Kickstarter Project

The mainstream economic profession has run out of ideas, the state of our economy demonstrates their policies have been a failure. The problem is that most economists don't recognize the fact that government debt of a currency issuer is not remotely analogous to household debt. Why? For starters, no one in a household is the monopoly producer of money. What exactly is it? Government "debt" of an issuer is the "savings" of the currency users as a matter of accounting. The issuers debt is simply a digital savings account corresponding to all the users' savings in banknotes, deposits, and treasuries at the Federal Reserve Bank. The issuer's debt creates the supply of currency, or savings, that people either spend or choose to save. A common misperception of our monetary system is that the issuer "borrows" from currency users, such as the US borrows from China. This is not only a complete misunderstanding of our system but leads to catastrophic outcomes when the currency is not managed correctly - just look at the erosion of our middle class. The correct interpretation of "debt" is that the US government produces the currency that China choses to save.The more China saves the more debt our government takes on. A mutually beneficial relationship with little downsides as long as the currency supply is optimized to the conditions. Most of the academic community continues to trip over itself because of their complete failure to grasp the fundamental nature of our monetary system.

Thankfully, the Kansas City school of economists are challenging the failed orthodoxy. The change represents a paradigm shift in thinking and places the center of analysis on the accounting behind monetary operations. Just as every asset has a liability, the issuer's debt is dollar for dollar equal to the currency users' savings. If mainstream economists don't recognize their mistakes the "dismal science" will continue to cause collateral damage to the US economy and the American public. Click here for a simple explanation of what most academics fail to grasp.




I am raising funds on Kickstarter to raise awareness of the Kansas City school of economic thought. The deliverable will be a prototype website using my "issuer-user" paradigm to provide explanations and diagrams to the non-technical reader. The prototype will in turn be used to raise additional money from philanthropies and foundations to fund a larger interactive website.

Why funding for a prototype?
Developing the content for this subject matter is a time consuming process. Monetary policy, capital flows, exchange rates, current account deficits put most people to sleep. Economists talk in a language of equations and terminology that have no meaning to the average person. The challenge is to pound this enormous subject into something that the rest of us can understand. Crafting a message without jargon and clutter takes a lot of time, iteration, refinement, and feedback from others.

No Politics
If everything is political how can we avoid politics? Paradigms describes how things work - the conditions, operations, and effects. Understanding how things work leads to options and different outcomes. Policy choice is political. My objective is not to make policy recommendations but rather apply basic accounting principles to explore policy options and their outcomes. One of the primary problems with politics today, among other things, is that the economic policy advisors don't remotely grasp how the system actually "works" operationally.

Why support this project?
Support change. Well-intended policymakers are only as good as their economic advisors. Mainstream economists are using the wrong models, drawing the wrong conclusions, and giving the wrong advice. They may have more resources and theories than us but I'm willing to bet that our logic, reasoning, and basic use of accounting will prevail.

Bonus
All donors to Dollar Monopoly will receive a free ebook of Warren Mosler's “Seven Deadly Innocent Frauds of Economic Policy”. Reading this book a year ago was a watershed moment for me. Warren has been kind enough to donate the use of his book in support of this project.

Who am I
Thankfully I’m not a college educated economist. I’m an engineer by training, a marketer by profession, and an avid reader with a passion for economics. I love all things related to business, technology, productivity, transparency....and of course Austin Texas.

I am also a long-time contributor to the Institute for Affordable Transportation. The public charity is devoted to improving the lives of the world's poor by providing simple, low-cost vehicles to aid development in rural Africa and Latin America. My brother founded the organization about a decade ago and now has more than 150 vehicles operating in 23 countries. I've managed their online presence pro-bono for over 10 years and proud to be associated with their success. Please consider a donation to help support a grass roots organization that is working to make the world a better place.


5 comments:

  1. Well done. That's one of the clearest descriptions of how our economy works.

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  2. Thanks RobertM. You read an updated version of the site after i got some great feedback from Roger E who suggested I change my terminology to "currency supply optimization". The recommendation helped me clarify some nuances within my explanations. Big props to Roger!

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  3. I have to admit I'm confused. Yes, one country's debt is another country's/household's/pension fund's/whoever's savings. But I'm not understanding what little-understood conclusions you're drawing from this fact? Does this make the debt less of a concern? Why? If you could suggest some corresponding policy implications of your insights without getting more political than you're comfortable with, that could be helpful in elucidating your point for me.

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  4. I am copying a post of mine using definition og GDP and empirical data on GDP growth with government of USA. This shows the following;

    Deficit spending by increasing G is the only solution to economic growth.
    Define the symbols; G=govt spending per year
    I=gross investment per year
    C=private consumptio­­n per year
    X=export/y­­ear
    M=import/y­­ear
    By definition GDP = C+I+G+(X-M­­) = 5G( empiricall­­y using US data from 1969 to 20100), which means C+I+X-M = 4G. If G decreases, you have to import more, export less,inves­­t less or consume less or a combinatio­­n of all. This is an accounting identity and has nothing to do with any ideology. If G increases, C+I+X-M will increase and USA will become prosperous again.
    I added a diagram in

    http://pshakkottai.wordpress.com/2011/11/23/how-the-econom…orks-a-diagram/ ‎to explain MMT.
    Feel free to use the diagram if you see its value.

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  5. I added a diagram in

    http://pshakkottai.wordpress.com/2011/11/23/how-the-econom…orks-a-diagram/ ‎to explain MMT.
    You may use it if you like.

    ReplyDelete

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