Mosler: seminar

["William B. Ryan" <william_b_ryan@xxxxxxxxxxx>]

1.  I had written:

http://csf.colorado.edu/mail/pkt/jun98/0010.html

"Mosler's thesis is that money, in every form and from whatever source,
derives its value from the imperative to pay taxes in government issued
'currency.'"

In response, Warren Mosler wrote:

http://csf.colorado.edu/mail/pkt/jun98/0015.html

"You are reading too much into the paper.  This draft states that it is
providing a framework for analyzing tax driven currencies.  Not 'money'
in general, whatever that is!"

Literally, then, Mosler must be using the word "currency" to mean
currency, not as a metaphor for other forms of money, including checking
deposits.  If so, Mosler's argument becomes ludicrously simplistic.
Most transactions are conducted by checks or electronic substitutes for
checks.

The demand for U.S. currency does not primarily derive from the
imperative to pay taxes--even the government accepts checks--but from 1)
the demand for dollars overseas, where local money lacks perceived
reliability, and 2) by the underground economy throughout the world,
where transactions are conducted in avoidance of taxes and other
controls.

It would be ridiculous to say that drug dealers need currency to pay
taxes.

That is why the largest denomination of U.S. currency is one-hundred
dollars.  Perhaps currency should be phased out entirely.

2.  Warren Mosler wrote at:

http://www.gate.net/~mosler/comm.htm

"...If individuals and businesses desire to hold actual cash, that money
must be 'left over' after taxes are paid.  All cash held by the public
must be money provided by the government in excess of the need to pay
taxes..."

Here, Mosler is using the word "cash" in the sense that he uses
"currency" in our seminar paper, apparently.  I say ~apparently~ because
many technical words used by Mosler deviate from standard usage, even
from his own previous usage.

What about endogenous credit expansion?

As if he is saying something meaningful, Mosler responds (in our seminar
paper) that credit expansion is the "leveraging" of government issued
"currency" that "nets to zero."

But if the economy is growing, both government and the private sector
will deficit spend.  And the deficit spending of the private sector will
greatly exceed that of government, resulting in "cash" balances that
accumulate throughout the economy.

3.  In our seminar paper, Warren Mosler wrote:

http://www.warrenmosler.com/sce/hand21.htm

"Notice that while the note was circulating, it was not an acceptable
means of tax payment."

Even this seemingly obvious statement does not apply to the real world.
Governments, local, state and federal, often do in fact accept other
means of payment than "currency" in payment of taxes.  Certainly, this
would apply to checks, but Mosler now includes checks within the
category of "vertical activity" in this most recent incarnation of his
thesis.

I once settled a substantial liability with the I.R.S. by handing over a
promissory note I had received in trade, in partial payment for a
business I had sold.  The I.R.S. accepted the note in full settlement of
the debt; all liens against me were lifted.  This sort of "negotiated"
transaction occurs quite frequently.

4.  Mosler persistently defines "fiat" money as "deficit" spending by
government, with no distinction between spending that is financed by
borrowing from the public, and spending that is financed by simply
"printing" money.  Indeed, he claims that they are identical in their
effects.

Bill Ryan



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