My Also Unsatisfying Second Reply From L. Randall Wray

I received a response from L. Randall Wray. My comment is here. It is as follows:

[L. Randall Wray:]

When I’ve engaged advocates of debt-free money, my protestations always generate confusion and the topic gets switched to government payment of interest. The “debt-free money” cranks seem to hate payment of interest by government. I’m not sure, but I think what they really want to do is to prohibit government payment of interest. That is fine with me. ZIRP forever. Stop paying interest on bank reserves, and stop issuing Treasury bills and bonds.

I'm glad to see you say you agree.

As for the use of the term "cranks" while pointing out an issue of semantics, why? The use of the term debt as applying to interest owed by the government is a perfectly legitimate connotation. I often say interest-free money or debt- and interest-free just so the general public might start to draw any connection at all.

You went on a long time trying to prove that money is always debt. It does not have to be. It can be nothing more than a medium of exchange. I have money that is owed to no one. That money is not a debt, per se. No one can look at it and rightly say that someone or group owes something as a result of the fact that it is simply money sitting there, with the exception of the mere existence of Treasurys, which one might rightly argue has some attachment to that money; but that really is a collective argument (the "debt" in debt-free) where I'm discussing the money on my individual level only. So what I just said represents two connotations, both different from yours (which I also consider valid but obviously not to the exclusion of my two connotations mentioned here). Perhaps I'm not as arbitrary as are you when thinking about these matters.

I recall your discussion on the Money Multiplier being dead and that when I attempted to engage a bit concerning the semantics and some other points, you dismissed it and didn't engage upon my follow-up. I was criticized in the LinkedIn MMT group for thinking that you "owed" me a reply, you being a professor of economics while I'm apparently a nobody. Of course, I didn't tell the group that you owed me anything but simply that you had not yet replied. I was simply anticipating anyone wondering whether you had answered.

My question concerning the Money Multiplier was far from unreasonable, and I was fully open to hearing something from you that I might not know about how the Fed actually handles its legal ability to sanction banks (at the Fed's discretion) that don't have sufficient reserves. It was not a question about which comes first: the horse or the cart. Is the multiplier dead because the Fed has chosen not to enforce it? I'm not claiming to know. I have heard you about loans being made first. It's not completely the same issue. That banks can create credit first does not actually answer the question.

A clear explanation about the mechanics would be helpful. Maybe you don't know either on that level. I've considered putting it to the Fed, but maybe you could do it since you're not a "nobody" and let me know their answer.


Tom Usher

Back more directly to topic of your article, what you wrote above is not lost on me. I have understood for a long time your point about taxes being the practical reason why Federal Reserve Notes (tangible or cyber units) are sought. It's fine. I also have understood the accounting principles.

You actually stated a great deal of common ground in very few words (not your debt argument portion) but in the process, thumbed so many in the eye over nothing but an issue of semantics concerning which you cannot win or lose.

Why not make your next post about advocating for public policies and practices to stop issuing Treasury bills and bonds? That's what I've been advocating for many years now.

Thank you in advance for your consideration.

Background links:

Part 1: My Questions to L. Randall Wray on the Money Multiplier

Part 2: My Questions to L. Randall Wray on the Money Multiplier

Here's Randy Wray's reply, which is also as follows:

Tom: doesn't look like you understood what I wrote. First, take a look at the New Palgrave entry on monetary cranks. It would certainly include "debt free money" as well as "100% money" and, yes, "MMT". Second THERE ARE NO MONIES THAT ARE JUST MEDIA OF EXCHANGE! All monies are on 2 balance sheets--liabilities of issuers and assets of holders. You are thinking of bananas, not monies. Try to shake the bananas out of your head. That is an imaginary world of dupe the dope. You cannot drive money by duping dopes.

I did not receive a notification of his reply even though I should have. I went back to the post for a different reason and happened to see that he had replied.

Randy says that it looks like I didn't understand what he wrote. No, I understood. I just didn't, and still don't, agree.

He says in effect that a child who finds a penny on the sidewalk is now the proud owner of a balance sheet and that magically turns money into something that the child can't use as a medium of exchange for whatever. I'm sorry, but it is because of Randy's style of blurbing things back on the level he does that having an enlightening conversation seems impossible. It's the same approach he took via his first reply: dismissive and too short to explain but rather just repeating himself, as if that's going to turn on the light.

There is nothing about a balance sheet that I can see that precludes money as a medium of exchange. Balance sheets and other financials are just devices for keeping score of units in a given medium of exchange. Non-money assets and liabilities are also translated into unit multiples of that medium of exchange for score keeping, so to speak. The unit just happens to be what is deemed legal tender by the US government and used to pay the IRS. They aren't bananas, though bananas can be on the balance sheet as dollars.

It doesn't matter whether the money is also a commodity, commodity backed, or what is termed fiat.

So, I got nowhere; and EconoMonitor turns off comments and replies, which I don't do except in very rare cases (such as where I'm drawing racists like flies on posts from years and years ago).

Update: The way Randy writes his comment replies to me as opposed to how he speaks when answering other people's questions strikes me like dealing with two totally different people.

I suppose questions have to contain no statements but just leave it entirely to him so that he'll come off in a serious, clear manner (helpful).

I hadn't seen the following video until July 27, 2014. It delves into the solvency/liquidity issue somewhat along the lines of my inquiry.

I do agree with what Wray says here though I'd go for public employment long before a "last resort."

July 29, 2014, update: Theological semantics is my forte. Multiple connotations for given terms is a given in my book. So, I went hunting.

I dissed John Carney a bit here, but here I go giving him credit: MMT Monetary Theory vs. Austrian Monetary Theory

I completely agree with him. It's exactly what I was thinking. I believe John is right and Randy Wray is wrong on this issue.


Tom Usher

An additional post in this miniseries: "Modern Money Theorists Need Instructional Videos!"


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  • Tom Usher

    About Tom Usher

    Employment: 2008 - present, website developer and writer. 2015 - present, insurance broker. Education: Arizona State University, Bachelor of Science in Political Science. City University of Seattle, graduate studies in Public Administration. Volunteerism: 2007 - present, president of the Real Liberal Christian Church and Christian Commons Project.
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