Latest MMT Madness Is QE = Savings. Really, What Are Savings?

Government Bonds Are Allegedly Savings

Fantasyland Position

"Government bonds are not debt. They are savings just as the reserves from whence they came are savings. When they mature they will either roll over or be converted back to reserves. They will never be a burden on our children."

What Are Savings?

Savings = Production Minus Consumption

That's what savings always meant and still does. By your labor, you produce something, and part of it you consume. The rest is savings.

In the classic example, a farmer grows wheat, consumes some of it, and saves some of it. But stored wheat can go bad so he sells some of it for money.

That money is savings. 

If you work at a factory, you help produce widgets even if you are a secretary. You get paid. You buy food and clothes and save the rest. 

That money is savings.

MMT Savings Madness

  1. Savings can be conjured out of thin air.
  2. Money the Fed prints to support the government dropping bombs in the Mideast is allegedly savings.
  3. If the government builds a bridge and pays $1 million for it by floating bonds, the savings are $1 million. If the government paid $1 trillion for the same bridge, the savings would be $1 trillion. 
  4. QE is savings. 
  5. Paying people money to do nothing is saving.
  6. One does not have to produce anything to save. 

Modern Monetary Theory (MMT) is sheer lunacy.

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.