international trade actually based on floating rates instead of artificially imposed ones that inevitably result in imbalances due to inefficiencies. Martin Reply: December 9th, 2010 at 1:38 pm Tom, you are starting to agree with me more than you think. What is failing is not the inability of the US government to spend, it is that price signals are being lost (primarily through foreign governments pegging to the dollar). MMT works, but the impact on local productive output due to a foreign government maximizing its local labor utilization by holding US dollars (utilized to buy commodities or US government bonds) is creating stress on US dollar prices. The end result has to be a decrease in purchasing power, either through politial means (taxation) or price (inflation). Defined Benefit Pension Plans 1.A defined benefit pension plan (an annuity) issued by a government that has a fiat currency is exactly like the purchase of a government bond. a.US social security is regressive therefore the price at which the ammunity is purchased in dependant on the size of the annuity one is purchasing. One dollar of future benefits is not the same for every purchaser. b.If you assume no default, then the value of the annuity is based on the discount rate and not the rate at which a bond would be purchased in the market. i.If the discount rate is higher than the market yield then you are increasing net aggregate demand, if it is lower than you are decreasing net aggregate