Warren Mosler-en Congress: You Are the Scorekeepers for the U.S. Dollar, Not a Player!1
(Warren Mosler Fixed income fund manager specializing in monetary policy; Founder, MMT)
(i) 2011n, karta joko berezi bat: jokalariak eta markagailuaren arduraduna (Kongresua)2
(ii) Markagailuaren arduraduna eta jokalaria3
(iii) Analogia zuzena4
(iv) Galderak markagailuaren arduradunari5
(v) Kongresua: dolarrerako markagailuaren arduraduna6
(vi) Kongresuaren gastua eta zergak7
(vii) Kongresua gastua, zergak eta aurrezkiak8
(viii) Fed (banku zentrala) eta bankuen eta parte hatzen duteneko gobernuen kontuak9
(ix)Txina eta AEB10
(x) Gobernuaren ‘mailegu hartzea’ eta ‘zorra’: zorra eta aurrezkiak11
(xi) Fed-en (banku zentrala) rola12
(xii) Defizitak, errenta eta aurrezkiak13
(xiii) Grezia14
(xiv) Ez dago finantza krisia AEBko gobernuarentzat15
(xv) Inflazioa16
(xvi) Jakitea da kontua17
Argi? Ados?
Ados bazaude, ondokoak jakingo dituzu, agian:
(1) Europar Banku Zentrala (EBZ) euroaren Scorekeepers, aka, ‘markagailuaren’ arduraduna da
(2) EBZ-k ‘puntuak’, euroak, sortzen ditu, inongo kosturik gabe, teklatuaren bidez
(3) EBZ-k Europako banku zentralei (Espainiako, Frantziako, …, Alemaniako) euroak luzatu diezazkie, kostua zero izanik
(4) Ez dago Europar Batasunean, EBZ dela eta, inongo solbentziaren arriskurik edozein delarik haren ‘zorra’
Hortaz, Europako, Espainiako eta Euskal Herriko ekonomialari gehienek, guztiek?, ez dakite zertan ari diren.
Argi? Ados?
Mosler-ekin ados bazaude, ulertuko zenuke agian, aspaldian Euskal Herriarentzat proposatu duguna, alegia, ondoko hauek18:
(a) Proposta economica MMT per Italia (edo Euskal Herrirentzat) —> Defizit publikoa %3tik %8ra igotzea, zeren baitakigu dirua non dagoen: EBZn!
(Ikus Non dago dirua Europar Batasunean?)19
Eta hori onartzen ez badute…, Dare un ultimatum all’Unione Europea.
Eta orduan, eta soilik orduan, hona hemen zer egin beharko genuke:
(b) Italia (edo Euskal Estatua) moneta berria (kasu, lira Italian edo euskoa Euskal Herrian) jaulkitzen hastea, baita moneta berri horretan zergapetzen hastea ere, enplegu osorako beharrezkoa den defizit publikoa erabiliz
Zeregin horretan,
(c) Italiak (edo Euskal Estatuak) ez ditu automatikoki banku gordailuak liratan (euskotan) bilakatuko
(d) Italiak (edo Euskal Estatuak, hots, Euskal Errepublikak) bere Banku Zentralari tramitatuko dio moneta berriko gordailuen %100aren bermea
(e) Italiak (edo Euskal Estatu independenteak), denbora osoan, aldi baterako eta modu iragankorrean, lanpostu bat eskainiko dio lan egin nahi duen eta prest dagoen edozeini, Banku Zentralak finantzatuz
Gehigarriak Euskal Herriarentzat:
(i) Litekeena ote eurogunean austeritatearekin bukatzea?19
(ii) Bideragarria ote da euskal estatu independentea?20
(iii) DTM lau eskematan (euroa eta lira)21
(iv) Ongi etorri euskoa!22
Argi? Ados?
2 Ingelesez: “Imagine a card game, where every entity in the economy is one of the players, and you, Congress, are the scorekeeper.”
3 Ingelesez: “The message here is the difference between being the scorekeeper and being a player. The problem is, you are acting like one of the players when, in fact, you are the scorekeeper. Moreover, you support your mistake with false analogies that presume you are one of the players, when, in fact, you are the scorekeeper for the dollar.”
4 Ingelesez: “That correct analogy is for scorekeepers in card games and your role as scorekeeper for the U.S. dollar. As scorekeeper in a card game, you keep track of how many points everyone has. You award points to players with winning hands. You subtract points from players with losing hands.”
5 Ingelesez: “That correct analogy is for scorekeepers in card games and your role as scorekeeper for the U.S. dollar. As scorekeeper in a card game, you keep track of how many points everyone has. You award points to players with winning hands. You subtract points from players with losing hands.
So as the scorekeeper, let me ask you:
How many points do you have?
. Can the scorekeeper run out of points?
. When you award points to players with winning hands, where do those points come from?
. When the scorekeeper subtracts points from players with losing hands, does he have more points?
. Do you understand the difference between being the scorekeeper and being the players?”
6 Ingelesez: “Congress, you are the scorekeeper for the U.S. dollar.
You spend by marking up numbers in bank accounts at your Fed, just like your Fed Chairman Bernanke has testified before you.
When you tax, the Fed marks numbers down in bank accounts. Yes, the Fed accounts for what it does, but doesn’t actually get anything,
Just like the scorekeeper of a card game doesn’t get any points himself when he subtracts points from the players.”
7 Ingelesez: “When Congress spends more than it taxes, it’s just like the scorekeeper of the card game awarding more points to the players’ scores than he subtracts from their scores.
What happens to the players total score when that happens? It goes up by exactly that amount. To the point.”
8 Ingelesez: “What happens to dollar savings in the economy when Congress spends more than it taxes?
It goes up by exactly that amount. To the penny.
The score keeper in a the card game keeps track of everyone’s score. The players’ scores are accounted for by the scorekeeper. The score keeper keeps the books.”
9 Ingelesez: “Likewise, the Fed accounts for what it does. The Fed keeps accounts for all the dollars all its member banks and participating governments hold in their accounts at the Fed.
That’s what accounts are — record keeping entries.”
10 Ingelesez: “So when China sells us goods and services and gets paid in dollars, your Fed — the scorekeeper for the dollar — marks up (credits) the number in their reserve account at the Fed.
When China buys U.S. Treasury securities, your Fed marks down (debits) the number in their reserve account and marks up (credits) the number in China’s securities account at your Fed.”
11 Ingelesez: “That is what ‘government borrowing’ and ‘government debt’ is — the shifting of dollars from reserve accounts to securities accounts at your Fed.
Yes, there are some $14 trillion in securities accounts at your Fed. This represents the dollars the economy has left after your Fed added to our accounts when your Treasury spent, and subtracted from our accounts when your IRS taxed.
It also happens to be the economy’s total net savings of dollars.
Paying back the debt is the reverse. It happens this way: your Fed, the scorekeeper, shifts dollars from securities accounts to reserve accounts. Again, all on it’s own books. (1 trilioi amerikar = 1 bilioi europar)
12 Ingelesez: “This is done for billions of dollars every month. There are no grandchildren involved.
The Fed, the scorekeeper, can’t ‘run out of money’ as you’ve all presumed. The Fed, the scorekeeper, spends by marking up numbers in accounts with its computer. This operation has nothing to with either:
(1) ‘debt management,’ which oversees the shifting of dollars between reserve accounts and securities accounts, or
(2) the internal revenue service which oversees the subtraction of balances from bank reserve accounts.”
(1 biloi amerikar = mila milioi europar)
13 Ingelesez: “And so yes, your deficits of recent years have added that many dollars to global dollar income and savings, to the penny. Just ask anyone at the CBO.
It is no coincidence that savings goes up every time the deficit goes up. It’s the same dollars that you deficit spend that necessarily become our dollar savings. To the penny.”
14 Ingelesez: “A word about Greece. Greece is not the scorekeeper for the euro, any more than the U.S. states are scorekeepers for the dollar. The European Central Bank is the scorekeeper for the euro, not Greece.
Greece and the other euro member nations, like the U.S. states, are players, and players can run out of points and default, and look to the scorekeeper for a bailout.
What does this mean?”
15 Ingelesez: “There is no looming financial crisis for the U.S. Government, the scorekeeper for the U.S. dollar.
The U.S. Government can’t run out of dollars, and it is not dependent on taxing or borrowing to be able to spend. That sky is not falling. Ever.”
16 Ingelesez: “Let me conclude by stating that the risk of under taxing and/or overspending is inflation, but NEVER insolvency and monetary inflation comes from trying to buy more than there is for sale, which drives up prices.
But, as they say, to get out of a hole first you have to stop digging. I don’t think you, or anyone else, believes acceptable price stability requires 16% unemployment?
Someday there may be excess demand from people with dollars to spend for labor, housing, and all the other goods and services that are currently and desperately looking for buyers with dollars to spend. However, today excess capacity rules.”
17 Ingelesez: “An informed Congress that recognizes it’s role of scorekeeper and recognizes the desperate shortage of consumer dollars for business to compete for, would be debating a compromise combination of tax cuts and spending increases.
Instead, presuming itself to be a player rather than scorekeeper, Congress continues to act as if we could become the next Greece, as it continues to repress the economy and turn us into the next Japan.”
19 Gogoratu:”
Draghi unusually offguard could have answerd: ECB is monopolist of euro, can’t run out of money, money is not wealth
(…) ECB can’t run out of money: https://www.youtube.com/watch?v=Xda78gNm72o
“So ECB can create money at will. ECB can create as much debt free physical or digital cash as they want. But only big banks (tier1 banks) are allowed to get digital cash since they are the only ones holding central banks accounts. The rest of the society are force into debt to the banks since the only money (besides physical cash) the society can get hold on are the banks so called “credit” that the banks create out of nothing and “lend” out. So why not let ECB create debt free digital cash so that the society can pay off their the debts the banks created from nothing? The simple reason is that the banks don’t wont to lose their debts slaves.”
As Fredrick Soddy, Nobel Prize winner in chemistry, put it:
“There is nothing left now for us but to get ever deeper and deeper into debt to the banking system in order to provide the increasing amounts of money the nation requires for its expansion and growth. An honest money system is the only alternative.”
Berriz:
“… why not let ECB create debt free digital cash so that the society can pay off their the debts the banks created from nothing?”
19 Ikus https://www.unibertsitatea.net/otarrea/gizarte-zientziak/ekonomia/litekeena-ote-eurogunean-austeritatearekin.
20 Ikus https://www.unibertsitatea.net/otarrea/gizarte-zientziak/ekonomia/bideragarria-ote-da-euskal-estatu-independentea.
201 Ikus https://www.unibertsitatea.net/otarrea/gizarte-zientziak/ekonomia/dtm-lau-eskematan-euroa-eta-lira.
joseba says:
AEBko Kongresuaren aurreko proposamenak (W. Mosler)
Warren Mosler-en Proposals before Congress
In Trade, Inventories, Proposals before Congress (http://moslereconomics.com/2016/12/29/trade-inventories-proposals-congress/)
All of this ties into proposed trade policies designed to reduce imports and increase exports, for the further purpose of increasing domestic output and employment:
The questions begin with what this would do to the value of the $US. Mainstream theory concludes that, all else equal, the $ would appreciate to offset the price effects of the ‘border adjustments’. While I agree $ appreciation would offset the price effects, given the forces currently at work I don’t see them pushing things in that direction.
First, mainstream theory would say the current trade balances should ‘fundamentally’ be driving the dollar lower. The US has a large and growing trade deficit, while the euro zone has a large and growing trade surplus, with China also in surplus and Japan working its way back to surplus, etc.
However, while trade has been ‘fundamentally’ working against the $, portfolio shifting, a ‘technical’ force, has been going the other way. (Personally I often use the term ‘savings desires’ to indicate the various desires to hold financial assets of a particular currency.) As previously discussed, for example, the euro area had ‘capital outflows’ of over 500 billion euro over the last year or so, which means portfolio managers of all types with euro financial assets sold them and switched to financial assets denominated in other currencies, such as $US, yen, and Swiss francs (with the Swiss National Bank then selling maybe half of the euros they bought and buying $US). This would be analogous to a crop failure such as the corn crop being reduced by drought, for example. The drop in supply would be a force that would put upward pressure on the price of corn. However, is a company with a very large warehouse full of corn decided to sell it, that selling could dominate and drive the price lower, until the warehouse was empty. Only at that point would the effects of the crop failure dominate, and then drive the price higher.
So technicals (portfolio shifting) can overwhelm fundamentals (trade balances) for long periods of time until the technical force has run its course, and the warehouse is either empty or as low as the portfolio manager wants it to be. In fact, this time around, while the trade flows were presumed to reduce the US trade deficit via lower prices for imported oil, and therefore be supportive of the $, it didn’t work out that way, however, as lower oil prices were partially ‘offset’ by reductions of global income from the lower oil prices, which reduced US exports, and increasing US consumer related imports.
Second, I’m not comfortable with the idea that US export prices will go down if the revenues are no longer taxed. Prices in this case are ‘world prices’ and to the extent the US exporters are ‘price takers’ I don’t see how a lower cost of goods will necessarily result in a drop in global prices any more than, for example, reducing income taxes on oil would cause the price of oil to fall. Yes, longer term, lower costs might bring out more supply, but that’s a different and much longer term story.
Nor do I see the quantities of US exports going up even if the proposed border tax policy results in a reduction in the price of US exports, given the general weakness of global demand. And more specifically, who would buy more US exports if prices were maybe 15% lower, for example? China? Japan? India? I don’t see it.
Third, I do see US imports softening with the proposed import tax, which means an equal reduction of $ revenues to the rest of the world, which means they are likely to buy fewer US exports. This is similar to what happened when the price of oil fell, and the US spent less buying oil from the rest of the world, and that reduction of $ income reduced the demand for US exports.
This is also a strong channel for a general reduction in global aggregate demand.
Now back to the value of the $. Yes, the border tax policy could over time reduce the US trade deficit and thereby be a fundamental force that works towards $ appreciation. However, current fundamentals- the growing US trade deficits- have been and are currently working in the other direction. So what I happening would be a moderation of the fundamental trade flows that have been and are currently working to weaken the $, even as the portfolio managers- the technical forces- continue to deplete their non $ currencies and buy $. And when those currency warehouses are depleted, current trade flows will take over and drive the $ down until they reverse, with the proposed border tax policy perhaps slowing the $’s fall.
To sum up, the way I see it is the current fundamentals overwhelmingly negative for the $, with the proposed border adjustment tax policy at best a much smaller force in the other direction.
Not to mention I’m categorically against it all for more macro reasons. Imports are real benefits and exports real costs, the difference being real terms of trade, which are optimized by running as large a trade deficit as possible. And any lack of aggregate demand for domestic goods and services that results in undesired unemployment if instead best addressed by a fiscal adjustment- lower taxes or more public spending. But in a world where that understanding doesn’t exist, we get these types of highly counterproductive proposals that ultimately and necessarily make things worse.
Post script:
Seems to me it’s just a matter of time before Trump proposes the US start buying and building foreign exchange reserves to counter the strong $, which he has said many time is about ‘currency manipulation’. With the general notion that his other proposals, such as repatriation, will also have strong $ biases, seems to me it’s just a matter of time until we see fx purchases proposed?