Drudge Retort: The Other Side of the News
Monday, January 22, 2018

The current system of having money created by private banks as interest-bearing debt is unnecessary and dangerous. The industrialists and economists of the classical period of capitalism, the producers of things for profit thought that the proper role of banking and credit was to be a service for the productive sector of the economy. Every society should understand the danger when that relationship is reversed, as it is today. Understanding how money works, in Modern Monetary Terms (MMT), makes visible why it's entirely unnecessary to figure out how to "collect" money for social programs, and why it's absolutely necessary to surtax the wealthy. It also implies that any minimum income program requires what should be a maximum income policy as well. Taxes do not fund government spending. MMT is not well understood at all, and most people, including capitalist economists, fall back to the taxes-for-spending paradigm that is completely wrong.

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American monetary policy is structured, and forced to function, around economically illogical confusions that obscure these facts and impede our understanding of how to promote spending for progressive purposes.

The Fed is a servant to the banking system while also trying to be a public purpose servant. It has two masters by design. In the American monetary system, it is not the people's government, but the bigamist Fed and its member banks that create money, and money is debt. 97% of the money in the economy today is created by banks, whilst just 3% is created by the government.

Everything we know about money is backwards. When banks make loans, they create money. This is because money is really just an IOU. Private banks have the exclusive right to create money in the form of interest-bearing debt that they profit from.

The Fed controls the money supply by calculating what's necessary in relation to the productive capacity of the economy. The Congress, through the Congressional Budget Office (CBO), relies on a revenue forecast. It asks the irrelevant question: How much money are we going to collect? Congress makes decisions on the basis of an entirely fictional problem.

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Drudge Retort