Sumary of The Political Alchemy Called Modern Monetary Theory:
- I hoped for (and got) more from listening to a TED Talk by Dr. Stephanie Kelton, an economist and professor at Stony Brook University who was the senior economic advisor to Bernie Sanders’ presidential campaign and author of The Deficit Myth (reviewed by Bob Murphy here).
- It reminds us that we are no longer on a gold standard, so finding the money to pay for the things we need is never an issue for countries like the US or the UK.The implication of having a monetary monopoly is that the “[t]he federal government can never run out of money” (all quotes are from Kelton’s talk unless otherwise stated).
- This is obviously true, but only because Kelton (and MMT) does not distinguish between money in the real sense (the valued medium of exchange, i.
- For example, the government of Venezuela was not running out of bolívars, but from this it did not follow that the currency would retain its purchasing power (as, obviously, it didn’t) or even retain its status as money (which it also didn’t).
- Her point here is to delink government spending and taxation:If you got a $1,400 check from the federal government earlier this year, or if your company received money to help cover payroll and other expenses, then you received some of the newly minted digital dollars that were created to support our economy.
- The problem is that it is based on a fundamental mistake: confusing the unit for its meaning to users or, if you will, thinking a currency is money.
- By talking about one, and the creation of more of it, yet referring to the other, thus assuming it remains largely unaffected, Kelton can state the following about deficits:Here’s what I see.
- Government creates new money for which it purchases infrastructure, teacher salaries, electric vehicles, etc.