There’s a myth in the USA that just won’t go away. It’s this idea that a household balance sheet is somehow comparable to that of the federal government’s. Few myths are more destructive and lead to greater confusion and/or misguided government policy. In recent months this has become a particularly public subject as the debt ceiling debates have raged and the European debt crisis continues. The problem is, the analogy between a sovereign government’s balance sheet and a household’s balance sheet is never accurate. The reason this analogy always fails is due to the difference between being a currency issuer and a currency user.

In the following video I explain briefly why this is such a destructive myth and why this country desperately needs to learn that the burden we leave our children is not a debt burden, but a certain living standard. It’s true that spending money at the government level could reduce this living standard and we could certainly leave our children with a standard of living that is below our own, but what we won’t leave them with is a bill that they need to pay off in the form of some debt burden.

See the following video for more and read the following links if you’re still confused:

Understanding the burden we leave our grandchildren:

Why government debt matters:

Understanding the modern monetary system:



Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • wh10

    Nice. Now how do we make it viral?

  • SS

    Nice. You should do more video. Much more effective spreading the message.

  • Jo

    Yeah…….says you.

    It’s a great analogy.

    Suck it chaps….we ain’t going anywhere.

  • Noob1

    Saw the same thing posted on facebook with numerous likes and positive comments. I simply replied “Houses can’t create money”.
    :) That shut them up.

  • Bob Chan

    “the government’s debt is the non-government’s savings” should read “the government’s debt is the Chinese government’s savings”

  • TC

    I agree – we haven’t talked much about this yet, but MR will have video. Probably podcasts too. A friend who is in radio gave me shockingly high numbers on how many people downloaded their podcasts.

  • TC

    lol – that’s good. I know for a fact some PE firms have a significant amount of CiC money in them.

  • AWK

    I know I’ll get slammed for this but…

    The video was OK. I’ve now watched/listened to videos from or including Roche, Mosler, Wray, Norman, Auerback, Mitchell, and Kelton. I have yet to see an MMT/MR proponent who has the speaking style, clarity, and personal gravitas needed to motivate the public at large. I think William Black may have “it” but his focus is not MMT, at least not in public.

    With the likely exception of Mosler, I realize that was not the aim of their various presentations, i.e., to be the international spokesperson for MMT/MR (with the possible exception of Mosler). I’m just hoping such a person emerges.

  • freemarketeer

    This is like saying people should understand quantum mechanics. It’s a different framework for a system we can’t interact with. Naturally, this is worse, because money means more to people than science does.

    I haven’t seen the video (can’t at work), but like AWK said, no party to MMT is exceptionally cogent. There is no Richard Feynman of MMT, if you will. The rhetoric works for the wonky types who actively pursue this knowledge, but it’s not digestible enough for normal people.

    I’ve recently decided to start my own website, and this is something I aim to address, but I’m a nobody who will only be regurgitating what I read here (links will be used liberally).

  • Dunce Cap Aficionado


  • Obatalasacrificedmychicken

    Karl Denninger disagrees with you, and argues for your death for promoting this idea.

    I think that may be illegal, better check with your lawyer though.

    Denninger wrote: In fact, The Coinage Act of 1792 specified that this sort of debasement game was to be punished by death.

    Our nation desperately needs to bring back this penalty so that people who promote and execute such schemes get their just “reward.”

    Disclaimer: Long stout timbers, sharpened steel plates and finished guillotines.

  • Dunce Cap Aficionado

    Denninger always reminds me of that quote, “Truth never triumphs but its opponents eventually die.”

    His ramblings are so obviously from a man mentally stuck in his ways. He is one of ‘defenders of the status quo.’ Those people who will defend to the death the ideas that have always governed their understanding of the world around them so they don’t have to go through the uncomfortable process of accepting those ideas may be flawed and having to starting over.

  • Malmo

    Karl Denninger’s whole existence depends on the idea that the USA can and will go bankrupt. He has peddled this fiction for some four years now, with an array of silly redundant charts in a never ending stream of obtuse Tickers that would even put a speed freak to sleep.

    Apparently Denninger really does think the U.S. is Greece. I guess that is the point in which any bright person would delete Market Ticker from their bookmark list. I know I did just that some three years ago and counting. If you want to make money I suggest you do the same. The man is literally an anal obsessive freak. He uses the most vile language known to man in an attempt to argue his points. He even encourages others to do violence, and I’m not joking (I know of one blog that catalogues his transgressions in this regard). I hope the authorities are on to him and his schtick. I know that I alone have supplied them with enough Denninger fodder to have him at a minimum locked up and evaluated.

  • Dunce Cap Aficionado

    Also, you should research companies that supply long stout timbers and sharpened steel plates as well as the companies they sell to that manufacture finished guillotines ;)

  • tv

    How about refuting his math.

    You are welcome to think what you want of him. I support that.

    But I notice the posts against Denninger avoid accurately attacking his math….

    In fact they avoid math altogether.

  • New Guy

    Does anyone have any points I can borrow? I’m working as a scorekeeper in a local basketball league… and, well, I’m afraid we might run out of points. If you’re interested in loaning me some points maybe we could implement some sort of inter-sport swap line… You know, just to ensure in game point liquidity. Don’t worry, If I die at half time, my kids will repay all the points with interest… What’s that you say? Just print my own points? But I wouldn’t want to devalue the home team’s score; the whole standard of play will plummet! We’ll have hyper score-flation!!! Teams will need thousands of points just to win a game!

  • Malmo

    Denninger uses math? Really? Then why does he ignore the math contained within a currency issuer country as opposed to a currency user country? The math of the former says that the USA CANNOT go bankrupt, which directly contradicts the scaremongering tactics contained in Denninger’s math. Denninger starts out with a false premise and the conclusion that follow, national insolvency, is likewise false. He might not like the printing press and the math therein, but that’s not the issue, is it? Next.

  • Dunce Cap Aficionado

    Hahaha, well put!

    There has to be an opportunity for some idiot-scorekeeper-arbitrage out there “Oh sure, I’ll loan you some points to keep score in your game, I have plenty.”

  • Dirck Noorman

    “somehow comparable”…”analogy never holds”…pretty broad strokes, particularly for social science. Maybe the video was making a slightly different point and it went over your head.

    There are reasons other than short term headline inflation and interest rates to be concerned with a sovereign’s monetary activities.

  • Cullen Roche

    If you can figure out a way to make discussions about the monetary system sexy then just let me know. Unfortunately, what we’re dealing with here is a pretty mundane topic. And honestly, I am not sure if sexing it up in any way will help spread the message.

  • Cullen Roche

    Denninger’s argument is the 95% collapse in the dollar since 1913 argument. Except he’s revised it to run the MSM’s myth that American living standards have collapsed since 1970. Except, that’s totally wrong.

    This whole idea that a 95% decline in the dollar has ruined our living standards is totally wrong. It ignores the fact that the decline in the USD has been far outpaced by productivity and the increase in living standards. I don’t think anyone has any clue how hard life was back in 1913. We live extraordinary lives compared to 100 years ago. I’d love to see the evidence for this collapse in living standards….

  • Cullen Roche

    I made the mistake of reading the comments at BI. Pretty funny if you’re interested.

  • New Guy

    Maybe we could find some way to incorporate naked people in the MR discussion… Naked people are sexy!

  • Dunce Cap Aficionado


    His math is fine. Why he’s doing that math and what it represents is something else entirely.

    What he doesn’t spell out is that over the periods of time he’s using, he’s assuming no growth, no increase in productivity or change in what a dollar can get you.

    Take the cost of a TV from today and the cost of a TV 45 years ago, even after you adjust for inflation the cost has risen drastically and by Denniger’s math this would mean the value of the dollar has plummeted. But how can you not see that setting a TV from 1967 as equal in value to a TV from 2012 is a logical fallacy?

    To put it back in Denniger’s example, he says that over 45 years, the value of the dollar decreases from 1 to 0.2724. He does not include what $1 can get you in year one and what $0.2724 can get you in year 45.

    Best regards,


  • Dunce Cap Aficionado

    You’re better than that. Leave that sess pool to the real masochits like me.

  • Malmo


    Denninger is now attempting to alter the playing field constructed wholly by himself by arguing debasement instead of outright insolvency. In other words he obviously realizes he was dead wrong on the sovereign currency issuer going bankrupt front (he won’t admit it though) and thus he tries to shift the argument to the moral sphere vis a vis dollar debasement robbing us of our living standard. He thus wont acknowledge any productivity gains that accrued from “borrowed” money over the pat 40 years, calling it phantom wealth/growth, even with the obvious tangible benefits starring us in the eyeballs. Good luck arguing with one harboring those types of ideological blinders.

  • Dunce Cap Aficionado

    He builds examples and paradigms to fit his conclusion instead of the other way around. He continues to discredit himself.

    (I also replied to TV but I think its in the spam filter, basically said what Cullen did but with the example of a TV from 1967 and today).

  • Cullen Roche

    He’s just moving the goal posts now. Here’s his piece on Greece from a few years ago where he basically guarantees the USA is the next Greece:

    So the government stepped in and replaced 11% of private final demand with more borrowing as the only able and willing borrower. But that cannot continue forever. Eventually those who lend us capital will discern that we’re not going to pay, as that actual private final demand will not recover.

    This is in fact precisely the same recognition that led to Greece’s problems, and it will come here.

    He’s basically become a hyperinflationist and he doesn’t even know it yet. This is a prediction that will haunt him forever. He doesn’t know the difference between a currency user and issuer. And I don’t think he’s intellectually honest enough to care. He’s just trying to scare people into believing a political agenda. Ignore that guy.

  • Erik

    Wow Cullen, I read the comments you linked to and that was the hardest I’ve laughed in a while. It makes one dismay, that people can listen to a well reasoned arguement, but if it goes against there pre-conceived notions it’s like they didn’t absorb a single word.

    Debt is Debt!!! Cullen Roche couldn’t park a bicycle!!

  • geerussell

    This one was my favorite:

    “This article shows the liberal bias of businessinsider.”

  • New Guy

    How come guys like this never bother to point out that people get paid a lot more now-a-days?

  • Dennis

    I think your new MMT write up is a hugh improvement. I had your old write up on my laptop and have read that many times. I didn’t realize you had made so many changes until yesterday. I have one suggestion however that goes to the question you have highlighted here. The MMT/MR concepts are extremely important to the world (you say the most important!) The section about why people don’t get it needs more. Here is my idea:

    Add to PDF page 8:

    Fourth, deficit spending by the government (in particular spending that benefits cities, counties and states), without a corresponding “loan” from the banking system deprives the banking system of an important source capital generation, e.g. interest on bonds. The Banking system keeps track of Federal deficit spending calling it the “National Debt”, something that can be used to keep the status quo, and constrain the Government from providing funds to the States, providing funds for infrastructure projects, health care for the aged, research, education etc. Thus government deficit spending into the economy is in competition with our banking system that wishes to provide interest-bearing loans (horizontally created debt dollars), for this funding. Many non-bank entities also participate in horizontal money creation. “Nationalization” of the Banks (making bankers government employees with the interest going back to the government minus expenses), would end this competition. However, ideas such as this are politically impossible because of the total misunderstanding of Monetary Realism and where fiat currency (e.g. “money”), comes from. Monetary Realism provides an understanding of where money comes from and thus is a foundation from which changes can be suggested. What the actual changes should or should not be are beyond the scope of Monetary Realism, however it can provide a prediction as to what might happen in the economy if a suggested change were implemented and the power of our monetary system to make lives better for all were fully utilized.

    Add a footnote on PDF page 5 since Y=C+I+G+NX appears different than page 20.
    For example: (Y means GDP, C means consumption, I means investment, G means government spending, NX means exports-imports.) Is this right?

  • Cullen Roche

    Yeah, that one made me laugh. On the one side I am getting blasted by MMTers for being some sort of far right hack. And on BI I am getting slammed for being too liberal. Pretty funny.

  • Cullen Roche

    Because guys like Denninger don’t know how living standards, wages, inflation and productivity are interconnected.

    I am dying to see a cogent argument that proves living standards are lower today than they were in 1913 despite the 95% decline in the dollar.

  • Dan Kervick

    It’s not sexiness. It’s explaining the financial system and monetary system, and the special role of monetarily sovereign governments within that system, to ordinary people of reasonable intelligence who are neither economists nor financial experts.

    I’ll bet I could do it. I’d love to have a job like that.

  • AWK

    That’s a good point Cullen. It’s not sexy enough. The international spokeperson for MMT/MR needs to be a beautiful intelligent woman with big boobs.

    Depending on your body and “package” perhaps you could “work it’ for the ladies and gay men out there. Grab you crotch every so often and flex your muscles while you talk.

    But seriously, I realize economics is a dry subject. But haven’t we all known people (teachers, mentors, leaders. etc.) who could make almost anything sound interesting? And MMT could be made much more interesting, if pitched the right way. I can think of many ways how I would present it if given an hour on TV. But the way I think would work best would be to present it almost like a mystery/conspiracy drama, explaining the mystery (and history) of money while debunking the conspiracy of myths and fraud that are undermining of economy and society.

    The most “moving” thing about MMT/MR is that, when you get it, it comes at you like an epiphany, when you realize that many of the most fundamental things you believed about the economy are lies. That should be part of the commercial. Imagine a Carl Sagan, Richard Attenborough, or Laurence Fishburne (chenneling Morpheus) asking, “what if I told you that everything you believed about money was a lie?”

    Another approach that could work is not to put the focus on money/MMT/MR per se but on something like the collapse of the Euro or corrupt crony capitalism and introduce MMT/MR like a Trojan horse. We need a good documentary worthy of PBS’s Frontline to take that on.

  • chewitup

    King Jeremy of Vividavia is an issuer of porn. The rest of us are users of porn. In order to live in King Jeremy’s country you have to give up 35% of your porn collection every year, otherwise you go to jail. The King buys all the stuff he needs to keep the country of Vividavia serene and secure from all of it’s hard working citizens. He pays his bills in porn. All of the citizens also buy goods and services in exchange for porn. This way everyone accumulates enough porn to pay their porn tax every year.
    Can King Jeremy run out of porn?

  • Paul

    It is very hard for those of us that understand inflation to get word out to the public about why it can be good for the economy. Because our opponents have a simple statement that resonates in the non-economically inclined.

    “In 1913 $1 was worth $22 today”.

    This makes people feel like they are being robbed. If they make $10,000, they think they should have $220,000.

    It’s very hard to convince them that they would not be making what they are making now had there not been inflation.

  • AWK

    Actually (I’m not joking), this is how my family used to play Monopoly. None of us felt very good starting with only $1500. So we’d start doleing out more.. $2000, $3000, $5000… Of course then the rents and everything seemed puny so they had to be multiplied, etc etc. Unless the winner ended up with $50k in cash and assets it just didn’t seem right.

    As I recall, it was very hard to win or lose because we also stretched the rules to keep everybody in the game. People would be tendered loans they’d obviously never be able to repay just to get dibs on a railroad monopoly. And don’t make me discuss all the crony capitalism we practiced with the backer or in ganging up on each other.

    Thank God our real economy isn’t like how we used to play Monopoly. Or is it?

  • chewitup

    I really like your stuff, but you’re a bit dry too. But the important part is to keep spreading the word. Keep it up!

  • AWK

    My last post above about how my family used to play Monopoly actually gave me an idea. We should come out with a game (online or board game) called “Fiat Money” that is funny and fun to play. Heaven forbid you should roll the dice and land on “Return to Gold Standard”.

  • Roger Ingalls

    That’s a good thing, right?

    Jesus didn’t have a lot of support from the powers that be (whether liberal or conservative), but his writings and philosophies (however altered, depending on your viewpoint) had a significant impact on the way we live today.

    I think the problem with “sexing up MMT”, is that there are only two reasonable ways to do it, appeal to fear, or appeal to greed. You seem to avoid both(to yo:r credit, I may add), but someone eventually will.

  • Don Levit

    In an article entitled the GDP Deception posted recenty on financialsense, it stated a simple formula for calculating GDP.
    It is money supply times money velocity.
    The velocity 10 years ago was 2.0. Today, it is 1.6. Without an increase in the money supply (government debt), we would be in a steep recession.
    While the asset part of the government debt is calculated in increasing GDP, where does the liability of the increased government debt get calculated?
    Don Levit

  • Roger Ingalls

    LOL 1+ !!

  • Paul

    Lol!! Whenever you talk about this issue, you get all the crazies to come out. My favorite comment….

    “We don’t need economists to tell us what’s up. We need shrinks. Where’s Fat Mike Moore when you need him. He shamed Nike’s evil Phil Knight into making working conditions better overseas. Why isn’t he on Apple’s case? Because he probably thought Steve Jobs was a god and he probably tweets from his iPad.”

    I don’t even know where he was going with this, hahaha!!

    Like Winston Churchill said… “The greatest argument against democracy is a five minute conversation with the average voter”.

  • Cullen Roche

    I’d like to avoid ending up nailed to a cross or inside a woodchipper as Karl Denninger calls for (what a deranged comment that was btw). We’ve made a lot of progress in the last few years. Honestly, I think eliminating the JG is a huge step in pushing these ideas forward because it’s such a nasty political hurdle. Now, if I could get MMTers to stop attacking me then we can push forward with the message. Instead, I’ve got people like Joe Firestone writing 20 part rebuttals and commenters who are intent on attacking me personally. Talk about counterproductive.

  • Dan Kervick

    That’s when I’m talking to you guys! I used to be a college professor doing a 4/4 undergraduate teaching schedule, and have also had to do lots of public presentation in my current job. I know how to boil ideas down and organize them to meet the needs of the average undergraduate when necessary. I can also make some decent jokes when I’m not being all serious fighting the war for the future on the internet.

  • hangemhi

    I agree it needs more spice…. fire. Watch Peter Schiff talk about the economy. He gets people fired up. You need to be similarly dramatic and bold. Make GIANT claims. After all, doesn’t MR have what sound like outrageous claims to so many? Lead with those, pepper them throughout. Even call others names… like “Peter Schiff and his inflationist chronies are a joke. How many years do they have to be wrong before they take the microphone away from them?” Say that loudly and boldly in a Peter Schiff style.

    Of course the answer to that microphone question is the issue here…. they will always have the microphone as long as they are interesting to listen to, and since fear mongering sells. Right now MR is too boring…. but there is no reason MR can’t have a litte fear built into it “if we don’t get this our government is going to destroy the little that is left of the middle class.” “We’re in this mess because our delusional politicians think we’re broke”

    Making someone else a bogey man too – like the Tea Party.

    Or use humor…. having a tea party crowd screaming and yelling, and then all of a sudden shutting up and looking shocked. Cut to the “debt clock” having its name changed to the “wealth clock”.

    I’m making this up as I go along, but you get the picture.

  • paulie46


    Just curious, who do you believe is liable for the public (government) debt, the government or non-government sector?

  • phil

    Doesn’t US bond issuance also serve the purpose of propping up the dollar and holding down the value of foreign currencies? China buys US debt so as to stop the dollar from depreciating and the yuan from appreciating. If the US deficit spent without issuing bonds the dollar could weaken significantly and the yuan would appreciate rapidly vs the dollar. This could lead to high inflation in the US due to oil prices and other import costs, as well as threatening the dollar’s international reserve currency status. So govt debt also serves to control inflation and maintain the exorbitant privilege of the dollar.

  • Roger Ingalls


    Gotta give the video a pretty low grade, sorry!

    First, it’s reasonably effective for an existing convert, and mildly OK at refuting the inaccurate video.


    1. Don’t leave the opponent’s chart(and argument) on the screen while you are attempting to explain a contrary concept. Put up your own charts, or put up visual diagrams that support the argument, rather than contradict it. The brain has a way of wandering. and when it tries to process two or three concepts simultaneously, it may choose the wrong one, or tune out altogether.

    2. Your speaking voice is decently effective, but a video image image of you, at least for a portion of it, would be better.

    3. You’ve probably heard “They don’t care what you know, until they know that you care”. Put another way, the casual viewer has no idea of whether to believe you, or to pay any attention, until they understand (or think they understand) where it is that you come from, and what is YOUR angle. Display the passion that you have to save this country from unnecessary ruin and suffering from these misguided myths. Explain that you have successfully invested by understanding that these are myths.

    That’s my two cents…from a guy who is arguably a better marketer than investor. Thanks for at least trying!

  • hangemhi

    Monopoly is yet another good analogy to explain MR. One thing I don’t see enough of, or at all, are simplistic explanations about money supply. For example, in Monopoly, one person gets all of the money in the end because he/she is the most productive and lucky. The game ends. Or the game could go on if the winner loaned money to the losers, but the losers can tell they have no chance of beating the winner, so they don’t bother to play. The solution is to reward work, and pay them with NEW money. Sure that debases the “winners” money, but he’s either got so much he doesn’t care, or the debasement is so slow he is long dead before he cares, or he goes back to work and makes new money, or he invests and keeps up with inflation.

    Another simple thing about the need for new money is population growth….. in monopoly what happens when your door bell rings and the number of players doubles. In 1970 we had 200 million people. Today we have 310 million. Don’t we need more monopoly money so those people can play too? Of course – and where does new money come from?

  • Cullen Roche

    I made it on Saturday afternoon in about 15 minutes. I guess it showed. :-)

    Thanks for the tips. Next time I’ll put more effort into it and try to spice it up.

  • Don Levit

    Paulie 46:
    Excellent question regarding who is responsible for the public debt.
    From what I understand about MMT, it is 2 entities: everybody and nobody.
    Don Levit

  • Wise Guy

    I think a better analogy is a household that has a printing press in the basement and the only thing that constrains them from printing too much is getting caught.

    The problem I have with MMT as I understand it is this: It seems as if MMT’ers are assuming that: as money and debt are issued by the government (currency issuers)that: it then generates economic activity by the currency users. Eventually the money is paid back in the form of taxes. In that sense currency and debt can be viewed of as a form of a loan. But suppose all this money and debt doesn’t get paid back? Suppose you have an economy that is so hamstrung by overregulation, zombie banks and corporations, a dysfunctional school system, corruption etc., such that you don’t generate enough economic activity to pay off the government debt (loan) in the form of tax revenue? Suppose the government spends all this money on ventures that have little economic value, bridges to nowhere, welfare queens, exorbitant pensions, etc.? Suppose you have such little economic activity that you cannot even ignite enough inflation that could then monetize the debt? Then what?

  • hangemhi

    Wise guy – MR or MMT does need to be much, much clearer in its presentation to avoid getting bogged down in your very real concern…. real that is until it is more clearly explained.

    Printing money doesn’t create wealth or productivity. It greases the wheels.

    I read recently that the Constitional Congress, against the law of the Crown, printed $200 million in U.S. notes. During the war the Crown attempted to debase the currency and ruin the U.S. economy so they counterfeited another $800 million. It backfired…. it greased the wheels of people who wanted to be productive and transact. More money meant more people could see or obtain a physical reward for their efforts.

    In the U.S. there has been a massive new need for more money (or debt as we like to call it). In 1970 we had 200 million people. Today 310 million. We have also made huge productivity gains…. just women entering the workforce alone created more need for money, but so does innovation that leads to higher productivity.

    Finally, when a population desires to save – what if they save too much. What if we have 400 billionaires, and a number of large corporations, sitting on a combined multi-trillions of dollars? How does everyone else transact unless new money is introduced? Like the Crown counterfeiting, more money will grease the wheels.

  • Cullen Roche


    Have you read my primer on the monetary system? I discuss the importance of productivity in there throughout much of the paper.

    Any country that becomes corrupt, unproductive or prints in excess of its productive capacity will experience a ruinous decline in their living standards.

  • Paul

    It’s paid back the same way it is created. It’s just a revolving loan that is created out of thin air. Picture it as you borrowing money from a bank and whenever you owe it back, they simply just give you another loan. So you never have to pay it back and the bank never runs out of the ability to create another loan.

  • paulie46

    …”Eventually the money is paid back in the form of taxes”…

    No. Eventually the money becomes accumulated wealth in the non-government sector. Taxes disappear into the ether.

  • beowulf
  • SS

    Here’s Joe Firestone once again using that comment you made.

  • beowulf

    Denninger is just confused. It seems like just yesterday he was declaring his love for Dennis Kucinich and his 100% reserve banking bill…

    Dennis Kucinich, which many people have (properly) labeled as one step removed from a communist in the past, and who has a reputation as having a hard-core left slant in his politics, has just written up and introduced a bill that will fundamentally restore the free market – for real – to banking and credit… Treasury would issue and spend into circulation United States Notes.

  • paulie46


    I would say nobody because it is created out of nothing and it capitalizes a growing economy. It was never intended to be paid back, since every dollar has been earned in spades by the American worker. New money has to start from somewhere.

    Since 1980 we have created ~$14 Tn and produced $266 Tn in GDP

  • beowulf

    In fact, The Coinage Act of 1792 specified that this sort of debasement game was to be punished by death.
    Our nation desperately needs to bring back this penalty so that people who promote and execute such schemes get their just “reward.”

    Considering that dollars are printed and coins minted (“execute such schemes”) at the direction of the Secretary of the Treasury, it could be construed as a terroristic threat against a federal official.

    Since its Tim Geithner and not Tim Tebow, nobody at the FBI will care. I just hope he didn’t put this up on twitter!

  • Cullen Roche

    I can’t believe how disingenuous that man is. He’s used that comment in 4 or 5 parts of his 50 part personal vendetta against me. His lack of evidence has forced him to misrepresent comments. He’s still claiming that I am against full employment. Even though yesterday’s post makes that pretty clear where I stand on employment. Does it get much more intellectually dishonest than this? The JG argument is literally devolving into a lie about my personal positions on politics and economics.

  • Wise Guy

    Thanks for the claification. I think MMT is well suited for Scandinavian style economies and even say Germany and Canada that are constantly vigilant of both sound fiscal policy and productivity. Wether we in US get to that level remains to be seen. While not an MMT’er, I love your website. Very intellectually stimulating.

  • Cullen Roche

    Well, the most important takeaway is to understand that we live in a world where Monetary Realism (not MMT) is already in place. We live in a fiat world where autonomous currency issuers can’t “run out” of money. Where the govt’s deficit is the non-govt’s surplus. These are just facts of life in a fiat monetary system. Don’t confuse MMT (which is in large part a policy theory) with Monetary Realism, which is just a focus on the descriptive aspects of the monetary system using components of the MMT approach (and eliminating the prescriptive elements). For instance, MMTers want a job guarantee for all Americans. MR focuses on the operational realities and clarifies that any prescriptive component is periphery to the core aspects of the monetary system.

  • New Guy

    We need a commercial like the scientologists used to have, you know the one with the lava rocks crashing together, then the deep voice saying, “Dianetics, by L Ron Hubbard”. All your video’s now need to start with that as an intro, “Monetary Realism – etics, by Cullen Roche”. Oh, and we need a Super-PAC! Also, we need to get Cullen interviewed on the Colbert Report! If we can get all that taken care of in the next six months or so, maybe we can throw a branding party next year at Davos! Oh, wait… you guys have real goals?

  • chewitup

    That’s a good though Beo. Scott Adams could use Elbonia as an example. Let’s get him on board. Dilbert could use another road trip.

  • Dismayed

    I don’t sell basketball points, but I do lease them. The cost is $1/point per day. You must buy in 50 point packages, and if you go over your daily allowance the charge is $2/point. I also offer pints for other sports. Football costs $5/point in 10-point increments, and $10/point for anything over your purchased allowance.

    I’m also working to securitize point income. Stay tuned, investors.

  • chewitup

    It’s weird how some people take things personally. His 50 part series lost it at part 3.

  • Paul Milenkovic

    Yes, but . . .

    The individual state governments in these United States are currency consumers, not consumer issuers. They can get shared revenue, bailouts, etc., etc. from the Federal government, but they have to balance their budgets out of what they raise in tax revenue.

    It is not quite as dire as Greece, but . . .

  • SS

    He desperately wants you to respond. It’s so obvious. Your site is a lot bigger than his so he’s like a bull dog who won’t stop biting your leg until you kick him off. Instead, let him wear himself out. At some point he’ll realize that no one is paying attention.

  • Cullen Roche

    Right. But the big difference between the USA and Greece? The states get a 20% funding allocation from the Federal govt every year.

  • Cullen Roche

    I’m done with this whole thing. It’s beyond absurd. Joe Firestone can continue his petty personal vendetta over at his site. I am tired of the JG fighting and the links here back to JG debates. I’m just going to start moderating comments on the JG. They’ve become entirely counterproductive.

  • In Accounting

    “Because guys like Denninger don’t know how living standards, wages, inflation and productivity are interconnected.”

    That is exactly it though, for these guys the only wealth is gold. There is clearly nothing better to do with wealth/capital than bury it in your backyard and marvel at how many slips of paper it will fetch 90 years later.

  • Pierce Inverarity


  • AndyB

    dont know where to put this but was in a bit of a row with some austrians and a couple of goldbugs last night but anyway cut a long story short it seems the India are going to be paying Iran for oil in gold…. not sure what to think of that, sounded like just a way of dodging sanctions but sounds dangerous to me
    any thoughts?

  • Wise Guy

    As an armchair economist of a classical liberal bent, I actually do not have a lot of problems with a fiat currency even though that may sound like heresy. The function of backing fiat currency with gold is to keep governments honest, to prevent governments from issuing too much paper. While the problem of the lack of supply of gold relative to the increasing demand for money in the 19th century was a problem, I think it was largely overblown. That problem could be solved by backing money with say a basket of assets. Bimetallism (backing money with both gold and silver) after the Civil War in the US was a step in that direction. My real problem with asset backed currency is this: up until the 20th century gold was primarily used for monetary exchange and jewelery. While an economy could function well with less conspicuous consumption, gold on the other has a tremendous amount of industrial uses in a modern economy. The same goes for almost all other assets you can think of. You in effect tie up a tremendous amount of assets that have productive purposes, indefinitely and ad infinitum, just to keep up with the demand for money. Without getting into a lot of academic arguments, you can quickly see how that is a little ridiculous.

  • New Guy

    Hey Cullen… Not to beat a dead horse (I know you’re engulfed in your new favorite past time of dodging petty JG insults), but I’m still wondering about the Triffin Dilemma and any additional thoughts on how a typical currency issuer differs from the current US Role of global reserve currency issuer. If the CAD is problematic, how does it get reduced without reducing the flow of dollars being injected into the global (ex US) economy? Musn’t the dollar abdicate it’s role as global reserve currency? Does it matter to MR if the Dollar is the GRC? Does it matter if it’s not? In my own mind I think I’m coming close to concluding that the US MUST abdicate it’s role as GRC… am I off base in thinking that MR will eventually come to that conclusion as well? Also, if MR is truly an attempt to explain the current system as it exists today, then aren’t we a little short cited in simply discussing the US as though it were any other sovereign currency issuer; as opposed to discussing the US as the unparalleled monopoly issuer of GRC?

  • Johnny Evers

    - I have no doubt this is technically true, but in reality we are passing on a lower standard of living to our children, which is another way of saying they will *pay* the price for our profligacy.
    – Someone made the point that the federal debt is comparable to family debt only if the family had a printing press in the basement to print money. So let me ask: What if we all had a printing press? What would happen then? How long would it take before the grocer stopped taking your money.
    – OK, we’re not Greece because we have a printing press. Then a better analogy would be Japan, whose young people are paying for the profligacy of their elders with lower living standards.
    – Another argument against endless deficits — who gets the money? Right now we are printing money to send to Wall Street bankers … but not homeowners. And, we are sending money to unproductive people who do not work (Medicaid is what I am thinking) rather than productive people who have worked (consider college students who are financing the retirement packages of their boomer instructors instead of being able to save or invest in their own retirement packages.)
    — End game: Mr. Roche is technically right (he has explained the rules of the game very well) but the game is ultimately self-destructive.

  • Cullen Roche

    The game is only self destructive to the extent that spending outstrips productive capacity and reduces living standards. Remember, the USA has run deficit since its inception. Here’s a brief snapshot of that history:

    You can very clearly see what I touch on in the video. The govt’s deficit is the pvt sector’s surplus. Now, living standards are different things to different people, but I don’t think any rational person would argue that our living standards have declined since 1776 or 1913 or even 1950. But we’ve run deficits since then.

    LIving standards are a function of using govt for some public purpose while also empowering productivity, innovation and growth. Ultimately, it is productivity and innovation that offers us a better living standard over a multi-generational period. We live much better lives than our great great grandfathers did because we have far more time to do the things that we appreciate. That’s the result of productivity and innovation. As a society, we have to agree on the size of govt that we feel best maximizes public purpose without sacrificing productivity and innovation. Saying that govt spending always does that is just flat out wrong. History proves this.

  • Dunce Cap Aficionado

    “- I have no doubt this is technically true, but in reality we are passing on a lower standard of living to our children, which is another way of saying they will *pay* the price for our profligacy.”

    You have not explained how we are passing on a lower standard of living, you have simply stated that it is true.

    “- Someone made the point that the federal debt is comparable to family debt only if the family had a printing press in the basement to print money. So let me ask: What if we all had a printing press? What would happen then? How long would it take before the grocer stopped taking your money”

    That question shows you don’t understand MR/MMT. The fact that the Governemnt is the Monopoly Supplier of the currency direly important.

    “- OK, we’re not Greece because we have a printing press. Then a better analogy would be Japan, whose young people are paying for the profligacy of their elders with lower living standards.”

    They would be far better off if they had performed greater fiscal stimulus.

    “- Another argument against endless deficits — who gets the money? Right now we are printing money to send to Wall Street bankers … but not homeowners. And, we are sending money to unproductive people who do not work (Medicaid is what I am thinking) rather than productive people who have worked (consider college students who are financing the retirement packages of their boomer instructors instead of being able to save or invest in their own retirement packages.)”

    Again showing you haven’t done your homework. Mr. Roche and those who understand the operational realities of the system advocate stimulus that will directly affect the middle class (like massive tax cuts).

    “– End game: Mr. Roche is technically right (he has explained the rules of the game very well) but the game is ultimately self-destructive.”

    Again, you make declarative statements without showing a shred of evidence.

  • wh10

    Oy- wish the pragcap army could come to your defense over there, but the work that needs to be done is a bit overwhelming…

  • Willy2

    Oh yes, the US can “”print””/issue as much money as they want. But that’s (potentially) very (Hyper-)inflationary. NOT in the current situation. And Hugh Hendry and Robert Prechter share the same view. They both say that issueing money is a politcal decision. That’s not the problem. The problem is that this rising debtload needs to be serviced. Somewhere in the future interest rates will rise and the servicing that debt will become impossible. And falling interest rates prepare the ground for (much)higher rates in the future.
    Yes, the US could issue as much currency as they want but the mere fact of rising rates makes investors flee the T-bond market. (Greece anyone ??).

    Future generations won’t need to pay down that debt. They will simply default on the debt.

  • Dunce Cap Aficionado

    I saw this thrown around too. At best it will be used as ‘proof’ that the US is losing its reserve currency status.

    I don’t see how it affects the US economy in any way.

  • FDO15

    Sorry to do this Cullen, but I just had a thought on the JG. Isn’t the financial industry the very worst evidence about the potential ramifications of the JG? The financial industry is basically this massive industry subsidized by neoliberal policies. Their growth over the last 30 years has been largely driven by government policies. And where has it gotten us? It’s produced millions of unproductive overpaid jobs that produce little and take a lot from society. Granted, bankers can’t be compared to JG workers, but it’s the same sort of unproductive idealism. The JGers are just at the opposite end of the spectrum from the neoliberals.

  • AndyB

    where they sent me was frankly just a load of people saying its the end of the dollar then complaining it was too high which seemed a bit silly if its the end hardly going to be too high is it
    Mind you seemed to show it was the Indians decision not the Iranians which was even more curious… the Indians who historically love gold think the price has topped i dunno…. but a strange one anyway..not something i was prepared for

  • AndyB

    apologies as i know its way off topic but the forum doesnt seem to be used that much and no open topic

  • Johnny Evers

    – The two facts that living standards are higher than they were in 1950 and we have run government deficits since then does not imply that the latter led to the former. You could put hem lines on that chart, too, but it wouldn’t mean that rising helm lines equaled higher living standards.
    — Living standards are higher now because technology and productivity and immigration and population growth have created economic benefits — which have increased the money supply. Increasing the money supply in itself does not increase the standard of living.
    — You are saying that Japan needs *more* stimulus (more debt)?! At what point would you forsee that Japan’s currency becomes debased. 400 pct debt to GDP? 800 percent?
    — Tax cuts? The people who need the most help in this economy do not even pay federal taxes. How do you send your printed money to them? You put them on welfare, I guess, but that does not lead to any economy activity or productivity.
    — Government should not be in the business of sending money to those it deems worthy. Certinaly government should increase the money supply to correspond to increased econmic activity.
    — You say government provides the money supply. Yes, until it abuses that power.
    — How are we passing on a lower standard of living? Well, I see it all the time in my profession. My retired clients have a higher standard of living than their children because government is electing to use borrowed money to benefit older people rather than their children and because government provided cheap interest rates to divert investment into wasteful economic activity (the real estate boom.)

  • Cullen Roche

    The Fed swap lines proved that you can increase dollar supply without increasing the CAD. The Fed swap lines, while not ideal, might be the necessary evil involved in being the GRC. I think we can go a great distance to reduce the CAD issue by by reducing our need on the financial sector for all things growth oriented. The other policies we discussed are probably political non-starters. Also, these are secular developments that will take years to implement, but I think they’re crucial and would help alleviate the CAD imbalance. Some of the ideas we’ve thrown around might also promote that process more quickly. I’m not holding my breath on the above developments to unfold and unfortunately, it means we’re at risk of experiencing deterioration and continuation of many of the negative trends that have become apparent in recent decades.

    The USA clearly, is a unique example and it’s not fair for MMTers to constantly use it as the shining light of all things MMT. It’s a unique country in many regards. I think it’s unfair to paint with a broad brush as many MMTers do. We have to approach each country based on its own unique status in the world. There’s no one size fits all. The USA is the case I tend to focus on for selfish reasons…being an American and all. :-) But I will try not to extrapolate out too much to other countries as specific cases require specific approaches. So, in short, for the USA and its status as GRC issuer, I conclude that the swap lines are a necessary evil until we can resolve our own domestic imbalances which will subsequently help with the CAD issue.

  • Johnny Evers

    Yes, there is more money in the game today — more population, technological advances, etc. create a higher standard of living — as you mention, so more dollars are circulating because there is more wealth out there.
    But that is not the same as more government debt, unless there is a chart that shows government debt rising one to one with the money supply.
    You cannot create sustainable economic activity by showering borrowed or printed money on people, right? You could have given Bill Gates $1 trillion but that wouldn’t have the same impact as the business he and his partners created. The economic activity must come first.

  • Cullen Roche

    I never said printing money increases living standards. I said printing money in excess of productive capacity will reduce living standards. We have a huge amount of idle resources in the USA today. We could put them to work without much inflation at all and it would almost certainly result in increased innovation, productivity, and higher living standards. This is what the hyperinflationists got so wrong a few years ago. They misunderstood the fact that our productive capacity did not collapse in the 2008 recession and remained quite robust. We just needed to fill the demand gap.

    FX traders have been betting on the Yen’s debasement for 20 years. Why hasn’t all the printing ruined them? Because they haven’t printed enough to generate stable demand. So inflation has remained low and deflation has ruled the day. Likewise, Japan, with high potential output, has not filled the gap or seen a subsequent collapse in productivity.

    I am all for efficient spending and cracking down of govt corruption.

    Have you read my primer? I discuss all of this in detail….

  • hangemhi

    right, population growth and/or productivity must come first…. and it has…. look at any chart showing growth in both. Now add savings, meaning dollars that are not in circulation. Then add the money destruction as households pay down debt. What you get is a massive need for new money, and it appears the new money wasn’t created fast enough to keep up over the past 40 years – hence the demand for debt when credit was so easy.

    Or if you believe there is enough money out there – then it means it needs to be coaxed from its hiding places…. the bank accounts of the wealthy, of larger corporations, and trade deficit dollars.

    The answer is probably a combination of both – the need for new money, and the need to coax out saved dollars…. the first one is easiest to fix…. lower taxes for the people who would spend what they get back and/or hire them for things like infrastructure. The second – no so easy. How do you get that money back into circulation? And does it matter – because a rich person or corporation would only spend their money if they saw an opportunity to make more money – no? So if they succeed, it will result in even less money in circulation, which brings us back to needing more money in the economy.

    I’m curious what others think of my thoughts here.

  • hangemhi

    “servicing that debt will become impossible”. Why? Will we be running out of points sometime soon?

    Why is everyone so worked up about inflation and not equally worked up about deflation????? Yes, there is a too much money problem, but there is also a too little money problem. The debt is meaningless if the need for that debt is far greater than the debt itself.

  • Johnny Evers

    Re: Japan — there was a kid in my college dorm who drank like a fish. We all thought he’d be dead at 40. Boy were we wrong. He was dead at 50! Meanwhile, his standard of living declined every year!
    I guess I disagree that in a practical sense that putting more gas in the car will make it go faster.
    You are stating that we have productive capacity, but that is an opionion. We could be producing 50 million cars if we wanted. Would that raise the standard of living if everybody had a cheap, new car? We could put 20 million people to work sweeping the streets, but would that raise the standard of living?

  • hangemhi

    Cullen – I’d like to know more about “size of government”. Does Gov spending mean “big government”? How can we have small government, but maintain the necessary spending to keep up with our growth in population, productivity, and private sector savings rate.

  • hangemhi

    “…Then a better analogy would be Japan, whose young people are paying for the profligacy of their elders with lower living standards.”

    You mean their elders who founded and grew Toyota and Honda. Who built roads and schools. Who innovated, produced, farmed, fed and clothed them?

    When the debt load gets too big – since clearly 200+% isn’t too big yet – the poor youngsters who are saddled with it will just have to man up and create some points on their keyboards to pay off their parents “profligate” ways. And then similarly produce great new technologies and new companies and new children so that there is a need for and a demand for new points (er, um, Yen).

  • Cullen Roche

    The data refutes these points. Capacity utilization is at what, 78%? Unemployment is 8.5%. Are you saying we’re maximizing our potential production right now? Granted, I don’t think 20 million people sweeping streets is productive, but there’s a lot of work out there to be done right now that could really get this economy back up and running. Work that would be very productive. Do you disagree with that? Or do you think we’re tapped out?

  • Johnny Evers

    Of course if you default on the debt, then the guy who owns Treasuries in his retirement account will see a reduced standard of living.
    Unless the government steps in to pay for his retirement, meaning it will then cut spending for someone else.
    Either way, future generations pay for our spending today. … And we’re not even leaving them something tangible, like a bridge or a school, as previous generations did for us.

  • chewitup

    Be careful Cullen. The next thing you know you’re going to be on camera with charts and graphs crying like Glen Beck.

  • Ben Wolf

    “We could be producing 50 million cars if we wanted. Would that raise the standard of living if everybody had a cheap, new car?”

    If there is demand for fifty million cars then the answer is yes.

  • hangemhi

    We are our grandparents “future generation”. What burden do you feel from them? How is the debt-clock weighing down on your shoulders? Are those piling up digital points hurting you? If not, how are they going to hurt your grandkids?

    We only place a burden on our grandkids if we prove not to be productive. Right now we are proving to not be as productive as we could be because we refuse to issue more points to reward willing and able bodied people who are fully capable of scoring touchdowns and kicking field goals if we’d let them. Instead, with not enough points available to them, they are sitting in the stands, or protesting in the parking lot screaming that they want in the game.

  • jt26

    TPC, re:productivity measurement … a concrete example … social security etc. (and I’m not talking about future liabilities). If we’re paying a senior (today) to sit around and read alternative financial blogs all day, that doesn’t sound very productive. They could argue that their sitting around now was the natural outcome of having paid taxes in the past or they “paid an equivalent tax” indirectly by increasing national productivity over their lifetime (to 25 years into the future), far and above the wages they received. Now, we know the first isn’t true (i.e. SS is pay as you go). How do we know the second is true?

  • hangemhi

    I guess what I’m asking is…. how does a small gov spend enough to support a large private sector? Or, how can you have a small gov and still spend enough to support a large private sector?

  • Ben Wolf

    Seniors spending money via their SS checks creates demand, which generates jobs and elevates productivity. People who can’t get work but have money to spend is better than people out of work and dead broke.

  • Anonymous

    I received an e-mail from my 30 something daughter today and it was a forward going around her work site . I singled out #3 and replied with the link to this article today as a means to provide a different point of view

    3. The government cannot give to anybody anything that the government does not first take from somebody else.

    I talked to her later and was surprised that she was not more interested.
    I have made progress towards MR but over the years my rants on uncontrolled debt has rubbed off.
    Keep making those videos and we will see if you can turn her around. Then I will know that they are clear as she is a smart lady!!

  • hangemhi

    Thanks Cullen – I’m not purposely leading to a point, but rather being led by your answers…. and the next logical question is…. is it possible to eliminate a massive Gov institution – or cut one or two in half… and not replace it with another Gov institution, without destroying the economy? The Gov cancels the transfer payments, say to military, and then cuts taxes so it nets to zero. But what of the lost military jobs, and the lost military production at Boeing, etc? It seems really hard to go back from where we are today. Some could clearly be replaced by the private sector doing what the public sector had been doing. But than that requires paying customers – say killing off all free public education. But that is equally, if not even more destructive.

    This seems like a terribly difficult subject with no easy answers.

  • firts

    In 1913 people live a lot better than in 1813 also.
    They had electricity an never before in history had so many inventions came about in about in the world History.

    With all due respect to think that with out the FED and MMT we would be in worst economic situation is wrong.

  • Robert Rice

    Your intuition serves you well. If the government lays off an entire department, it will no longer pay wages to some substantial quantity of individuals. Instead it’ll pay out unemployment benefits. There will be a change in the income of the group once unemployed, and this difference will not be in their favor. This reduction in paid wages is all money the government employees would’ve used to transact trade in the economy. Sure they might’ve saved some (have you seen the savings rate of most Americans???) or paid some taxes or whatever, but by and large people would’ve created demand with it by spending it. There is a net loss of money being supplied into the system by the government in an effort to reduce its commitments, and therefore there is a net loss in trade the former gov employees can transact in the private economy.

    You see, there is enough desire for transactions to occur, there is only not enough money in the system to transact the trade given current prices. More money in the system in the hands of those who will spend it, the more transactions/demand creation they can generate, which means more jobs, and a healthier, happier economy.

    So the solution and answer to your question is yes, the government can eliminate one of its branches without hurting the economy by making sure the same amount of money is being given to those it laid off, or if not to them, then the same quantity of money to other private individuals who will generally spend it. Of course that wouldn’t reduce the government’s expenditures, but it is how to eliminate a government branch without harming the economy.

  • Cullen Roche

    Sure, if we eliminate the military for instance, then everyone else can afford lower taxes. As Robert mentioned, we probably end up paying out UE benefits for a while until all of these people can find a pvt sector job. The key is that the govt has to supply the net financial assets to make sure they can all be hired. So, instead of paying these people to be in the military, we cut taxes for everyone thereby affording the pvt sector the ability to hire the unemployed. Obviously it doesn’t work out that smoothly, but your example is rather extreme.

  • JK


    Anyone here got a net worth in the hundreds of millions and wants to throw $3 million or so into a sexy super bowl commercial???

    Better hurry up.

  • Gerald P

    DC Aficianado; $1 in 1913 would buy a very good meal. 27 cents today pays for the Ketchup. But in 1913 $2,000 a year was a middle class income, life expectancy was about 39, and it could cost $10,000 to by an impressive but primitive car. Today with a middle class income of $100,000, a life expectancy of 79, you can buy a car beyond the dreams of 1913 for $19,000.

  • JK

    Can you picture it? That deep voice that does the talking for big movie trailers? Someone start a simple, ONE PAGE website called List all the monetary realities that seem important, and THAT’s IT and a section called LINKS… with links to ALL OF THE MMT, MR, Monetary Sovereignty, websites… so visitors can freely choose to browse them all etc etc

    (dramatic music)

    “A lie has been told for too long…”

    (pause) (some visuals)

    “The U.S. government CAN NOT run out of money…”

    (pause) (more visuals)

    “The National Debt is nothing more than U.S. Dollar World Savings….”


    “Visit, our future depends on it…”

  • JWG

    Speaking of aggregate demand and printing: the next ECB LTRO could hit 1.5 trillion euro; maybe much more. That means either the Germans have surrendered and it’s party on again in Europe via keystroke euros, or that Greece and Portugal have been written off and the LTRO is actually the bank mega-recap of all TARPs to build a banking firewall against default by Greece and Portugal.

    The Germans are thinking that Greece is a bottomless pit; and so, we might as well get it over with. The Italians, via Draghi, might be cynical enough to sacrifice Greece and Portugal to win the bank mega-recap via the LTRO that will save Italy and Spain.

    MMT (or I should say MR, because MMT has an ax to grind, as we have learned) has a fine track record for predictive capacity since I have been following it, because fiscal, monetary and banking variables are all accounted for in a heterodox and nonideological approach that “gets” the essentials of fiat money in the US and the world. There could be a huge buying opportunity in March or April if Greece and Portugal get thrown into the fire and markets tank big time worldwide, only to rally big time as investors figure out that the LTROs firewalled the European banking sector and TARP and $1 trillion in basically free reserves covered the USA banking sector.

    What do all of the smart people on this site think about this scenario? Any bankers from the City out there?

  • Amazed

    You’ve been a commenter here as long as I can remember, and yet you haven’t learned one single solitary gawddamned thing about anything in all that time.

  • Dunce Cap Aficionado

    You are leaving out so many things that go into producing the 1913 meal vs the meal today! Supply of gas to the kitchen that cooks it and all the infrastructure behind that. The delivery of fresher and better quality supplies to make the meal! Companies that do NOTHING except deliver your weekly order (which you can specify at your leisure to them online) along with so many other improvements!

    Hell, you’re even wrong about te ketchup! That’s included free with your meal!

  • Dennis

    WG The central problem with backing our fiat currency with anything is: hey it’s way way too late. The currency is already out there. US dollars are 60% or more of the currency in the world. Where in the world could Uncle Sam come up with the required “backing”. In order to all of sudden decide to back the currency makes no sense and is in reality totally impossible. To go back to a so-called “gold standard”, or anything other type of backing for that matter, is in reality impossible. Fiat currency gets is “value” as a medium of exchange from the “law” and nowhere else. When Nixon took us off the gold standard, “backing” was in reality already gone! Let’s say over the years you gave people ten million dollars in IOUs backed by your promise to pay them back with more IOUs some day. Then you decided to “back up” your IOUs with gold. Hello???

  • Willy2

    Oh yes, by visiting this website I have learned a lot. But some notions trotted out here simply don’t jive with reality. Like the FED controling interest rates. And that becomes apparent when one visits other (US) websites as well. Then one is forced to dig even deeper before one – step by step – can resolve the contradictions and then one starts to understand how the financial system REALLY works. I visit at least 6 financial websites (the majority of them are US websites) EVERY day. I don’t limit myself to this website only.

    And I can recommend everyone to buy and read Robert Prechter’s book “”Conquer the Crash”” that was published in early 2001(2002 ??) and/or the 2.0 version from 2009. Keep in mind, he is a deflationist like one Mr. Roche.

  • Willy2

    1. Who said that I was currently an (Hyper-)inflationista ? (Worldwide) Deflation has been in force since US home prices started to fall in late 2005. Then it was a matter of time before the whole system would blow sky high. I am surprised that it took until 2008 before that became apparent.
    2. Deflation is destruction of credit/debt. And somewhere in the future that will include government debt as well.

  • Marcellus Chan

    China only owns 8% of US public debt. The Chinese government has no choice but to buy US debt because of the need to influence the Chinese yuan at a lower rate to boost their competitiveness

  • that anonymous guy

    that’s exactly what needs to be done though. funny, sexy, entertaining, and simple. nothing is impossible.

  • that anonymous guy

    A film crew and some polished, smooth videos, funny videos, are in order.

    The fact of the matter is that most people – say 95-99.9% – don’t care about economics enough to budget it in alongside parenthood, work, a girlfriend, and fixing up that old jeep. That would include probably 95% of the senate, probably 95% of the senate has no real idea how economics works or any real idea about sectoral balances or any real idea that eliminating the government debt is an impossibility as attempting to do so would cause a heinous recession and call for deficits, etc.

    A message needs to be created that attempts to interact with people not already or intrinsically interested in economics. The video above has polish, it was clearly professionally made, and that results in alot of people being willing to watch it that would turn away from a video like the one posted above.

    A fundamental challenge of marketing MR is that its basically selling hope. The debt hawks are selling fear. Two people walk up to your door and one says “its gonna be allllllright”, the ohter says the russians are coming and we’re all going to die… everybody remembers the fear salesman. Its easy to sell fear, look at the evening news sometime.

    That is a formidable challenge. Tell somebody there is no government debt problem and, in fact, they could mint a 50 quadrillion dollar coin tomorrow, give it to themselves, and ahve 50 quadrillion dollars… that almost sounds too easy, doesn’t it? And we already have an enormous outcry against the fed “printing money” and even very intelligent people are kind of predisposed to oppose that (again, they don’t have a great deal of spare time to devote to studying econ).

    While I fully realize that this is a case of “well, its just not that simple”, exceedingly simple messages could really help reach some minds that are right now convinced that the gov’t is broke, a youtube channel showing some vid’s with some spit and polish. If Ed Burns can make “The Brothers McMullen” for $28k…

  • that anonymous guy

    youtube channel wouldn’t hurt…

  • that anonymous guy

    To sell the world at large the idea that the US Govt has an unlimited budget in dollars will absolutely require a credible, and prominently presented, discussion of how to control inflation.

    So implanted in minds right now is contempt for “money printing” and hate of inflation that you simply cannot be cavalier about it and hope to win over the masses. Or congress.

    A discussion of what causes inflation is sorely lacking from the general blogosphere, at least that I’ve ever seen.

    Whether or not inflation right now is high is not relevant to the debate with the general public – those 95-99.9% of people who really don’t care enough to read deeply into things but who catch tidbits on the news here and there. You know, like congress. – the general public is so obsessed and concerned with inflation and “money printing” that they simply won’t take anything seriously unless it addresses it.

    MR would benefit from a discussion of how to control inflation, what causes it, etc.

    Think of it as a way of saying, to the world at large, “look, you’re right, inflation is important, we’re on it like bonnet”. Its far easier to win a negotiation when the other party realizes you understand their position and are concenred about it.

  • that anonymous guy


    a video about Pete Rose’s autograph being the currency. some folks running around shopping, spending their Peties… saving their Peties, talking about how many Peties they need to get the kids through college.

    Then show pete rose walk in and just sign. That’d be cool. People would watch it.

    And it makes the point accurately enough, I think. I wonder what it costs to get Pete Rose to make a short film?

  • Ben Wolf

    The comments at BI are exactly why MR/MMT is in desperate need of alternate terminology when communicating with the public. Telling the (rather ignorant) commentors there that debt is not debt just confuses them and provokes pushback. When I talk to people about this sort of thing I always use “bonds” in place of “debt”. but if anyone can think of something better I’m all for it.

  • jt26

    BTW I’m not making a policy statement or judgement, but trying to explore a concrete example of how we can address the debt/productivity issue raised by TPC.

  • Ben Wolf

    After watching Cullen’s video I’m convinced almost none of the commentors did. Looks to me like they poured in from some whacked out libertarian/austrian site, judging by the attempted snark factor.

  • Mercator

    Cullen, it’s hard to understand these days where you stand on Fed policy. You used to be more critical, but now have turned toward what seems to be a more supportive position, without really saying it?? Maybe I’ve missed some of your articles.
    It seems like everyone had confidence in Greenspan until it blew up in our faces. Greenspan’s Fed was a bubble ship and he was the captain. There was very little criticism at the time. Now, it seems like Bernanke’s slaughter of the savers until risk improves policy will also end with an enormous correction of some type. It’s just a strong instinct I have, but something is very very wrong with Fed policy. I’m afraid Mr. Bernanke’s next book will be “What I Didn’t Learn from the Great Depression” (and how it made the Great Recession worse).

  • Ben Wolf

    Haha!!! With a pair of black-rimmed glasses on, shouting, “Don’t you understand it’s the productivity! Oh how I fear for America”.

    Now that’s entertainment.

  • Ben Wolf

    Gold for oil is just an asset swap, the sort of thing which happens every day. There’s absolutely nothing new there. I’d suggest peppering your auatrian pals with lots of “whys” and wathc their heads explode once they realize they can’t articulate their argument in a coherent fashion. I guarantee you their ideas are assumption based: they won’t be able to tell you why what they think is correct.

  • Ben Wolf

    So you know the truth, that I control interest rates. You pesky kids and your dog just had to put your noses where they didn’t belong, huh? I’m afraid I can’t let this information become public, which means you’ve become a liability . . .

  • Ben Wolf

    I get your point. All I’m saying is if you’ve got people who are for whatever reason not working (producing) they can at least be useful by spending and spurring greater productivity in others.

  • Dunce Cap Aficionado

    “With all due respect to think that with out the FED and MMT we would be in worst economic situation is wrong.”

    I DO think that we would not be in as beneficial an economic place without the Fed. Just knowing what it took to prevent total collapse during the panic of 1907, the individuals and their actions, their levelheadedness and abilities to control a room full of (other) bankers so that there was not a collapse- hell, it wouldn’t happen in today’s world. Having a the lender of last resort is a vital part of the system today.

    Imagine if September 2008 had rolled around without the Fed (yeah I don’t agree with everything the gov’t did and did not do, but its better than total collapse). You think the bankers running the worlds largest financial institutions and Paulson & Geithner would have acted as deftly and properly as JP Morgan, Rothschild, Rockefeller, Stillman & Cortelyou?

  • gf

    Once again the MMTer’s are correct!!!


  • Greg

    I am going to write this day down as the first time I mostly agreed with something FDO15 said!!

    “Isn’t the financial industry the very worst evidence about the potential ramifications of the JG? The financial industry is basically this massive industry subsidized by neoliberal policies. Their growth over the last 30 years has been largely driven by government policies. And where has it gotten us? It’s produced millions of unproductive overpaid jobs that produce little and take a lot from society. Granted, bankers can’t be compared to JG workers, but it’s the same sort of unproductive idealism. The JGers are just at the opposite end of the spectrum from the neoliberals.”

    Very good points! However…………(.you knew there had to be a however didnt you?)…. what this really shows is that neoliberals are disingenuous about their criticisms of the JG policy. They ARENT against large govt intervention in markets or “picking winners” they just want to pick their own winners….. and losers. So to argue that spending literally trillions on rich financial companies versus hundreds of billions on middle and lower class potential consumers is less disruptive or less inflationary (what drives up prices more, little guys going to walmart or trust fundies buying their second house and third masserati) is absurd. The truth is that everyone knows (even neo liberals)that the govt can spend on whatever it wants to….. its all about the wants!

  • Adam1

    “Future generations won’t need to pay down that debt. They will simply default on the debt.”

    Future generations will not pay for anything because taxes pay for nothing as it is. The problem is the lack of transparency. Today we “issue” debt/bonds and then spend; or at least that’s what people observe and think. But it is false. When the US Treasury “borrows” money it reduces the supply of reserves in the banking system. In order for the FED to have and TO HOLD a target interest rate it must ensure there are sufficient reserves in existence BEFORE the Treasury can sell those bonds. If it does not then the FED cannot maintain its target interest rate. Since the FED can infinitely produce reserves it NEVER has to surrender its ability to hold its target interest rate.

    It would be far more transparent if the FED directly gave the Treasury the needed reserves and then later had the Treasury issue bonds for excess reserve holders to park them in.

  • phil

    I just came across this 2009 report from the NY Fed, about how excess reserves aren’t inflationary and the interest rate can be controlled by paying interest on reserves. Worth a quick read if you haven’t already seen it.

  • Cullen Roche

    I still think the Fed is a mess. Just haven’t had time for my usual rants. :-)

  • Colin, S.Toe

    If the Fed swaps dollars, for say Euros, this would make dollars available (while if the Fed charged a premium over the exchange rate, actually decreasing the US CAD).

    Does this then make the Eurosystem effectively an issuer of dollars? (Since it can issue Euros, which the ECB can swap for dollars. This also raises the question of how/by whom Euros are issued, about which I am still unclear.)

    More generally, could this ultimately lead to a situation where it would make sense to view the Fed and the other central bank participants as a single entity managing a supranational currency system?

  • Cullen Roche

    Foreign central banks are essentially borrowing USD’s from the Fed. They’re not issuing their own USDs.

  • New Guy
  • Colin, S.Toe

    Understood, but if the foreign CB’s can create their own currencies and then trade them for dollars (newly created by the Fed for this purpose), does that not have something of this effect?

    What I am trying to understand is how the USD/GRC might evolve in an increasingly globalized financial system.

  • Johnny Evers

    I don’t know. I suspect we might be entering a time in history when we can — and are — producing all we need and traditional ways of boosting production (make more cars! build more houses! sell more mortgages!) are not helpful because we already have enough houses and most of us can do with our cars for another year. Then the qustion becomes — does the system and the society spread that production around, and does it reward people for doing the right kind of work.
    As for employment, practically speaking anybody who really, really wants a job goes out and finds one. Those that can’t are, sadly, people who don’t have skills to do produtive work. They could get jobs in plants in China, but not here. And with the breakdown in the family structure, those people don’t have a support system like they used to do, back 50 years ago when the aunt who couldn’t work could still live upstairs and take care of the children.
    I have no answers, just thinking out loud — great discussion. Love the board.

  • Johnny Evers

    But then Pete’s card isn’t worth so much and we start buying things with Joe Dimaggio’s card instead, because he’s dead.

  • phil

    Don’t US bonds serve as an investment vehicle which “sterilizes” US over-spending and props up the exchange-rate value of the dollar, whilst allowing the govt to spend money to its heart’s content? If the US were to deficit spend without issuing bonds, wouldn’t the US eventually have to settle into a non-reserve-currency status and achieve a more realistic balance of trade?

  • phil

    Isn’t there another way of controlling interest rates within MMT/MR, other than paying interest on reserves? The idea of paying interest on bank reserves at the Fed seems highly suspect to me – as if the govt is shelling out money to pay interest to the banks for reserves that serve no real purpose to the govt. Could raising reserve ratios be an alternative, possibly along with other measures?

  • phil

    “Teach man to enjoy his benefits, and not injure his fellows”. Sounds like a pretty open-ended doctrine to me. It could appeal to left, right, JG’er, anti-JGer, JG Lover and JG Hater (and “I want to kill all JGers”) equally. Wisdom of the ages, accessible to all.

  • Luis

    I think you use semantics to mislead everyone here. I won’t fall for that.

    Yes, technically the US government can print as much money as it wants. We have a fiat currency backed by nothing but “trust” and history. This is not free money even though it is issued without any collateral (printing money is unsecured). The “US government” issues a debt obligation to “US citizens” and “foreign citizens” in the form of treasury notes and bonds. The US government then pays that off with printing money and/or turning around the revenue it receives. When rates are low this is easy to do. Not all debt is bad but when the amount of debt exceeds a threshold of reliable payment (ie 100%+ of GDP), a currency default is possible and likely. As you explain in the video, this is achieved by massive devaluation of the currency (inflation). However, inflation is also dispersed among other nations and asset classes over time. Children of the future will have a devalued currency in a nation that produces very little. Real money comes from production not consumption. So again, you are correct that we may not “run out of money” but neither would a household if dumb lenders keep giving money. The US has a unique advantage of the dollar as a reserve currency for important international trade. If this dollar reserve is abandoned, we will face a terrible burden and children will suffer for decades.

  • Luis

    It takes two incomes to provide that standard of living we see today. This comes also at the “expense” of lack of savings. The savings rate and net assets for retirement are so low that in fact most Americans have virtually nothing to live on after retirement other than social security. Thus there is an incredible transfer of responsibility to federal and state programs to support the unproductive elderly. Medicare and Medicare have unfunded liabilities in the 30+ trillion. So to answer your question, the standard of living we see today, despite the 95% drop in the value of the dollar, is due to borrowing and false assets.

  • Cullen Roche

    Luis, living stds do not decline because of inflation alone. If that were true then why have living stds increased since 1913? Why has the USD fallen 95% while the CPI has soared since 1913? Or are you saying that people today have lower living stds than 100 years ago? Please read the links for more. It seems that you aren’t quite understanding my point. Thanks.

  • Cullen Roche

    It only takes two incomes because we demand much more. Two cars, mcmansion, granite countertops. I am sure you could live a 1913 style lifestyle on one income. But people don’t choose that. They want the higher living std. Overall, I think it’s a real stretch to argue that we live worse lives than people in 1913 did.

  • Jack

    What have you been smoking lately?

    You will need to find another sucker to drink your misleading Krugmanite Kool-Aid.

    Weimar Republic geniuses used similar to yours bizarre logic to rationalize money printing as a solution to high government debt (that resulted from funding the war entirely by borrowing).

    This was the outcome (initially inflation was “under control” until the parabolic spike).

  • Cullen Roche

    Weimar’s hyperinflation was caused by foreign denominated debt. See here for more.

  • Jack

    I was using Weimar’s hyperinflation (external vs domestic debt is irrelevant) to illustrate limits to government money printing — there are limits as to how much the government can print (but you are misleading your readers as if there is no limit to money printing and therefore according to your bizarre logic “the government can never run out of money”).

  • Cullen Roche

    No, I very specifically say that printing in excess of productive capacity can lead to disastrous outcomes. Read the links I provided. All of these topics are covered in detail.

  • Jack

    You need to listen to your video again, you are repeating multiple times that “the government can never run out of money”.

    This is not true and misleading Krugmanite-like propaganda.

    There is a limit to goverment money printing (therefore, the government can run out of money) and nobody knows where this limit is — 17 academics (aka the Fed), who never had a real job and did not see the housing crisis two months away, do not have any clue where the limit is either).

  • Cullen Roche

    You’re conflating the point. Even in a hyperinflation the country does not “run out of money”. In fact, they generally create more money. There’s no such thing as a sovereign currency issuer running out of money due to some debt constraint. A nation with a printing press does not run out of money. They could kill the currency by creating hyperinflation. But that’s not “running out of money”.

  • Jack

    If tomorrow (for what ever reason) nobody believes that the paper the government prints is money, the government “runs out of money”.

    Your statement that “the government can never run out of money” is not true and misleading Krugmanite-like propaganda.

    The government can run out of money.

  • Cullen Roche

    Not true. Govts don’t “run out of money” in a hyperinflation. You think Weimar ran out of money? No, they printed too much money. The fact that they couldn’t run out of money ultimately did them in. I am fully aware of the fact that abusing the privilege to print can destroy the currency. In fact, that’s my whole point here.

  • Johnny Evers

    Couple of questions:
    Are we, in fact, printing money right now? Is QE2 a matter of taking back bonds that we will quietly tear up later and electronically crediting the accounts of bondholders?
    What would happen if the markets became aware that this is happening, or, that we plan to begin printing money at some time? My understanding is that inflation can be an overnight event.
    Has there been any (positive) examples of governments that printed money either to pay down debt or finance operations?

  • Cullen Roche

    Johnny, QE is never “money printing”. It is the Fed swapping reserves for tsys. They’re not adding net new financial assets. They’re just exchanging assets. I have a full section on the website dedicated to QE.

    We are printing money through the deficit spending. And because we’re in a de-leveraging cycle it’s the only thing propping the economy up. If you read my headline post today you’ll see how the sector balances add up. For instance, if we rearrange the GDP equation you get this:

    (I – S) + (G – T) + (X – M) = 0

    (I – S) = private sector balance

    (G – T) = public sector balance

    (X – M) = foreign sector balance

    All the sectors have to sum to zero.

    So the best way to think of this is to think of the govt’s deficit as the non-govt’s surplus. If the country has a trade deficit then think of that as a demand leakage out of country. If the govt doesn’t run a budget deficit to offset this demand leakage then the pvt sector doesn’t have the net financial assets to continue growing without going into debt. So, with a 3.5% CAD, the 10% budget deficit is allowing the pvt sector to save quite a bit today and repair their balance sheets. It’s also leading to growth.

    Make sense?

  • Johnny Evers

    THanks. I’ll have to think on that for a while.

    One question:
    If the $1.5 trillion deficit is the ‘non-government surplus’, it seems that you are defining the latter by the former. If we decided to have a $1 trillion deficit, then that would be the non-government surplus. If we balanced the budget, then the non-government surplus would be zero.

    I do understand the aim of the QE2 is to repair the banks’ balance sheets.

  • Cullen Roche

    They’re mirror images. I am not sure I follow your point?

  • Johnny Evers

    OK, I thought the ‘nongovernment surplus = the slack in the economy and that deficit spending made up the slack in the economy.
    But you could run a $1 trillion deficit in a rip-roaring, full employment economy and still call it the non-government surplus.
    By balancing your equation you create the impression the deficits don’t matter, or that the deficit is meant to restore the economy to equilibrium, which I don’t think is what you mean to say.

    Listened to the video. When you say that government is a currency ‘issuer’ not a user, I see some problems with that as a theory. For example, when the Defense Department buys a new tank, it spends money that it either borrowed or received in taxes. The money is issued by the Federal Reserve, which to my understanding is an independent entity that is technically not even part of the government.

    At any rate, I think I now understand that yes, the government is not like me because it can print money, but if that’s the message the public grasps, it is going to horrify them even more than their current fears about having to pay it back. We know that if we had a printing press, we would certainly use it, just as the federal government will, and we suspect it won’t have a positive ending.

  • Cullen Roche

    Johnny, you’re not really understanding some of the more basic points of MMR. Have you read my primer? It’s dense and requires some effort to grasp, but all of your questions are answered within.

  • Mr.Market (a.k.a. Willy2)

    LOL. And I love pizza too.

  • Johnny Evers

    Thanks for responding. I don’t want to take up more of your time, appreciate the answers you have provided.
    I took an hour and read through your article; can’t say I quite understand it, but I grasp the outline and the general concept.
    I think what irritated me initially is that your video gave me the impression that ‘Deficits don’t matter, idiot’ when most of us are not idiots, we just want to be able to translate concepts into things that are familiar to us.
    The idea that I work my ass off to earn a dollar and the Federal government can just — poof — give a dollar to somebody who doesn’t work without consulting me drives a lot of us crazy. The idea that the Fed is electronically sending money to my bank’s account and my bank is squeezing me on my mortgage drives me crazy.
    I get what you said that money is just a means to circulate and grease the economy. True wealth is property or shares in a company (or, sorry, gold) or even a promise from a loved one that they will take care of us when we are old; however, for most Americans who have maybe $100k in assets that must be invested conservatively and must be held in cash the idea that cash is essentially very fragile is going to be a great shock to them. The fact that inflation benefits wealth holders and destroys savers is going to create societal turmoil if people grasp what is going on.

  • Cullen Roche

    Yeah, there’s a balance between production and spending. I would even argue that our production is being watered down by things like the financial services industry. So the margin for error in the USA growing thinner with time as we increasingly become a nation of rentiers producing less of real value and consuming everything in sight. That’s why I always like to emphasize the importance of production, making goods and services of real value and not allowing our govt to just paper over our problems with deficit spending. Govt spending can be good though. We have to remember that deficits are not always bad. They don’t always lead to a decline in our living stds.

    Let me know if I can help with the concepts more.

  • JC

    I’ve been trying to wrap my head around the implications of MMT for MONTHS now. Maybe I’m dense or too old to learn new tricks or both. One thing, I’ve never been able to understand is how the system works where the vertical and horizontal views intersect. For instance, it sounds like a bank’s own capital and it’s reserves are in “separate” accounts. And if banks are lending and maintaining capital levels based on their judgement of credit risk and this deviates from the reserve requirment ratio, does this mean for instance that they could possibly obtain more funds from the government to maintain reserve requirements as a simple automatic mecahnical process even though the banks capital levels could very well be lower than that reserve requirment? So a way to think about it would be that the bank is basically operating around this core reserve that does not belong to them and that they don’t actually ever “touch” – its just there to instill confidence in the system and provide a tool for the fed to maintain a target rate? And that being said, would it be right to think that in terms of the banks operations, it has 0 reserve assets and all decisions are made without taking the reserves into consideration, they are merely there because it is law? And instead of thinking about the banks as “leveraging government money” (which implies the fractional reserve system is real in some people’s perceptions of the statement), is it correct to think that in a theoretical world in the beginning of the monetary system where there was no money in the system, that the treasury spends, money makes it’s way through the economy and ends up as cash on the balance sheets of banks which they use for operations as stated in the first portion of this long winded question and THAT is how banks obtain cash for operations, NOT the reserve rqmt? sorry so long :0) thank you so much for the great research

  • Cullen Roche

    Reserves are an asset. Capital is equity. So banks are constrained by their solvency essentially and not by their reserve balances. Does that help?

  • Carla

    Sorry to display my ignorance, but I am trying to learn. So, what are JG’s and CAD’s? If these acronyms were defined in the thread, I missed it. Thanks.

  • Carla

    P.S. I agree about the most destructive monetary myth in the USA — it’s been driving me NUTS. Thank you, Cullen Roche, for your clear explanation.

  • Cullen Roche

    Job Guarantee, a program MMTers believe in, and current account deficit. Sorry. I shouldn’t speak in code. Not a good way to teach.

  • Anonymous

    You need to have a catchy name like Dr. Doom ala Mark Faber or Roubini. And write a NY times Bestseller. And teach at an Ivy league school. Unfortunately. How about “Roche the Realist”……or segment called “Get Real with Roche”. etc. etc….. also some shameless self-promotion on your home page…e.g. links to interviews on CNBC and Bloomberg…etc….

  • PaulG

    I think we should all chip in and get Morgan Freeman to do a series of MMR videos!

  • Wise Guy

    Dennis, the way you could handle backing currency with a basket of assets is not to do it “all of a sudden”. Instead of the Fed capriciously issuing currency, it would begin to buy assets, much the way we buy oil for the Strategic Oil Reserve with issued currency. Over time that would restrict the supply of assets, driving up the cost until paper currency finally reflected the cost of those assets. My problem with asset backed currency, though: is that as you can see it would eventually make everything more expensive. Prior to the 20th century, a government could back its currency with large warehouses of say gold, silver and even diamonds; because outside of a medium for monetary exchange, those assets were primarily only used for conspicuous consumption in society. But in the 21st century all those assets are used extensively in industry and manufacturing.

  • Pod

    People do not argue it because it is not the case. To argue it would be preposterous.