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)

Scotland is Part of #Global MMT

Scotland being a good example, at some point I imagine creating a page for each of the countries with an MMT presence. Bill Mitchell has been writing about Scotland — here — for nearly a decade. So that’s a good place to start. Meanwhile, here’s what I’ve add to added to #GlobalMMT: Commentary re Developed & Developing Nations

The Case for Scottish Independence with Kairin Van Sweeden Executive director of Modern Money Scotland, works with the Scottish National Party.
— Real Progressives, Kairin Van Sweeden (@IndyAnatomist) Jan 30, 2021 (01:11:50) Transcript available

Nicola Sturgeon indicates a Job Guarantee would be part of a Scottish Green New Deal
— Sean Bell (@SeanCMBell) Commonspace (@TheCommonSpace) Aug 8, 2019

The MMT Podcast #15 Modern Monetary Theory and the economics of an independent Scotland
— Patricia Pino & Christian Reilly talk with Warren Mosler, Bill Mitchell, Chris Cook May 9, 2019 (02:30:43)

Modern Monetary Theory and an Independent Scotland
— Cameron Archibald Bella Caledonia (@bellacaledonia) Jan 7, 2019

The Eurozone

Dirk Ehnts (@DEhnts), who I was fortunate enough to meet at an MMT conference in NYC a few years back, mentioned that he is seeing increasing demand “for MMT.” One thing led to another, in this case a new page linked from the FAQ, dedicated to the Eurozone, with these starting entries:
Britain is now free of the legal neoliberalism that has killed prosperity in Europe
— Bill Mitchell (@BillyBlog) Jan 7, 2021

Dirk Ehnts – The Eurozone is Fully Committed to Modern Monetary Theory (MMT)
— Dirk Ehnts (@DEhnts) Brave New Europe April 4, 2020

Stephanie Kelton (MMT): Why the euro is a bad idea Suso Medin Dec 6, 2018 (03:18).

The Deficit Myth: MMT & the Birth of the People’s Economy

Extra! Extra! Read all about it. @NathanTankus wrote this fine review on Amazon. Please be encouraged to read them all, mark as ‘helpful’ what you find to be helpful, and (if you qualify under their rules) write your own. On A or elsewhere. Spread the word!

One of the most important books written in the 21st Century
Reviewed in the United States on June 10, 2020
disclosure: I work with Professor Kelton on various projected related to Modern Monetary Theory in my capacity as Research Director for the Modern Money Network

The book is just out and I see there are already a couple of people who have claimed to read it who have given the book bad reviews based on their preconceived notions. As someone who played a small part in the book’s construction, and received my copy before official release, I’d like to provide an informed viewpoint on the quality of The Deficit Myth.

This book is masterfully done and a deeply important read for anyone who cares about creating a just society without mass unemployment while responding to the crises of our age such as systematic racism and climate change. Professor Kelton guides readers through what the national debt is, how government deficits are our surpluses (or how the government’s “red ink” is our “blank ink”), what are the real constraints on government spending (the availability of physical resources) and how we can wage trade peace.

It may seem that Professor Kelton’s vision is “pie in the sky” but that kneejerk instinct is based on ignorance and decades of propaganda and not on her expertise or track record. She knows how the congressional budget process works as someone who has worked on the senate budget committee and as adviser to a major presidential campaign. She does readers a great service by giving them insights and anecdotes grounded in that experience. She also has a fantastic track record of being correct when others were wrong. She was right about the fragility of the Eurozone. She was right we weren’t doing enough fiscal policy-wise during the Great Recession. She was right that quantitative easing wouldn’t cause inflation. She was right that the Trump tax cuts, while increasing inequality, didn’t reduce the federal government’s capacity to respond to the next recession- or depression as we’re seeing now. Buy the book and judge for yourself, but keep in mind how many big things Professor Kelton has been right about and read her erudite analysis with these facts in view.

What she has to say is more important than ever during the Coronavirus Depression. Get the truth straight from her and ignore the lazy “readers” on this website.

Warren Mosler: How we pay for it.

Note: Mosler wrote this speech — unsolicited — with Bernie Sanders in mind. I don’t know if Sanders or his campaign saw it; but imo it’s past time for every progressive candidate and their staff to make use of it. I thank Mr. Mosler for permission to share it with you.

I’ve proposed a lot of initiatives from Medicare for all to desperately needed infrastructure.

And in all cases the Federal Government will be paying for it. And each time the question that immediately explodes is “So how are you going to pay for it?”

I’m going to answer that question directly and definitively and in a way that everyone can understand.

And before I begin, I’d like to thank my chief economist, Professor Stephanie Kelton, a specialist in economic policy as well as Federal Reserve Bank monetary operations, for educating me on this critical question.

And I’ll tell you right now that what was once cloudy and shrouded in myth and mystery is now absolutely crystal clear.

So first let’s talk about how your government makes ANY and ALL payments.

Whenever the Treasury spends, it instructs the Federal Reserve Bank to add those dollars to the bank account of whoever is getting paid. So, for example, if you are getting a $1000 payment from the Federal Government, the Treasury instructs the Federal Reserve Bank to cause the number of dollars in your bank account to be $1,000 higher. In other words, if you had $2,000 in your bank account, and then got $1,000 from the government, your bank account would then show $3,000 in it.

More specifically, when the government spends, all it does is act to change the numbers in your bank account to higher numbers. As the former Fed Chairman Ben Bernanke testified:

“We just use the computer to mark up the numbers in the account”

Now this is not some new idea, or proposal. It’s how ALL government spending has always been done. That’s all there is to it and there is no other way to do it. And everyone in the Treasury and the Fed, including the chairman, knows it.

There is no dispute whatsoever that whenever the US government spends, yesterday, today, and tomorrow, it’s just about changing numbers in bank accounts.

And the government can just as easily spend $1 billion as it can spend $1, since all it has to do is change a number on its own books.

So how will we pay for medicare and all the infrastructure we need? The exact same way we are paying for everything today, yesterday, and tomorrow: We spend by changing numbers in bank accounts to higher numbers.

This is not to say spending doesn’t have consequences, which it does.

What it does mean is there is no such thing as the government running out of dollars to spend, because all it does is change numbers in bank accounts. The government can’t run out of dollars it adds to bank accounts any more than the football stadium can run out of points it shows on the scoreboard.

And if you don’t want to believe me, I have this gentlemen from the Federal Reserve Bank standing next to me along with another from the US Treasury, to answer all of your questions.

So let me continue with this question. Since the government can’t run out of money, and can make any payment when it needs to, like it’s always done, what possible problem can there be if it spends too much?

The answer to that is inflation. Too much spending can cause too much inflation.

So how do we know if that’s going to happen?

How about looking at the inflation forecasts?

And just so happens the Federal Reserve Bank and the Congressional Budget Office already are spending a lot of money doing inflation forecasting.

So here’s how it works.

We propose a program, like Medicare for all, or my trillion dollar 10 year infrastructure proposal, and then we ask the Fed and the CBO how much inflation, if any, it will cause.

And if they say those proposals won’t cause inflation, then we’re free to act without increasing anyone’s taxes.

But what if they say they will cause too much inflation?

Well, in that case we have to raise taxes.


Because taxing takes money out of the economy.

So if the Fed and the CBO say the new spending will cause too much inflation, we can take some of that money out of the economy by taxing.

And, again, how do we know how much to tax?

It’s the same answer – the inflation forecast.

The important point is that the inflation forecast is what tells us how much to tax, not the size of the deficit.

And so what is this thing called the public debt?

Listen carefully:

The public debt is nothing more than all the dollars spent by the government that haven’t yet been used to pay taxes.

Let me repeat: The public debt is nothing more than all the dollars spent by the government
that haven’t yet been used to pay taxes. And those dollars stay in the economy as someone’s savings [Ed note: in bank accounts] until they get used to pay taxes.

Think of it this way – when the government spends a dollar, someone has to have it.

And if it also taxes away that dollar, that dollar is gone from the economy.

But if the government spends a dollar and doesn’t tax it away, it stays in the economy as someone’s savings.

And most all of that savings is right there at the Federal Reserve Bank in bank accounts that they call Treasury bonds, notes, and bills. Yes, all those Treasury’s are just dollars in savings accounts at the Federal Reserve Bank with fancy names.

Yes, the Treasury has spent some $18 trillion more than it’s taxed, and that $18 trillion is the savings of people and businesses in the economy that’s in bank accounts at the Federal Reserve Bank called Treasury securities and also called the public debt.

This means the government doesn’t owe any dollars to anyone, because it’s already given them the dollars when it spent them.

Someone already has them, and the dollars are already are sitting there in bank accounts at the Fed.

And this explains why paying off the debt has never developed into a problem.

If it was going to cause a problem, don’t you think it would have happened long before it got to $18 trillion?

Yes, all savings accounts are called ‘bank debt’ by the accountants, but in this case it’s highly misleading, and it’s been driving some very bad policy decisions.

Now let me quickly review the three points I’ve just made:

1. How do we pay for Medicare and infrastructure?

The same way we always pay for everything. We instruct the Federal Reserve Bank to enter the dollars into the appropriate bank accounts.

2. How do we know how much to tax?

We give our proposals to the Federal Reserve Bank and the Congressional Budget Office to determine how much tax is necessary to keep inflation low.

3. The results are world class healthcare and infrastructure for all, millions of new jobs, and an increase in total dollar savings for the economy, with taxation at the right level to prevent unwanted inflationary pressures.

Well, I’m pretty sure you’ve never heard anything like this before. And until not long ago, I hadn’t heard it either. And yes, I’m mad as hell! I used to think the government had run out of money, and had to borrow from lenders like China demanding high rates to be able to spend more than it taxed, and all the rest of that nonsense that’s been keeping us down.

And everyone in Congress still probably thinks that way. And they’re all wrong. And every insider in the Fed and the Treasury knows they’re all wrong, and word is just now getting out.

After all these years of hearing it wrong, we’re only now hearing the truth.

And let me finish by saying that’s it’s not about adding any kind of stimulus, but about removing a restriction. Think of the US economy as a champion runner, ready for the Olympics. But then we put a plastic bag over his head and he can’t breathe and he can’t run. What I’m proposing is to remove the plastic bag- remove the restriction- and let him run again. It’s not about giving him drugs. And so it’s about removing the artificial financial restrictions on the economy and letting it run to it’s potential.

Added April 15 through 17

To Debates & Controversies

Rohan Grey’s Twitter Thread on @dylanmatt’s Vox piece on MMT
— Rohan Grey (@RohanGrey) April 16, 2019

Modern Monetary Theory, explained • A very detailed walkthrough of the big new left economic idea.
— Dylan Matthews (@dylanmatt) Apr 16, 2019

Tom Friedman Just Noticed that the UK “Has Gone Mad” (Part 2) • Blair, Brexit, and Friedman Show the Need for MMT Insights
— William Black (@WilliamKBlack) New Economic Perspectives April 11, 2019

Tom Friedman Just Noticed that the UK “Has Gone Mad” (Part 1)
— William Black (@WilliamKBlack) New Economic Perspectives April 11, 2019

Democracies With Sovereign Currencies Can Dance
— Anonymous New Economic Perspectives April 11, 2019

MMT, Models, Multidisciplinarity
— Pavlina Tcherneva (@PTcherneva) New Economic Perspectives April 8, 2019

Why Does Everyone Hate MMT DOWNLOAD
— James Montier, GMO April 3, 2019

A Must Read: Why does everyone hate MMT?
— L. Randall Wray, New Economic Perspectives, March 26, 2019

To News & Op-Eds

The Untold Story Of How Clinton’s Budget Destroyed The American Economy
— Joe Weisenthal (@TheStalwart) Business Insider (@businessinsider) Sept 5, 2012

Added April 5 through April 14

To Basics

Investment Perspectives: Modern Monetary Theory, and why you’re about to hear a lot more about it • Part 1
— Chris Bedingfield LiveWire & QuayGlobalInvestors, April 3, 2019

To News, Op-Eds & Reviews

Modern Monetary Theory Finds an Embrace in an Unexpected Place: Wall Street • Money managers, chief executives and business analysts maintain that modern monetary theory offers important insights. Far from finding it fanciful or deranged, they are using M.M.T. to build economic forecasts and even trading strategies.
— Patricia Cohen (@PatcohenNYT) NY Times April 5, 2019

Note: worth getting past cheap shots and sloppy reporting such as “The package of eccentric ideas” and unpacked reference to “University of Chicago’s Booth School of Business.”

To (the recently added) Debates & Controversies

MMT, Models, Multidisciplinarity
— Pavlina Tcherneva (@PTcherneva), New Economic Perspectives, April 8, 2019

To Federal Job Guarantee

Macroeconomic Stabilization Through an Employer of Last Resort
— Scott Fullwiler SSRN 2005

Full Employment Through a Job Guarantee: A Response to the Critics
— William F. Mitchell, L. Randall Wray SSRN Jan 1, 2005

To Expand Social Security
Does Social Security Need Saving? Providing for Retirees throughout the Twenty-first Century
— Dimitri B. Papadimitriou, L. Randall Wray The Jerome Levy Economics Institute of Bard College 1999

Debates & Controversies

“First they ignore you, then they laugh at you, then they fight you, then you win.” ~ Labor Organizer Nicholas Klein, 1914

While the boundaries aren’t precise, we seem to have blown past ‘ignore’ and through much of the laughter phase and are perhaps entering a real sea-change. There are a number of pull-no-punches posts for background and context, suggesting that it may be IS time for a new page on this site. Meanwhile, in chronological order, here’s what I found (which form the start of a new page Debates & Controversies):

Modern Monetary Theory is On the March. Posted Feb 18, 2019 on New Economic Perspectives by William Black (@WilliamKBlack), Associate Professor of Law and Economics at the University of Missouri-Kansas City.

MMT: Sense Or Nonsense? Posted March 5, 2019 in Forbes by John Harvey, Professor of Economics at Texas Christian University

MMT Takes Center Stage – and Orthodox Economists Freak Posted March 11 on New Economic Perspectives by William Black (@WilliamKBlack)

MMT Responds to Brad DeLong’s Challenge Posted March 12 on New Economic Perspectives by L. Randall Wray, Professor of Economics at the University of Missouri-Kansas City, Research Director with the Center for Full Employment and Price Stability and Senior Research Scholar at The Levy Economics Institute.

Three Natural Experiments Documenting Krugman’s Bias Against MMT Posted March 14 on New Economic Perspectives by William Black (@WilliamKBlack)

Wolfers Blames MMT for Orthodox Economists’ Ignorance of MMT Posted March 14 on New Economic Perspectives by William Black (@WilliamKBlack)

The Chicago Booth Survey on MMT Posted March 14 on MacroMania by David Andolfatto (@dandolfa), Senior V.P, Economic Research, Federal Reserve Bank, St. Louis.

Four “Tells” That Show Krugman Knows He Cannot Win an Honest Debate Posted March 15 on New Economic Perspectives by William Black (@WilliamKBlack)

The Day Orthodox Economists Lost Their Minds and Integrity Posted March 15 on New Economic Perspectives by William Black (@WilliamKBlack)

A Conspiracy Against MMT? Chicago Booth’s Polling and Trolling Posted March 18 on New Economic Perspectives by L. Randall Wray

Is there a better model to explain economics in the Trump era? Published March 20 Boston Globe (@GlobeOpinion) by James K. Galbraith, Chair in Government/Business Relations and Professor of Government, University of Texas.

A Must Read: Why does everyone hate MMT? Posted March 26 on New Economic Perspectives by L. Randall Wray

MMT Scholars’ Predictive and Policy Successes Posted April 1 on New Economic Perspectives by William Black (@WilliamKBlack)

MMT and Why Historians Need to Reclaim Studying Money Posted March 31 in History News Network (@myHNN) by Rebecca L. Spang (@RebeccaSpang) Professor of History at Indiana University

In the way it links monetary policy, fiscal policy, and social policy—the Jobs Guarantee and something like a Green New Deal are not things to be “paid for” via MMT, but are part of it—MMT rejoins the Enlightenment tradition of political/social economy. ~ Rebecca L. Spang

A Response to Rebecca Spang’s “MMT and Why Historians Need to Reclaim Studying Money” Posted April 7 in History News Network (@myHNN) by Maxximilian Seijo (@MaxSeijo)

MMT, Models, Multidisciplinarity Posted April 8, 2019 in New Economic Perspectives by Pavlina Tcherneva (@PTcherneva) Complete with suggested reading.