The federal reserve owns half of all US debt. We are paying interest on interest to our own Fed that serves as the banking systems perpetual bailout fund with the ability to create unlimited amounts of money.
Interesting possibilities stem from it:
https://www.huffpost.com/entry/sovereign-debt-jubilee-japane...
Unfortunately, economics is a very ideologically charged subject.
This has been going on since started inflating our money supply (since when we went off the gold standard in 1971 at least), and the economic degeneration won't stop unless we stop the inflation of our money supply too.
MMT relies heavily on the fact that tracing back who is paying for it is so convoluted that its backers can claim nobody is. That isn't true. At any moment there is a fixed pool of real resources that we have to divide up. It is pretty obvious that a lot of those resources should be given to people who will use them to create more real resources in the future. It is also obvious that everybody needs enough of a share to live.
A State entity can control the money supply and do strange things with the accounting identities, but in real terms it can only redistribute wealth. The government isn't going to turn to MMT to increase the claim of the makers and innovators to societies bounty; the truly inspired ones tend to be a bit eccentric and tend not to present very well on camera at a press conference. MMT will be a redistribution, by and large, to fast talking and charismatic charlatans or pork barrelling to political consituenties. The political process is not very good at assessing technical risk but excellent at pork barrelling. People will use the word 'fairness' a lot.
It is reasonable to say that MMT will do wonders for the accounting identities. GDP through the roof, measured real wages may rise, everyone can be a millionaire, banks will be saved and inflation will be mysteriously low no doubt. The median citizen will also have less actual stuff and a lower real quality of life.
For example, many people here is predicting hyperinflation, using the MMT model we can predict that's not going to happen. Many people here are predicting "slave grandsons by public debt", the MMT model tell us that doesn't make sense.
>>"MMT relies heavily on the fact that tracing back who is paying for it is so convoluted that its backers can claim nobody is"
I don't know what that means.
>>"At any moment there is a fixed pool of real resources that we have to divide up"
That sentence agrees totally with the MMT cannon.
Lets jump over the the Wiki page on MMT where it has a helpful comparison to Keynesian economics [0]. First line in that table:
Keynesian: Advocates taxation and issuing bonds (debt) as preferred methods for funding government spending.
MMT: Emphasizes that taxation and debt issuance are not required to fund spending.
Under the Keynesian model I can tell who is paying for government activity - taxpayers and lenders. I can also work out how much, by comparing how much tax they pay or how much they lend. It is reasonably transparent about who the government is distributing resources away from (net taxpayers, current lenders) and towards (net tax receivers, people who are enjoying the latter stages of a bond where the interest is payed back). People could have claimed resources; then they were taxed/saved so they didn't.
How do I do that under the MMT model where neither of those things are necessary? Who is the government distributing resources away from? How do I figure that out? I know where they are going. Where do they come from? When we debate MMT inspired ideas, how will we figure out who will be worse off in real terms and in what proportion?
[0] https://en.wikipedia.org/wiki/Modern_Monetary_Theory#Compari...
PS.
> But MMT it's not a policy, but a model
People aren't interested in MMT because it is a neat model; but because if we use that model then it becomes very hard to explain that policies are wasteful uses of time and stuff. It is very easy to make a taxpayer understand why government waste is bad. Quite hard to make people take an interest when nobody knows if they are net givers or takers.
Anyway, you are implying that the current system is Keynesian, and that there are people advocating to change to a MMT system. But the current system is already MMT.
So, to answer your question, for accountability, you could just keep in place the current way of doing things (or find some alternative) but recognize that "taxation and debt issuance are not required to fund spending". Let's recognize that public debt is irrelevant for instance, and that, yes, deficits can be inflationary, if the economy is already in full utilization but could not be in the proper circumstances.
>>" People aren't interested in MMT because it is a neat model; but because if we use that model then it becomes very hard to explain that policies are wasteful uses of time and stuff. It is very easy to make a taxpayer understand why government waste is bad. Quite hard to make people take an interest when nobody knows if they are net givers or takers"
So, basically, what you are saying is "let's lie to people" so we can have a smaller government.
They say that naming is one of the hard things of computer science, maybe it's also true for economics. Let's change the name "public debt" for "public investment" and discuss then how much public investment can we afford.
> So, basically, what you are saying is "let's lie to people" so we can have a smaller government.
That is not at all what roenxi is saying. That is what roenxi is saying MMT is saying, except for the "smaller government" part.
It also is you putting (incorrect) words in someone else's mouth, which is very much not cool.
It is also coming somewhat close to a personal attack (since many of us consider lying to be immoral), which is against site guidelines.
There are several kinds of orphan entities, such as trusts, foundations and more.
In the USA at the national level, only Congress is able to incorporate businesses, and they do this in one-off charters, Act by Act. So it was incorporated by a public body - Congress - while the wording of its charter leaves it very autonomous and orphaned. It is not owned by the public, it is not owned by the private sector. Simultaneously, Congress created another public body called the Board of Governors of the Federal Reserve, which is owned by the public, and interfaces between the autonomous orphan entity and the public. It is the one with the appointed Chair, who occasionally reports to Congressional committees.
Congress can amend the charter of both organizations at any time. They don't and it is a line they do not cross. The alternative is the politicisation of monetary policy, which is a heavy distraction for Congress, far more than fiscal policy. It didn't work well before the autonomous central banks and other better alternatives haven't been presented.
To further complicate things - in the minds of those perturbed by the Federal Reserve's role in this country - the Act allows for collaboration with private banks as shareholders, with a 6% dividend. Yes, banks have been earning 6% dividends from their shares of the Federal Reserve for a century. These shares do not convey voting rights. This was to encourage participation in the Federal Reserve system, and any new system would need to be extremely competitive and enticing to encourage banks to participate in that instead. For context, think about America in 1913 when the Act was passed. Banks existed and had their own payment networks all around the country, and the Federal Government wasn't in the business of this at all. The idea of inherent fealty to whatever the US Government represented simply did not exist, the idea of an omnipotent US Government didn't exist. Impressionable children were not taught this in schools and bankers then and now obtain better benefits from not thinking this way. Instead, America was a burgeoning society, that recently got bailed out by JP Morgan himself, now trying to get into finance. It had better be very convincing to the banks!
Like any orphan entity like a foundation or trust, there are people that control it together, in accordance and restrained by the charter. The Federal Reserve is a system, controlled by regional directors who are selected/elected. In each region:
Three directors are selected by the Board of Governors of the Federal Reserve System to represent the public. These directors must reside and conduct business or other activities in the District. They represent the interests of labor, consumers, commerce, manufacturing or agriculture. They may not own stock or serve as a director of financial institutions.
Six directors are elected to the board by the Bank's shareholders, which are the member banks in the District. Of those six directors, three are representatives of the District's banks, and three represent the public (like those selected by the Board of Governors). The three elected public directors may not serve as a director, officer or employee of a financial institution.
Yes, the System is able to purchase certain kinds of securities (or whatever Congress allows, such as the new amendments for direct money to citizens as in the stimulus packages) and whoever it buys from now has newly created money that is diluting the money supply. The System is also able to trade the securities it has purchased for existing money. It is interested in not causing rampant inflation, but this is an inherent possibility, but it is fortunate that it has inherited a larger economy than the rest of the world, and there are people willing to accept its dollars and it just selling them into liquidity keeping the dollar's relative purchasing power amongst other currencies steady.
EDIT: The profit from the Fed's assets (after the small interest payments to the private banks) all goes to the government.
It's actually privately owned and not public.
The profit share ("dividends") the banks receive is trivial, a couple percent of the Fed's profits. Typically 96-98% of profit is sent to the US Treasury.