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53 votes

Is money we make completely taken away by taxes?

No, this will not happen. Government does not tax people just for 'shits and giggles'. Governments do not hoard money at some pile as a some sort of dragon from a fantasy novel. Taxes are levied so ...
1muflon1's user avatar
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26 votes

Can someone explain why sterling-dollar parity is bad?

There's nothing wrong with \$1=£1. Unless it was \$1.50=£1 last week - then it's a big problem - for the people who have £, at least! The people who have \$ will be glad they can buy things from the ...
Stack Exchange Supports Israel's user avatar
19 votes

Is money we make completely taken away by taxes?

Wind the clock back in the other direction: where did this money come from in the first place? The government issued it. Render unto Caesar that which is Caesar's, etc. You've also chosen to stop your ...
pjc50's user avatar
  • 558
14 votes

Why doesn't the government create money, spend it for free without interest, and recollect it with taxes?

Why doesn't the government create money, spend it for free without interest, and recollect it with taxes, you ask. Well, it does. That's exactly what public investment & spending, and the taxation ...
410 gone's user avatar
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12 votes
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Cash and negative interest rates

Actually they're saying that, when cash is available, people need not to deposit their money into the bank, and hence is "guaranteed" (not taking into account risks associated with holding on to cash, ...
Art's user avatar
  • 2,792
12 votes
Accepted

On what basis do countries repay international loans?

Only sufficiently credit worthy countries are able to borrow money internationally in their own currency. In principle you are right that such a country could effectively default by expanding the ...
noob2's user avatar
  • 255
10 votes
Accepted

The Printing of Money for Paying Debt

Printing money causes inflation because someone (or some institution) will get the money and will spend it somehow. This increases demand for goods, but the number of goods, the supply was not ...
Giskard's user avatar
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10 votes

Why can't countries print another country's currency?

Why assuming that it isn't done in the first place? Turns out, it was actually done by Nazis in WWII https://en.wikipedia.org/wiki/Operation_Bernhard Also, suppose that somebody actually made ...
bbecon's user avatar
  • 688
9 votes
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Does control system engineering have a place in economics?

Economists have been exploring control theory applications to macro economics for decades. For example, here is a 40 year-old research paper written in 1976 on the topic. top of page 2 (also numbered ...
FreeMarketUnicorn's user avatar
9 votes
Accepted

What is the purpose of monetary expansion during an economic lockdown?

What is the purpose of monetary expansion in this environment? Avoiding (and preventing future) supply and demand shocks The purpose is to keep as much as possible markets (labor related, of goods ...
keepAlive's user avatar
  • 1,435
9 votes

Is money we make completely taken away by taxes?

Your calculation is fundamentally wrong because you are forgetting an important factor - the money that government spends. In your calculation you seem to think that the 10% the government takes in ...
DJClayworth's user avatar
7 votes

Why should I get a bond with negative interest instead of having a bank deposit account either zero interest or positive interest

It makes little sense to me either, but here are some possible reasons for buying a bond with negative interest rates rather than depositing the same amount in a bank: The deposit-taking bank may go ...
Henry's user avatar
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7 votes
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What would monetarists do when interest rates approach zero and become ineffective?

An excellent overview of not just monetarist view on this issue but all other mainstream views on monetary policy at zero lower bound (ZLB) can be found in Ullersma (2002) The Zero Lower Bound on ...
1muflon1's user avatar
  • 57.1k
7 votes

Does Modern Monetary Theory (MMT) provide a useful insight into how to manage the economy?

Does Modern Monetary Theory (MMT) provide a useful insight into how to manage the economy? That depends on your definition of MMT, because it is not generally agreed on what it even is. You will find ...
1muflon1's user avatar
  • 57.1k
6 votes

Is zero inflation desirable?

A little inflation is better than zero inflation (or deflation), because wages are "sticky" - they don't usually get adjusted downward. If a company is facing a year that is a bit worse than the ...
M3RS's user avatar
  • 1,087
6 votes
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Consequences to lending and value of national currency from a negative interest rate and 140-year mortgages in Sweden

There is some concern about the interest rates (currently at -0.5%) fueling a housing bubble in Sweden. This article at Fidelity states: In a bid to track the ECB, Sweden has cut its interest rate ...
user100487's user avatar
6 votes
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Intuition for the CES consumption index in New-Keynesian DSGE models

Heuristically, you can think of the integral as just a sum: $$ \bar{C} = \left( \sum_{i=1}^n C_i^{1-\frac{1}{\epsilon}} \right)^{\frac{\epsilon}{\epsilon - 1}} $$ where $\bar{C}$ is an index of ...
Theoretical Economist's user avatar
6 votes

Why can't countries print another country's currency?

Although one should never speculate, this may actually be happening on a small scale of sorts. The reference to this is from here: https://en.wikipedia.org/wiki/Superdollar A superdollar (also ...
Rustov's user avatar
  • 81
6 votes

Why does an economic slowdown lead to deflation?

First, let me address some incorrect premises in your question Usually economists say that in recession there is deflation, so increasing the money supply does not lead to high level of inflation. ...
1muflon1's user avatar
  • 57.1k
6 votes

Are quantitative easing and helicopter cash really different tactics? And how does QE relate to Modern Monetary Theory?

What is QE: QE is simply an asset purchase by central bank. As explained by Fed St. Louis QE is defined as: large-scale asset purchases—in the hundreds of billions of dollars range—of, for example, ...
1muflon1's user avatar
  • 57.1k
6 votes
Accepted

Why did John Keynes believe that monetary policy to be less effective than fiscal policy?

This was due to the idea of liquidity trap, and due to Keynes thinking that in economic recession it is easy for an economy to slip into the liquidity trap. Liquidity trap is a situation where ...
1muflon1's user avatar
  • 57.1k
6 votes

What are some of the good textbooks on Modern Monetary Theory and the Development of Monetary Theory?

You ask for sources on MMT and then sources on development of monetary theory. I don't know about the former (but I know there are some users here who are fans of MMT so hopefully they will hook you ...
1muflon1's user avatar
  • 57.1k
6 votes

What are some of the good textbooks on Modern Monetary Theory and the Development of Monetary Theory?

For Modern Monetary Theory, this is a list of textbooks/books that I used in a primer. Macroeconomics, by William Mitchell, L. Randall Wray, and Martin Watts. Red Globe Press, 2019. ISBN: 978-1-137-...
Brian Romanchuk's user avatar
6 votes

Why was Friedman so wrong about inflation?

Why was Friedman so wrong about inflation? He actually was not wrong in a broad sense, only in more specific sense. First, you are actually misrepresenting and slightly 'strawmaning' Friedman's ideas....
1muflon1's user avatar
  • 57.1k
6 votes

Is money we make completely taken away by taxes?

A distinction must be made, as also other answers suggest, between money and income. If you speak of money, meaning the amount of money you have at some instant of time, and with which you pay taxes ...
BakerStreet's user avatar
  • 4,047
5 votes

Why should I get a bond with negative interest instead of having a bank deposit account either zero interest or positive interest

@Henry gives a good answer with lots of interesting reasons. However, there are lots macro-model setting where the demand for risk free assets is positive, even when the interest on savings is ...
BKay's user avatar
  • 16.3k
5 votes

Monetary policy optimization

You are unfortunately mistaken. DSGE models are at the heart of monetary policy and the most widely used class of models in this field. To work in monetary there is no real way around learning DSGE. ...
BB King's user avatar
  • 6,238
5 votes
Accepted

What effect would destroying large amounts of physical currency have on government finances

In most modern economies, the central bank certainly has the authority to print money, when it does so to implement its legally defined objective. Let's consider what the implications of this '...
Tomas's user avatar
  • 174
5 votes
Accepted

If I shred a $20 bill, is society poorer? What is the effect on the real economy?

You have to make distinction between short-run and long-run. Short-run: In short-run money is not neutral, meaning that in short-run money and other nominal variables can affect real output. A one ...
1muflon1's user avatar
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