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Pragmatic Capitalism

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Clarification request re “David Graeber & MMT”

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Kudos for your explanation. In response to Nathan’s question, you make several helpful points: “A “dollar” is just a unit of account. … [Y]ou can have financial assets without a government.… If a banking system is regulated by a govt then the banking system can create new loans from thin air.”

Given that, it would be helpful if you modified your article with, e.g.: “[I]magine a closed economy with no govt [expenditure]. I borrow $100 from a bank [that is either authorized by a government to loan money] (or, more loosely, any entity that creates — out of thin air — a socially accepted unit of account)] to create a factory that makes food. We’ve created the assets and liabilities from nothing. From thin air.”

Make sense?

(Frak Wall Street = Frak the Neoliberal Thought Collective (NTC) a la Mirowski)

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Posted by Frak Wall Street
Posted on 03/18/2017 2:29 PM
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minor typo: delete ‘either’ from insertion

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Posted by Frak Wall Street
Answered on 03/18/2017 4:43 PM
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    I thought the “unit of account” for the USA is the dollar. You can’t use anything but dollars to pay taxes. If you use a bank that is not authorized to lend Uncle Sam’s dollars, then you could get a loan in other types of money I guess. Like bitcoin, jelly beans, shells, but you can’t use them to pay taxes. “any entity that creates — out of thin air — a socially accepted unit of account”. Here we have Uncle Sam letting banks under the Federal Reserve System loan dollars out of thin air. I don’t know if bitcoin banks and/or their lenders are under the Federal Reserve System.

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    Posted by Dennis
    Answered on 03/18/2017 9:31 PM
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      As Cullen set up a simplified context to address for asset creation, I inserted only ‘expenditure’ to comport with that. For completeness, it should be ‘no govt expenditure or taxation’. See the original article at http://www.pragcap.com/ama/david-graeber. hth

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      Posted by Frak Wall Street
      Answered on 03/19/2017 1:07 AM
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        Yes, precisely. The govt does not have to spend a single dollar into existence for the rest of us to use the monetary system and prosper. Does it hurt? Well, that depends. Some govts are very stupid with their spending and some are very smart. But yes, the whole MMT perspective where deficit spending is some required function is total bunk.

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        Cullen Roche Posted by Cullen Roche
        Answered on 03/19/2017 1:37 AM
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          Am I correct to assume that the potential inflationary effect of creating more money, $, out of thin air and giving it as a loan. Is compensated for by the deflationary effect of the ‘value’ created by building this factory and having its good’s available to market? (Assuming its goods are purchased in $ of course, or the factory its self could be sold as an asset in $.)

          If this is right correct?

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          Posted by Jamie Box King
          Answered on 03/20/2017 8:30 AM
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            I would be careful assuming that new production is deflationary. For instance, what if I borrow $100 to build an oil pump in an environment where oil is scarce. As this oil gets consumed I have actually contributed to putting upward price pressure via demand pull inflation. Additionally, if I don’t repay my loan I’ve added to the money supply. All else equal, this should cause prices to rise.

            A lot of innovation and production is deflationary because its improving the rate at which we produce things, but this is not universally true.

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            Cullen Roche Posted by Cullen Roche
            Answered on 03/20/2017 5:04 PM
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              Thank you. That makes sense, appreciate the answer.

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              Posted by Jamie Box King
              Answered on 03/21/2017 1:01 AM
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