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The 7 Deadly Innocent Frauds of Economic Policy [Kindle Edition]

Warren Mosler
4.0 out of 5 stars  See all reviews (1 customer review)

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'The most important book ever written'

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Product details

  • Format: Kindle Edition
  • File Size: 229 KB
  • Print Length: 117 pages
  • Publisher: Valance Co Inc (13 Aug. 2010)
  • Sold by: Amazon Media EU S.à r.l.
  • Language: English
  • ASIN: B0092IUG00
  • Text-to-Speech: Enabled
  • X-Ray:
  • Word Wise: Not Enabled
  • Enhanced Typesetting: Enabled
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (1 customer review)
  • Amazon Bestsellers Rank: #495,519 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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1 of 1 people found the following review helpful
4.0 out of 5 stars Blows your mind! 2 Feb. 2014
Format:Kindle Edition|Verified Purchase
The book focuses very much on trying to develop a theory of fiat money. While some of the points of this book, especially the discussion on repo's and overnight rates lacks proper context, the book itself manages to be fairly great due to the way content is presented. Where views of interest to many are cited and then debunked(perhaps not perfectly convincingly). Its a fun read and very iconoclastic.
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Amazon.com: 3.9 out of 5 stars  52 reviews
23 of 28 people found the following review helpful
5.0 out of 5 stars Remarkable! Unnerving! Hit's the Bullseye! 5 Oct. 2010
By Steve M - Published on Amazon.com
Format:Hardcover
This counterintuitive analysis is brilliant! The reader must put aside all he knows and believes how the economy works. Readers should not try to fit Warren's model into the model of macroeconomics in their mind. There will be too much conflict.

The reader must read this with an open mind not trying to reconcile the macroeconomic model in the book to what he has mislearned through the years.

Such thoughts as "federal spending is not revenue constrainted" seem impossible unless you change your mental macroeconomic model. After you accept the book's economic model then try to find flaws as it applies to the current state of affairs--not how it conflicts with other economic models. You will be amazed! Warren is right!

The book is for the non economist, yet economists who read it will find no flaws in the analysis.

We would all be better off if politicians, their staff and the media read how the 7 deadly innocent frauds are crippling our economic recovery.

Three cheers for this short, timely, insightful, easy to read unmasking of the wrong road our economic leaders are taking us!
20 of 25 people found the following review helpful
5.0 out of 5 stars This book needs to be read by every sentient American 8 Nov. 2011
By Truth Insister - Published on Amazon.com
Format:Hardcover|Verified Purchase
Someone get this book to the President of the United States.

I read the free copy that is available online. I am buying two of these books today. One goes to my congressman. This book is that important.

Years ago, a mathematician/physicist who created software in the early 90s for derivatives on Wall Street told me exactly the same thing as Mosler. He chuckled at how "stupid" Americans are about the economy, that they couldn't see or accept what was right in front of their eyes. He said: money is software, and that the smartest guys on Wall Street know that the only thing they need to do is remove the regulations and they're home free. Why? Because we're the reserve currency and we control reserve accounting. Regulations, he told me, were public policy for the benefit of the American people. Getting rid of them was Wall Street's number one goal, then they could all operate globally and no one could touch them. He said deregulation turned Wall Street into a better casino than anything Vegas had to offer because Wall Street controlled the 'house'. He even wrote a paper about it called "The End of Ordinary Money," if you can find it online. (With Google's new controlling algorithm, I doubt you can.) Regulation is public policy, and smart policy represents our country's values. Get rid of them, and you can rob the bank. Legally.

Too bad I didn't really pay attention to what he was saying. Reading Mosler's book brought it all back to me. Mosler, however, believes in principled use of public money. He believes in the idea that the economy is supposed to serve the people, be subservient to it. What his book is about is educating you and me to the basics of how money works after the gold standard was dropped. If you still believe that our debts are going to impoverish our grandchildren, the government's budget needs to be balanced, deficits are bad, or that government should be run like your business or household, then you need to read this book, and loan it to everyone you care about. The government is a currency issuer. You and I and everyone running a business or household in the USA are currency users. The same rules do not apply. You need to know what those rules are.

There are a couple of investor guys who think like this guy, and guess what: their investment funds are making 25% in this economy.

Mosler is the creator of something call MMT, which I think stands for Modern Monetary Theory, but don't quote me.

Buy this book or read it for free online. It will completely change how you think. It is as revolutionary as discovering that the sun does not revolve around the earth, which happened in the 16th C, and people were being burned at the stake for believing that the earth revolved around the sun.

No wonder our wages have declined since the gold standard was dropped. The only people whose wages increased were the people who understood what Mosler explains in this book.
10 of 12 people found the following review helpful
3.0 out of 5 stars Brilliance with Deadly Flaws 15 Nov. 2013
By Will Wilkin - Published on Amazon.com
Format:Hardcover|Verified Purchase
This book has flashes of brilliance mixed with disastrous error.

Let's start with what is right. Most people would say something along the lines of "The federal government is supported by income taxes in various forms and other taxes." Mosler shows this is absolutely false, a counter-intuitive and essential insight needed to think clearly about how America's ongoing and historic economic disintegration could be arrested and prosperity rebuilt.

That "taxes fund federal government spending" is thinking that was true under the gold standard but, since 1971, has not actually been true. For thousands of years, when money was bullion, governments had to tax to get it. But according to Mosler in his Modern Monetary Theory, in post-Bretton Woods USA and in other monetarily sovereign states, that is no longer what is happening. A monetarily sovereign government issues its own money like an author issues words, like a stadium issues points. A check from the US government will never bounce. Taxes now exist to remove aggregate purchasing power from the economy so as to prevent inflation, but taxes are not actually funding the government, nor is there any federal debt crisis, since all federal debts are payable in dollars. A secondary role of taxes in a monetarily sovereign economy, according to MMT, is to give the currency value in the sense that taxes must be paid in that currency and therefore the currency must be obtained by taxpayers, preventing some other currency from replacing it.

That much of MMT makes sense to me, not even as theory but as real description of what is happening. There are other parts of MMT, however, that strike me as fatal error with disastrous real-world effects, such as Mosler's contention that trade deficits are to our advantage because they bring us real goods in exchange for currency issued out of thin air. The fatal error here is that trade deficits are the quantitative measures of a key qualitative problem Americans face: the offshoring and outsourcing of our manufacturing and other high value-added industries. Manufacturing is the heart of real wealth creation in modern economies, and therefore should be developed within our country to make sustainable prosperity. The problems with trade deficits --and the offshoring and outsourcing they measure-- are not just the loss of manufacturing jobs, but also all the supply chain and multiplier-effect jobs that support and are supported by manufacturing. This offshoring has become so huge that it is dismantling our economic ecosystem, as design and R&D and a multitude of high value-added industries follow manufacturing offshore. We as a nation are losing our long-term capacity to create wealth, to create careers and be the leader in innovation we once were. This is not just a blindness in MMT but across the spectrum of economics schools, a discipline that seems to shun national interests and treat everything as universal math populated by atomized individuals, as if there is no such thing as a larger society requiring stability and solidarity.

Mosler and MMT theorists generally also wrongly posit that full employment could be had simply by creating government jobs. Perhaps temporarily, but this is another disastrous idea, because government agency jobs have only a limited constructive function in society, beyond which they become make-work without contribution to wealth creation. The real engines of wealth-creation are private sector manufacturing and the larger supply chains that grow out of it. Locating these real engines of wealth creation in our own country is the most important thing we can do for the long-term prosperity of our children and our communities.

In sum, Mosler and MMT have some valid points to make about the real function of taxes and the possibilities that monetary sovereignty open up for much better public spending priorities than we now have (ie, infrastructure, tech development and full employment). But these insights must be applied in smart ways that recognize the centrality of ending our trade deficits and reshoring our industries. Thus Mosler's ideas about how the federal government actually is free to spend on infrastructure and technology development (say, along the lines of Germany's model of state-industry cooperation in supporting basic research all the way to the factory floor) can turn around our economic disintegration only if applied in conjunction with a Balanced Trade policy that diverts our trade deficits into demand for US-made goods and services. This means we must replace "Free Trade" policies with a BALANCED TRADE POLICY.

The best way to achieve balanced trade would be a system of Import Certificates issued in the same value as exports. This would effectively require globalized corporations to invest and employ in the USA if they want to sell their products here. By legislating an Import Certificate (IC) system to license all imports, and issuing IC's in the same value as exports, we would divert our chronic $600 Billion annual trade deficit into a $600 Billion annual stimulation of American manufacturing, creating millions of manufacturing jobs directly and many millions more jobs through manufacturing's multiplier-effect. Only in that context would Mosler's insights into monetary sovereignty and the public spending it affords (on infrastructure and technological development and full employment) make our real economy once again competitive and sustainable in a way that brings that prosperity to all our people.
6 of 7 people found the following review helpful
5.0 out of 5 stars Much Ignored Common Sense Economics 30 Dec. 2012
By Indrajith A. Weeraratne - Published on Amazon.com
Format:Hardcover
"Seven Deadly Innocent Frauds of Economic Policy" by Warren Mosler is a provocative book that will question the validity of many things that you may have been convinced to believe as it gives a new meaning to Keynes famous quote ""Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist."

The defunct economist in this instance would be almost every economist (and their echo-chamber politicians and media personalities--we really don't have journalists anymore) that you may see or read in mainstream Media.

The book picks seven established principles that have been immersed in our minds through impressive slogans turning those into myths and then shattering them one by one with common sense arguments.

It rejuvenates Keynesian in a way anyone can understand (a task many economists including Keynes may not have succeeded in doing- thus the confusion among people). Mosler's background as an Investment manager may have given him this insight because when you are dealing with having to make money day after day, your brain illuminates to ideas other don't see.

The best way to understand the book is to put the citizens of the USA and the government to two separate units in a large circle. An action by one side has an equal and opposite reaction on the other. If the government spent money, it ends up with the citizens. When citizens are taxed, the funds end up with the government. Thus a deficit in the government becomes an equal amount of savings in the hands of the public. Mosler says, "Just ask anyone at the CBO (Congressional Budget Office), as I have, and they will tell you they must "balance the checkbook" and make sure the government deficit equals our new savings, or they would have to stay late and find their accounting mistake."

Mosler tells us about various meetings he had with some of the most famous names in our political and economic arena illustrating how ignorant most these people are about issues involving money. Here's one such encounter in Mosler's words:

""Several years ago I had a meeting with Senator Tom Daschle and then-Assistant Treasury Secretary Lawrence Summers. I had been discussing these innocent frauds with the Senator, and explaining how they were working against the well-being of those who voted for him. So he set up this meeting with the Assistant Treasury Secretary, who is also a former Harvard economics professor and has two uncles who
have won Nobel prizes in economics, to get his response and hopefully confirm what I was saying. I opened with a question: "Larry, what's wrong with the budget deficit?" He replied: "It takes away savings that could be used for investment." I then objected: "No it doesn't, all Treasury securities do is offset operating factors at the Fed. It has nothing to do with savings and investment." To which he retorted: "Well, I really don't understand reserve accounting, so I can't discuss it at that level." Senator Daschle was looking on at all this in disbelief. This Harvard professor of economics, Assistant Treasury secretary Lawrence Summers didn't understand reserve accounting? Sad but true.
So I spent the next twenty minutes explaining the "paradox of thrift" step by step, which he sort of got right when he finally responded: "...so we need more investment which will show up as savings?" I responded with a friendly "yes," after giving this first year economics lesson to the good Harvard professor, and ended the meeting. The next day, I saw him on a podium with the Concord Coalition - a band of deficit terrorists - talking about the grave dangers of the budget deficit.""

It's a pity that we hardly see economist such as Warren Mosler, Mike Norman and others from "Modern Money Theory (MTM)," on main stream Media (thank goodness for the Web or we will be living in the dark about economics to nutrition believing some defunct experts). When it comes to this media censorship of intellectuals, I feel, we can solve all our problems only if we have a truly free media and most people (not only those spend time on the Internet) are allowed to listen to them. If Media does not believe in what MTM group advocates they can have debates between the MTM group and establishment economists and allow public to decide who make sense.

Founding fathers when writing the First Amendment to the constitution may never have considered the censorship by a few corporations owning the airwaves as an issue to have the most destructive effect on the whole global community as it is now due to ignorance of both the rulers and the public. I wished the founding fathers looked into the future and set forth some rules for the FCC because it appears that current generation is not capable of handling that.
5 of 6 people found the following review helpful
5.0 out of 5 stars Its how state money works 15 Nov. 2012
By sombreronegro - Published on Amazon.com
Format:Hardcover
Its not communication with an advanced alien race. Its not the 10 commandments written by the finger of God. Its not even an entire economic theory at all. Its about finance and the functions of state money instead of a market based metal commodity money. The current policy tries uses buggy whips and oats on an iron horse while the Neanderthals who do so are confused why the beast does not respond like they think. If you read his book you will be able to predict the affects of monetary and fiscal policy, not the weather. Finance is but one bullet in the gun, but we are shooting ourselves in the foot with it chasing a mirage of false obligations when we should be looking at the real economy.
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