EconoMonitor

Great Leap Forward

Framing Modern Money

Here’s an excellent example of good framing. Susan Feiner explains why sovereign governments using “modern money” (their own currency) cannot go bankrupt.

 

U.S. Bankruptcy–A Colossal Hoax.
by Susan Feiner, Professor of Economics, University of
Southern Maine

Readers put on your thinking caps and learn something new
about money.

Modern money—not the old fashioned, greasy kid’s
stuff—follows uber modern rules, rules which have been
misrepresented/misunderstood in the coverage of Washington’s debt-ceiling
hysteria.

First things first: no matter how much money we’re talking
about, there’s nothing there—not gold not silver. At best, a few reams of green
paper.

Follow up:

For some folks the fact that there’s nothing there is
intolerable. “How,” they wonder, “can money be so important, and so
insubstantial?”
That’s modern money. When was the last time your pay (if you
still have a job, there are 29.2 million unemployed or underemployed in the US
today) was cash in an envelope? Like 99.9% of Americans you get paid by check
or a direct deposit.

Someone working for your boss tapped on a keyboard (just
like the keyboard I’m typing on now), to initiate a transaction that put
‘money’ in your checking account by taking ‘money’ out of your boss’s checking
account.

That money is just a click, an electronic blip, your ability
to keep bread on the table and a roof over your head, an ineffable nothing, and
the root of all evil.

Read the rest here:

http://econintersect.com/b2evolution/blog2.php/2011/08/13/u-s-bankruptcy-a-colossal-hoax-1

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Ed Dolan Ed Dolan's Econ Blog

Edwin G. Dolan is an economist and educator with a Ph.D. from Yale University. Early in his career, he was a member of the economics faculty at Dartmouth College, the University of Chicago, and George Mason University. From 1990 to 2001, he taught in Moscow, Russia, where he and his wife founded the American Institute of Business and Economics (AIBEc), an independent, not-for-profit MBA program. Since 2001, he has taught at several universities in Europe, including Central European University in Budapest, the University of Economics in Prague, and the Stockholm School of Economics in Riga, where he has an ongoing annual visiting appointment. During breaks in his teaching career, he worked in Washington, D.C. as an economist for the Antitrust Division of the Department of Justice and as a regulatory analyst for the Interstate Commerce Commission, and later served a stint in Almaty as an adviser to the National Bank of Kazakhstan. When not lecturing abroad, he makes his home in San Juan Islands, Washington.

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