Welcome to DU!
The truly grassroots left-of-center political community where regular people, not algorithms, drive the discussions and set the standards.
Join the community:
Create a free account
Support DU (and get rid of ads!):
Become a Star Member
Latest Breaking News
General Discussion
The DU Lounge
All Forums
Issue Forums
Culture Forums
Alliance Forums
Region Forums
Support Forums
Help & Search
General Discussion
In reply to the discussion: Why is the "private sector" better than the "public sector"? [View all]girl gone mad
(20,634 posts)98. Just for the purpose of education..
Here is an accurate description of our modern money system:
When the government spends, the Treasury disburses the funds by crediting bank accounts. Settlement involves transferring reserves from the Treasurys account at the Fed to the recipients bank. The resulting increase in the recipients deposit account has no corresponding liability in the banking system. This creation is called vertical, or exogenous to the banking system. Since there is no corresponding liability in the banking system, this results in an increase of non-government net financial assets.
When banks create money by extending credit (loans create deposits), this occurs completely within the banking system and results in a liability for the bank (the deposit) and a corresponding asset (the loan). The customer has an asset (the deposit) and a corresponding liability (the loan). This nets to zero.
Thus vertical money created by the government affects net financial assets and horizontal money created by banks does not, although its use in the economy as productive capital can increase real assets.
The mistake that is usually made is comparing what happens in the horizontal system with what happens at the level of government accounting. At the horizontal level, debt is the basis for horizontal money creation. Therefore, it is often assumed that debt must be the basis for the creation of money by government currency issuance. This is not the case.
Reserve accounting uses the standard accounting identities, but the meaning of liability is not debt. The husband-wife analogy for Central Bank-Treasury accounting relationships is apt. Since a husband and wife are responsible for each others debts, neither can be indebted to the other. That is to say, reserve accounting is a fiction that does not represent real relationships, such as exist between a creditor and debtor in the horizontal system.
more: http://monetaryrealism.com/mmr-and-the-diagonalist-view-of-money
When banks create money by extending credit (loans create deposits), this occurs completely within the banking system and results in a liability for the bank (the deposit) and a corresponding asset (the loan). The customer has an asset (the deposit) and a corresponding liability (the loan). This nets to zero.
Thus vertical money created by the government affects net financial assets and horizontal money created by banks does not, although its use in the economy as productive capital can increase real assets.
The mistake that is usually made is comparing what happens in the horizontal system with what happens at the level of government accounting. At the horizontal level, debt is the basis for horizontal money creation. Therefore, it is often assumed that debt must be the basis for the creation of money by government currency issuance. This is not the case.
Reserve accounting uses the standard accounting identities, but the meaning of liability is not debt. The husband-wife analogy for Central Bank-Treasury accounting relationships is apt. Since a husband and wife are responsible for each others debts, neither can be indebted to the other. That is to say, reserve accounting is a fiction that does not represent real relationships, such as exist between a creditor and debtor in the horizontal system.
more: http://monetaryrealism.com/mmr-and-the-diagonalist-view-of-money
Edit history
Please sign in to view edit histories.
116 replies
= new reply since forum marked as read
Highlight:
NoneDon't highlight anything
5 newestHighlight 5 most recent replies
RecommendedHighlight replies with 5 or more recommendations
I got a public sector job in 1972.....when all my friends went to college....my parents couldn't
a kennedy
Jun 2012
#9
AND most of the so-called "private sector" jobsl contract with the government and steal
nanabugg
Jun 2012
#34
You have hit on the reason that the greedy capitalists were so afraid of the Soviet Union.
MnExpat
Jun 2012
#5
Marks and Engles both agreed that revolution sometimes has comes from the barrel of a gun
MnExpat
Jun 2012
#15
You would be justified in saying that if the Soviet Union didn't last ~65 years
tralala
Jun 2012
#76
The same is true for public sector workers. Who do you think public employee unions represent?
badtoworse
Jun 2012
#33
Nobody ever got a job before there were public school teachers to teach them how to read.
slackmaster
Jun 2012
#90
In my (non-economist) opinion money derives its value from the good and services you can buy with it
badtoworse
Jun 2012
#105
So you believe we don't have a government that spends money into the economy?
girl gone mad
Jun 2012
#96
The private sector provided the money that enabled the government to do those things
badtoworse
Jun 2012
#106
When I did an assignment for the government way back when in 2004, I saw the memo
Laura PourMeADrink
Jun 2012
#10
Yes. Privatization = corruption. It's about pay-offs to buddies and campaign supporters.
JDPriestly
Jun 2012
#20
This is an important point. It's not just abstract philosophy and ideology for the privatizers.
limpyhobbler
Jun 2012
#24
absolutely...explains school vouchers - friends own private schools - more people go - more
Laura PourMeADrink
Jun 2012
#61
It's not especially in a service economy you get low paying jobs like fast food and retail with no
craigmatic
Jun 2012
#16
Because rich people can make a killing exploiting the private sector. n/t
lumberjack_jeff
Jun 2012
#17
i am sure as shit happy those firefighters keeping my happy self safe tonight are public employees
fizzgig
Jun 2012
#25
Because we are run by small town plutocracies that want to get their hands directly
Baitball Blogger
Jun 2012
#26
I've encountered bat crazy libertarians who have suggested just such a thing
Nuclear Unicorn
Jun 2012
#94
The idea is that the one must pay for the other--the "public sector" is not self-supporting. nt
Romulox
Jun 2012
#38
I don't disagree (at all). The point STILL remains: the "public sector" requires tax revenue to
Romulox
Jun 2012
#66
It seems to me that the teaching profession is supporting the entire structure of civilization
aint_no_life_nowhere
Jun 2012
#103
The argument that private enterprise is less bureaucratic is absolutely ludicrous.
randome
Jun 2012
#47
He is targeting the wrong "Public Sector" Overpaid Congressmen and Senators is where the fat needs
Tuesday Afternoon
Jun 2012
#59
If "the public sector is "sponging" off of the value produced by the private sector..."
kentuck
Jun 2012
#73
This is an incomplete view of the role of the government in a modern economy.
girl gone mad
Jun 2012
#84
If divide & conquer didn't work, politicians and corporations wouldn't use it. nt
shcrane71
Jun 2012
#74
I guess I must have not paid attention during my 6 years of economics studies
IndyPragmatist123
Jun 2012
#116
It's not better. It's much bigger and much more important to the economy in terms of job creation.
slackmaster
Jun 2012
#89