I think my major problem with Mosler’s theories is that there are two sets of rules. The second set only applies to the the issuer of the fiat currency. It is not applicable to, for example, New York State, or Dutchess County, or the Town of Beekman, or the Arlington Central School District. Because money is not really an issue for the owner of the mint, some policy options are available to the Federal government which are not available to more local governments. More power is available to the Federal government which is not available to local governments. This is a problem if you think, as I do, that certain functions are forbidden the Federal government. This is a problem if you think, as I do, that certain functions are best performed locally.
Suppose, for example, that you are in favor of providing a free education to all citizens. If the town pays for it, then the town will need to float a bond issue, or raise taxes, or otherwise find the funds to provide the education. If the Federal government pays for it, then money’s not an issue.
If the Federal government pays for it, then control is not likely to be local.
It’s simpler if there’s just one set of rules.
I’ve been slowly reading Warren Mosler‘s theories since Zimran Ahmed pointed them out a few weeks ago. They are, to say the least, non-intuitive.
From what I can discern so far, there are two sets of economic rules: Those for mere mortals, and those for the Royal Mint. The former are constrained by a scarce resource; the latter are not.
A couple of weeks ago, Zimran Ahmed tossed out the suggestion that the Federal government send $1 million to each person in the U.S. (Though he said “everyone,” I’m assuming that he means “everyone in the U.S.”)
Current U.S. Census estimates place the population at 305,630,009. So, that’s only $305,630,009,000,000 of new money.
Now, if he meant “in the world,” current estimates place the population at 6,736,197,368. Again, that’s only $6,736,197,368,000,000 in new money.
Because everyone receives the same amount, no one is favored over another — unlike the current plan. What does change is that assets valued in Day-1 dollars are now much cheaper than they are on D-Day. This essentially resets the game by wiping out all current debt, provided the players spend the new money on the old debt, while leaving all players in their same relative positions on the board.
On Day+1, prices will adjust to reflect the influx of money and the penny become extinct. So, how does this grant of new money not lead to hyper-inflation?