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This is Question 1 in a series of Modern monetary theory interviews - Professors Bill Mitchell and Randy Wray. See billy blog for more information on this approach to macroeconomics. You can also get more information from Centre of Full Employment and Equity
Questions:
How did you both come to invest so much of your professional careers in the issue of unemployment and labour underutilisation generally?Question 2:
A fundamental or central part of the research of both of you is centred on the nature of money. Could you perhaps talk a little bit about the nature of money and particularly explain to non-economists what fiat money is and what the implications it has on policy formation?Question 3:
The emergence of countries such as the United States, Australia and other countries around the world, modern countries, adopting a fiat currency becomes a significant issue. Can you explain what a fiat currency is?Question 4:
One of the biggest challenges when presenting these issues to the general public, is to explain to people how money, in a fiat currency system is actually created. It is difficult for people to get their head around the idea that a fiat currency is money that is created by the sovereign power declaring it to exist, essentially by entering an amount in an account. Theyve just declared this is now money that exists.Question 5:
But this is a critical issue on macroeconomics isnt it? That the taxation therefore is not producing the money, its not creating the money, taxation by your explanation creates the demand for the money in the broader economy?Question 6:
Would it be fair to say that one point of departure between yourself and other conventional mainstream economists is that you criticise them for treating a fiat-based currency system as if it were on a gold standard or it was still constrained?Question 7?????
Question 8:
Youve explained why there is taxation, even though Governments dont rely on taxation or require taxation in order to be able to spend currency, why is it that they issue (sell) bonds. Why are they borrowing money from the broader community? Is it in order to finance their operations, or some other reason?Question 9:
Why is the setting of this overnight interest rate so important to a GovernmentQuestion 10:
I take it that the cash rate underpins all other interest rates in the economy? Is that the notion? That by controlling that one they have a sort of indirect control over all others?Operation Twist Prof Bill Mitchell 31/3/2010
A short video demonstration of the dynamics of the US government debt yield curve during the early to mid 1960s while the so-called Operation Twist was being used by the US Federal Reserve. More detail available at my blog (billy blog)
Questions:
How did you both come to invest so much of your professional careers in the issue of unemployment and labour underutilisation generally?
A fundamental or central part of the research of both of you is centred on the nature of money. Could you perhaps talk a little bit about the nature of money and particularly explain to non-economists what fiat money is and what the implications it has on policy formation?
The emergence of countries such as the United States, Australia and other countries around the world, modern countries, adopting a fiat currency becomes a significant issue. Can you explain what a fiat currency is?
One of the biggest challenges when presenting these issues to the general public, is to explain to people how money, in a fiat currency system is actually created. It is difficult for people to get their head around the idea that a fiat currency is money that is created by the sovereign power declaring it to exist, essentially by entering an amount in an account. Theyve just declared this is now money that exists.
But this is a critical issue on macroeconomics isnt it? That the taxation therefore is not producing the money, its not creating the money, taxation by your explanation creates the demand for the money in the broader economy?
Would it be fair to say that one point of departure between yourself and other conventional mainstream economists is that you criticise them for treating a fiat-based currency system as if it were on a gold standard or it was still constrained?
Question 8:
Youve explained why there is taxation, even though Governments dont rely on taxation or require taxation in order to be able to spend currency, why is it that they issue (sell) bonds. Why are they borrowing money from the broader community? Is it in order to finance their operations, or some other reason?
Why is the setting of this overnight interest rate so important to a Government
I take it that the cash rate underpins all other interest rates in the economy? Is that the notion? That by controlling that one they have a sort of indirect control over all others?
A short video demonstration of the dynamics of the US government debt yield curve during the early to mid 1960s while the so-called Operation Twist was being used by the US Federal Reserve. More detail available at my blog (billy blog)