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New Currency Theory (NCT)

You said "...nothing stopping the US govt from creating 10T.. "  Borrowing is not creating.  But if you want to redefine the word to mean "borrowing" - fine, I'll go with your meaning.  So of course the gov could raise the debts ceiling, be in the hole for even more massive interest payments - $10T=$9T.  (I'm not sure they could find buyers for $10T at a reasonable rate) but politically they won't borrow that much.

If you'll humor my old fashioned meaning of creating - if the law was changed to allow the government to print $10T of needed money, there would be no interest or the need to tax in order to fund the government. (Taxing at some level is still needed),

That printed money would flow through government contractors and employees right into the private economy for non-public purpose spending and financial needs. Do you have a problem with that?

Well, the problem is, if you printed $10T you’d almost certainly create inflation. To increase the demand for money the govt pays an interest rate on it. Just like, if a private corporation wants to increase the demand for their debt they raise the interest rate on it to make it more attractive.

The dynamic is similar here.

A more realistic example is that the govt could easily print $500B in T-Bonds tomorrow and use it to finance infrastructure. Who cares whether they do that by printing cash or printing bonds? In fact, I’d think you’d prefer the bonds (since you love printing money) because it results in even more printing for the interest payments.....

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

Yes $10T in a year would probably cause inflation (that was your number).  The economy in its current state could not absorb that much money over a short period. And I did say in my previous message that the gov would have to raise the bond rate to a high level to attract buyers. Even if there were willing buyers, why would you want a system so convoluted?  Just print the darn money.  You keep saying the end result is the same (ignoring the interest penalty), so why not go with an honest, direct method?

If you don't care whether printing cash (no principal or interest to repay) or bonds (devalued due to interest and repaid from future receipts - diminishing the availability of future money,  continually rolling over just to pay interest )- what a mess - why not go the straightforward route - print the cash.

There would be no national debt clock to scare the hell out of citizens, no deficit to fight over.

 

 

 

 

Because, as I mentioned 100 comments ago, there is a SERIOUS flaw in NCT. Credit markets are endogenous. They appear because there is endogenous demand for credit. People need money in random places at random times. They get that money by getting a loan from a bank that creates that money. In your system there is a fixed amount of money at any given time so we can't meet the monetary demands of the economy when we want to.

I need to be blunt because you're obviously not getting the message. NCT is a stupid idea. In addition to not really changing the govt's financing capabilities, it unnecessarily constrains private credit markets. This is a bad idea. It solves nothing and complicates everything for no good reason.

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

Thanks for elaborating.  Why are you conflating giving credit with creating money?  Under monetary reform there is no prohibition on extending credit.  The credit is just intermediated with real US dollars.

Your picture of the money supply seems odd to me. Money constanlty is moving around between "safe" vehicles to higher-risk investments.  Money doesn't need to be created endogenously for that process to take place.  I would have no problem investing part of my salary in a mortgage-backed security fund, or a green technology fund, etc. (just as is done now ).  I don't need a bank to have those magical powers.  As I said many messages ago, my previous mortgage was obtained precisely in that manner, through a mortgage company's investors who did not have the power to create money endogenously.  It didn't take any longer to access that money than through a bank.  And, it is well known that most endogenous money is created for mortgages, not innovative  and risky business ventures.

Paul,

There is so much confusion in that comment I don’t even know where to start. I can tell that there is no possible way to change your mind. Which is fine. I am not here to twist people’s arms into believing certain things. Take care.

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

I believe the confusion is on your part not mine.  You conflate credit creation with bank-money creation which is, on its face, false.  You assert the there would be a shortage of credit under monetary reform - completely unsubtantiated.  You have some sort of bias against any changes to the current system which has needed to be rescued by government intervention numerous times.  I don't get your close-minded attitude.  Instead of providing evidence, you use put downs and bold letters.  Hopefully, if there are any readers of this interchange, they will make up their own minds.

Paul, I'm going to have to agree with Cullen on this thread.  You seem to be ignoring his basic points about our current endogenous money system, wherein banks can and do create money when doing loans, versus your idea of a system with a fixed amount of money at a given time.  How about putting in some effort and reading more of Cullen's research, as well as easy to find research on various Federal Reserve Bank sites, research by Paul Sheard, and others.

@paul-lebow,

Cullen has tried to explain basic facts to you on several occasions here. It's clear that you don't even understand basic accounting and basic banking. Credit IS money in the modern monetary system. Banks create credit. Banks create money. This is what loans do - they create a credit in the customer's account endogenously.

Cullen has been very patient with your comments just as he always is. I'm surprised he didn't close this thread a long time ago honestly.

Paul, give me a break. I've created a forum for you to express your views and I've been extremely patient letting you try to explain your stance. The simple fact of the matter is that you've made repeated accounting mistakes, you completely misunderstand what credit even is and you don't understand that money is endogenous and not some fixed supply variable in the economy.

I am sorry, but no one here is being mean to you or insulting you. In fact, lots of people have gone out of their way to explain, over the course of 100+ comments, why your views are wrong. And you simply don't want to admit that they don't make sense.

Anyhow, this isn't remotely personal and I don't intend for it to sound that way, but at some point we just need to be blunt because I won't stand for people using my website to promote a nonsense view of how things work. I take education very seriously and one of the main goals of my site is to provide an objective and educational platform. You are promoting politics based on a misunderstanding of how things work. I don't appreciate that!

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche