Modern Monetary Theory and Chartalism

Miscellaneous General
1

I was reading Bill Anderson’s blog right now, and I saw a man called AP Lerner posting in comments. He endorsed a Tea Party candidate for United States called Warren Mosler, who has 37 years of experience in finance and is a proponent of the Modern Monetary Theory.Bill Anderson called his views by a more archaic name called Chartalism, and I don’t know what it is.

I was sitting there, trying to understand how or why AP Lerner kept saying that the public deficit is a private surplus and other things. Hell, I still have no clue what it means.

I swear to you, anything that sounds alien to me, I reject. On those grounds, I have rejected many things said by, um, free market economists, or rather other schools of free market economics. I am a layman, and I need to be explained as a layman. The ideas of the Austrian School stood the same risk of being rejected by me, but Rothbard’s explanation of money was just too straightforward for me and was written in a manner too easily understood by a common man on the street like me. Unlike some of the fairy tales spun by other economics writers, I didn’t have to force it down like a rock my oesophagus to pretend I understood it. As a layman, I stand the chance of being conned, and I don’t like being conned. It’s a safety measure, where I am predisposed to hate intellectuals.

I understand we all need to do our homework and can’t go by the crude internet summary of even the professionals. So I looked up the proper books on Charlatism. There is a problem - there aren’t any. There are books on money which have small sections on it, but not a book proper by itself. It’s a fringe to the fringe. The Mises blog did have a list of comments by MMTers, and I, um, felt a chill run down my spine.

At no point did they say anything that - to a layman like me - comes close to a coherent thought. May God have mercy on their souls.

The Seven Deadly Innocent Frauds of Economic Policy
2

This Chartalism is really an unfortunate name for calling an economic school, since it’s often been misread as ‘Charlatism’, as if a bunch of charlatans didn’t bother coming up with a better name.

I understand why they would now call it “Modern Monetary Theory”, making it cool sounding and such.

But anyways, here is a thread which may help:

[url]Public deficits = net private savings]

3

Here’s how it works operationally.

Tsy spending credits an account at the Fed called a reserve account. think of it as a ‘checking account’ as that what a commercial bank might call it.

Tsy securities are called ‘securities accounts’ at the Fed. Think of a US Treasury security as a ‘savings account’ or ‘CD’ at the Fed, as that’s what a commercial bank might call it.

when a Tsy sec is bought by the private sector, the Fed debits their ‘checking account’ at the fed and credits their ‘savings account’ at the fed.

And when a Tsy sec matures the Fed debits their savings account and credits their checking account (including interest)

To recap- buying the ‘debt’ means moving dollars from checking to savings, paying off the debt is nothing more than moving dollars from savings to checking.

this isn’t theory, just operational reality

This shift from checking to savings was critical under the gold standard as funds in checking accounts at the fed were directly convertible into gold, while funds in savings accounts were not convertible until maturity. This was no longer applicable after convertibility was suspended many decades ago.

see;

http://www.moslereconomics.com/?p=8662/

Warren Mosler

4

This Chartalism is really an unfortunate name for calling an economic school, since it’s often been misread as ‘Charlatism’, as if a bunch of charlatans didn’t bother coming up with a better name.

I think ‘Charlatanism’ is a good name for it.

But seriously it seems to be Keynesianism run amok.