- File Size: 922 KB
- Print Length: 41 pages
- Simultaneous Device Usage: Unlimited
- Publication Date: January 12, 2014
- Sold by: Amazon Digital Services LLC
- Language: English
- ASIN: B00HUF6POI
- Text-to-Speech: Enabled
- Word Wise: Enabled
- Lending: Enabled
- Amazon Best Sellers Rank: #369,607 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
DIAGRAMS & DOLLARS: Modern Money Illustrated Kindle Edition
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My education in system dynamics began back in the 1960s working as a civilian engineer for the US Air Force. At that time, digital computers were too large and too slow to be used for navigation and bombing calculations on-board our aircraft. Instead, we used analog computers, and these had all the elements needed for system dynamic models. The differences were simply different names for the elements, for example, mathematical integrators correspond to the stock tanks or dollar storage tanks of this book.
Since that time, I've used system dynamic concepts to develop Monte Carlo simulations for a missile (Maverick), economic development of petroleum production fields, and an analysis of a proposed research process. It is a useful tool for better understanding many complex processes.
My only complaint about the book is that the author ignores fractional reserve banking, which seems to indicate that dollars are, in fact, created in the private sector, but his analysis is still correct because the federal government must supply the reserves making those new dollars possible.
Some of the comments seem to confuse dollars and value. We are used to thinking of value as being measured in dollars, but they are not the same. When we say an object has a value of so many dollars, we usually mean it cost that many dollars to create, or it could be exchanged for that many dollars. Value is indeed created in the private sector, and the dollars are there only to facilitate that creation.
The federal deficit is manifest as treasury bonds held within the private sector. Also, with the gold standard and the Brenton Woods agreement no more than distant memories, the Federal Government is free to issue currency constrained only by concerns for inflation. The federal deficit is nothing like household debt. Beginning with these facts the book derives and defends several surprising characteristics of the U.S. national economy and develops a logical progression of clear illustrations to correctly represent the national economy.
+ Money is created only by the federal government, not by the private sector. “By law, a U.S. Dollar can only be created –printed or issued electronically—by the U.S. sovereign government.”
+ The Federal Government buys its public goods and services from the private sector.
+ Federal taxes drain Dollars from the private sector and destroys them. The U.S. Dollar actually is “simply a promise, by the U.S. sovereign government, that it will accept the Dollar as payment for a Dollar’s worth of taxes.”
+ The U.S. government “promises only to accept the Dollar in exchange for the cancellation of a Dollar’s worth of taxes due.”
+ This promise is what allows Dollars to be widely accepted as an exchange medium.
+ Selling Treasury Bonds moves Dollars from Private Sector spending accounts into private sector savings accounts. While these Dollars are being saved in the form of Treasury Bonds they are not being used by the private sector to purchase goods and services.
+ The Federal Government transfers interest payments due on treasury bonds into spending accounts within the private sector.
+ Spending by the public sector at a rate beyond what the real economy can produce leads to inflation.
+ Spending Dollars created by the Federal Government pays the private sector for creating public goods and services.
+ Dollars the Federal Government spends are not dollars it has to earn—they are Dollars the Federal Government simply issues.
+ The “National Debt” is manifest as Treasury Bonds held by the Public Sector. Therefore The numbers displayed by the “National Debt Clock” are more accurately described as the “National Savings Clock.”
The implications of these considerations are profound:
+ The idea of balancing the federal budget is baseless.
+ Spending by the U.S. Treasury is not constrained by revenue collected as taxes.
+ The primary constraint on the public goods we can have is inflation resulting from exceeding the capacity of our real economy to produce goods and services.
Although this short book is little more than an essay, it rocked my world, turned my thinking upside down, and caused me to question several basic economic assumptions I have held for a long time.
The arguments presented seem sound, but the conclusions are so unconventional that the book deserves to spend time addressing inevitable questions and objections. Could student loans be offered interest free? Can the national debt grow without limits or consequences? Can we eliminate taxes? Can the Federal Government readily provide each of us with a generous citizen’s dividend? Could we end poverty with a few pen strokes? Is this all too good to be true?
“If at first the idea is not absurd” Albert Einstein once remarked, “then there is no hope for it.” Enjoy an hour reading this short, clearly written, and thought provoking Introduction to Modern Money Theory and decide for yourself if there is any hope for the ideas it presents.
This book should be required reading for anyone interested in today's economy. It is especially important for politicians, who continually make economic assertions without knowing anything about the way money works. This book will provide the valuable insight for further study of Modern Money Theory. The book is not political, so people of all political persuasions can benefit from it.
If I thought they would take a few minutes to read the book, I would send complimentary copies to our top political leaders and the editorial staffs of leading newspapers. At $1.50 per Kindle copy, it's a huge bargain.