An Alternative To Complete Freedom To Inflate Prices

L:  I see that most, if not all, of the comments assume that in our fiat money system taxes are used by the government to pay its expenses. Those who assume this are dead wrong. You have to understand MMT and fiat money to realize that NONE of the government’s income pays for ANYTHING. It all is credited to the payees’ liability accounts and then it disappears from the government’s asset account as it goes back into the void from which all fiat money originates. Likewise, the principal and interest paid to lenders and bondholders is created on the spot from thin air, and the phony government liability account balance is simply decreased accordingly by computer keystrokes.

FACT: The government creates NEW fiat money to pay ALL its expenses–including any payment of principal and interest on the “national debt”. NOTE: There would be only bond interest to pay if the Federal Reserve system had not been established. The banksters really pulled off a heist with that arrangement.

Taxes simply suck from M1; they act to diminish the money supply and cause redistribution of wealth (to the benefit of the rich).

Me:  MMT certainly has the mechanics of fiat money correct, and as it recognizes that government deficits are necessary it also is onto the most basic problem of modern economies, namely insufficient aggregate INDIVIDUAL demand THAT IS REALISTICALLY AND ACTUALLY AVAILABLE TO LIQUIDATE A COST-PRICE.

This scarcity is at the base of every other problem in the economy and certain other fallacies like additional money in the economy being the operant reason for “monetary” inflation make it appear as if there is no alternative but austerity.

The problem for MMT and other heterodox economists need to resolve is their adherence to this fallacy. Instead they fall back on liberal orthodoxies on inflation like “automatic stabilizers” and even more off mark conservatives fall back on “inflation will not occur if aggregate demand does not exceed production.”

The actual cause of “monetary” inflation is….there is absolutely no impediment or rational ALTERNATIVE to commercial decision makers, already being afflicted by a scarcity of individual demand, to raising their prices, especially when they see additional demand coming into the economy.

So, if you created a policy alternative that simultaneously increased individual incomes and integrated price deflation into profit making economic systems implemented at the TERMINAL expression point for any and all forms of inflation….you could kill the two birds of individual monetary scarcity and chronic inflation with one stone….and create the thirdness greater oneness of increased individual monetary freedom, monetary abundance for all enterprise and systemic economic free flowingness.

And of course if one then doesn’t have to worry about inflation (or with unemployment with a sufficient universal dividend being paired with a discount/rebate policy as above) then, except for a smallish percentage to establish governmental sovereignty, we could eliminate both income taxation and transfer taxes that everyone pays….and concentrate on directly funding government on all levels….based on and aligned with the concept of grace as in the ultimate rationality of combining the truths in opposites instead of the stupidities and arrogance of obsessive partisan politics.

L:  Craig, I really don’t understand what you are trying to say are problems with MMT from the beginning of your reply to the very end. The understandability seems to get worse as the word count increases. I have no idea what the last paragraph is about.

Me:  The problem with MMT and the rest of heterodoxy is they aren’t looking directly at the infrastructure of all commerce, i.e. double entry bookkeeping, the fact that it and the pricing and money systems are all digital in nature and that hence a digital policy of equal amounts of discount and rebate at the point of sale throughout the entirety of the economic process and also at retail sale would resolve the individual monetary scarcity, systemic monetary austerity and any possibility of price inflation. Instead they get caught up in the complexities and abstractions ABOUT the economy, and they also do not perceive that “monetary” inflation is a misnomer and a fallacy. Now as I said I agree with them about fiat money mechanics….it’s just that they and others are not looking in the place that if integratively researched could result in the policies that will bolster their theories, resolve the deepest and most chronic problems of modern economies and if done so in sufficient abundance elevates those policies to paradigm changing level.

The last paragraph shows how not thinking integratively and paradigmatically insures that economists do not understand the “knock on” benefits of doing so. After all paradigms fit seamlessly within the vast majority of current structures but simultaneously transform them.

L:  MMT is not concerned with microeconomics. It is concerned with macroeconomics only. You seem to be saying that if it doesn’t get into microeconomics it is not valid. Is that what you are saying?

Me: Nope. The scarcity ratio of TOTAL individual incomes to TOTAL costs/prices is an aggregate one, thus macro-economic. I AM talking about how we can most insightfully and intelligently integrate the most basic infrastructure of the micro-economy, double entry bookkeeping and its digital nature so as to create policies that resolve modern economies’ most basic problems and do so with sufficient amounts of the new paradigm of monetary gifting….to make it a genuine paradigm change.

Just play out the two policies of a universal dividend and a 50% discount/rebate at point of sale as they would occur in the temporal universe with the three agents involved, a monetary authority mandated to distribute the monies of the policies, an enterprise and the enterprise’s consumer and you’ll see just how beneficial they will be for the latter two.

We can actually look at the effects of these policies and herd pols in the direction of their implementation or we can figure-figure with theorizing forever and a day, hobby horse less effective policies and hope that we don’t have another 10 years of stagnation, another financial crisis from the continuing build up of individual debt or stumble or be manipulated into a war or something stupid, destructive and unethical like that.

Progressives had better look at these policies and recognize how they accomplish economic democracy in spades and make the system flow freely….or some less orthodox conservative economist will recognize how good it will be for the business community to have twice as much purchasing power available to purchase their products or services and reduce prices by half as well and yet still get their best competitive price with the rebate.

It’s my observation from 10 years of posting about these matters that progressives are only slightly less orthodox than conservatives, but that conservatives are better at recognizing when something is beneficial to their agenda and are willing to go for it as a result. So unless liberals want to have egg on their faces for the umpteenth time….they’d best be open to policies that are truly innovative, integrative and beneficial to all agents except perhaps the illegitimate business model of private banking.

 

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