Money, a Symbol, Against Rent, a Real Surplus, by Jeffery J. Smith
Neither the borrower nor the lender?
My wallet contained American banknotes. When Congress spent them, it owed no interest on printing dollars and was sometimes not in debt.
Then Congress gave the power to print money, a duty that the (second) US Constitution expected from Congress, to the central bank (which made its notes look like those of the United States). Now Congress is borrowing money from the “Federal Reserve”. To lend US money, the “Fed” uses dollars that never existed before being spent on government bonds. The “Fed” can charge interest, indebting trillions of US dollars in debt.
To erase it, some academics are proposing a “modern monetary theory”. Want a new nuclear bomb? Pay your own new money to the bomb maker. Politicians are back to creating money and the central bank is becoming a toothless tiger. This MMT is neither modern nor theoretical. For most of its history, the United States has printed money and has done well without a central bank.
MMTers propose that politicians spend only on projects the public can use – highways, Medicare for everyone, etc. If the value of these new programs equals the value of the new dollars, then the currency geyser cannot create inflation. And, by using its own new money, the government does not have to tax anyone to fund the programs. No taxes? Who wouldn’t like that?
Suggest that politicians only spend on MMTers’ favorite projects and in fact to persuade the politicians to spend on such projects are two totally different mammoths. Where is the guarantee? Why would politicians suddenly stop subsidizing agribusiness and Bridges to Nowhere? Especially if they could print all the money they wanted? And never had to repay anyone? Nor the fiscal voters? Giving politicians free money is like giving a sixteen-year-old boy car keys and whiskey, then expecting to drive safely. Not very rational.
Debt as a weapon
Currently, instead of printing money, the government sells bonds that it is supposed to pay back with interest. This debt to bond buyers now stands at $ 29 trillion. MMTers offer to print new money to pay off old debts. But so many new dollars in circulation would inflate prices, which would devalue the remuneration of bondholders. To date, the United States has defaulted four times; repay with funny money would be a fifth, not very honorable.
The United States – Federal Reserve and Treasury – loaned central bankers et al 30,000 billion dollars after 2008, which these lucky recipients would have reimbursed. If they can, why not the United States? Especially if Congress shuts down its corporate welfare. And pass one of the current rich tax bills.
The branch in the United States that sells bonds is the Treasury. In fact, the United States does not sell bonds. He hires Goldman Sachs et al to do it. Wall St charges us high fees. Often, Goldman Sachs provides the Treasury with its secretary. Sometimes the United States fines Goldman Sachs and others on Wall Street for their illegal schemes. The broker-managers do not pay the fine but pass it on to the shareholders. Plus, they write off their corporate taxes… even if they never pay the full fine.
When corporations borrow, that loan is not taxed and interest reduces taxed income. Companies also sell bonds to buy back their stocks; paying bondholders is cheaper than paying shareholders, and the managers who sell their stocks pose as bandits. Aren’t the inner cogs much more interesting than the outer cogs?
MMTers face tough sleds. The rich and the powerful don’t want us common people to take advantage of the free money. They want us to pay taxes, which keeps people obedient. They want to buy government debt, which protects their fortunes. Even when U.S. bonds are low earning, 2% of a billion dollars is still $ 20 million each year.
MMTers cannot maintain economics over politics. Of course, the state – the monopoly of legal violence – can spend what it prints. He can do just about anything he wants. But should he? In one-company towns, the company can pay employees with a company certificate, which is good for the rental of company-owned homes and purchases in company-owned stores. But should he?
Another MMT, “Magical Mystery Tour”, was the Beatles’ only commercial flop. MMTers never have to create value in the real world: managing employees or negotiating deals. If they were to get their hands dirty, they would probably think realistically, broadly, deeply, and would be annoyed by inflation.
Debt vs. shared surplus
For the public, bonds are useful.
1, Pension funds own government bonds. If MMTers get rid of them, pension funds might pay retirees nothing if they can’t find a safe replacement investment. If it existed, bonds wouldn’t be that popular.
2, Currently, the government is taking on new debt to pay off old debts – drug addict behavior – and to wage war, to build white elephants, etc. However, if the government were to pay its bonds only from an increase in the value of the site around new projects – no increase, no reimbursement – then no one would buy bonds offering unprofitable plans.
Offering how the government can avoid debt, the MMTers are overdue. They are like the generals who plan how to win the last war. In fact, the government shouldn’t be spending that much; most of it is wasted. As for keeping up with a growing economy, growth kills the biosphere. Like all living things, the economy has matured. It is time to stabilize, to operate in a steady state.
While MMTers remain obsessed with central governments, local co-ops are already issuing money as needed and without interest. For the support, they leave gold and silver for jewelry and tableware. In some systems, producers buy products from others with coupons that sellers use to buy products from other producers. In other trust-based systems, the cooperative issues new tickets to new members who spend them on other people’s products, then sell others their own products. It is those who need to consume who need money, not the producers; they already have assets and need paying customers.
Once a new currency grows sufficiently, the government could grant it legal tender status. It would compete with banknotes issued by a central bank or central government. If any of these currencies behave badly, people will avoid them and those dollars will go the same way as Confederate notes.
If the government needs money, there is no need to shell out unnecessary excess dollars. A huge surplus of wealth is available: the annual rental value of locations like downtowns and resources like petroleum, as well as government-granted privileges like corporate charters and monopoly patents. Now, these values create class and reinforce the hierarchy. The government could recover them… but not necessarily spend them.
Since politicians don’t spend responsibly, take away their discretion. Put the budget on the ballot so voters can vote for or against major categories. Most categories – education, health – can disappear, once citizens get a share of the social surplus, leaving governments with little or nothing to spend.
Once the company has collected and paid all the rent, no one would need the inflation-causing excess dollars. As technological progress lowers costs, prices will follow. So less money, not more, will be needed to invest and produce everything, to sell and buy everything. The challenge will not be to create more money but to destroy it. The company could lock the hood on the economy, and on politics too.
© Text Copyright Jeffery J. Smith All Rights Reserved.