End of debt-based currency

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End of debt-based currency

Post by adorchak on Tue Oct 18, 2011 3:25 pm

For me one of the biggest problems we face is that the Federal Reserve system REQUIRES that the gov't BORROW money into existence. Not only that but every dollar in circulation is AT INTEREST to the private organization known as the Federal Reserve. Even Jefferson understood that a gov't that must go into debt to circulate currency will soon find itself hopelessly in a ever deepening debt spiral. We must END this cycle and restore our republic to a currency that is not debt ... The Paul faction will say End the FED and return to the gold standard but, IMO, this is a ruse and not helpful. We need a cheap currency (did you know that coins are NOT issued by the FED) that is SPENT into existence by the gov't rather than BORROWED.

I see the lack of this issue on the declaration as a major hole that needs to be addressed now.

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Re: End of debt-based currency

Post by Post Gold Standard on Wed Oct 26, 2011 11:49 pm

"The funds to pay taxes and buy government securities come from government spending. "

Operationally you have the cart before the horse. Ask yourself, where does the USD come from? Who issues it? How does it come into existence? The US Federal govt. issues it of course. But how? The answer is deficit spending. The issuance of Treasuries sop up the excess reserves out of the system and give them a risk free interest bearing home. This issuance of treasuries to soak up excess reserves created by deficit spending keeps the overnight rate from going to zero.



Myth #1 -The U.S. government needs to be more like a household and save money before it can spend.

Myth #2 – The U.S. government is “running out of money”.

Myth #3 – The USA is becoming the next Greece! We are bankrupt!

Myth #4 – We are Zimbabwe or the Weimar Republic and hyperinflation is coming.

Myth #5 – China will stop buying our debt and crash the bond market.

Myth # 6 – Just wait until those bond vigilantes make yields rise and bankrupt America!

Myth # 7 – Interest on the national debt is unsustainable and will inevitably bankrupt America.

Myth #8 – We are the reserve currency and if we lose that status the dollar will crash.

Myth #9 – When the bond auctions start failing the U.S. government will crash and burn.

http://pragcap.com/10-economic-myths-that-persist
http://pragcap.com/resources/understanding-modern-monetary-system

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Re: End of debt-based currency

Post by JCB on Fri Oct 28, 2011 1:02 pm

Read Dennis Kucinich's HR 2990, which ends our debt-based currency. We need to pass it!

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Re: End of debt-based currency

Post by Post Gold Standard on Fri Oct 28, 2011 6:06 pm

Horizontal banking money creation nets to zero. Vertical Money (real new money) is created when the congress deficit spends new money into existence and treasuries are issued to mop up the excess reserves created by the deficit spending.

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Re: End of debt-based currency

Post by JCB on Fri Oct 28, 2011 7:19 pm

Post Gold Standard, What do you think of this paper by Dr. Yamaguchi on the effects of ending "horizontal money?"

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Re: End of debt-based currency

Post by Post Gold Standard on Sat Oct 29, 2011 1:21 am

I have to be honest right in the first paragraph the author makes a major mistake and false assumption: "Secondly, with an
introduction of open macroeconomies, it examines how the current system
can cope with the liquidation of government debt, and obtains that
the liquidation of debts triggers recessions, unemployment and foreign
economic recessions contagiously." It is the austerity push and deficits being too small after a shock (like the 2008 mortgage collapse) that keeps us in the recession.

The author falsely assumes that a country that is monetarily sovereign: nations which are monetarily autonomous, are monopoly suppliers of their own currency and exist within a freely floating exchange rate system (USA, Japan, and the UK - Not Spain, Greece, Italy) have to borrow or tax before they can spend.

Actually it works the other way, but 99.9% of all politicians and over 90% of all economists actually don't know this (because they've been trained with old economics - pre 1971 theories and models). The US government (the issuer of $USD) must first deficit spend to create new money that in turn creates excess deposits, which creates excess reserves, which is used to buy the Treasuries. Technically the issue of treasuries is not needed. An old Gold Standard law requiring their issue is why the USA still issues them (they have a benefit as well - risk free interest place for savings). If the treasuries were not issued the side effect would be that the overnite bank rate would head to zero. The issue of treasuries and paying interest rates on reserves serves to set the interest floor for the economy. All fed operations do is keep the rate from going to their natural rate of zero.

Here's what you should be reading: http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

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Re: End of debt-based currency

Post by JCB on Sat Oct 29, 2011 6:47 pm

Post Gold Standard wrote:I have to be honest right in the first paragraph the author makes a major mistake and false assumption: "Secondly, with an
introduction of open macroeconomies, it examines how the current system
can cope with the liquidation of government debt, and obtains that
the liquidation of debts triggers recessions, unemployment and foreign
economic recessions contagiously." It is the austerity push and deficits being too small after a shock (like the 2008 mortgage collapse) that keeps us in the recession.

The author falsely assumes that a country that is monetarily sovereign: nations which are monetarily autonomous, are monopoly suppliers of their own currency and exist within a freely floating exchange rate system (USA, Japan, and the UK - Not Spain, Greece, Italy) have to borrow or tax before they can spend.

What do you mean? Dr. Yamaguchi is correct; you are making the false assumption.

Art I, Sec 8, "The Congress shall have Power To...coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures"

Art I, Sec 10, "No State shall...coin Money; emit Bills of Credit"

How could we not be monetarily sovereign? Have we secretly rewritten our Constitution and ceded our sovereignty to a monetary dictatorship?

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Re: End of debt-based currency

Post by Post Gold Standard on Sat Oct 29, 2011 11:41 pm

Ok went ahead and dove in and read the full piece even though his description of our monetary system is incorrect.

Funny thing is he remodels our system to ultimately be what MMT says we already have (but common thinking continues to misunderstand). So in essence it appears that MMT and American Monetary Act (AMA) are in agreement.

Since he does not understand our current monetary system (90% of economists and policy makers also do not, as well as almost all citizens) and equates Gov debt with business or private debt, and issuance of treasuries with borrowing and possible interest rate climbs, and he assumes gov. have to tax to spend. Due to all this misunderstanding he looks for a better system. What he finds is a system that is nearly the current system but he just doesn't know it.

MMT states that new money only comes into existence by deficit spending.
AMA would remodel the system to make it so (even though it already is).
MMT states the natural rate of interest is zero (issuance of treasuries set an interest floor).
AMA would remodel the system to make it so.
MMT states the money to buy treasuries and pay taxes comes from gov. deficit spending.
AMA would remodel the system to make it so.
MMT says that the US gov. is not revenue or borrowing constrained and the only constraint to deficit spending is inflation.
AMA would remodel the system to make it so.
MMT says the Fed's attempts to use monetary operations to manipulate or raise interest rates to stave off inflation which is an unnecessary and very blunt and ineffective tool and sees no real need for the Fed except as lender of last resort and to provide interest rates satisfactory for savers.
AMA would remodel the system to make it so.
MMT says the issuance of debt by the gov. is not necessary except for an old gold standard law that is still used that says it has to.
AMA would remodel the system to make it so.
MMT says fractional reserve banking doesn't exist and banks are not reserve constrained for lending, they are capital constrained as well as having a viable credit worthy borrower with good collateral.
AMA would remodel the system to end fractional reserve banking which ended in 1939.

and so on, and so on, and so on.

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Re: End of debt-based currency

Post by richard in norway on Sun Oct 30, 2011 12:06 am

Post gold

I have all the major religion books on one shelf, the bible, the Koran, the Taoist writing, has capital, the wealth of nations and so on. Can you honestly say that the MMT writings don't belong on that shelf.

It may well be correct but it comes over like religion to me


flower

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Re: End of debt-based currency

Post by Post Gold Standard on Sun Oct 30, 2011 1:19 am

Religion? It's just a Sectoral balance explanation of our monetary system.

The USA made a major fundamental change in 1971 dropped the Gold standard, but then we changed nothing else. We didn't change the school of economics, any of the laws pertaining to Gov. debt issuance, or anything else. It is as if everyone thought that change made no difference. That change was huge and made many fundamental differences, but no one cared to figure out what that change actually meant operationally.

Here's the sectoral balance accounting identity.
(G - T) = (S - I) - (X - M)
G = government spending
T = taxes
S = savings
I = investment
X = exports
M = imports

Net gov. spending minus net imports equals net private sector savings. To the exact penny since this is an accounting identity. It is all the old Gold Standard assumptions floating around in peoples heads that keep them from getting it more quickly. I know for me that was the biggest hurdle.

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Re: End of debt-based currency

Post by oregonstu on Mon Nov 07, 2011 5:37 pm

Post gold standard has the markings of a corporate/governmental troll... he does nothing but spread disinformation.

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Re: End of debt-based currency

Post by Post Gold Standard on Tue Nov 08, 2011 12:19 am

It's sad that when someone tries to help that someone calls them a troll.

"Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics."

"No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings"

Does that sound like government or corporate speak?

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Re: End of debt-based currency

Post by BradB on Tue Nov 08, 2011 12:39 am

Federal Deficits – Net Imports = Net Private Savings

?????????

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Re: End of debt-based currency

Post by Post Gold Standard on Tue Nov 08, 2011 2:46 am

Federal Deficits – Net Imports = Net Private Savings

In essence deficit spending creates Net New Financial Assets. It is how new money is issued into the system. Federal Govt. spending creates money and taxes destroy it.

http://pragcap.com/resources/understanding-modern-monetary-system

Here's the complete formula:

The sectoral balances can be broken down according to GDP:

GDP = C + I + G + (X – M)

C = consumption

I = investment

G = government spending

X = exports

M = imports

Or stated differently;

GDP = C + S + T

C = consumption

S = savings

T = taxes

From there we can conclude:

C + S + T = GDP = C+ I + G + (X – M)

If rearranged we can see that these sectors must net to zero:

(I – S) + (G – T) + (X – M) = 0

(I – S) = private sector balance

(G – T) = public sector balance

(X – M) = foreign sector balance

So therefore:

Federal Deficits – Net Imports = Net Private Savings
](G – T) = public sector balance] - [(X – M) = foreign sector balance] = [(I – S) = private sector balance]

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