54
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 ...
- 58.5k
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 ...
- 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 ...
- 8,168
12
votes
Accepted
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, ...
- 2,800
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 ...
- 255
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 ...
- 688
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 ...
- 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 ...
- 217
7
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 ...
- 1,097
7
votes
Accepted
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 ...
- 58.5k
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 ...
- 58.5k
6
votes
Accepted
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 ...
- 2,156
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 ...
- 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.
...
- 58.5k
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, ...
- 58.5k
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 ...
- 58.5k
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 ...
- 58.5k
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-...
- 9,907
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....
- 58.5k
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 ...
- 4,160
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 '...
- 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 ...
- 58.5k
5
votes
Accepted
Why don’t sovereigns like Venezuela just immediately replace the currency in event of a hyperinflation
Introducing new currency won't help if the underlaying problems are not addressed.
In fact as reported by AlJazeera:
Venezuela introduces new currency, drops six zeros
So they are already ...
- 58.5k
5
votes
Is money we make completely taken away by taxes?
Let's look at this from a more theoretical point of view.
Consider Government G, Company C and Yourself Y.
Company C is a Monopolist for everything (or an aggregate of all companies, same thing), so ...
- 531
4
votes
How do central banks create money to pay interest on reserves
The payment of interest is straightforward. The central bank is a bank, and pays interests on deposits in exactly the same way as any other bank.
If the central bank wants to pay $1 in interest to a ...
- 9,907
4
votes
Accepted
How should one expand the information set in VAR models?
My recommendation is that you read through this paper from Bernanke, Boivin, and Eliasz. This paper introduced something called factor-augmented VAR. The gist is that you can use principle component ...
- 2,911
4
votes
Is money mostly created (out of nothing) by banks making loans?
The monetary base (MB) contains what might be called "public money creation", Notes and coins in circulation (outside Federal Reserve Banks and the vaults of depository institutions), Notes ...
- 16.4k
4
votes
What would be the likely economic consequences of the "trillion dollar coin" idea to eliminate all government debt?
Quite obviously, the act of creating and depositing the coin can't possibly impact anything of economic interest (except for creating an imperceptibly small increase in demand for platinum and hence ...
- 1,563
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