After getting some feedback, I decided to create a new section that can be subscribe to all and subscribe to separately from the main newsletter. This section “MMT for the Rest of Us”will be as close as I can go to a plain English introduction of modern monetary theory, MMT.
I do not know how often I will publish in this section but if there is something you do you not understand, please reach out.
I realised only a paid post with a preview was going out today, so I added this to our BRAND NEW section!
What follows is a repost from the main newsletter.
This is a post for those new to understanding Modern Money (MMT).
This post lays it out as simply as possible. This is MMT in a nutshell.
The Australian Dollar $A is a tax credit.
It is a unit of measure.
You can't run out of metres.
You can't run out of numbers
The government can't run out of dollars...
unless it purposely and politically chooses.
Since the $A is a mere tax credit and a unit of measure, it is neither precious nor permanent.
A dollar is an IOU.
When it is spent into existence a debt is born.
When it is taxed out of existence a debt is washed away.
You do something for me – a debt. This is in effect spending, creating an IOU that I hold, just like a dollar.
I do something for you – a credit. This is in effect taxing. This is me repaying the IOU that I held back to you.
Thus, a dollar also forms a community credit/debit system.
All money is debt. So, reducing the national debt means reducing the national money supply.
Dollars are not reused A dollar is spent once into existence. It circulates within the economy and is destroyed once it is returned as a tax. More precisely, it drains reserves at the RBA and is destroyed. There is *NO* PRINTING MONEY!!!!
Government spending is simply marking up accounts and taxation is marking them down. Dollars are constantly created and constantly destroyed daily. DAILY!!!! There is no such thing as paying for programs. The government neither has nor doesn't have dollars.
Dollars are created every time the government seeks to provision itself and deposits are made into their account for spending... via keystrokes on a keyboard.
Dollars are deleted, destroyed, and shredded when received as tax. Get it? So why are we always talking about the government going broke?
It cannot go broke.
Why are we always talking about reducing the deficit or lowering the debt? The National Debt is merely… wait for it... The sum total, to the dollar of every untaxed dollar in existence since the start of the national currency.
To pay off the debt is to DELETE, Destroy EVERY dollar in the economy.
That is to take every dollar out of any rainy-day fund you have whether it is under your mattress, in an envelope or in a bank account. Is that what you really want?
What needs & necessary services are we missing out on because people do not know this?
Taxes are perceived to fund spending as they create ‘spending room’ but they do not fund nor finance. It is not about the dollar but the real resources, land, labour, equipment, services, etc.
A long time ago we knew spending funds taxes, that the national debt is our collective assets and the things we own but these tales got turned on their head.
An important distinction exists between the currency issuer & currency users.
The Federal Government is the currency issuer. It has no means to live beyond.
It creates money at will when Parliament authorises it.
States like New York or New South Wales, counties, provinces and non-sovereign zones such as the Euro currency area are revenue constrained.
States (NSW) and individuals cannot spend without borrowing, earning or taxing.
Nation States (Australia) spend currency into existence.
States and individuals have to get it first.
Whatever is technically feasible is financially possible!