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Saturday Quiz – March 26, 2011

Welcome to the billy blog Saturday quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following six questions. Your results are only known to you and no records are retained.

1. Modern Monetary Theory tells us that a sovereign national government can run deficits without issuing debt. But the debt issuance allows the government to drain demand (private spending capacity) so that the public spending has more non-inflationary room to work within.

2. Workers can enjoy a stable share of GDP over time if they secure wage increases in line with the growth in their contribution to production.

3. The ratio of the "stock of money" (currency plus demand deposits) to bank reserves has fallen dramatically in the US in recent years. This tells us that the money multiplier is not constant.

4. The level of tax revenue has no bearing on the real spending capacity of a sovereign government.

5. Premium Question: The government and the private domestic sectors cannot simultaneously reduce their debt levels (under current public sector debt-issuance arrangements)

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    This Post Has 3 Comments
    1. MMT has to go mainstream – it’s the only long-term solution to the neoliberal nightmare unfolding all around us (I’m in Madison, WI). But is it too heavy a lift right now? Might we be smarter, politically, to put our energy into things like the Uncut campaign or the Robin Hood tax? These are radical initiatives that don’t really challenge the dominant paradigm, but which, for that very reason, gain relatively easy traction at the grass roots. I’m thinking it would be smart to build the movement any way it can be built, and then work within an emergent progressive base to push for the further enlightenment that’s needed.

      But we’d have to sit still for Jeffrey Sachs saying “It’s because we need the money.”

    2. Dale, I think that the MMT people should stick to MMT and let the Uncut people do their thing. They are harnessing the rage of a public that sees Wall Street getting trillions in bailouts and themselves “being stuck with the bill for it.”

      Of course, that is not completely accurate form the MMT perspective, but there is a modicum of truth to it. Public funds are being diverted to private bailouts, which is socialism for the rich, instead of being directed toward public purpose. This is the perfect time for big stimulus packages to both increase effective demand and invest public funds in the future in areas that the private sector is either unable or unwilling to tackle. Funds that could be going toward stimulus to reduce unemployment, end the recession, and improve the country and world’s future prospects are going into financiers pockets, where they are being used to drive leveraged speculation.

      One thing that MMT advocates can learn from Uncut is the value of theater to get attention. While academics can’t become clowns or even be perceived too much as partisan advocates and maintain a perception of objectivity, the rest of us can. It is vital that voters understand the basics of MMT. Otherwise, they are going to stumble over themselves.

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