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SMT vs. MMT

     Sound Monetary Theory vs. Modern Monetary Theory In this piece I will contrast Sound Monetary Theory (SMT) with Modern Monetary Theory (MMT). The term SMT may be as new to you as MMT, but I will reveal that you already know everything about SMT, unlike its upstart rival, MMT. By asking a few simple questions, it will become clear which theory is superior in describing the real world. 1.  Where does money come from, who makes it? SMT – Obviously, money is only made when people in the private sector make a profit. Entrepreneurs and big corporations such as Apple, Sony, Tesla make millions if not billions every year. Banks make money by charging interest. Even governments can make money by selling land and so on. Organisations that lend money clearly need the savings of richer people to give to creditors. MMT – Only banks can make money, essentially out of thin air, though some argue that a balancing asset is needed such as a promise to pay it back. P...
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Is Gold Money?

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                                                                ( Image by PIRO4D from Pixabay ) Gold. Mmmm - nice! But is it "money"? (a) What is gold? Gold is a rare element found in the Earth's crust. It is a shiny yellow metal with very interesting properties, the most important here being is that it doesn't easily corrode or oxidise, so a gold coin 2,000 years old will still look like a gold coin, rather than a lump of rust. Though you can sell gold for "money", there are probably no shops in the world that will accept payment of gold in exchange for goods. You can't buy stuff with it at the supermarket, or change it for money at a high-street bank. You can wear it as jewellery, and that's about it. Of course, there are many uses for gold in industries such as electronics, but the average person can't actually buy an...
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The Three Pillars of mass deception.

The current popular macro-economic paradigm is corrupt, where 'popular' means here the statements proclaimed by most political leaders of all stripes and parroted by main-stream media (MSM) and its pundits. The paradigm is unfortunately taught in most universities. It rests on 3 pillars : (1) Ignorance of the sources and final destinations of all money (2) Ignorance of Sectoral Balances - for every deficit there is a surplus (3) The household budget analogy of government funding and spending These pillars need destroyed.
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The List of Nonsense

There are many things that mainstream economists and their supporters believe that are, frankly, nonsense. Here is a partial list, in no particular order. 1. The quantity theory of money. 2. Efficient markets hypothesis 3. The Laffer curve 4. Trickle down theory. 5. Fractional reserve banking 6. The money multiplier theory. 7. Loanable funds. 8. Monetarism. 9. Ricardian equivalence. 10. DSGE models and their requirements and assumptions. But what do they all mean? They are outmoded concepts designed in some cases to obfuscate what money really is, and how it works in most modern economies. If you see anyone using them, you know they are either ignorant or trying to deceive you. You could Google them, but I wouldn't bother. Google 'Modern Monetary Theory' instead.
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Money - what is it?

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Wow - ten trillion dollars !. If I owned this note, would I be a trillionare? Yes. Would I be rich? Unfortunately, no. What exactly is money - a big question - you might answer 'who cares, as long as I have enough'. A very loose definition might be 'the numbers in your bank account that allow you to buy stuff' (economists have more detailed definitions - see later.). You don't even need bits of coloured paper or plastic or little discs of stamped metal to buy stuff, you can just use a debit card and touch it to a machine and money is 'transferred' from your bank account to the coffee vendors' bank account so you can walk away with a latte. However, you might be surprised that nothing was actually 'transferred'. The debit card allowed your bank to reduce your bank account by one coffee price, and the vendors bank was allowed to increase the vendors account by the same amount. Numbers were decreased in one computer, and increased in anoth...
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