1 Ikus https://www.unibertsitatea.net/blogak/heterodoxia/2015/10/23/warren-mosler-en-liburua-alemanez/.

2 Ikus https://www.unibertsitatea.net/blogak/heterodoxia/2015/09/25/zazpi-gezur-politika-ekonomikoan-warren-mosler-en-aurkezpena-2015/.

3 Ikus http://bilbo.economicoutlook.net/blog/?p=32284.

4 Ingelesez: “… the introduction to the German Translation of my friend Warren Mosler’s 2010 book – The Seven Deadly Innocent Frauds of Economic Policy. The publisher wanted an introduction for the German readership that helped them relate the discussion in the book to the reality in Europe – given that the Economic and Monetary Union is a perverted hybrid of a fixed exchange rate/fiat currency system that works for no-one really.”

5 Ingelesez: “Warren Mosler’s book is a gem in translating very difficult and often abstract concepts about the way modern fiat currency monetary systems function into a language and narrative that is accessible to the intelligent layperson not schooled in the turgid jargon of economics.”

6 Ingelesez: “It also provides a coherent and evidence-based framework for understanding the capacities of a national government that issues its own currency and the opportunities and options that such a government has to improve the well-being of the citizens of that nation through the maintenance of economic stability and efficiency.

As Mosler writes his analysis focuses on the “the operational realities of our monetary system”, which should, in his view, form the basis of any economics study.”

7 Ingelesez: “First, the fraudsters claim that governments, like households, have to live within their means. The means are the financial resources they can muster through taxation or borrowing. However, the household analogy is flawed at the most elemental level.

A national government such as the US or Australia is never revenue constrained because it is the monopoly issuer of the currency. Household spending is always financially constrained because it is the user of the currency that the government issues.

Such a government can never run out of money and thus never needs to generate tax revenue or issue debt in order to spend. Mosler explains in detail what the role of taxation and government borrowing plays given that the government can spend its own currency at will.

A corollary of this myth is the oft-repeated claim that fiscal deficits are inflationary. Mosler clearly shows that all spending in a monetary economy, whether private or public, is open to inflation risk. If nominal spending growth outstrips the capacity of the economy to respond by producing real goods and services, then the result will be that prices will start going up.

But if the goal of the government is to ensure there is full utilisation of productive resources, then the idea that it will keep increasing deficits beyond the point where the net government spending fills the spending shortfall left by non-government savings is ridiculous.”

8 Ingelesez: “Second, the public is regularly apprised of the claim that fiscal deficits have to be repaid and this requires onerous future tax burdens, which force our children and their children to pay for our profligacy. This personalisation of public policy – the deficits will damage our own future generations – is a powerful metaphorical device designed to disabuse us of supporting on-going deficits.

Mosler shows clearly that not only do fiscal deficits underpin economic growth now and contribute to the creation of public infrastructure that provides a flow of benefits for many generations into the future, but that it is absurd to think that we can bring forth future production and consume it today.

Each generation gets to choose its own tax rate and production at some future date will be consumed at that date. What will determine the material well-being of the future generations is the availability of real resources in the future and the productivity rates that transform those resources into goods and services.

A key part of that future potential is how well educated and trained the future workforce is. It is ironic that the ‘innocent frauds’ target government spending on education and health which undermines the capacity of our youth, who will become the future workforce, to become more productive than ourselves. Mosler points out this inconsistency.”

9 Ingelesez: “Third, the fraudsters argue that government borrowing competes with the private sector for scarce available funds and thus drives up interest rates, which reduces private investment — this is the so-called ‘crowding out’ hypothesis that undergraduate students are indoctrinated with in the mainstream teaching programs in economics at our universities.

The corollary is that public use of scarce resources is wasteful because governments are not subject to market discipline.

It is well-known in heterodox economic circles that the building blocks that support the textbook ‘crowding out’ theories have no application in the real world. John Maynard Keynes, among others, long ago showed that total savings are dependent on levels of income and that fiscal deficits stimulate increases in national income which also increases the pool of saving.

So the idea that there is a scarce pool of savings that the government and private industry fight is flawed.

Those that study organisation efficiency and the related areas also categorically dismiss the claim that what is public is inefficient and what is private is efficient. The attribution of efficiency to ownership is erroneous. The Global Financial Crisis most recently demonstrated how poorly private sector decision-making and resource allocation driven by ‘markets’ can be. There are many other glaring examples of how the ‘market’ fails and it is only the resources that the public sector has available to deploy that saves the world from economic meltdown.

Mosler provides a deeper understanding to all this by drawing on his experience in banking to show how banks create deposits through loans, which means that any credit worthy borrower will be able to access credit irrespective of the state of the government deficit.

In fact, if anything, on-going fiscal deficits, through their positive impact on bank reserves (as national income rises), places downward pressure on market interest rates, the exact opposite dynamic to that assumed by the erroneous crowding out theory.

He also demonstrates that it is the central bank that sets the benchmark interest rate.”

10 Ingelesez: “Fourth, Mosler debunks the claims that the US Social Security system which encompasses pensions and health care will go broke and that those in need will be deprived of the benefits of that system. While the analysis is about the US institutional system the fact remains that once we understand that a currency-issuing government is not financially constrained, it is a simple step to also appreciating that any public service can be sustained into perpetuity up to the limits of the real resources available to it.

A currency-issuing government can not guarantee a first-class health system for all into perpetuity. The real resources that might be required to ensure that status may not be available. But if they are, then we also know that the government can always buy them.

In that context, the issue of pensions and health care become political. There is no financial reason why the government cannot ensure there are adequate pensions offered to older people or first-class health care – real resources permitting.

Mosler demonstrates that the constraints on government are real not financial.”

11 Ingelesez: “Fifth, the book debunks the claims that the US trade deficit “takes away jobs” and robs the economy of national income generating output. This myth is tied in with the idea that foreigners fund the American government and may, at some point, stop buying US government debt, which would immediately bankrupt the government.

The book argues that trade deficits, which result from imports being higher than exports, are actually beneficial in material terms. They mean that foreigners are willing to sacrifice more real goods and services than they expect back in return from the nation which means the citizens of the nation are better off.

Living standards are measured in real terms.

It is true that trade alters the pattern of resource usage in a nation and some jobs might disappear as capitalist enterprises see advantages in producing elsewhere. That is the logic of capitalist – to pursue surplus value wherever they can get it.

But, thinking back to the earlier discussion, the US government can, in Mosler’s words:

ALWAYS support domestic output and sustain domestic full employment with fiscal policy (tax cuts and/or govt. spending), even when China, or any other nation, decides to send us real goods and services that displace our industries previously doing that work.

This is not to say that changes in the industrial composition of output are smooth and painless. Workers in the industrial belt of North America have certainly faced the cold winds of capital mobility.

But the resources left idle by these changes can always be brought back into productive use by appropriate government fiscal strategies, even if other supports also have to be put in place (such as, re-training) to make the transitions smooth.

Mosler also demonstrates why the claim that China funds the US government is inapplicable to a fiat currency system. He turns the argument around and notes that “Instead, it’s the foreigners who are dependent on our domestic credit creation process to fund their desire to save $U.S. financial assets”.”

12 Ingelesez: “Sixth, and related to the third is the analysis of the claim that the US needs “need savings to provide the funds for investment”. In the 1930s, economists such as Michał Kalecki knew that ‘spending brings forth its own savings’. This curious phrase just means that when a household, firm or government spends, output and income is generated to provide the goods and services to match the sale.

As noted above, when income rises so does saving. The opposite is true. Keynes talked about the “paradox of thrift” which was his term to describe what happens when politicians extol the population to save more. The paradox is one of several fallacies of composition (errors in logic) that the mainstream economics textbooks fall into when trying to apply what might be true at the individual level to the entire economy.

So if one person is disciplined enough to save more of their weekly income, then their saving to income ratio will rise. The impact on total sales in the economy will be negligible. But if all people attempted the same outcome, total sales would drop significantly, and firms would lay off workers as they cut production. Income would drop in the economy and total savings would drop as a consequence.

The fraud also fails to understand the the banking system creates loans when credit-worthy customers request them. They do not need prior deposits to create the loans and the reserves to back the loans are created afterwards with a final resort to central bank loans always being available if the banking system cannot generate the reserves themselves.”

13 Ingelesez: “Seventh, Mosler considers the claim that “higher deficits today mean higher taxes tomorrow”, a common argument used by conservatives to attack the use of fiscal deficits by governments.

He ties this claim in with his earlier analysis, which shows that a currency-issuing government is not in need of tax revenue in order to spend.”

The use of the term – Innocent Frauds – is Mosler’s generous interpretation of the way that these myths emerge and are sustained in the public domain. Following Galbraith, Mosler takes the softer view, that these myths are the product of ignorance and that:

… those perpetuating the fraud are not only wrong, but also not clever enough to understand what they are actually doing. And any claim of prior understanding becomes an admission of deliberate fraud – an unthinkable self-incrimination.

Among this list of dolts who push ‘innocently’ these tawdry lies are “mainstream economists, the media, and most of all, politicians”.

One could easily dispute the presumption of innocence. There is ample evidence that across each of these cohorts a more sinister agenda pervades – one that is centred on class control and developing conditions that permit the maximum redistribution of national income to the top end of the income distribution.

Many of these myths pressure us into believing that our governments are bankrupt, that our grandchildren are being enslaved by rising public debt burdens and that hyperinflation is imminent among other maladies that result from governments running fiscal deficits.

Many are perpetrated by conservatives, some of whom were direct beneficiaries of bailout packages in the early days of the crisis. They were silent then as the public handouts were directed to them.”

Mosler should have included the role of the think tanks in his cast of liars. The organisations receive massive funding from conservative sources and pump out these ‘frauds’ on a daily basis and brief journalists to spread the lies.

There is really nothing innocent about it. But that is another story.”

14 Ingelesez: “The use of the term – Innocent Frauds – is Mosler’s generous interpretation of the way that these myths emerge and are sustained in the public domain. Following Galbraith, Mosler takes the softer view, that these myths are the product of ignorance and that:

… those perpetuating the fraud are not only wrong, but also not clever enough to understand what they are actually doing. And any claim of prior understanding becomes an admission of deliberate fraud – an unthinkable self-incrimination.

Among this list of dolts who push ‘innocently’ these tawdry lies are “mainstream economists, the media, and most of all, politicians”.

One could easily dispute the presumption of innocence. There is ample evidence that across each of these cohorts a more sinister agenda pervades – one that is centred on class control and developing conditions that permit the maximum redistribution of national income to the top end of the income distribution.

Many of these myths pressure us into believing that our governments are bankrupt, that our grandchildren are being enslaved by rising public debt burdens and that hyperinflation is imminent among other maladies that result from governments running fiscal deficits.

Many are perpetrated by conservatives, some of whom were direct beneficiaries of bailout packages in the early days of the crisis. They were silent then as the public handouts were directed to them.”

Mosler should have included the role of the think tanks in his cast of liars. The organisations receive massive funding from conservative sources and pump out these ‘frauds’ on a daily basis and brief journalists to spread the lies.

There is really nothing innocent about it. But that is another story.”