The Chicken and Egg of Money Creation

December 7, 2020 at 12:10 pm

Which came first — the pro­duc­tive work or the pay­ment? That depends great­ly on the sce­nario. You reim­burse the chef after they cook your meal. A home con­trac­tor might get half of the money before start­ing work and the other half upon com­ple­tion. Hourly wages are for the time spent before the pay­check, not in advance.

Here’s an eas­i­er sce­nario. Which came first — the dol­lar or the income tax? The American dol­lar came into exis­tence on April 2, 1792 with pas­sage of the Coinage Act of 1792 by the 2nd United States Congress. A short lived income tax dur­ing the American Civil War last­ed from 1861 to 1872. Our mod­ern incar­na­tion of income taxes began in 1913 with the rat­i­fi­ca­tion of the Sixteenth Amendment. Similar pay­roll taxes did­n’t appear until 1934 with the cre­ation of Social Security by Franklin D. Roosevelt.

Modern Monetary Theory appears to be new eco­nom­ic thoughts grap­pling with a dif­fer­ent answer to the fun­da­men­tal nature of what comes first when talk­ing money. The fol­low­ing pod­cast from Slate Money is a good wake up call for dis­pelling some of the fact-myths that have formed in our cur­rent eco­nom­ic systems.

Professor Stephanie Kelton joins Slate Money to talk Modern Monetary Theory. June 20, 2020

Money has no value and what­ev­er value we want all at the same time. We for­get that because it has num­bers print­ed on it. One dol­lar can get you a soda out of a vend­ing machine or a tooth from under your kid’s pil­low. No value and infi­nite value all at the same time. Money is just a medi­um of exchange and can be what­ev­er we want it to be. If we can agree on some values.