Foundations with Warren Mosler
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Newcomers to MMT tend to draw a blank when they are told that taxes drive the currency or taxes created the first unemployed person. After all, none of that seems to track with the way they personally experience taxes. Warren Mosler makes sense of it by starting with the money story, using the example of colonial currency. The British wanted workers on African coffee plantations, but people were not clamoring to be hired. So, they created a coin or scrip and levied a hut tax payable in the new currency.
The public purpose behind what the British were doing was to grow coffee. They levied a tax. They put a tax liability on everyone's house. That caused lots of people to be looking for work or look for some way to earn scrip so they could pay the tax so their house wouldn't be burned down ... It's just a tax liability. Nobody has any yet. Those are called unemployed. And so, the hut tax created unemployment.
Some of the scrip was used to pay taxes and the rest became the money supply in the local economy. The British did not collect taxes to accrue currency for payroll, just as the US did not need to collect taxes (or borrow dollars from China) in order to distribute COVID stimulus checks.
By getting the sequence all wrong, mainstream economic models cannot arrive at correct solutions. It leads to hyperbolic predictions of the US becoming like Greece (Venezuela? Zimbabwe? The Weimar Republic?), appealing to the IMF on bended knee.
This week’s Macro N Cheese is the recording of Warren Mosler’s January 5th presentation to members of the US Green Party, hosted by Real Progressives. The episode includes excerpts from the Q&A following his talk. He explains why a sovereign currency is a public monopoly, discusses the policy implications of the money sequence, debunks misconceptions about the Federal Reserve, and defines the “national debt.”
The full two-hour session is available at Real Progress in Action on YouTube.
Warren Mosler is an American economist and theorist, and one of the leading voices in the field of Modern Monetary Theory (MMT). Presently, Warren resides on St. Croix, US Virgin Islands, where he owns and operates Valance Co., Inc. He is the author of “The Seven Deadly Innocent Frauds of Economic Policy” and “Soft Currency Economics,” which are available on his website.
moslereconomics.com
@wbmosleron Twitter
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