Finding The Money, Part II

Money, money, money! Not ideas, not principles, but money. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ May 8, 2024 Finding The Money, Part II “It is money, money, money! Not ideas, not principles, but money that reigns supreme in American politics.” – Robert Byrd [Reminder: In case you missed [our announcement]( The Essential Investor has merged with legacy contributors to Agora Financial. The new, larger, more inclusive project is called The Grey Swan Investment Fraternity. If you’re interested in the scope and benefits of our new endeavor, please see what prompted us to merge [here](. If you’ve been a member of The Essential Investor, keep an eye out for your new benefits.] Dear [Reader], May 8, 2024 – “You’d have thought the Modern Monetary Theory (MMT) kool-aid drinkers would have hung their heads in shame or at least re-buried them in the sand,” writes Dan Denning, commenting on the documentary [Finding The Money]( We introduced the doc yesterday for the purpose of igniting a debate. “The 20% shift higher in the price level from Covid proved beyond a doubt that money printing for the sake of public policy goals is wildly inflationary. It ruins lives and destroys savings.” But more than shy away, “the clowns and jokers are back.” Maren Poitras is the film’s director and producer. This is the third film she’s worked on. Originally from the California Bay Area, Poitras has a background in environmental science and agriculture from UC Berkeley. Her interest in MMT began while facing the challenge of finding support and funding for environmental public-policy programs she deems to be important for all of mankind. Below, I selected Poitras’ description of MMT and the context in which Finding The Money was conceived and has been produced. It’s a bit of a slog, but worth getting through so you can understand whence these ideas have been derived. Give it a shot. ~~ Addison (How did we get here?  An alternative view of the financial, economic, and political history of the United States from [Demise of the Dollar]( through [Financial Reckoning Day]( and on to [Empire of Debt]( all three books are available in their third post-pandemic editions.) (Or… simply pre-order [Empire of Debt: We Came, We Saw, We Borrowed]( now available at [Amazon]( and[Barnes & Noble]( or if you prefer one of these sites:[Bookshop.org]( [Books-A-Million]( or [Target]( CONTINUED BELOW... >>ADVERTISEMENT<< Mysterious Gold Leverage Just Announced As gold continues to break all-time highs, many folks will run out and buy bullion or mining stocks. That's not the best way to ride this gold bull market higher. Note, this showed a 995% gain the last time we shared this same investment idea. [Click here to find out what to do.]( CONTINUED... Finding the Money – There’s Another Side to the National Debt [Maren Poitras, Director and Producer]( When I set out to examine the heated conflict which exists around the story of MMT, I endeavored to speak with critics from all sides of the political spectrum to find the core areas of disagreement. Where does MMT go wrong in their description of the modern monetary system? This venture was obfuscated by a certain amount of misunderstanding of the assertions made by MMT scholars, as most critics preferred to critique popular mischaracterizations rather than direct quotes. But it seemed to me the crux of the debate continually led back to the story we tell about the nature of money itself. What is it actually, and does it come from the private market or from the government? (Hint: the word ‘money’ itself is far too vague. If you are careful to refer to which currency or financial instrument you are speaking of, it is much easier to trace where it comes from.) Early in the film we introduce the story of barter, the simple origin story of money told in almost every economics textbook. It is this “myth of barter” or “gold story”, which has been called the “foundational myth of economics.” According to this story, first there was barter, i.e. a free market. But to solve the problem that exists when I don’t have what you want, exactly when you want it (in econo-speak the “double coincidence of wants”) the free market invents money as a medium of exchange. A commodity is chosen as an intermediary which has value due to its qualities of scarcity, portability, divisibility, durability, etc. In ancient times ‘the market’ supposedly settled upon gold, as an inherently valuable object and the best medium of exchange. (And in modern times that scarce object could just as easily be bitcoin, which of course must also be “mined” and its supply constrained.) The only problem is, there is no historical or anthropological evidence for the existence of a society organized around a barter market system, let alone the evolution from that system, of money and a monetary market. The MMT or “Chartalist” school counters that money evolved through the process of accounting for and moving real resources. As civilizations became more complex and hierarchical, endeavoring to move resources towards a center, or build infrastructure such as canals for irrigating agriculture, or build roads and armies, they first imposed taxes on their population in ‘real things’: bushels of wheat, cows, goats, or hours of labor. Money evolves as a measure of accounting for the movement of these real resources, first simply as a virtual measure of credits and debts on ledgers or balance sheets, and then evolving into physical records or “token” forms of tax payment. Known as ‘tax-driven’ money, this school posits what gives currency its value is not simply its scarcity, but the political power of the issuer — whether democratic government, dictatorship, king, or commune — and the issuer’s ability to enforce taxation in order to move resources. The value of the currency is thereby initially determined by what you have to do to get that currency from the issuer - the price the government pays for labor and goods. Gold coins of the past also fall under this category of a “token” currency— a physical representation of a ‘tax credit’— which is the ‘IOU’, liability, or debt of the issuing authority. The authority promises to accept this credit token in payment of taxes owed by any individual in the realm. The physical material on which the tax credit is recorded or ‘printed’ was usually chosen for its anti-counterfeiting technologies, rather than its inherent value; such as tally sticks in medieval Europe, which used the unique pattern of a wood’s grain to prevent tampering. Here we find the definition of a national debt of a currency issuer, such as the US, not as the amount of ‘money’ borrowed, but simply the number of dollars (tax credits) spent by the federal government and not yet taxed back. That is, the recorded number of IOUs or liabilities outstanding, currently held as assets in taxpayer’s pockets or bank accounts. Money always has two sides, like balance sheets: an equal credit and debt, or asset and liability. This story of money posits the exact reverse of the story presented in the textbooks. Rather than the natural existence of private free markets first, who later invent money, and only later do government authorities come along to tax some of that money away for its own purposes… a historical analysis might find political authorities evolving first, inventing money as a tool for increasing the efficiency of taxation systems, and only after this establishment of both a monetary unit of account and laws to enforce private property and punish theft, can we see the evolution of markets. As Randall Wray states in the film, “there has never been a market economy with no government”. Indeed, often the stronger the government the stronger the currency and markets. We typically don’t find well-functioning and prosperous ‘free markets’ in nations with weak, ‘hands-off’, or corrupt governments. If we believe money is a natural physical object like gold, that exists outside the realm of human political boundaries, and if we believe the ‘free market’ is a natural phenomenon and a ‘natural force’, then government is an inefficient intrusion upon a balanced system that is best left alone. Even if that system produces very high levels of inequality, it must be natural and still better than any alternative. But if government is in fact the organizing political force which enables money and markets to exist in the first place— and without which indeed neither could function— we can see more clearly the role of government in the modern economy, and in shaping outcomes. Due to mainstream economic ideology and a belief that the government simply “doesn’t have the money”, for decades we have left the green energy transition to the private ‘free market’ to inch along with incredibly meager research and investment based upon consumer demand, not nearly meeting the enormity of the societal mobilization required. We have thus wasted precious decades of what could have been a concerted research and mobilization effort to build out the needed public infrastructure to decarbonize the economy and ensure a just and equitable transition to avoid climate calamity. Rather than a ‘natural force’ or the study of a natural system, economics can be simply defined as the way in which a society chooses to produce and distribute the resources necessary for that society to exist. And those are inherently political decisions— not natural inevitabilities. Rather than a scarce real resource itself, the alternative story presents money as a public utility and an organizing tool for the production and distribution of the real resources of a society. And in a democracy we all get to have a say in determining those answers. The gold story of money is important because not only does it feed the current mainstream free market ideology, but the story also allows for the phenomenon of crypto-currencies, such as bitcoin, to make intuitive sense for the general public. But would it be wise for a nation or a people to adopt bitcoin as its primary currency, foregoing its own national currency? Let’s set aside the fact that bitcoin is starting from a place where a few random people who bought early, hold the majority of the bitcoin in the world (with the likely result being simply higher concentration of that currency into fewer hands as in the game of monopoly); and setting aside the fact that a currency such as this, much like the gold standard, is deflationary, leading to prolonged depressions where consumers are not able to purchase goods, and businesses are not able to invest to produce goods, in a self-reinforcing downward spiral; setting these aside, consider the hypothetical situation in which a nation finds itself in existential peril. Let us assume the only source of fresh drinking water for a small nation was contaminated by a mining development, and the only way to restore clean water is to restore the forest and wetland needed to filter the watershed. Let’s say this nation has everything they need to restore these ecosystems- they have thousands of unemployed people looking for work, they have the scientific know-how, and they have the seeds and nurseries ready to propagate— but all of this will take money to pay all the laborers and run the nurseries, and the nation simply does not have enough digital bitcoins to do it, nor do its citizens hold enough bitcoins to raise taxes. Do they go extinct? Should the nation excavate more mines to export metal to nations who have digital bitcoins, in order to pay citizens to restore forests? This is clearly preposterous, but it is exactly what the Global North asks developing nations to do today. Of course developing nations may need to export goods, in order to acquire a foreign currency with which to import goods that the country itself does not produce, such as high tech equipment or medicines. But a sovereign nation can afford to pay its own citizens and mobilize its own domestic resources with its own sovereign currency: credits which are needed by those citizens to in turn pay taxes. The story of Finding The Money is constrained to the United States, but applies equally to other nations which issue their own currency such as Australia, Canada, the UK, Switzerland, China, and Japan among others. And the story contains especially important insights for developing economies. How can post-colonial nations achieve real political sovereignty if they do not have monetary sovereignty? That is, they do not issue their own national currency, but instead use a currency emitted by another nation such as the US dollar in Ecuador, or peg their currency to another, such as the CFA Franc in West Africa, or join a monetary union such as the Euro. Individual nations in Europe have given up their monetary sovereignty to join the Euro, a currency emitted by the European Central Bank, without commensurate political representation over the power to create and tax Euros as that of Congress in the US. Is a sovereign national government really politically sovereign if it must get another nation’s currency in order to run its own domestic affairs? To employ people who are unemployed within its borders to do socially useful work- such as teaching, growing food, nursing, building infrastructure, or restoring ecosystems? Money is a tool rather than an end in itself in helping nations to achieve their goals of self determination. Understanding money as a public organizing tool rather than a scarce commodity allows us to envision national goals that do not require infinitely growing GDP— either to ‘pay back’ the debt, or increase tax revenues in order to pay for better public services— but economies that strive to improve human wellbeing while staying within sustainable and just planetary boundaries. In the end I made this film to empower audiences: to understand as a society we do have the tools, the know-how, and the people to create the better world we can envision. Otherwise we might think 'finding the money’ is the obstacle that prevents us from allowing ourselves to even try. ~~ Maren Poitras ~~~ Ms. Poitras is clearly more interested in her social concerns than she is in managing her own money. So it goes, Addison Wiggin, The Wiggin Sessions P.S. “It’s absurd,” Dan Denning continues. “It’s an absurd way to run a country. Or the country is run by absurd people. Or both. “Either way, the MMT crowd is still wrong. If you spend money into existence, you will unleash an inflationary hell-scape on America that makes the last four years look like a good time over Spring Break on a Florida beach. Prepare accordingly.” P.P.S. There is another thread brewing among the fraternity of Grey Swan thinkers… one which could easily be categorized as the “if you can’t beat ‘em, join ‘em” crowd. “Inflation or deflation is just the flow of control,” writes one. “Control in inflationary environments flows to debtors. Deflation, it flows to savers. “Right now, it’s inflation as far as the eye can see. “I believe America won’t have a credit crisis that leads to a collapse of the dollar in our lifetime. The government and its cronies will just slowly control everything, as crisis by crisis it bails out more sectors. “The balance sheet of the Fed will slowly own everything.” The only way out of a debt crisis is inflation, the argument goes, so pick assets that will gain value during an inflationary environment… and buy them on debt. Then let the government inflate away your debt like they must for their own. We’ll keep an eye on that thread and let you know where it goes. (How did we get here? An alternative view of the financial, economic, and political history of the United States from [Demise of the Dollar]( through [Financial Reckoning Day]( and on to [Empire of Debt]( all three books are available in their third post-pandemic editions.) (Or… simply pre-order [Empire of Debt: We Came, We Saw, We Borrowed]( now available at [Amazon]( and[Barnes & Noble]( or if you prefer one of these sites:[Bookshop.org]( [Books-A-Million]( or [Target]( Please send your comments, reactions, opprobrium, vitriol and praise to: addison@greyswanfraternity.com. The Daily Missive from The Wiggin Sessions is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to The Wiggn Sessions delivering daily email issues and advertisements. To end your The Daily Missive from The Wiggin Sessions e-mail subscription and associated external offers sent from The Daily Missive from The Wiggin Sessions, feel free to [click here.]( Please read our [Privacy Statement.]( For any further comments or concerns please email us at feedback@wigginsessions.com. 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