Tuesday, 24 June 2014
Another flawed criticism of full reserve.
I do love the critics of full reserve. They put one argument after another all of them quite clearly flawed or hopeless.
The latest such (published in the last 24 hours) comes from Randall Wray. In an otherwise very good article about MMT, he says:
“In the developed nations we have thoroughly monetized the economies. Much (maybe most) of our economic activity requires money, and we need specialized institutions that can issue widely accepted monetary IOUs to enable that activity to get underway. While our governments are large, they are not big enough to provide all the monetary IOUs we need….”
Now that contradicts the claim rightly made by Randy and dozens of MMTers namely that there is NO LIMIT to the amount of money that government can print and spend. Robert Mugabe illustrated that point, didn’t he?
Next, Randy says, “I cannot see any possibility of running a modern, monetized, capitalist economy without private financial institutions that create the monetary IOUs needed to initiate economic activity.”
Now why is privately created money needed in order to “initiate economic activity”? If I want to start producing widgets, clearly I need enough money to buy a widget factory complete with widget making machines. If I have enough government produced money, I can fire ahead. And if my customers have enough government money, they can buy my widgets. And if I don’t have enough cash to buy the factory, but someone else has a pile of government money and will lend it to me, then again, I can fire ahead.
In short, privately produced money is just not necessary.