As a consequence of loose monetary policy with a fiat currency, the United States is rapidly descending into an economic reality of Modern Monetary Theory, or MMT. While MMT (also known as Chartalism) is typically associated with its Keynesian predecessor and the policies of the Left, new developments reveal that both parties are responsible for the slip into a brave new economic world.
Essentially, there are four preconditions in Modern Monetary Theory:
1) Money enters the economy through government spending, as the total amount of money is constrained not by gold but by the total output of the national economy;
2) Government spending is speculative as it prints as much money as it needs to control production and, as a byproduct, employment, and spending beyond productive capacity leads to inflation;
3) Taxes do not pay for expenditures but are instead a way to throttle private sector demand; and
4) The government is the issuer of the currency, sovereign governments that issue their own currency are never insolvent, so debts essentially don’t matter.
What if the Federal Reserve dollar falls – hard? How is the globalist blueprint known as Sustainable Development Agenda 21 designed to make humans into livestock? Why liberty must be understood by this generation of Americans lest it be lost for a very long time.
More Americans, an accelerating percentage of ordinary citizens, have come to understand the nature of “fiat” monetary system – that is money created out of thin air. The contemporary fiat system came to the United States in 1913 with the congressional creation of the privately owned United States Federal Reserve. The Federal Reserve legislation violated Article 1 Section 8 of the Constitution by the issuance of legal tender and brought once again the influence/control of the globalist banking cartel to the U.S.
Today’s global monetary system was originally authorized by the British Parliament. Its purpose was to form the central bank of England as the Bank of England, which is the equivalent to our Federal Reserve, to control a nation’s money.
“Issuing money” means controlling fiat (phony) money creation through the operation of a printing press or computer entry. This results in the regular increase in the money supply which ultimately expresses itself as price inflation.
Newly issued money is infused into the money supply via the creation of debt. Much of this debt is held by the federal government. More money equals more debt. ‘The harder I work’, says the average American, ‘the deeper in debt the nation becomes.’
Growing debt cedes the ultimate exercise of control to the creditor, particularly as the system breaks down under its own largesse. A “new” system is being designed by the same forces who designed today’s fiat system and who now have America close to the brink of dollar destruction. It is the replacement system that we must be wary of if we are to exercise a wise defense and restoration of freedom.
The 2008 Mises Institute Supporters Summit
The Gold Standard Revisited
This past weekend was a chance for many of the Mises Institute’s supporters to get together, get familiar, and get updated on the Austrian tradition’s interpretation of recent events. The focus of this weekend seminar was on the gold standard, and the increasingly desperate need for sound money in today’s fiat fiasco of an economy. Speakers, local and international, delivered the message of monetary sanity to the supporters and students in attendance, as well as those who tuned in around the world via Mises.org. Talks were given by many of today’s
The Daily Caller has taken notice of increased support of an audit of the Federal Reserve, like that introduced by Rep. Ron Paul (R-TX), from tea party organizations and promoters:
Though Republican Rep. Ron Paul told The Daily Caller last week that he was worried that “some people have slipped into the Tea Party who are awfully close to being part of the establishment,” on at least one particular anti-establishment issue close to the Texas congressman’s heart — auditing the Federal Reserve — Tea Party leaders told The DC that they are all for it.
FreedomWorks vice president of public policy Max Pappas said the PAC has signed onto Paul’s “Audit the Fed” movement as a way to hold the institution accountable.
“A call for an audit of the Fed has been pretty popular,” Pappas told TheDC in a phone interview.
Pappas said news media continually want to label the entire Tea Party movement as a proponent of or a proponent against a particular recommendation, like auditing the Fed, instead of trying to understand the movement is bonded together on core values.
“What brings together the Tea Party movement is general agreement over free markets, fiscal responsibility and constitutionally limited government,” Pappas said. “It [the Tea Party movement] is not a think-tank that produces white papers saying, ‘here’s what needs to be done at X agency or Y agency.’”
In doing some research I came upon the following quote:
“Whenever commodity prices are far removed from a stable relationship with the alleged gold content of the monetary unit concerned, there is something, probably more than one thing, seriously wrong. Included in the maladjustments may be extensive abuse (misuse, unwise use) of the banking system with resulting inflation, serious overexpansion of capital facilities in various lines, unwise speculation in tulip bulbs, commodities generally, Florida lots, common stocks, Canadian mining stocks, or what have you, and possibly serious distortions among wages with steel workers getting more than college professors, etc.
“How anyone can imagine that all such distortions, maladjustments, abuses, etc. can be miraculously cured by devaluation is beyond me. Devaluation simply satisfies the most ardent pressure groups for the time being and greases the skids for the next slide by gradually destroying the stable middle-class element of society; it confirms all the unwise in their unwisdom; makes unsound banking look like sound banking; and, after two or three doses, virtually assures the ultimate destruction of the monetary unit as the strengthened pressure groups demand more and more. Such, in my opinion, is the obvious lesson of history, ancient, medieval, modern, and recent. Perhaps things will some day be different, but I doubt that.”
As I read this I couldn’t help but think how right he was. Everything he described has come to fruition today.
The date? 1953. The writer? Edward C. Harwood, founder of the American Institute for Economic Research. Would that such wise men were still around today.
Chances are that you’ve never heard of chartalism (unless you arrived here because you Googled the word). I’ve been reading an increasing number of articles which argue certain points which are central to the economic theory of chartalism. This theory is centrally focused on characteristics of a fiat currency regime. The basic assumptions and conclusions are sounds although I have not studied it enough to have a fully informed opinion. Further, I disagree on principle with some conclusions on the surface level.
So what is it all about? Basically, the chartalists suggest that the state issues fiat currency via government spending and recoups (destroys) the money via taxation. Thus, fiat issue is no more than printing money and, if the government did not do so, there would be no money for citizens. This extends to a conclusion that the private sector cannot save money unless the government runs a deficit. This is further shown by using simple algebra with the formula for GDP. This reinforces the argument of the adherents.
I see a few basic flaws in this theory. First, if there were no fiat money, that would not destroy economic activity. There would be, at a minimum, barter activity. Second, it seems to ignore debt (or at least under-appreciate its role like most all schools of economic thought). Since private banks issue credit, the state is not the only entity which can issue currency (depending on one’s definition).