Tornado Alley (PROG)

[SilverSurfer]

the funny thing is Senator Obama in 2006, as may be the case now, misunderstands our monetary system.

"The USA does not finance spending via the bond markets. The USA issues bonds as a form of controlling the Fed Funds rate. It’s a pure monetary operation that is designed to help control the money supply in the banking system. It is not a fiscal financing operation. The USA issues bonds to maintain the money supply by controlling the overnight rate and control excess reserves. People think this is government debt because Congress mandates the issuance of bonds.........

Why has this thinking never changed in the USA? Despite the dramatic changes in the monetary system after the Nixon shock neo-liberalism came to dominate economic theory in the 70's and 80's. After the economic successes of the Reagan and Clinton eras there was little doubt that such thinking was accurate. Of course, we all know what happened next and now many of these neo-liberal beliefs have been pointed to as causes of the recent crisis. I believe most people in power do not understand exactly how our monetary system works due to this fundamental flaw in our educational system –-------

Why don’t more people understand how the system works? And more importantly, why don’t high ranking officials understand it? I believe these misconceptions persist due to several reasons:

¦First of all, this is all highly complex.
¦Second, this system in its current format is not very old and most of the people in power currently were educated by a generation in which this system was not largely applicable. Therefore, the theories of old run rampant in modern economic circles.
¦Thirdly, politicians and ideologues have a vested interest in keeping the American public from understanding that the government is fundamentally different from a household, state or business.

http://pragcap.com/resources/understanding-modern-monetary-system