IF STATES CAN PRINT MONEY, WHY DO THEY BORROW IT?
Jared Bernstein - Biden's chief economic adviser - in the documentary “Finding the Money” struggles to explain why governments need to borrow money since they can print it.
What follows is my English translation of an article by Megas Alexandros published on ComeDonChisciotte.org yesterday, 8th May 2024. (All formatting original, though I could not keep the underlined sections, due to lack of such feature here on Substack).
I know that this article is more on economy rather than geopolitics, but I believe that the two topics are quite related, as we saw in my previous post. Also, I strongly believe that the current socio-economic struggle that people around the world are facing is very related to geopolitics and, in particular, to the hegemony of the Outlaw US Empire and its dollar.
Jared Bernstein - Biden's chief economic adviser - in the documentary “Finding the Money” struggles to explain why governments need to borrow money since they can print it. His “stammering” shown in front of the exponents of Modern Monetary Theory makes the fraud, within which our rulers and their advisers operate, ever more blatant.
The Thessaloniki International Film Festival in Greece saw the European premiere of the documentary FINDING THE MONEY - a feature film produced by Hand Hewn Productions and directed by Maren Poitras, which deals with economic and monetary issues and features all the major exponents of Modern Monetary Theory (MMT).
For a few days now, a clip of the documentary has been circulating on the Internet where US President Joe Biden's first economic advisor appears in great difficulty in answering the question as to why the states rush to borrow money, since they can freely print it.
Listen to the words, or rather the stammering, of economist Jared Bernstein in his reply (click on the photo):
[I have changed the original photo and link, to save a few more clicks]
“Like you said, they print dollars. So why, why does the government take loans?” an interviewer asked Bernstein. “Well, um, the uh… so the… I mean, again, some of these things become… some of the… language that… some of the language and concepts are just confusing. I mean, the government definitely prints money and it definitely lends that money, that’s why… um… the government definitely prints money and then it lends that money by selling bonds. Is this what they do? … They, they uh… they, yeah, they um… sell bonds… yeah, sell bonds. Right? Since they sell bonds and then people buy the bonds and lend them the money,” Bernstein said in the documentary “Finding The Money.” [1]
In the video Bernstein continued to struggle to explain the basic concepts of US monetary policy. He apparently said he did not “understand” what critics mean when they suggest that the US could simply print more money instead of borrowing.
Yeah, I mean I can’t really talk about it. I don’t get it. I don’t know what they’re talking about because it’s like, the government clearly prints money. It does it all the time, and it clearly borrows. Otherwise we wouldn’t be having this debt and deficit conversation. So, I don’t think there’s anything confusing there.
It is quite obvious how Bernstein goes into extreme difficulty when faced with this simple question that no journalist from our [Italian] mainstream [media] has ever in recent years dared to ask our [Italian] Prime Ministers starting with Mario Monti or their economic advisers.
The truth is so clear and obvious that MMT and those who write about it have never tired of repeating it over time.
Any government operating in the current economic systems based on fiat money, as a monopolist of the currency, would have no need whatsoever to borrow it.
So why do our governments continue to borrow it?
Warren Mosler and co. have provided a precise, accurate and exhaustive answer to this question for decades:
borrowing money that constitutes the savings of the private sector from the state, giving citizens, businesses and the financial world the securities issued by the Treasury in return, is a fiscal policy choice aimed solely at providing interest income to those who already have savings. Nothing more!
The decision to pay interest to a government is nothing more than a political choice to whom we want to direct public money, just like any other spending measure that governments implement in their daily actions: from paying public salaries and pensions to building a hospital or a road to supplying arms to Ukraine and renovating Italians' homes through the now well-known Superbonus.
We speak, as already identified, of mere choices on how to spend, which governments make within the fiscal policy delegated to them. And if we want to go into the merits of an evaluation of what is precisely the measure in question – aimed at providing a “couch” income to those who have savings – it has a decidedly regressive character: precisely because it is so obvious, it provides income to those who already have savings in proportion to the savings they possess.
An expenditure measure that, it is plain for all to see, tends to widen exponentially the gap in the social scale of the country that implements it.
Not only that, when such a measure – as has been the case in our country [Italy] for decades now – is implemented within the primary surplus (state budget balance net of interest paid on debt), there is a real transfer of financial wealth from labour to income. And this (as in fact has been the case in Italy for the past three decades), leads to a definitive undermining of a country's economic system, creating unemployment, poverty and increasingly poorer living conditions for the majority.
In a fiat system, such as the current one, there is no need to resort again to the issuance of government bonds to finance public spending. These are a remnant of the period when the gold standard was in force, at least on paper; when states resorted to non-convertible gold instruments (such as bonds) in order to expand public spending within what was a potential fixed exchange rate system for currencies.
Today, all the countries of the world - except for a few that quite recklessly decide to peg their currencies with other currencies - adopt a flexible exchange rate policy, thus making the issuance of public debt securities no longer necessary. The public expenditure of any government can be safely financed through a direct correspondent account relationship between the Central Bank and the Treasury, with the former returning to properly performing its public function as an institution, directly subordinate to the government.
I often read, among the various criticisms levelled at MMT, that Mosler and the other proponents of modern money theory would have never highlighted the problem of a Central Bank legally in private hands.
This is a false problem!
For the public function takes precedence over the legal question of ownership. From the moment that any company, albeit private, is faced with carrying out the diktats of a truly democratic government - i.e. actually performing a public function imposed on it - from that precise moment onwards it loses all the typical characteristics and above all the economic interest that characterises assets held in private hands.
On the other hand, we witness on a daily basis state-owned companies that, abdicating their public function, are instead managed as if they were real private entities, in the interests of those deep powers that have taken possession of our institutions.
For a state monopolist of the currency, with which it can acquire whatever it wishes, the concept of private property loses all meaning; on the other hand, that of public function is essential, which must be carried out in accordance with the guiding principles that underpin modern democratic states and, above all, in the interests of 99% of its citizens.
Private ownership of the means of production is a socio-economic instrument, not a moral imperative!
I am not an evonomist, so you do not have to believe me. But my answer is that money is usually mostly created as loans, because when the loan is paid back the money created is effectively and actually annihilated. This ensures that money is a limited resource in the economy. If money was just printed, it would actually accumulate and the value of it would be reduced fast. Interest is to control the demand for the money which is temporarily created. Money is only a means to create property or "value" and as such are only of temporary value themselves. The solution is to create it as a loan and destroy it in the repayment. A government could print all the money it needs, if it made sure to tax it completely back, thus preventing its accumulation.