I’ve been having some encouraging converstions with Positive Money (PoMo) members.
First, let me be clear, I use MMT (Modern Monetary Theory) in the sense that the Theory is the Job Guarantee and the Modern Monetary bit is a statement of fact. This is the view that Prof. Bill Mitchell himself takes, having in fact, based the Job Guarantee on the wool clip price guarantee for Australian sheep farmers.
Although PoMo used to consider that 97% of money is issued by private banks – this is beginning to change and now even the Bank of England suggests a lower figure. Indeed the Bank of England is also asking about the future of money –here -perhaps it might be because they have got only 39 likes on their original article!
Many are becoming convinced of the correctness of the idea that government creates money when it spends, and that destruction occurs, in effect a contra-entry when they then receive tax, thus destroying both the entry and money.
Some PoMo members still have – understandably – banking anger. And their 2008 idea of 98% of all money created out of thin air by private banks is a bolt of truth.
Destroying that belief is, again understandably, quite difficult.
But for believers in PoMo, if private banks create money out of thin air, then it seems not to be understood why the government itself might prevent its very own bank from doing the same?
Well – this is also an argument that is more difficult than it should be to counteract, because most see that the EU Lisbon agreement probably outlawed state money creation. I’ve no special evidence one way of the other, although I inderstand that to be the case, but the fact is that Alistair Darling did create money- as he actually said – albeit in a circumlocuitous (alright, timid and deceptive) fashion in his letter to the Bank of England of January 2009. And the European Central Bank has followed suit. So, even if it used to be – allegedly – illegal under EU law, I very much doubt it can be said to be so now.
But to me the closing issue is that if the government requires payment of its taxes in sterling, which it can, alone, create, why would anyone suggest that it had always outsourced its currency creation, and so was powerless? It issues banking licences which are rescindable and conditionally granted. And even if perchance it had forever outsourced currency creation to private enterprise, then why does that also indicate it is actually incapable of doing it itself, when it has its own nationalised bank (that is the Bank of England -100% nationalised from 1946)?
In many ways this is the knub of the issue. In 1694, the date of the foundation of the Bank of England, currency creation was indeed partially outsourced, but once it was, in fact, entirely nationalised in 1946, surely this changes everything?
As I’ve previously suggested, democratic governments create money on the basis of democratic consent.
Anything else is another branch of neoliberal deceit.
….I’m beginning to wish there was still a USSR.
At least then TINA (There Is No Alternative) might actually not be, to some, so obviously evident. Because most have never even thought of the economy of China…