Wednesday, 20 August 2014

The 7 Deadly Innocent Frauds of Economics Policy

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Seven Deadly Innocent Frauds of Economic Policy (Basic List)

1. The government must raise funds through taxation or
borrowing in order to spend. In other words, government
spending is limited by its ability to tax or borrow.
2. With government deficits, we are leaving our debt burden
to our children.
3. Government budget deficits take away savings.
4. Social Security is broken.
5. The trade deficit is an unsustainable imbalance that takes
away jobs and output.
6. We need savings to provide the funds for investment.
7. It’s a bad thing that higher deficits today mean higher
taxes tomorrow.

Warren Mosler (author of the above book)

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Warren Mosler
Warren Mosler.jpg
Warren Mosler speaking at War and Poverty, Peace and Prosperity Conference at the Levy Economics Institute
Born(1949-09-18) September 18, 1949 (age 64)
NationalityUnited States
FieldModern Monetary Theory, Macroeconomics, Monetary policy
School/traditionPost-Keynesian economics
Alma materUniversity of Connecticut (B.A.)
AwardsDoctor Honoris Causa,
Franklin University Switzerland
Warren Mosler (born September 18, 1949) is an American economist and theorist, president and founder of Mosler Automotive, and co-founder of the Center for Full Employment And Price Stability at the University of Missouri-Kansas City. He briefly ran for President of the United States as a member of the Democratic Party in the 2012 election before dropping out to run for U.S. Senate.

Early Life[edit]

Mosler attended the University of Connecticut where he majored in Economics.
After graduating from college, he initially went on to work at the Savings Bank of Manchester in Manchester, Connecticut in 1973. Next he went on to work in Hartford before moving to New York City. From there he would go on to work on Wall Street, specifically Bache and Co., Banker's Trust NYC, and William Blair.[1]

Hedge Fund work[edit]

In 1982 he founded his hedge fund, Illinois Income Investors (III), where he was made president and was responsible for several strategies utilizing government securities, mortgage backed securities, LIBOR swaps and LIBOR caps, and financial futures markets. Here he made several profitable investments, particularly betting successfully on government securities. By the mid 1990s, most of the firm had been largely turned over to his partners, as he had disagreements on the direction of some of its investments.[2][1]
Later, he relocated to the U.S. Virgin Islands to participate in a government-sponsored economic growth initiative.[3]

Economic Views[edit]

Mosler is a champion of Modern Monetary Theory.[4] His unorthodox views have gained a substantial following among the Internet and academia.[4]

Mosler's Law[edit]

He is attributed with creating Mosler's law dealing with fiscal policy of a nation during a recession. Specifically, Mosler's law states there “…is no financial crisis so deep that a sufficiently large increase in public spending cannot deal with it.”[5] He stated that the recent recession could have been alleviated much quicker from massive government spending increases until unemployment fell.[4] He opposes high taxes since they discourage consumption within an economy but does agree a certain tax level is needed to guarantee citizens use the dollar as a currency.[4][2] He is confident that inflation is a non-factor in this theory since the government has the complete ability to constantly expand the money supply and guarantee consumption and growth.[4] He supports extending FDIC insurance to private deposits of up to $10 million, as well as unlimited FDIC insurance to US banks.[6]
He stresses that federal spending is in no way constrained by tax revenues, therefore the government will always be able to make payments in its own currency, regardless of solvency, stating “Federal Government checks don't bounce”.[7] He goes on to state that any and all debt passed on to future generations will never be burdensome, since they will undoubtedly consume whatever is produced.[7]
He developed much of his belief from his time as a hedge fund manager when many investors predicted the US government defaulting on bonds, whereas he predicted, correctly, that US government would not default and thus made considerable returns.[4]


Mosler supports government funding for full-time employment with full health care coverage for employees and dependents, thus triggering all firms providing health care to remain competitive. He states health cannot be viewed as a production cost, therefore the government should fund for at least 90% of the cost paid by the firms. Finally he supports issuing medical debit cards to all citizens, for a fixed amount. This covers any medical costs and any amount above this will be covered by "catastrophe insurance". At the end of every year, citizens would receive a portion of their unused medical debit card.[8]


In a brief proposal, Mosler stated the energy crisis could be solved by lowering the speed limit nationally to 30 mph. According to Mosler, this would cut gasoline consumption and pollution since automobiles run more efficiently at slower speeds, while also greatly increase the demand for public transportation.[9] He states that such an initiative would eventually lead to a supply shock forcing prices down, and improve real terms of trade.[9]


Mosler supports government purchases of houses in the foreclosure process from the bank at the lower of the fair market value or remaining mortgage balance. The government then would rent the house back to the original owner and after two years the house is put on the market with the original owner having the first rights of purchase.[10]


Mosler supports eliminating the income tax and replacing it with a real estate tax to "anchor the currency".[11] He also supports eliminating tax advantages for any savings accounts, since he states savings do not increase investments necessarily.[11] He supports luxury taxes being used to limit the consumption of outside goods.[11]

Academic work[edit]

Academically, he is known for his writings on Modern Monetary Theory, an economic theory that describes the way fiat money is created and used in modern economies.
In 2010 he published Seven Deadly Innocent Frauds of Economic Policy outlining errors that can be made in the development of policy and explains what he deems "true" as proper alternatives.[1]
In recognition that his "leadership in the field of economics is notable" Mosler was awarded an honorary doctorate from Franklin University Switzerland in 2014,[12] after that in 2013 the Mosler Economic Policy Center (a center founded by him and aimed at encouraging education and research in new concepts and methods of economic policy analysis)[13] promoted a lecture about functional finance at Franklin.[14]
In 2014 he became visiting professor at the University of Bergamo.[15]

Selected publications[edit]

  • “Critique of John B. Taylor’s ‘Expectations, Open Market Operations, and Changes in the Federal Funds Rate’,” Journal of Post Keynesian Economics, forthcoming.
  • “The Natural Rate of Interest Is Zero,” with Mathew Forstater, JOURNAL OF ECONOMIC ISSUES, Vol. XXXIX No. 2, 2005
  • “Public Sector Employment, Foreign Exchange and Trade, Achieving Full Employment,” edited by Ellen Carlson and William F. Mitchell, pp. 62–71, vol. 12, ELRR: Sydney, 2001.
  • “Unemployment and Fiscal Policy, Unemployment: The Tip of the Iceberg,” William Mitchell and Ellen Carlson (eds.), pp. 219–231, CAER: Sydney, 2001.
  • “Building a Palestinian Economy,” Middle East Insight, pp. 57–59, Washington DC, June–July 2001.
  • “Comment on ‘In the Interests of Safety,’ by Martin Mayer,” in The Management of Global Financial Markets, edited by Jan Joost Teunissen, pp. 94–101, FONDAD: The Hague, 2000.
  • “Exchange Rate Policy and Full Employment,” The Path to Full Employment, Ellen Carlson and William F. Mitchell (eds.), pp. 12–22, vol. 11, ELRR: Sydney, 2000.
  • “A General Framework for the Analysis of Currencies and Commodities”, in Full Employment and Price Stability in a Global Economy, edited by Paul Davidson and Jan Kregel, pp. 166-177, Northampton: Edward Elgar Publishing, Inc, 1999.
  • “Full Employment and Price Stability,” Journal of Post Keynesian Economics, Vol. 20, No. 2, Winter 1997–98.[1]


  • Soft Currency Economics II, ADS Incorporate, Kindle edition: 2012. Paper edition: 2013
  • In alto il deficit! (Up with the deficit!, book written in Italian), foreword by Paolo Barnard, Edizioni Sì, 2012
  • Seven Deadly Innocent Frauds of Economic Policy, foreword by James K. Galbraith, Valance, 2010
  • Soft Currency Economics,, 1993. Paper edition: AVM, 1995

Political campaigns[edit]

In February 2009, Mosler declared his candidacy with the Federal Elections Commission to run for the office of President of The United States as an independent.[16] In April 2010, he withdrew[17] to run in the United States Senate election in Connecticut, 2010,[3] briefly as a Democrat, but ultimately as an independent. In the final tally he received 0.98% of the vote.

Other Professional Activities[edit]

Mosler developed his own automobile line, Mosler Automotive, and designed several luxury sports cars and supercars that were briefly marketed starting in 1985.[2] His designs were marked by excellent performance and high-speeds.[18]
Mosler was so confident of one of his models, the Consulier GTP, that he offered a bounty to anyone who could beat it in a race. Car and Driver took up the gauntlet and defeated his car. However Mosler argued that the model used in the race was a worn out Consulier and thus offered the challenge once more for a higher bounty.[2]
In the 90s he developed environmentally friendly vehicles including both electric cars and composite-bodied automobiles.[2]


The company was sold off in June of 2013.[18]
He also designed his own catamaran that he prides on being much lighter, faster, and more fuel-efficient than other models.[2]

Personal life[edit]

Warren Mosler lives in St. Croix in the United States Virgin Islands where he resides full-time with Elizabeth O'Toole.[1]


  1. ^ Jump up to: a b c d e "About". Center of the Universe. 
  2. ^ Jump up to: a b c d e f "Warren Mosler". Car & Driver Report. 
  3. ^ Jump up to: a b Altimari, Daniela (February 25, 2010). "Another hat in the ring? Financial analyst Warren Mosler considers U.S. Senate run". Courant. Retrieved 28 May 2011. 
  4. ^ Jump up to: a b c d e f Lowery, Annie (July 4, 2013). "Warren Mosler, a Deficit Lover With a Following". New York Times. 
  5. Jump up ^ "Mosler's Law". Kenne Turner. Feb 20, 2009. 
  6. Jump up ^ Mosler, Sada (May 20, 2008). "Alternative Bank Liquidity Proposal". Center of the Universe. 
  7. ^ Jump up to: a b Mosler, Warren. "The Seven Deadly Innocent Frauds". Center of the Universe. 
  8. Jump up ^ Mosler, Warren (Mar 2, 2009). "Mosler Healthcare Proposal". The Center of the Universe. 
  9. ^ Jump up to: a b Mosler, Warren (May 22, 2008). "Energy Crisis Solution". Center of the Universe. 
  10. Jump up ^ Mosler, Warren (Feb 18, 2009). "Mosler housing proposal". Center of the Universe. 
  11. ^ Jump up to: a b c Mosler, Warren (Apr 26, 2009). "Current Proposals". Center of the Universe. 
  12. Jump up ^ Retrieved 28 January 2014.
  13. Jump up ^
  14. Jump up ^
  15. Jump up ^ Warren Mosler, visiting professor at University of Bergamo, DAEMQ Department, Lectures of International Monetary Economics, ME/MMT: The Currency as a Public Monopoly
  16. Jump up ^ "Warren Mosler". Federal Elections Commission. Retrieved 28 May 2011. 
  17. Jump up ^ "Warren Bruce Mosler Termination Report". Federal Election Commission. Retrieved 28 May 2011. 
  18. ^ Jump up to: a b Petrany, Mate (Jun 17, 2013). "Mosler Made The First Production Car With No Structural Metal In 1985". Jalopnik. 

External links[edit]

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