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View Diary: Who can own the future? (262 comments)

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  •  This was a really well written and knowledgeable (11+ / 0-)

    piece, great work.

    The only realistic solutions to the problem of funding these great, costly scientific projects can be found through the economic understanding of Modern Monetary Theory or MMT.  MMT is the only school of economic thought that actually analyzes the monetary and economic systems through the realization that the gold standard and convertible currency days are over, the era of truly fiat currency is here to stay.  And as such, there can be no such thing as running out of the US dollar.  Its a simple invention that can only be exchanged for itself and 98% of all US dollars are actually digital entries at banks and other financial institutions.  How is this relevant?

    Lets take for example the idea of the US federal Govt funding extensively multiple experimental facilities for different approaches to achieving fusion power.  How much would it cost?  $100 billion a year?  $300 billion?  The point is that it doesn't matter what the number is the Govt could create the money to do it. It creates money every day all the time, so its not like the notion of "printing money" is crazy, just not really applicable to how the monetary system works, its more data entry in ledgers than anything else.  The real impact of that much investment is on the real economy side.  Will employing that many scientists and engineers from around the country and world cause inflation?  I don't see how the federal Govt employing an extra 100,000 to 500,000 people would be disastrously inflationary, does anyone else?  And the thing is, building high tech science like this (or spaceflight) doesn't really drive up the prices of commodities generally since the costs are usually in the very technically specific and unique fabrication and not in bulk buying.  Compare this example to the amount of resources (concrete, steel, excavators, gravel, etc etc) spending $100s billion per year on building new roads and bridges would require.  

    In conclusion, the point that I'm trying to make is that the only thing holding us back from making the kind of investments that would prevent this great general failing of civilization that you postulated so eloquently here; is our inability to get past our antiquated gold standard notions about the Federal Govts budget operating the same way as a household or business budget.  Namely, that like everyone, the Govt must earn income or borrow money BEFORE it can spend and therefore, the Govt must remove as much money from the private economy through taxes as it adds to the private economy through spending, or in other words, have a balanced budget.  The Govt can not run out of US dollars, Congress created the US dollar, the modern Federal Reserve Note in 1913.  We need to stop thinking of deficits as morally bad and start to understand that the Govt's deficit is simply the amount of NET NEW money that Govt adds to the private and foreign sectors each year.

    "The Earth is my country and Science my religion" Christiaan Huygens.................... Please join our Kos group "Money and Public Purpose". The gold standard ended on August 15, 1971, its time we start acting like it.

    by Auburn Parks on Sun Jul 14, 2013 at 07:05:24 AM PDT

    •  What MMT does (1+ / 0-)
      Recommended by:
      Subterranean

      What MMT does is usurp labor through the taxing process.  We can usurp labor for the type activity you describe and I agree inflation would not be a consideration.  It is only if we want that product as a society.  People doing your research couldn't do other research.

      The other thing is that the reason spending doesn't increase inflation is because it produces utility - that is a good.  If we just credited everyone's bank account without producing additional utility we would have lots more $ chasing the same amount of goods and that would produce inflation.  That's not what MMT advocates.  

      The question here is what kind of utility would we get.  My guess it would be substantial.

      This is just my understanding of MMT - I am always grateful for correction.  I might join your group.  

      •  You are 100% correct that the question is always (5+ / 0-)

        "what is the utility of this investment, what is the social good and productivity increase that this investment will create" and never "can we afford this investment as a society".

        You did a nice job of describing MMT thinking, but I would just add one simple caveat to this sentence:
        "If we just credited everyone's bank account without producing additional utility we would have lots more $ chasing the same amount of goods and that would produce inflation."

        I would add "When the private economy is running at full capacity.........if we just credited everyone's bank account without producing additional utility we would have lots more $ chasing the same amount of goods and that would produce inflation"

        The reason MMT would put it this way is because if there is plenty unused productive capacity due to low aggregate demand stemming from high unemployment, then adding additional spending power to people (instead of a lump sum payment into everyone's bank account, you could equivalently just cut broad based taxes like FICA to accomplish the same economic effect of giving people more spending capacity), would go towards increasing sales and thus employment.  Increasing employment would increase the number of goods and services produced, so even if there was more money, it would be chasing more goods and services so you could have a net zero effect as far as inflation when you are doing this from a high unemployment rate position.  Now if the unemployment rate was 3%, and we implemented a large FICA tax cut, or increased Govt spending significantly, we would already be near our maximum ability to produce and then we would more likely get inflationary pressure.

        A good way to think about and summarize the rule of thumb is as follows:

        If unemployment is too high => the deficit is too small
        If inflation is too high => the deficit is too large.

        Always remember that inflation is a combination of 4 factors:
        M x V = P x Q
        (M)oney supply
        (V)elocity of money
        (P)rice level (inflation)
        (Q)uantity of goods and services for sale

        If the money supply increases and goods stay the same, we could not have inflation in the velocity of money were to drop a corresponding amount.  There is always more to it than just "More money = more inflation".  Thats a right wing myth.

        You have a much clearer understanding than many people so thats good

        "The Earth is my country and Science my religion" Christiaan Huygens.................... Please join our Kos group "Money and Public Purpose". The gold standard ended on August 15, 1971, its time we start acting like it.

        by Auburn Parks on Sun Jul 14, 2013 at 09:55:42 AM PDT

        [ Parent ]

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