How money really works

Positive Money have started a discussion forum and already there seems to be an interesting division between so called Modern Monetary Theorists or MMTers and the opposition.

A chap called Howard was certainly against:

Sorry but this is MMT nonsense. Tax money comes in and the numbers in the account go up, when it is spent the numbers in the account go down. Nothing is destroyed, nothing is created, its all electronic.”

The reply from someone who seems to be nameless, nonetheless summarises my own view:

It’s our money, mate. It works how we want to make it work – it doesn’t have a life of its own.

So you don’t want it to be destroyed when tax is collected – fine.

But if we elect a government that says that’s how it works, it will.

That’s why we have austerity – because the government says so.

And in the often obscure discussions of how the monetary system actually works we should remember that we do elect a government that issues the money and, much as they usually try to indicate that the monetary system is an outside force, the government does indeed control how it works.

The really important question at the next election will not be how are you going to pay for it but how are you going to use it?

So the ‘austerians’ will probably say ‘not a lot’ and the people who know what the economy is for will probably say ‘as required’.