead labor.
Saying the garden of finance is grown out of the decaying corpse of dead labor. Even if the financial system could somehow totally divorce itself from labor entirely and be fully financialized, self-sustaining of itself to the point of transcendence, it still began with its roots in dead labor, as an extraction of wealth, and always as exploitative as possible.
And the stocks come from the same humble beginnings, as well. Shares of the wealth extracted from labor. So the difference between money and stocks is one of species and not of genus, they are both products of the exploitative system of the by now industrialized and streamlined extraction of wealth from labor.
Meaning that stocks are still made of dead labor, just like money. Dead labor for funding the corporate adventurism of the too big to fail, dead labor repackaged as commercial product for market transactions. It isn't created from nothing, it's built on the extraction of wealth from dead labor. Maybe reanimating it now and then just to exploit it some more.
Both his words and manner of speech seemed at first totally unfamiliar to me, and yet somehow they stirred memories - as an actor might be stirred by the forgotten lines of some role he had played far away and long ago.
I guess that there is something I'm trying to get at here, about the "theory" part of modern monetary theory. The basic conceptual frameworks will determine the shape of the resulting theories. If we begin at "money is created," we're building our theories in the clouds. Money isn't created, it is extracted. Wealth extraction is always as exploitative as possible, the basic definition of capitalizing, taking advantage of circumstances, taking advantage of people, of ourselves, even.
So to take it for granted that money is created, we have to ignore simple facts. It's always an exploitative extraction of wealth from human sweat and toil.
Both his words and manner of speech seemed at first totally unfamiliar to me, and yet somehow they stirred memories - as an actor might be stirred by the forgotten lines of some role he had played far away and long ago.
dada » Sat Jun 05, 2021 10:41 am wrote:I guess that there is something I'm trying to get at here, about the "theory" part of modern monetary theory. The basic conceptual frameworks will determine the shape of the resulting theories. If we begin at "money is created," we're building our theories in the clouds. Money isn't created, it is extracted. Wealth extraction is always as exploitative as possible, the basic definition of capitalizing, taking advantage of circumstances, taking advantage of people, of ourselves, even.
So to take it for granted that money is created, we have to ignore simple facts. It's always an exploitative extraction of wealth from human sweat and toil.
MMT does not begin with first principles. It begins with a description from observation and historical study of the real-existing fiscal-monetary system, rejecting the obviously false self-serving mythologies of deficit hawkery, goldbuggery, and classical liberal economics (e.g., money originates in barter and given coinages/bills used as means of exchange somehow exist before these are set up by stakeholders and states and, effectively, enforced by taxation).
To the statements you made, I believe the reply would indeed be that money is created - so that (in the leftist version of MMT) wealth can be extracted. Your mistake, if I may, is in using money and wealth synonymously. Money is not wealth. It is a representation of wealth set up to facilitate its exchange, and a means of solidifying extracted wealth into liquid wealth. Money is not wealth, rather the fiscal-monetary system as set up under capitalism is a main means by which wealth is extracted from the labor to the ownership and ultimately the rentier classes.
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We meet at the borders of our being, we dream something of each others reality. - Harvey of R.I.
To Justice my maker from on high did incline: I am by virtue of its might divine, The highest Wisdom and the first Love.
So if I say money is a product of wealth extracted through exploitation of labor, does that correct my mistake?
I'm genuinely curious about this topic, but am unfamiliar with the inner workings of the discipline, just coming at it through what I see and read here. It could very well be that if I continue discussing it on the board, I might come to some kind of agreement with the mmtheorists. As of now, though, it seems to me that it is incomplete and kind of lost in the financial warp zone, another sleuthy interest, searching for answers in the wrong places, not much different than other sophisticated alternate reality games.
Just my impression, though, subject to change through understanding what others like you have to say about it.
Both his words and manner of speech seemed at first totally unfamiliar to me, and yet somehow they stirred memories - as an actor might be stirred by the forgotten lines of some role he had played far away and long ago.
dada » Sat Jun 05, 2021 11:24 am wrote:So if I say money is a product of wealth extracted through exploitation of labor, does that correct my mistake?
If you said accumulations of money under the reigning system are a product of wealth extracted through exploitation of labor, I think so.
I'm genuinely curious about this topic, but am unfamiliar with the inner workings of the discipline, just coming at it through what I see and read here. It could very well be that if I continue discussing it on the board, I might come to some kind of agreement with the mmtheorists.
Or you could ask Elvis for a reading list.
As of now, though, it seems to me that it is incomplete and kind of lost in the financial warp zone, another sleuthy interest, searching for answers in the wrong places, not much different than other sophisticated alternate reality games.
It can be used that way, yes.
Just my impression, though, subject to change through understanding what others like you have to say about it.
The money system itself is an ultra-sophisticated alternate reality game that MMT seeks to describe in a way that differs from the reigning ideology.
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We meet at the borders of our being, we dream something of each others reality. - Harvey of R.I.
To Justice my maker from on high did incline: I am by virtue of its might divine, The highest Wisdom and the first Love.
I don't want a reading list, I want to learn about it through engagement, dialogue, discussion.
Describing the sophisticated alternate reality game that is global finance is all well and good, but the same principle applies here as with the alternative media newshounds. If the mmt-ers don't see that "a way that differs from the reigning ideology" means constructing the mainstream alternative and not off the mainstream reservation, than it is a heatsink that bolsters the mainstream. And if they did see it, it wouldn't, because they'd use language that indicates that they are aware of the position they are presenting, as part of the mainstream.
I don't know how many other ways I can come up with to get this point through. Like we want ice cream, chocolate is more popular, but we want vanilla, or vice versa. Either way we're out buying the ice cream cone.
Or maybe like, social media is like baskin robbins, thirty one flavors to choose from. Every flavor is a niche market, inside the mainstream ice cream shop.
Both his words and manner of speech seemed at first totally unfamiliar to me, and yet somehow they stirred memories - as an actor might be stirred by the forgotten lines of some role he had played far away and long ago.
I mean, of course it isn't going to change mmt whether I understand it or not. I don't even think it is interested in convincing me of its usefulness, not looking for public support. The agenda is after something different, locked in the big old battle for academic ascendancy.
But even if I was convinced, adopting the language of the mmt, I'd still be buying into a niche mainstream market, displaying "being down with mmt" as part of my consumer brand identity.
Both his words and manner of speech seemed at first totally unfamiliar to me, and yet somehow they stirred memories - as an actor might be stirred by the forgotten lines of some role he had played far away and long ago.
Saying that the ways that bill themselves as different from the mainstream ideology, are the products of mainstream ideology. Like money accumulation is product of exploitative wealth extraction.
Anything truly outside the mainstream doesn't come on as "an alternative to the reigning ideology," but as a transgression of the mass dialogue happening within mainstream. As the language it uses is different, so are the basic ideas underpinning the theoretical positions. It isn't an alternative to anything, but a breaking of the laws of the class structure that govern social interaction in mass culture.
Both his words and manner of speech seemed at first totally unfamiliar to me, and yet somehow they stirred memories - as an actor might be stirred by the forgotten lines of some role he had played far away and long ago.
And you know it's funny taken in the context of my posts, that your response is to get a reading list. Because that's exactly what a Qstyle true believer would say. Go read this and that.
This is different, of course, not a culture war thing but an academic war thing. But I guess you weren't aware it might look that way, because if you had, you wouldn't have gone down that road at all, before ending at pressing the post button.
Both his words and manner of speech seemed at first totally unfamiliar to me, and yet somehow they stirred memories - as an actor might be stirred by the forgotten lines of some role he had played far away and long ago.
dada wrote:Because that's exactly what a Qstyle true believer would say. Go read this and that.
Oh, come on. It's what a teacher or professor says. Anyway, there are numerous book recommendations in this thread.
“The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.” ― Joan Robinson
dada wrote:If the mmt-ers don't see that "a way that differs from the reigning ideology" means constructing the mainstream alternative and not off the mainstream reservation, than it is a heatsink that bolsters the mainstream.
I think, rather, that what happened is that the present dominant "neoclassical" perspective distorted the narrative of money—as Jack wrote, to recast money as a private creation. MMT dismantles that distorted narrative and its bad assumptions, and puts us on a much more realistic footing to comprehend and use the money system. So, I think today's "reigning ideology" is the "alternative"—an imposter.
dada wrote: The [MMT] agenda is after something different, locked in the big old battle for academic ascendancy
It's quite the reverse: the original MMT scholars are brave men and women who risked their career standing by turning economics on its head.
"First they ignore you, then they laugh at you, then they fight you...”; MMT academics were ignored for a long time, then they were laughed at. Now it's a fight.
Heard of the "The Belmont Syndrome"?
the Belmont Syndrome — the desire of numerous Harvard faculty members of much professional distinction to commute from home, wife and issue in an amiable suburb to office, computer and classroom with no disturbance or dismay resulting from controversy, criticism or even unsettling thought. (JK Galbraith)
That does not describe the MMT researchers.
dada wrote:it seems to me that it is incomplete and kind of lost in the financial warp zone, another sleuthy interest, searching for answers in the wrong places
Of course it seems incomplete if you don't read any of the literature. On the Internet, 95% of the macroeconomics "explainers" are grossly wrong. After years of struggling—starting well before the advent of the Internet—it was MMT that clearly and methodically sifted the wheat from the chaff.
(If you follow my own learning progress in this thread, you'll see I definitely got some stuff wrong, it's inevitable. And even after nearly four years of absorbing MMT through books, journal papers, university lectures, and most recently the MMT course I posted about earlier—I'm blown away every day by how much more there is to know.)
dada wrote:Money isn't created, it is extracted.
Consider that someone has to create & issue money before it can be extracted.
dada wrote:I guess that there is something I'm trying to get at here, about the "theory" part of modern monetary theory.
I'll paste a snippet from the U of Newcastle MMT course materials:
[...] When we talk about theory, we are talking about a process that starts with conjecture or a proposition that we consider, in advance, will help us understand and explain reality. These conjectures transcend to theoretical status when they are confronted with that reality using data and empirical techniques and prove to be what we call 'congruent'.
Note that congruency does not equate to 'truth'. There is no way of knowing whether we have discovered the truth. Congruency means that our explanation is the tentatively most adequate in terms of helping us understand the dynamics of real-world data.
Research and theorising in the social sciences must involve empirical confrontation, but this process is quite different to the natural or physical sciences because we study humans in uncontrollable situations. That means the way we proceed and the types of conclusions we draw are quite different. There are no ‘laws’ in economics as there are in physics, for example.
A theory is typically comprised of certain interlinked components including: (a) Definitions of the key components of the theory - national income, unemployment, etc; and (b) Behavioural or functional relationships which specify how key variables are determined and interact with each other.
Here we make assumptions to structure and control the scope of the analysis and design hypotheses. Our aim is to see whether this structure has 'empirical congruency', which is a fancy way of saying that the theory is consistent with reality and provides a better explanation of the facts than any other competing ideas.
Now why is there a T in MMT?
[...]
To explain what happens, rather than just describe after the fact what happens, we need have to theorise about human behaviour to understand what variables respond to the initial increase in government spending and how they respond. In turn, we need to be able to explain what other variables might then respond and how.
Once the adjustments are completed, we will see the accounting relationship reasserted. But theory is crucial to understand how it is reasserted.
[...]
MMT is much more than a descriptive lens. It is a coherent body of propositions that allow us to understand how the monetary system works. Understanding comes with explanation.
Explanation requires, in part, theory.
MMT is appropriately named.
Here's a video where the prof, Bill Michell explains at greater length—
dada wrote:So the way I'm looking at it, then, the velocity of circulation is measuring how fast the money goes down the drain.
Money only goes all the way down the drain when it's paid in federal taxes—then, it's "destroyed," never to be seen again (like in the old days when they burned collected tax money). MMT reestablishes this reality, that money starts at the center, not the periphery.
I hope that helps!
P.S. Jack's replies are great.
“The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.” ― Joan Robinson
dada » Sat Jun 05, 2021 11:41 am wrote:I guess that there is something I'm trying to get at here, about the "theory" part of modern monetary theory. The basic conceptual frameworks will determine the shape of the resulting theories. If we begin at "money is created," we're building our theories in the clouds. Money isn't created, it is extracted. Wealth extraction is always as exploitative as possible, the basic definition of capitalizing, taking advantage of circumstances, taking advantage of people, of ourselves, even.
So to take it for granted that money is created, we have to ignore simple facts. It's always an exploitative extraction of wealth from human sweat and toil.
Currency is simply a claim on wealth. Currency used to be money when it was metal coinage, though the two terms are used interchangeably these days.
Currency started out as paper receipts for gold. Gold was good because it stored high amounts of value in low amounts weight, had stable value due to scarcity, and was easy to ascertain the authenticity of. Even still, Merchants still got sick of the amounts they had to exchange as the velocity of commerce grew, so a new instrument developed to service this need.
This instrument was someone with a big safe called a money changer. Merchants took their gold to the money changer for safe keeping, who put it in the safe and gave them a receipt. The Merchants soon discovered it was much easier to just exchange receipts between themselves rather then claim their gold, exchange it, and deposit it again. Thus, the universal exchange unit became a paper claim on gold.
The money changers soon discovered a certain reserve of gold sitting in their vaults never claimed. They discovered they could create "extra" receipts for this reserve gold on top of the ones already issued. So this reserve of gold now had two owners instead of one. This was the creation of fiat currency. Paper receipts for wealth which did not exist but could still be used as a universal unit of exchange.
money -> Currency -> Fiat Currency
Today the money changers have evolved into the modern banking institution, and still use the exact same system, only now it's called "fractional reserve lending" as apart of "quantitative easing". They still have reserves of "gold", and they use these to create more "receipts" then they have "gold". Only these days instead of gold, their assets are debt. This kind of complicates things but not really. The real confusing thing they do is change the jargon of the same economic concepts every cycle or two to keep people bamboozled and myopic in the their understanding.
Modern monetary theory culminated out of the 20th century transition from having reserves of gold in the bank safe, to having debt in that safe instead.
In 1930 the gold standard was abolished from domestic currencies in most Western economies. 1971 Nixon then abolished it from the US dollar reserve currency for foreign exchange. The difference here is that the gold standard was abolished for private citizens and organizations very early on in 1930. What Nixon abolished was other countries central banks being able to exchange their US dollars for US gold reserves. Anyway, the point here is that gold went away and they replaced it with debt.
The thing is, when they were creating extra "receipts" for gold they were creating currency from nothing, which was fiat currency because it was created from nothing. But when they started creating currency from debt, they started creating currency from less than nothing, because debt is less than nothing. Evolution Money(gold) -> Currency(receipts for gold) -> Fiat Currency(receipts for gold which doesn't exist) -> Debt-backed Currency (???)
??? <----- that is modern monetary policy. Utterly confused attempts at explaining how we magically discovered the philosopher's stone, while denying the bad vibrations in the market ever since, clearly showing that it's cursed.
The ??? = $28 trillion in US government bonds. Less around the world.
No one pretends this can be paid off anymore, and so modern monetary policy was created to bamboozle people, particularly its own proponents.
So modern monetary policy = instead of paying off the $28 trillion, you just add to it.
If you keep adding to it you get higher inflation. Keep going hyperinflation. Keep going and going the currency eventually loses all value.
If currency the debt is payable in has no value, the debt suddenly has no value. It could be paid with off with a shoelace, assuming someone wanted to go into debt just to collect on it.
Then you simply create a new currency and people have to adopt it. Perhaps this new currency is the one the Bank for International Settlements has been developing since late February 2020.
Modern monetary policy is a euphemism for currency reset. "The Great Reset", get it? "Reset"
I like it, but people didn't just wander onto the stage with gold in their pockets, there was a lot of blood sweat and toil that went into that gold, searching for it, stealing it, murdering for it maybe. Lot of taking advantage of people and circumstances to amass it.
So yes, currency beginning as claim check for the gold trade works, but it is still a product of the exploitative extraction of wealth from labor.
Both his words and manner of speech seemed at first totally unfamiliar to me, and yet somehow they stirred memories - as an actor might be stirred by the forgotten lines of some role he had played far away and long ago.
drstrangelove wrote:Today the money changers have evolved into the modern banking institution, and still use the exact same system, only now it's called "fractional reserve lending"
drstrangelove wrote:Currency started out as paper receipts for gold.
The goldsmith bankers came long after the invention of fungible "money"—which I place with the invention of coinage c.550 BC. Two hundred years before the English goldsmith bankers, the Chinese were issuing the first known paper currency.
We don't know exactly who issued the first known coins, just that it was in Lydia. Probably it was the king. In any case, if not originally, coins quickly became a government monopoly. It's what built the Parthenon (and financed wars).
The goldsmith narrative does explain some facets of the ensuing development of the financial system, but it's not the beginning of fiat money and it's really just a blip in the history of money. (But it's a great tale for those who want to privatize money.)
drstrangelove wrote:Only these days instead of gold, their assets are debt.
Money has always been issued as "debt"; see David Graeber:
In his book Debt: The First 5,000 Years, anthropologist David Graeber argues against the suggestion that money was invented to replace barter.[42] The problem with this version of history, he suggests, is the lack of any supporting evidence. His research indicates that gift economies were common, at least at the beginnings of the first agrarian societies, when humans used elaborate credit systems. Graeber proposes that money as a unit of account was invented the moment when the unquantifiable obligation "I owe you one" transformed into the quantifiable notion of "I owe you one unit of something". In this view, money emerged first as credit and only later acquired the functions of a medium of exchange and a store of value.[10][11] Graeber's criticism partly relies on and follows that made by A. Mitchell Innes in his 1913 article "What is money?". Innes refutes the barter theory of money, by examining historic evidence and showing that early coins never were of consistent value nor of more or less consistent metal content. Therefore, he concludes that sales is not exchange of goods for some universal commodity, but an exchange for credit. He argues that "credit and credit alone is money".[43] Anthropologist Caroline Humphrey examines the available ethnographic data and concludes that "No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money; all available ethnography suggests that there never has been such a thing".[32]
Graeber's analysis is refreshing, coming from an anthropologist. The study of "money" today has perhaps been advanced most by scholars outside of economics: historians, anthropologists, legal scholars, etc.
drstrangelove wrote:The ??? = $28 trillion in US government bonds. Less around the world.
No one pretends this can be paid off anymore, and so modern monetary policy was created to bamboozle people, particularly its own proponents.
Again, and with all respect—we only know what we've been taught—that $28 trillion means more—not less—money around the world. When the government creates a $100K Treasury bond, it's creating $100,000.
"Paid off"? That's easy: the money never leaves the bond account. When a Treasury bond matures, the dollars automatically revert to a reserve account. Nobody—not least the national government!—has to go "find the money" to repay bondholders. The interest is paid with further money creation. (Whether we should be giving away money to already-rich people is a political question.)
Who is being bamboozled? Ask yourself, who would want us to believe that money is a private creation that the public government must beg for? And why?
drstrangelove wrote:If you keep adding to it you get higher inflation.
We've been adding to it for 230 years and for the last 30 years inflation has been remarkably low.
The US dollar is a public instrument—a unit of account, a mode of payment, and a medium of exchange ("store of value" is way down the list)—issued by the national government, and all the myths surrounding it—"loanable funds," "deficits drive up interest rates," "national debt causes inflation," the "quantity theory of money," "crowding out" of private investment—are all empirically wrong and encourage the perception of money as a private creation. It's not.
The school of thought called Modern Monetary Theory started in the late 1990s with a handful of economists who noticed that textbooks and teaching were not reflecting the fundamental changes in the laws that establish our money system (see 1933 and 1971). They rightly saw that as insane, and in many instances malevolent. MMT did not begin as a plot to steal our wealth. Quite the opposite.
drstrangelove, have you read any of the MMT literature? Listened to lectures, etc.? If not, I recommend starting here:
“The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.” ― Joan Robinson
On the Internet, 95% of the macroeconomics "explainers" are grossly wrong. After years of struggling—starting well before the advent of the Internet—it was MMT that clearly and methodically sifted the wheat from the chaff.
