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The Triumph of the Magic Money Tree

Since taking over from the late Hugo Chávez in 2013, Nicolás Maduro has seen the bolivar lose 99.81 per cent of its value against the US dollar. The government has increased the money supply, but that has stoked inflation, predicted by the International Monetary Fund to pass 2,000 per cent in 2018.

We actually have this real world example of what happens when the government just prints more money to pay for government spending. Odd that the Senior Lecturer doesn’t see it really, isn’t it?

His answer would be, as we know, just raise the tax rate to curb the inflation.

What tax rate do you need to curb a 2000% inflation rate?

16 thoughts on “The Triumph of the Magic Money Tree”

  1. 2000%, obviously. Fortunately as we all know the Laffer curve is neoliberal sophistry, so that tax rate should be easily achievable and cause no ill-effects whatsoever.

  2. @TW
    You are not saying there is no Magic Money Tree: you are saying it has been mismanaged by Maduro. Not the same thing.
    Our National Heroine and Prime Minister simply lies on Question Time by baldly stating that there is no Magic Money Tree, or right of government to create money, when denying nurses a pay rise( then).
    BTW shouldn’t politicians be barred from Parliament and local government for lying? Big Bus Liar Johnson should be first to go, preferably with some degrading ceremony involving porky pigs, pour encourager les autres.

  3. @Reedy – so there is a Magic Money Tree but if you use it wrongly, say by creating money and spunking it on whatever, then you get rampant inflation. That sounds very much to me like that tree ain’t really magic.

    Barring liars from public office sounds attractive, but if you exclude them then only the deluded and demented, who genuinely mean whatever shit they come out with, would be allowed to govern. We know the sort of loons I’m talking about…

  4. Reedy-

    I don’t think anyone doubts that the government can create money. I think that they doubt doing so will have a positive outcome.

    Like it didn’t in Venezuela

  5. Having a 100% tax rate is the same as having a 0% tax rate, since neither get paid.

    I can’t see the value in trundling a wheelbarrow of government printed tax offices would have any effect either, because they are rapidly getting to the point where the Colombian peso is effectively worthless as nobody will take it for anything of real value no matter how many wheelbarrows of the shit they put forward.

    They might not have technically reached the hyperinflation stage yet (largely because of government interference and manipulation of the currency), but it’s in the mail.

  6. “You are not saying there is no Magic Money Tree: you are saying it has been mismanaged by Maduro. Not the same thing.”

    OK, let’s have one example of the magic money tree as Spud, Corbyn et al envision it actually working as they suggest.

    Just one.

    Otherwise you’re confusing money as bits of paper with a nominal face value, and representations of actual value. The MMT can spunk the former out with gay abandon, but not the latter.

  7. And further to last:

    If the magic money tree existed and worked, we’d just be using it. And it would be conventional economics.

    We’re not, and it’s not, and this is not some kind of evil neoliberal tory baby-eating conspiracy.

  8. Bongo

    This is a summary of how Israel did it

    From your link:

    “Curbing the Bank of Israel’s ability to print money to cover government deficits.”

    Or, to translate – they continued to be up shit street until they stopped doing it..:)

  9. DNR Reed: [The] Prime Minister simply lies on Question Time by baldly stating that there is no Magic Money Tree

    Ontologically speaking, the magic money tree is deciduous. We are now in autumn, a stage in life which you no doubt look back on wistfully, and the leaves are beginning to fall. Wherever the gales of socialism roar the ground is all the more rapidly covered with dank and rotting vegetation: in those latitudes the magic money tree is a mere skeleton, denuded and rocking on its loosened bole.

  10. @abacab
    Not much point in trying to kick this question around if you cant think of any schemes where governments create their own money. May I suggest a look at Ellen Brown’s Web of Debt blog “Thinking outside the box” wherein she describes the Greenbacks Lincoln issued to pay the Unionists expenses in the American Civil War and the Treasury Labour Certificates Hjalmar Schacht paid people in Nazi Germany which reduced pre-war unemployment of 60 million to 300,000? There are obviously issues and it might be better to discuss them, having a certain amount of common ground.

  11. @ DBC Reed
    The Magic Money Tree creates paper with no value and reduces welfare by destroying valuable trees in the process.

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