Monday, March 4, 2019

Stephanie Kelton explains Modern Monetary Theory

Just a short introduction for the general public.

Modern Monetary Theory (MMT) is gaining traction in American politics, energizing the progressive left and roiling deficit hawks. Stephanie Kelton, who advised Bernie Sanders' 2016 presidential campaign, explains the basics.



Konrad said...

I’m glad to see that MMT is gaining more and more exposure.

Let’s correct Stephanie Kelton on something…

“The only potential risk with the national debt increasing over time is inflation…”

No. She meant to say federal deficit. The size of the so-called “national debt” has no effect on inflation. Interest paid on Treasury Securities has an effect on inflation, but the sheer size of the “debt” does not. The higher the interest paid on T-securities, the more attractive T-securities become, and the more money is removed from circulation as more people buy T-securities.

Alexandria Ocasio Cortex says that we must correct the mistaken assumption that taxes pay for US government expenditures. No wonder people think AOC is insane. To habitual liars, the truth always seems insane.

John 8:32: "Ye shall know the truth, and the truth shall make you say, ‘THAT’S INSANE!’”



Now that MMT is being more widely talked about, MMT proponents need to start consulting economists like Michael Hudson. Or David Graber, author of Debt: The First 5,000 Years.

For example, Stephanie Kelton errs when she says the USA does not have an inflation problem.

The USA does have an inflation problem, caused by banks creating too much credit out of thin air, thereby pushing up housing prices, which in turn push up all prices.

Predatory bank lending causes the price of housing and of consumer goods to constantly rise. But because these rising prices are accompanied by rising debt, net worker incomes do not rise equally. Therefore everyone in the middle and lower classes is squeezed harder each day. That’s inflation.

MMT proponents must focus on debunking the myth that creditor tyranny is unavoidable, like a “law of nature.” They must focus on debunking the lie that debt jubilees are insane. They must specify that the problem is not federal spending, but out-of-control banks.

Stephanie Kelton totally misses the fact that without bank reform, MMT is useless.

Richard said...


I think the proper interpretation of the statement “The only potential risk with the national debt increasing over time is inflation…” is increasing the rate of deficit spending to the point that the economy reaches the current limits of its productive capacity resulting in inflationary price increases.

Konrad said...

Yes, that is why I wrote, "She meant to say federal deficit..."

Not the "national debt."

She often makes errors like this.

And I reiterate that MMT remains useless without bank reform.

As things are now, banks and debt rule, with or without MMT.

Andrew Anderson said...

As things are now, banks and debt rule, with or without MMT. konrad

Don't forget, a co-founder of MMT is a banker, Warren Mosler.

But the plan is this: The banks shall continue to automate jobs away with the legally stolen purchasing power of the workers and a JG will keep the dis-employed workers from having too much time or energy (or morale since a JG is disguised welfare that fools no one) to ponder things like justice.

And since automation reduces prices by eliminating jobs, continued privileges for the banks need not cause price inflation if they are regulated as MMT advocates propose to do.

See? No price inflation problem and if you are a control freak you can aim for an overseer job in the JG program!

Richard said...


I agree with you that bank lending is predatory.

Perhaps a new type of charted bank could be legislated into existence. This type of bank (essentially nonprofit) would also make loans at interest. The difference is that these loans would be funded by the Fed with 100% reserve backing. As these loans are repaid, both the principle and interest repayments would result in the destruction of reserves associated with the the repayment. This would have the same effect as a tax payment - which according to MMT is the destruction of money. Of course this is a simplified account of how such a bank would would function.

Also, this type of bank perhaps could be chartered to offer savings certificates which earn a nominal rate of interest which would correspond to a fair measure of the current rate of inflation. In other words the real rate would be ZERO, but the depositor would have the value of their savings preserved. These certificates could replace Treasuries, and would have the effect of removing money from circulation.

The goal of both of these proposals is to dampen inflation while providing space for more fiscal spending. Hopefully this spending will save our planet, and our freedom!

There is no need to make banking profitable when the product (money) doesn’t really cost very much to create.

Andrew Anderson said...


You are ignoring the legalized theft of purchasing power that occurs from the non or less so-called "credit worthy" to the more or most so-called "credit worthy" when we have government privileged banks or when government itself does the "lending".

The solution is therefore 100% private banks with 100% voluntary depositors AND a Citizen's Dividend to drive interest rates as low as desired.

Thus we can have BOTH an ethical fiat and credit system that cheats no one AND low interest rates.

What's not to like?

Richard said...


I neglected to say loan applications would be still be subject to rigorous underwriting standards and credit checking as today - if not even more rigorous. Banks that are deemed as having above average default rates would be examined and perhaps liquidated by the Fed or some appropriate agency. These banks, although non-profit, are not government owned. Any surplus revenues after expenses would simply be treated as undistributed retained earnings.

What is a Citizen's Dividend?

AXEC / E.K-H said...

Paul’s and Stephanie’s economic delirium talk

Stephanie Kelton: “Paul Krugman Asked Me About Modern Monetary Theory. Here Are 4 Answers.”

First answer: “Fiscal policy works by driving income into people’s pockets.”

False. Instead: “MMT deficit-spending/money-creation works by driving profit into rich people’s pockets.”

Stephanie Kelton is a scientifically incompetent agenda pusher for the Oligarchy.

Stephanie Kelton’s legendary Plain-Sight-Ink-Trick

The Kelton-Fraud

Down with idiocy!

Economists: Either stupid or corrupt or both

How counterfeiters save America with an extra profit and make WeThePeople pay for it

MMT for beginners

Egmont Kakarot-Handtke

Kaivey said...

'False. Instead: “MMT deficit-spending/money-creation works by driving profit into rich people’s pockets.”

How. Please explain the mechanism?

For your equation to balance, for G-T = 0, means more tax on the oligarchs, then all is well.

Andrew Anderson said...

What is a Citizen's Dividend? Richard

A Citizen's Dividend would mean that all fiat creation beyond that used to fund Federal deficit spending would be via equal distributions to all citizen.

So, using the US as an example:
1) No more interest on reserves (IOR).
2) No more positive yields on other sovereign debt, (e.g. US Treasuries).
3) No more loans from the Fed Discount Window.
4) No more asset purchases by the Fed.
5) No more any other fiat creation by the Fed except for the US Treasury and perhaps for the Citizen's Dividend if it is deemed that the Fed should be in charge of it.

All of the above violate equal protection under the law. Instead, all fiat creation beyond deficit spending for the general welfare would be by equal distribution to all citizens.

Calgacus said...

a JG will keep the dis-employed workers from having too much time or energy (or morale since a JG is disguised welfare that fools no one) to ponder things like justice.

No, it isn't welfare. A JG is a job, people working for society. Society gives them money back, so they can afford nice things, like food and videogames. What is the crazy belief that a JG is welfare, that it is unnecessary, that without a JG there is some mystical magic that makes everyone be satisfactorily employed, based on? Nothing. There is no logic or evidence for this universally and eternally false magical thinking.

It seems to me you have little understanding or interest in justice or Christian thinking. For according to you, Jesus must have been a fool or a liar, as he supported a JG, said it was a paradigm of justice and not disguised welfare.