11 responses to “How to Balance the Government Budget. The MMT way!

  1. Eventually nearly all spending goes back to government as taxes regardless of the level at which they are set, providing they are finite. It just takes longer if taxes are lower

    Neil Wilson put it even more emphatically saying something (lost the link) like “in the limit, every cent gets taxed back and destroyed”.

    It’s a terrific way to look at things because it renders the battle cry of the neo-libs, “Taxpayers Money”, total gibberish.

    But, if that is the plan, then politicians arguing for a balanced budget should say so in advance to give us the chance of voting for someone else.

    Yeah, good one Peter! Unfortunately even the Greens in this country (Aust) are besotted with neo-liberal ideology, rendering their progressive social and environmental agenda moot.

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  3. Government spending causes an equivalent amount of taxation. Each time, every time.

    And the only thing that stops taxation being equal to government spending *within any particular time period*, is that people have decided to save some of the money they received.

    So if you want things to be equal within a time period, you have to reduce the amount of overall saving within that time period. But why would you want to stop people saving or force them to take on more debt?

  4. Government spending causes an equivalent amount of taxation. Each time, every time.

    Another great, and succinct, insight. Thanks again Neil.

  5. I’ve read this with some scepticism having just stumbled on the site and my first reaction was this must be a load of twaddle. However, when I set out to write a rebuttal I could not find any flaw in the logic. So to say I am perplexed is an more than an understatement. If Mr Martin is correct how can it be that all the world’s highly paid financial experts can be so wrong?

  6. If Mr Martin is correct how can it be that all the world’s highly paid financial experts can be so wrong?

    Try self interest, ignorance, or so much intellectual capital invested that the pain of “writing it off” is too much to bear.

    If more folk had some understanding of national accounting and central bank operations the neo-liberals would be laughed out of town, along with the naked emperor.

  7. Pingback: Unhelpful things lefties shouldn’t say part 3 « alittleecon

  8. The truth is that most experts were educated under a gold standard and have little, if any, expertise with a true fiat money system. That and the fact that MMT would get them fired or laughed out of town….

    Molon labe

  9. “Warren Mosler likes to make the point that all money to pay taxes, and buy government securities, comes from Government spending.”

    What about the 97% of money in the UK which was created by commercial banks issuing loans?

    • Ah, I see from some of your other posts that you differentiate commercial deposits as commerical IOUs rather than currency per se.

      • Yes. The Positive money group like to latch on to this 97% figure, Its calculated assuming that Govt bonds aren’t money BTW. I’ve just argued in my recent post that they are.

        Commercial bank money is the IOU of the bank. They create asset /liability pairs just like anyone else can. They no different from the chips that are issued by a casino except they are digital. Those chips could, in principle, be used as money outside of the casino if everyone was confident of the casino’s financial viability.

        But just as you can’t pay your taxes with casino chips, neither can you pay them with commercial bank money. The bank has to cough up BoE issued money from its reserves whenever one of its customers writes out a cheque to government.

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