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Great Leap Forward

$100 Million Awaits First Deficit Hysterian to Prove Uncle Sam Can Run Out Of Money

Here’s a flashback to a press release from Warren Mosler’s Senate campaign in 2010. He bet that none of our deficit hysterians in Washington would be able to prove that Uncle Sam can run out of money.

The money still sits on the table. Presumably Pete Peterson and his hired hysterians all know that they are spewing nonsense.

press release

Posted by WARREN MOSLER on October 22nd, 2010

 

Senate Candidate Bets Congress $100 Million That the U.S. Government Cannot Run out of Money
Warren Mosler Offers $100 Million of His Own Money to Pay Down the Federal Deficit If Any Lawmaker Can Prove Him WrongWATERBURY, Conn.–(BUSINESS WIRE)–Warren Mosler, Connecticut’s Independent candidate for U.S. Senate today announced that it is an indisputable fact that U.S. Government spending is not operationally constrained by revenue and will give $100 million of his own money to pay down the Federal deficit if any Congressman or Senator can prove him wrong. “I am running for U.S. Senate to see my policies implemented to create the 20 million jobs we need. And to do this it must be understood that there is simply no such thing as the U.S. Federal government running out of money, nor is the Federal government operationally dependent on borrowing from China or anyone else. U.S. states, individuals, and companies can indeed become insolvent, but U.S. government checks will never bounce,” states Mosler. “Yes, large Federal deficits that push the economy beyond the point of full employment can lead to inflation or currency devaluation, but not bankruptcy and not bounced checks. If lawmakers today understood this fact, they would not be looking to cut Social Security and we would not still be mired in this disastrous recession.”
With 37 years of experience as an ‘insider’ in monetary operations, Mosler knows that President Obama is wrong when he says that the U.S. government has ‘run out of money’ and is dependent on borrowing from China in order to spend. As Fed Chairman Bernanke publicly stated in March of 2009, the Fed makes payments by simply marking up numbers in bank accounts with its computer. Mosler explains further; “The Government doesn’t get anything ‘real’ when it taxes and doesn’t give up anything ‘real’ when it spends. There is no gold coin that goes into a bucket at the Fed when you are taxed and the government doesn’t hammer a gold coin into its computer when it spends. It just changes numbers in our bank accounts.” Mosler likens this scenario to a football game; when a touchdown is scored, the number on the scoreboard changes from 0 to 6. No one wonders where the stadium got the 6 points, no one demands that stadiums keep a reserve of points in a “lockbox” and no one is worried about using up all the points and thereby denying our children the chance to play.
Warren Mosler urges his opponents, Linda McMahon and Richard Blumenthal, and the entirety of Congress to recognize how the monetary system actually works and implement a full payroll tax (FICA) holiday and his other proposals to restore full employment and prosperity while not cutting Social Security benefits or eligibility.
About Warren Mosler
Warren Mosler is running as an Independent. His populist economic message features: 1) A full payroll tax (FICA) holiday so that people working for a living can afford to buy the goods and services they produce. 2) $500 per capita Federal revenue distribution for the states 3) An $8/hr federally funded job to anyone willing and able to work to facilitate the transition from unemployment to private sector employment. He has also pledged never to vote for cuts in Social Security payments or benefits. Warren is a native of Manchester, Conn., where his father worked in a small insurance office and his mother was a night-shift nurse. After graduating from the University of Connecticut (BA Economics, 1971), and working on financial trading desks in NYC and Chicago, Warren started his current investment firm in 1982. For the last twenty years, Warren has also been involved in the academic community, publishing numerous journal articles, and giving conference presentations around the globe. Mosler’s new book “The 7 Deadly Innocent Frauds of Economic Policy” is a non-technical guide to the actual workings of the monetary system and exposes the most commonly held misconceptions. He also founded Mosler Automotive, which builds the Mosler MT900, the world’s top performance car that also gets 30 mpg at 55 mph.

19 Responses to “$100 Million Awaits First Deficit Hysterian to Prove Uncle Sam Can Run Out Of Money”

jonf34March 9th, 2013 at 2:34 pm

It is something of a mystery to me that the President can suggest we are running out of money, when this women I know – without a high school education – knew instantly that our Government could never run out of money. She told me she always knew that but was afraid to say so – bc so many smart people said it was so. It is simply not possible for this to be the case. So those who say we are out of money are lying or truly ignorant, or intimidated by the PTB to stay quiet. We need to be uneguivocal about this and things like the deficit.

Andrew_M_GarlandMarch 10th, 2013 at 2:09 am

Neither the German Weimar Republic, nor Zimbabwe ran out of money. They printed as much as they needed to pay for the government. Zimbabwe didn't even need much paper, relatively speaking. Zimbabwe merely added zeroes as needed to produce billions of trillions of Zimbabwe dollars.

All government debts were paid off along the way, and all savings in Zimbabwe dollars were destroyed in the process of currency creation.

Sorry for my mistake. The savings balances were not actually destroyed, they were still there. But the owners could not exchange them for anything of value, as compared to the real value of the savings before the money printing. People stopped accepting worthless Zimbabwe dollars long before the government ran out of the ability to print and distribute them.

Uncirculated Zimbabwe $100 Trillion bank notes

So, I am quite relieved to know that the US government can never run out of money. Like Zimbabwe, our government prints (or creates electronically) our money in the back room, and can add as many zeroes as it takes to meet its responsibilities. Our government need not default if it has learned anything from Zimbabwe.

EasyOpinions.blogspot.com

PZMarch 10th, 2013 at 11:49 am

I remember that years ago when I first learned about public debt, I was thinking that there is some much row over this that some people clearly want public debt to be large. So I came up with this hypothesis that public debt represents actually stock of money that government has issued. But after that literally no-one in the media would come out and say anything like that. So I abondoned that hypothesis. Why are economists so silent?

olly100March 13th, 2013 at 4:49 pm

Hi Randall,

I was hoping you could help with this question:

If the government runs a surplus, what does it 'do with with the money'?

For example, if the govt taxes $100 in total and spends $80 in total, it is left with $20 sitting in the Treasury's account (correct?). What does it do with this $20 surplus?

Thanks!

L. Randall Wray L. Randall WrayMarch 14th, 2013 at 11:00 pm

Olly: sort of like asking what the Boston scorekeeper does with the run when the instant replay shows the homerun was actually a foul ball. Does he store it for later use?

olly100March 15th, 2013 at 12:33 pm

Ok, but if the Treasury has a surplus, does it then buy back bonds from the Fed, for example, or does it do something else? I presume the "money" doesn't just sit in the Treasury's account.

I understand a surplus isn't "storing money for future use" and that it doesn't "provide extra funds" for government spending or anything like that.

MattMarch 15th, 2013 at 1:28 pm

Andrew. Neither Weimar Germany nor Zimbabwe come close to our situation. Weimar owed war debts in foreign currency, they issued notes, then had to sell in exchange for foreign currency. That selling killed their currency. Then the Ruhr was occupied killing the supply of key goods driving prices up. We do not owe debts in foreign currency – period.

Zimbabwe productivity was devastated by civil war, and goods were scarce.

L. Randall Wray L. Randall WrayMarch 16th, 2013 at 1:17 pm

No. All else equal, tax payments lead to debit of reserves; banks sell treasuries to Fed to relieve the drain. So, surpluses lead to retirements of treasuries, net–as they did under Clinton–Treasury’s IOU (treasury) is debited and so is Treasury’s asset (deposit at Fed). They can work out the timing so that maturing treasuries are redeemed.

L. Randall Wray L. Randall WrayMarch 16th, 2013 at 1:20 pm

Matt: right. These are the two main hyperinflationist’s hyperinflationary red herrings. No matter how many times you explain the reality, they will always yell: “Zimbabwe; Weimar”. Somehow, they believe that displays some kind of intelligence.

olly100March 17th, 2013 at 2:01 pm

Hello Randall,

People with an interest in MMT sometimes use the phrase "taxes destroy money".

Is this a phrase you have used or would use to describe the process?

Do taxes literally "destroy money"" in your view, or is this just a metaphor?

Thanks.

L. Randall Wray L. Randall WrayMarch 19th, 2013 at 1:42 am

I guess it is both. If I write an IOU to you for a cup of sugar, then later deliver sugar to you and you return the IOU to me, I literally tear it up (destroy the IOU). Most “money things” today are electronic entries. Tax payments lead to debits to those entries. Money is “destroyed” in the sense that the entry is eliminated. Where do the electrons go? Heck if I know–better ask an electrician. I seem to remember there are negative and positive charges so I suppose it has something to do with tapping a key that sends some positive charges through the wires to unite with the negative ones in a blissful neutral state. But I’ve been told it is all done with photons now. So I guess you really should say that when taxes are paid, light is destroyed. Not my field, obviously.

ChrisMarch 19th, 2013 at 9:01 pm

I have a grasp on the general idea of MMT, especially in the current unemployment situation, but how do things change when things are going well, e.g. "full" employment? (This isn't a "gotcha" question). Do taxes and interest rates go up?

If you've already answered this question in a book or another article or part of the MMT primer on NewPerspectives feel free to direct me there.

John DurhamApril 7th, 2013 at 9:40 pm

It is interesting to note that people are actually the backing for one's currency. Further, the general living conditions of the people determine the exact value. Thus the more money printed then put to work for the people's "General Welfare" solidifies the trading value of our money against speculation and improves the general living conditions of the people. All other cited support for money misses the mark a bit at least. And, thus ignoring this fact deludes the mind, more or less, into something even the most indirect social investment or even very destructive non-spending policies. ©johncdurham2013AllRightsReserved.

John DurhamApril 8th, 2013 at 3:35 am

It is interesting to note that people are actually the backing for one's currency. Further, the general living conditions they enjoy back money issued. It is the most accurate measure of wealth of a nation that exists. Cutting back on spending will bring an economy downward because the natural productivity, investment, education, health care, research and every other necessary spending cannot be paid for. The People's living standard, one by one, will decline because what is needed cannot be purchased. The easiest measurement of proper financial system activity is always to take a measurement of "The General Welfare" of "The People".

Expanding amounts of necessary money, easily available in a public credit, not a private debt, system insures an increase of living standard. When human's each get the liberty to live their lives fully, the potential of the human race has increased. Thus money equal to the necessities, issued for the necessities, naturally brings about a standard of living as high as humanly possible. How far down the road would Americans be financially and morally if this had been the practice for all of our last 200 plus years?

John DurhamApril 8th, 2013 at 4:49 am

Credit is the Materialization of Faith in people's future and comes from the future. If money for Necessary things like investment, education, health care, research and every other Necessary Spending is in short supply, people must cut back. which drags the economy and employment of human potential downward.

Expanding amounts of necessary money to fulfill every human necessity, easily available from a public credit (not debt) system, insures an increase of living standard. When human's each get the liberty to live their lives fully, the potential of the human race has increased. Thus money equal to the necessities, issued for the necessities for doing good, naturally brings about a standard of living as high as humanly possible from the highest possible human production of necessities.

Thus it is obvious that people's general living conditions back and support all money issued because it is the only accurate measure of the wealth of a nation that exists.

John DurhamApril 8th, 2013 at 12:20 pm

Warren Mosler is correct there is no loss of value of money, if the economy is not pushed beyond full employment through Federal Government lending into a credit (not debt) financial system. Minimum wage however should be closer to $20 per hour than $10.

If people operate at full potential in work they do (and this has never been seen) at full employment, more money will have to be made available in greater amounts in order to combat natural increase of money value. When human's each get the liberty to live their lives fully, the potential of the human race grows, the living standard goes and money value increases.

When money available is equal to the necessities of investment, education, beauty, health care, research and every other necessary spending that makes good, that naturally brings about highest possible human production of necessities and that standard of living that is as high as humanly possible.

A society reaches a condition equilibrium when money available equals the productive powers of the people. The potential of living standard for the human race at the present level of technological innovation is unknown.

America has had only fits and starts but little in policy that has been long lasting. The Life of the universe works well when Life has the highest value. Credit is Materialization of Faith in people's future and comes from the future. It is not addition and subtraction but an element of infinity and lends infinite potential to human beings.

It is obvious that people's general living conditions back and support all money issued because it is the only accurate measure of the wealth of a nation that exists.

Therefore, not sheep, oil or even gold back money value, but the well being of human condition itself. The nature of, the quality of, human life attained, or that can be attained, is the real "Gold Standard" and proper measurement of national and international economic well being.

John DurhamApril 8th, 2013 at 12:26 pm

Could you people edit and make suggestion here. I’m on to something new here but I can use some help in putting it together.

Warren Mosler is correct there is no loss of value of money, if the economy is not pushed beyond full employment through Federal Government lending into a credit (not debt) financial system. Minimum wage however should be closer to $20 per hour than $10.

If people operate at full potential in work they do (and this has never been seen) at full employment, more money will have to be made available in greater amounts in order to combat natural increase of money value. When human's each get the liberty to live their lives fully, the potential of the human race grows, the living standard goes and money value increases.

When money available is equal to the necessities of investment, education, beauty, health care, research and every other necessary spending that makes good, that naturally brings about highest possible human production of necessities and that standard of living that is as high as humanly possible.

A society reaches a condition equilibrium when money available equals the productive powers of the people. The potential of living standard for the human race at the present level of technological innovation is unknown.

America has had only fits and starts but little in policy that has been long lasting. The Life of the universe works well when Life has the highest value. Credit is Materialization of Faith in people's future and comes from the future. It is not addition and subtraction but an element of infinity and lends infinite potential to human beings.

It is obvious that people's general living conditions back and support all money issued because it is the only accurate measure of the wealth of a nation that exists.

Therefore, not sheep, oil or even gold back money value, but the well being of human condition itself. The nature of, the quality of, human life attained, or that can be attained, is the real "Gold Standard" and proper measurement of national and international economic well being.

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