‘Sovereign Money Creation’ that isn’t

Having recently submitted my twopennworth to Positive Money’s (PoMo) discussion on Richard Murphy’s new free to download book ‘Money for Nothing -and my Tweets for Free’, it is interesting to discover that the vast majority of PoMo commentators are now on board with Modern Monetary Theory (MMT).

The naysayers seem to mostly hail from the US and favour ‘Sovereign Money Creation’, where as I understand it, they believe that, although all tax is recycled, governments still have the power to create money – but that this power should be devolved to a power other than government, presumably on the grounds that governments can fall prey to PPE scandals…

Yes but, Parliament should be preventing that! The fact that it hasn’t is a Parliamentary failure, but appalling as it is, taking that power outside Parliament to whichever quango you choose does not in itself prevent the problem – indeed quangos being smaller and more private than Parliament, may more usually serve to increase it.

Worse still, it deprives governments of their power to get stuff done, because spending money is how they do it. What if the quango, like the computer, says no? We would be back to thinking that government money grew not out of thin air, or on trees, but on rich people, who would need taxing.

Sovereign money creation thus enables more power to be surrendered to the wealthy – which is the last thing we need,

Because of this (what I regard as) confused thinking many seem to think MMT actually provides a way of economic forecasting. It is not of course a crystal ball but can and should be used in whichever economic crystal ball you are peering into. Likewise there is the misconception that MMT suggests policies. Whereas of itself, it suggests none but it can and should be used in the creation of them. As, without a penny in extra tax being raised, the wrong policies of the PPE scandal have so clearly, unfortunately, shown us, that it can be.

Then there is the idea that the reasonable response to ‘The Deficit Myth’ is “Thanks Stephanie, but so what?” whereas I consider that a much more logical response is why we are told that we tax first and then spend when in fact enshrined in UK legislation – and indeed in general logic, we can see, as matter of fact, that governments spend first and tax afterwards.

That is the power of government – or as Stephanie Kelton would put it ‘the power of the public purse’.

We really don’t want to relinquish it to any Bank of England sub committee…

The PoMo old school are entitled to favour a different monetary system of course – but I shall certainly not be supporting their zeal when those reforms serve to bake in faults that make the system much worse than the current one.

Comments

  1. Schofield -

    MMT was implemented in 1694 by the private sector in the UK to increase the nation’s public money supply and satisfy greed.

    The creation of the Bank of England in 1694 was the method used to do this.

    It was accompanied by the huge lie from the bank founders that MMT was not being used but intermediation of savings. Few members of the public bothered to ask where the medium of exchange came from in the first place to create the savings.

    The lie has caused unremitting misery even premature death for many in the UK for 327 years now.

    Here is the first empirical test in 320 years which shows how money as a medium of exchange is actually created ex nihilo (from thin air):-

    https://www.sciencedirect.com/science/article/pii/S1057521915001477

    As the follow-on here is the detective story (admittedly long as detective work can be) which uncovers the Bank of England founders’ lie and explaining why it’s been the cause of so much unnecessary pain in the world and continues to be so:-

    https://eprints.soton.ac.uk/429609/1/The_Bank_of_England_A_Socio_Economic_Study_Corrections_final.pdf

    1. Peter May -

      Blimey that is long – it’ll have to be holiday reading – when we ever get any!
      Thanks
      Peter

      1. Schofield -

        Yes it is long but reminds me of the “Line of Duty” TV series but not so convoluted. It’s best printed out in sections or chapters and read slowly because the scales will be dropping from your eyes giving pause for shocked thought. Ivanov is effectively continuing the work of the implications contained in in Werner’s paper. Both papers are key to understanding the last 327 years of British and much of world history.

  2. Mistercorzi -

    That’s quite astonishing. In the article in the first link above they describe a ‘scientific experiment’ on an actual bank where they test the system by taking out a €200000 loan. It seemed to be very difficult to control all other factors e.g. other customer’s activity (described as background noise!). Eventually the ‘credit creation theory of banking’ was the only theory that survived the experimental results. Fascinating! (admission: I never read the whole article in full as I have a life to live. The actual test is described in section 3.2.)

    1. Schofield -

      The point being in the first paper that MMT is embedded in private sector bank software and in the second paper that it was also embedded as the modus operandi for the creation of the English central bank in 1694 (the Bank of England) but covered up by the massive lie (massive in its implications) that the government was receiving the savings of the joint stock holders of that bank. Obviously the lie kicked the can down the road how the medium of exchange was first created to allow those savings.

      The idea for the creation of MMT fiat money was derived from its introduction in 1683 by the Bank of Amsterdam and the practice of English goldsmiths issuing receipts for customers depositing valuables with them.

      https://www.atlantafed.org/-/media/documents/research/publications/wp/2010/wp1017.pdf

      England’s “Glorious Revolution” of 1688 had two motives fighting Catholicism (which was anti-usury) and making money from this fighting!

      1. Peter May -

        Also of course William of Orange was already familiar with ‘Dutch finance’…

  3. Peter May -

    Thanks, Helen Schofield,
    First tentative readings of Ivanov’s paper are very, very interesting.
    I’m beginning to get your idea that all our, post BoE founding, history may be contained within…

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