Monday, October 4, 2010

The Seven Deadly Innocent Frauds of Warren Mosler

An assessment of Mosler's 117-page PDF.

On page 13, Warren gets us started:

In the next few moments of reading, it will all be revealed to you with no theory and no philosophy- just a few hard cold facts. I answer this question by first looking at exactly how government taxes, followed by how government spends.

I'm not gonna be able to do this. The writing is just so totally dumbed-down, Mosler obviously has no respect for his reader's intelligence. Mosler takes two pages (14, 15) to say basically that our money is just accounting notations. He explains at length that when you pay taxes,

all the government does is change the number in your checking account “downward” as they subtract the amount of your check from your bank balance.

and that when you got your Social Security check, all the government did was

change a number in your bank account by making data entries on its own spreadsheet, which is linked to other spreadsheets in the banking system.

I don't believe that. The government doesn't have a spreadsheet where it can change a number to change the balance in my bank account. This is an over-simplified, made-up story.

Anyway, after that nonsense on how the federal government taxes and spends, Mosler offers a quote from Federal Reserve Chairman Ben Bernanke to prove his point:

The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed.

But the Federal Reserve does not do the taxing, nor does it do the spending of the federal government. The Federal Reserve is a bank that lends money to other banks.

Immediately after the Bernanke quote, Mosler gets to his point:

The Chairman of the Federal Reserve Bank is telling us in plain English that they give out money (spend and lend) simply by changing numbers in bank accounts. There is no such thing as having to “get” taxes (or borrow) to make a spreadsheet entry that we call “government spending.” Computer data doesn’t come from anywhere. Everyone knows that!

Computer data doesn't come from anywhere. Everyone knows that! What does that even mean??? And Mosler is still mixing up bank activity with government spending and taxation. And, yes, our money is just accounting notations. It's not a big deal.

Finally (on page 16) Mosler asks and answers a question:

You now have the operational answer to the question: “How are we going to pay for it?” And the answer is: the same way government pays for anything, it changes the numbers in our bank accounts.

That again. But it's not just numbers in bank accounts. It's obligations. I can't read any more of this. Oh and I just noticed "" in his URL. He's a politician.

I wouldn't vote for him.

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