Modern monetary theory

All money is created by the government or banks under licence from it.

Discuss.

No is the answer there. My taking a rain cheque on it being your round is money. Sure, not all that transferable and depending upon the depth of your character perhaps not worth very much either. But it is money. As is bitcoin, my promise to come back and pay tomorrow for goods borrowed today, an invoice and that promise of a bit of kink in return for the Jimmy Choos.

What Snippa is doing is defining government created money as money created by government. Which is too tautologous to be greatly useful.

41 thoughts on “Modern monetary theory”

  1. Obviously not true.
    During WWII, British POWs circulated their own money in prison camps.
    In the “Dark ages” viking raiders wore silver rings on their arms which were, when necessary, cut up to use as money.

  2. Its odd isn’t it, Brexit Brown Shirts are always going on about how terrible it is that we import things , an approach I had thought ended with Adam Smith and the end of Mercantilism. Marxist magic money men seem to want to locate wealth somewhere other than in goods and services, so they can pretend it is endless. Again this way of thinking was typical if the mercantilism that the great man knocked ,into a cocked hat.

  3. Dennis, Clear-Eyed As Always

    Its odd isn’t it, Brexit Brown Shirts are always going on about how terrible it is that we import things…

    Actually, what’s odd is you making up stupid shit that makes no sense whatsoever and trying to pass it off as being said by those whose opinions differ from your own.

    You really are the Murphy family member that escaped from the attic.

  4. Simply not true Dennis .You, as I understand it, live in the wide open mental spaces of America and would not know ( anything ). I can assure you that the UK`s trade surplus with the EU is mentioned relentlessly .An example is up of Conservation Home right now
    You are probably more man of action than thought ..shooting snakes ..roping steers ..enjoying the tender embrace of your gay cowboy love …that kind of thing.

  5. You really are the Murphy family member that escaped from the attic.

    Henceforth Newmania shall be known as Violet Elizabeth Rochester-Murphy.

  6. The Meissen Bison

    Compare this, from Con Home

    In the trade talks, the elephant in the room is the UK’s substantial trade deficit with the EU. In 2018, the UK had a trade deficit of £66 billion with the EU: a surplus of £28 billion in services against a deficit of £94 billion in goods.

    With Pneumonia’s assertion:

    I can assure you that the UK`s trade surplus with the EU is mentioned relentlessly .An example is up of Conservation Home right now.

    Poor old Pneumie: more brown underpants than brown shirt.

  7. ..yes yes trade deficit thats what I meant …… this is called Economic Nationalism the idea being that if you stopped imports and encouraged exports you kept the difference in gold. The Nation with the most gold won. You are surely aware that this sort of gibberish gets re heated on a daily basis ?
    I dread to think what Smith would have made of the rampant Nationalism of Brexit..He would have been a remainer without question

  8. The Meissen Bison

    ..yes yes trade deficit thats what I meant …… this is called Economic Nationalism

    No, no, confusing something with its antithesis – this is called stupidity.

  9. Dennis, On The Front Lines Fightin' Them Chlorinated Chickens

    You are probably more man of action than thought ..shooting snakes ..roping steers ..enjoying the tender embrace of your gay cowboy love …that kind of thing.

    Actually, I’m more of a look up the statistics at the House of Commons Library sort of guy.

    The UK’s deficit with the EU was 72 billion for 2019. In fact, the UK has run deficits with the EU in every year from 1999 to 2019… per House of Commons Briefing Paper No. 7851.

    Where the UK has consistently run a trade surplus (since 2011, at least) is with non-EU countries.

    Yeah, I live in the States, but you were so fucking wrong that I could spot it from here. Since you’re a thinking kind of guy, think on that.

  10. So Much For Subtlety

    Newmania June 15, 2020 at 1:00 pm – “this is called Economic Nationalism the idea being that if you stopped imports and encouraged exports you kept the difference in gold. The Nation with the most gold won. You are surely aware that this sort of gibberish gets re heated on a daily basis ?”

    Well yes. It is EU policy. This sort of thing is what the EU does. The EU you are so fond of. Why does it block the importation of cheap food from the Third World? Why can’t we buy New Zealand lamb?

    “I dread to think what Smith would have made of the rampant Nationalism of Brexit..He would have been a remainer without question”

    Without question? Another subject of which you are perfectly innocent. What do you think Smith said that would suggest he was in favour of the monstrous EU?

  11. Dennis, Pointing Out The Obvious

    I dread to think what Smith would have made of the rampant Nationalism of Brexit..He would have been a remainer without question

    Now he’s mind-reading dead people. This from the guy who can’t tell a surplus from a deficit.

  12. @ Newmania
    The point of building up gold reserves is so that a relatively small nation (England is less than one-quarter of the area of France, less than one-third of the area of pre-war Germany, less than one-twelfth of the area of modern Russia (let alone Tsarist Russia), only slightly larger than Ohio) can pay for a war. Those of us who can do sums are aware that the UK paid for its allies to feed and supply armies against Napoleon, in WWI and WWII {Dennis will doubtless point out that we borrowed money from the USA to pay for SOME of the stuff that the allies bought from the USA during WWI and WWII but that included most of the stuff that the French bought and a lot of stuff that we supplied to Russia to help them fight Hitler because the UK had a better credit rating in New York].
    You may have failed to notice that, thanks to Nelson. Wellington, Haig, the RAF, Montgomery etc. we won, partly because we had most gold.

  13. yes yes trade deficit thats what I meant

    Course it was. I thought you might have learned something from your betters on these pages, but it seems you’re still in the special needs stream.

  14. You really are the Murphy family member that escaped from the attic.

    Do we know that Rheumania is not in the attic? Which one smells of fish heads?

  15. All money is actually debt, have I got that right ? Silver pennies were still just tokens, because their value existed outside of the actual value of the silver.
    Even the Gold Standard was notional, because there was no way to convert gold reserves into usable specie.
    If I went to the Bank of England and called on them and presented a £20 note instead of a sliver if gold, theyd just give me 10 £1 coins. I’ve just replaced one debt with another.

  16. What a tiresome little jackanapes! Still banging away on his keyboard. Still not making sense. Still accusing those who point out his stupidity of being stupid.

  17. As mention is made here of Smith, I wonder if the current vogue for depedestalation will be visited on Smith’s statue outside St Giles. I’m sure some reason could be found to justify it. Even if it can’t the fact that he was white and middle class is probably enough.

  18. @ Ottokring
    Silver pennies and gold coins (or even lumps) had value because their metal contents were, in themselves, desirable in addition to their fiduciary value. When Henry VIII debased the currency by clipping coins, the good coins were melted down for their precious metal content or exchanged for foreign coins which had a differential exchange rate for clipped and unclipped English coins. More Maria Theresa Dollars were minted after her death than during her reign and they were more used outside outside the Austro-Hungarian empire than inside it.
    The invention of metal detectors has led to a flurry of discoveries of hoards of ancient coins (probably buried for safety by a warrior who neglected his own) which are frequently eclectic with coins from different realms, some of which were at war with each other in the period when the coins were buried.
    Since 1984 governments have tried to abolish any intrinsic value to their currency wityh the resuklt that the value of gold bullion has sky-rocketed (albeit with intermittent collapses to a few multiples of its Bretton Woods par value).

  19. “.yes yes trade deficit thats what I meant …… this is called Economic Nationalism the idea being that if you stopped imports and encouraged exports you kept the difference in gold. The Nation with the most gold won. You are surely aware that this sort of gibberish gets re heated on a daily basis ?”

    Hmm, remind me again how not having our own national production capacity worked during the great Covid PPE crisis. Reduced to hoping the Turks would deign to send us some surgical gowns was a fairly low point I’d suggest. A bit of economic nationalism might have come in rather handy at that point don’t you think?

  20. Rain check, Tim, not rain cheque. A free ticket for the next ball game when one’s rained off, not a payment for the existence of precipitation. Mind you, I’d pay someone to piss on Spudda and Nobrainia.

  21. @ Jim
    Adam Smith was in favour of specialisation and international trade. The problem is not relying on Turkey for surgical gowns – the problem was China sending stuff that did not meet specifications. The private sector merchant banks in Adam Smith’s era accepted responsibility for the goods being as specified, but China doesn’t care.
    If surgical gowns are a vital national interest (of which I am yet to be convinced) then national security, rather than economic nationalism, requires us to have manufacturing capacity. This would make us poorer as UK gdp/capita (whether at nominal or PPP exchange rates) is quite a bit more than twice that of China despite our shorter working hours and higher percentage of OAPs.
    It’s a choice and before we imagined Covid-19 we chose to import cheap textiles rather than manufacture them in the UK (Savile Row is different)

  22. John 77- The reason that Nelson won and Britain ruled the jolly old waves was not gold reserves but the development of the system of National debt and other relatively sophisticated financial instruments whereby the spending could be paid for gradually.
    Britain learnt this from the Dutch against whom it kept losing, thanks to their superior Banking skills.

  23. @ Newmania
    Completely and utterly wrong. 180 degrees wrong.
    Pitt the Younger was simultaneously paying down the National Debt with his Sinking Fund and investing in the Navy until war broke out with France.
    DO YOUR HOMEWORK D-

  24. I would think the existence of company scrip, private bank notes, wampum, rice, etc all put paid to the idea that money is only created by the government.

  25. Dennis, He Who Made His High School Typing Team

    DO YOUR HOMEWORK

    If he did his homework, he wouldn’t be Newmania, now would he?

  26. And there endeth Newmania’s case for centralising half of immigration policy as well as all of farmland owner subsidies policies to Brussels.
    He’s gone off to chow on the Czech PM’s white cock ( a noted landowner subsidised by the northerns, the PM, not the white cock ) so won’t be back tonight.

  27. John77
    The period up to 1815 is sometimes called the second hundred years war and was a protracted struggle for dominance that decided the fate of much of the word subsequently. By the 1820s, as a result the market value of the British Government debt was twice British GDP. That is twice !!!
    By the 1720s the British Government was able to raise cash at much lower rates than those offered by private lenders. It was this ability to borrow that kept the British on top against the much larger French State .In fact, the crucial seven years war Broke France, and the subsequent taxes on the poor were one of the most important causes of unrest,leading to the revolution.
    You have to understand that British was locked in an arm, arm wrestle with France for much of this entire period, and while of course debt was periodically paid down, it was a feature of the British State the France could never match and was the main reason Britain ruled the waves after Trafalgar.

    Anyone else need a history lesson ?

  28. So Much For Subtlety

    Newmania June 15, 2020 at 9:32 pm – “It was this ability to borrow that kept the British on top against the much larger French State .In fact, the crucial seven years war Broke France, and the subsequent taxes on the poor were one of the most important causes of unrest,leading to the revolution.”

    So it looks like Newbie can find Wikipedia. But I am curious – the lesson for modern Britain is what? That Britain should maintain its good credit rating by not spending too much, paying down its debt and trading with the world, or it should splash cash about with abandon and let the future take care of itself?

    History is very often conservative because the facts of life are very often conservative.

  29. Excuse me for knowing some basic economic history, this is kind of an economics blog?
    Here is a great stat : Today about 1.6 m UK citizens are aged 85 and above.In 1901 that number was 61,000. This change dwarfs any so called ‘demographic time bomb’, that could possible occur in the future but was barely noticed.
    Quiz..I line up ever family in order of post tax/NI income / family size income.
    How much greater is the income at 90% than at 10%
    4x 6x 10x 12x 20x 30x

    Answer?

  30. @newmania

    Do you use a computer programme to generate these random words or is a side effect of your medication?

  31. Your cunning questions to catch us out might work if:

    a) you had the faintest idea of what you’re on about
    b) you were capable of framing a question coherently

    You fucking mong.

  32. The Meissen Bison

    Yesterday Pneumie posted 1.73k words more or less at random and sprinkled 84 puntuation marks over them where they fell.

    Did we laugh:
    3×, 5×, 12×, 15× or not at all for want of understanding a word?

  33. Hmmm …so that pig shit ignorant all round and proud of it. No surprise there ..thats ya Brexit voter.

  34. Dennis, Clear-Eyed As Always

    Quiz..I line up ever family in order of post tax/NI income / family size income.
    How much greater is the income at 90% than at 10%
    4x 6x 10x 12x 20x 30x

    Answer: Surplus! No, wait… Deficit!

  35. Newmania
    June 16, 2020 at 9:13 am

    Hmmm …so that pig shit ignorant all round and proud of it. No surprise there ..thats ya Brexit voter.

    If we’re all pigshit ignorant, all your hanging around here does is get you covered in pig shit, don’t it?

  36. @ Newmania
    The subsidies that Britain paid to Austria, Russia and Prussia to persuade them to field armies against the French were paid in Gold Bullion, NOT IOUs signed by a representative of the British Government. While the rise in government debt was a regrettable consequence of the Napoleonic Wars, it was the gold acquired through England’s Balance of Payments surplus that procured the anti-French alliance that was essential to defeat Napoleon.
    Britain’s ability to borrow did NOT beat France – partly because *Britain* did not borrow. Britain mostly ran a trade surplus; during the war the British government frequently had to borrow from the British public but *Britain* did not need to borrow from abroad.
    I’ll forgive you knowing some economic history – but you either don’t know enough or you are disingenuously indulging in misleading comments.

  37. @ Newmania
    The 90th decile 10th decile comparison is utterly meaningless since the “bottom 10%” that New Labour loves to talk about includes a lot of rich people with – temporarily – no (or utterly negligible) current income.
    Let’s see: all the students living on grants, all the self-employed who made (or declared) a loss for the latest year, all the housewives being supported by their husbands, all the divorcees being supported by their ex-husbands, all the kids taking a gap year, …
    That’s before we take into account the caveats that ONS makes about the alleged data – the data from HMRC/DWP shows that 50% more was paid in benefits than was recorded in the household survey on which your comparison is based. Also those in the bottom decile spent about 120% of their income on VATtable items (which exclude all the basic necessities such as food, rent and children’s clothes).
    New Labour just love to talk about the bottom decile but we *know* that the numbers that they use are blatant lies.

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