Functional Finance & The Debt Ratio

These folks have been hard at it for decades. Stephanie Kelton recently pointed to this from 2012-2013 and so I added it to Functional Finance and the Debt Ratio and the Scott Fullwiler page, just under his MMT 101: A thread in 25 parts.

“This five part series will explore at length (warning!) and in detail (another warning—wonk alert!) the MMT perspective on the debt ratio and fiscal sustainability. While the approach suggests a macroeconomic policy mix and strategies for both fiscal and monetary policies that most neoclassical economists currently believe are unsustainable, ultimately the MMT preference for a significant role for fiscal policy in macroeconomic stabilization is shown to be consistent with traditional neoclassical views on fiscal sustainability.”
• Part I • Part II • Part III • Part IVPart V

— Scott Fullwiler (@STF18) New Economic Perspectives Dec 2012 – Jan 2013

Kelton to Investment Managers: #MMTWorks

iConnections’ presents themselves as bringing “the investment management community together.” For their 2021 Global Alternatives Conference, CEO Ron Biscardi interviewed Stephanie Kelton about seeing sovereign nations through the lens of MMT. I’ve added the interview to Videos and the dedicated Stephanie Kelton page. As always, Kelton is a delight to watch, listen and learn from.


— Ron Biscardi iConnections (@iconnections2) 2021 Global Alternatives Conference, Feb 11, 2021 (39:53)

“Government Can’t Run Out Of Money”

The crazy idea that We the People can have nice things is reaching a wider audience.

Over at HuffPo, in Stephanie Kelton Has The Biggest Idea In Washington, Zach Carter writes about how “MMT” is catching on,

“Modern monetary theorists believe that confusion around money has distracted economists from the real things that affect the economic health of society ― natural resources, technology, available labor. Money is a tool governments use to manage these variables and solve social problems. It is not a scarce resource that governments have to track down in order to pay for projects.”

Please go read. It’s worth it.

“The basic idea is that the government can’t run out of money,” Kelton said. “It creates money just by spending.”

Whoa, Cowboy!

Take a look at the op-ed by Stephanie Kelton in today’s LA Times, Congress can give every American a pony (if it breeds enough ponies).

Kelton introduces the idea that a government that issues its own currency can create money from nowhere, writing,

“Whoa, cowboy! Are you telling me that the government can just make money appear out of nowhere, like magic? Absolutely. Congress has special powers: It’s the patent-holder on the U.S. dollar. No one else is legally allowed to create it. This means that Congress can always afford the pony because it can always create the money to pay for it.

Now, that doesn’t mean the government can buy absolutely anything it wants in absolutely any quantity at absolutely any speed. (Say, a pony for each of the 320 million men, women and children in the United States, by tomorrow.) That’s because our economy has internal limits. If the government tries to buy too much of something, it will drive up prices as the economy struggles to keep up with the demand. Inflation can spiral out of control. There are plenty of ways for the government to get a handle on inflation, though. For example, it can take money out of the economy through taxation.”