Bleg: Government “Savings”?

If the Modern Monetary Theory model is correct, does “government savings” (either a stock or a flow) mean anything? Is there any such thing?

According to MMT thinking, the government creates money into the private economy by spending (including via interest payments on bonds), and destroys money out of the private economy by taxing. (Bond issuance and retirement reabsorption by the Fed is just interest-rate manipulation.)

Does a bowling alley have a stock of saved points?

Please tell me where I’m getting this wrong.






8 responses to “Bleg: Government “Savings”?”

  1. Paul Avatar

    I think you are on to something…

  2. Ted K Avatar
    Ted K

    I’m not sure if I get your point. Not because you’re not making it well, just it’s a little above my head. But I think Bernanke has gotten a bum rap so far in that inflation has been relatively low since he has been Chair, and also it’s not his fault that Republicans refuse to enact fiscal policy ( targeted fiscal spending would be much more effective ). Monetary policy (by creating more money supply) is largely useless (as most QE stays dormant in TBTF bank reserves). But what other choice does Bernanke have when Republicans only want welfare for banks???

    Also I think Bernanke had a good idea beforehand that his policy of QE would cause inflation of resources overseas, and doesn’t really care. Not that he takes pleasure in seeing people overseas suffer, but I think Bernanke feels it’s not his task to take care of prices in foreign countries and it’s overseas officials job to worry about that (and adjust accordingly). All of this is a very big assumption on my part—but I don’t think it’s an unreasonable assumption. And I also think that Bernanke is correct in putting that worry (prices of resources in foreign nations) at foreign officials feet. I think Bernanke’s job is tough enough to keep America on a halfway-right course. It’s a bit ridiculous to blame Bernanke for the price of shish kebabs in Turkey. Not that being ridiculous has ever stopped a dumbshit Republican before.

  3. The Arthurian Avatar

    If the Modern Monetary Theory model is correct then perhaps no questions need be asked.

    does “government savings” (either a stock or a flow) mean anything? Is there any such thing?

    If increasing one’s debt is ‘negative saving’ then paying down debt is saving. And the government can do that. Doesn’t do it very often, and it makes almost as little sense as austerity, but it *can* be done. If my definition is valid.

    Winterspeak of 27 May had a thought or two on government saving.


  4. Asymptosis Avatar

    Thanks for the Winterspeak link, Art. He’s saying the same thing I am (or actually, what I’m wondering). So is Megan, though she then proceeds to contradict herself — pas possible!

    I’m especially curious here about the notion of government savings as a stock — some equivalent to financial assets in the private sector. Is there any such thing?

  5. The Arthurian Avatar

    “…the notion of government savings as a stock… Is there any such thing?”

    Depends where you are on the cycle of civilization.

    Going in to the dark age, private individuals had all the savings, like now. Dragons sleeping on their hoards of gold.

    Coming out of the dark age, the dragon heirs had become governments. The king was in the counting-house, counting out his money. This was government savings.

    Then Robin Hood came along. Later, Adam Smith redefined the wealth of nations.

    Not a technical picture, but that’s the imagery I have.

    On TV during recent wars, occasionally a politician would use the phrase “blood and treasure.” Where we are on the cycle, the phrase is inappropriate. We have negative treasure.

    Where we are on the cycle is why people today have difficulty with the concept of government savings. People in the 12th century would get it right away.

  6. Clonal Antibody Avatar
    Clonal Antibody


    When thinking of the word “government,” what does one mean? Is the “government” some alien body sitting out there somewhere? What is it?

    In my view, it really represents the collective of individuals that comprise the country. If that is the case, then money is indeed a score card between the various components of the community, and can be “saved” for use at a future time, or “spent” in an economic or non economic exchange, by those components. However, from the point of view of the collective, the authority issuing that money, “monetary savings” are a meaningless concept.

    However, savings do have another meaning from the point of view of the collective. Governmental savings can be thought of as the total infrastructure of the community, that has been built up by the economic activity of the community, that is there available for future use. This would therefore then comprise of both publicly and privately owned developed infrastructure. Why both? This is because, the government can choose to acquire (it will not do so, but it can!) any privately owned property by buying it using newly issued fiat currency, and it can restrict the use of that currency through “taxation.”

    I hope that this adds some clarity to the discussion

  7. Asymptosis Avatar

    > Governmental savings can be thought of as the total infrastructure of the community

    I’d put it otherwise — and I think a great deal of confusion arises here. Quoting Kuznets from memory (and repeating myself from other posts), real assets are the true wealth of the nation. Those assets don’t just include structures, equipment, and software (what’s measured/estimated in the NIPAs). Real assets also include the knowledge, ideas, and skills developed through education, training, experience, research, and development. Plus natural resources, “organizational capital,” etc.

    Much confusion arises because financial assets are treated as somehow representative of, even synonymous with, real assets. But they’re totally different, artificial entities. They don’t decay (except via inflation). And they don’t produce anything that has actual value to humans, except to the extent that they stimulate real production. Many economics discussions don’t even make clear from sentence to sentence which type of “assets” they’re discussing. Likewise “capital,” and “investment.” Makes it hard to say (or understand) anything of value.

    But yes: real assets are the real wealth of the nation. Different from individuals, where “wealth” very much includes financial assets.

  8. Asymptosis Avatar

    @The Arthurian “Dragons sleeping on their hoards of gold.”

    Gold is a tricky subject. It’s somewhere between a financial asset and a real asset. (“It’s a floor wax *and* a dessert topping!”) I think it’s a confusion of numeraires.

    But in any case by MMT thinking, the big change happened when we went pure fiat. At that point it seems like government savings — at least a stock — became meaningless. It’s like a stock of points at a bowling alley.

    And no we don’t have negative treasure: true national wealth consists of our real assets, not our account books. This even if we “owe” something to future generations (health care, non-poverty retirement). If we have enough real assets, we can provide that. (I’m not saying we do; just that the account books don’t tell us very clearly whether we do.)

    If the MMTers are right, it’s really about the thing that neoclassical economics has so diligently sought to expunge from the analytical discussion: distribution, or how we divvy the pie. A political, not finally an economic, decision.