Stephanie Kelton: The Deficit Myth (with David Cay Johnston)
Join author Stephanie Kelton for a discussion of her book, The Deficit Myth. Stephanie is in conversation with David Cay Johnston.
Note, this recording starts mid-conversation.
Purchase a copy of The Deficit Myth: bit.ly/3es0fja
The leading thinker and most visible public advocate of modern monetary theory - the freshest and most important idea about economics in decades - delivers a radically different, bold, new understanding of how to build a just and prosperous society. Through illuminating insights about government debt, deficits, inflation, taxes, the financial system, and financial constraints on the federal budget, this book dramatically changes our understanding of our government’s spending and points a new way forward for dealing with important issues such as poverty, inequality, tackling climate change, creating jobs, and building infrastructure.
Stephanie Kelton, former chief economist of the United States Senate Budget Committee, is a professor of economics and public policy at Stony Brook University. Politico recognized her as one of the fifty people across the country most influencing the political debate, and Bloomberg named her one of the fifty people who defined 2019. Dr. Kelton was a contributing writer for Bloomberg, and her op-eds appear in the New York Times, the Washington Post, and the Los Angeles Times.
David Cay Johnston received a Pulitzer Prize for New York Times articles displaying "exquisite command" of tax law. He is the bestselling author of Perfectly Legal, Free Lunch, and The Fine Print and two international bestsellers books about Donald Trump. Johnston is now editor-in-chief at DCReport.org and in his 10th year as a Syracuse University law school lecturer teaching the business, property and tax law of the ancient world and legal theory.
Recorded June 10, 2020
I love both of them. They’re a dynamic duo and a necessity to balance the rhetoric in the American debate landscape.
Be careful of the idea of "balance." One gets that from those who want more than they deserve. I love them both also. Kelton wins this debate by miles. The baloney we get from politicians proves they do not understand economics or they are trying to jerk us around.
Very good stef you educate people
Sold!
Absolutely fantastic! I'm subscribing! And buying multiple copies for loved ones. Of both of you-alls' books! Tantalizing indeed. Especially on my long- lived Black Friday boycott day! A new tradition! Huge contribution. Thank you all!
Very informative I learned a lot
15:29 Barter 27:33 Fractional Reserve 43:43 Repackaged Keynes?
Thanks for this. Wish it was shareable. Did a screen shot of it.
Learned a lot, never heard of Chartalism before; it will be very interesting to see the effects of economic policy over the next few years. My first impulse is panic overemphasizing debt but maybe that's completely backwards!
There's a video under 10 minutes long on channel Playitalready that you'll probably find fun/helpful. type dollar on his channel. i will look for your comment there to see if you liked it. also browse his channel n click his sub/bell icons for some epic, future videos.
Yeah, but the key is to read Randall Wray's blog (MMT Primer). You learn money is fundamentally a unit of account for credit & debt. So money is credit, but _credit is debt._ Someone's debt is another's credit, always, it never fails to hold except by counterfeit. So the government debt is somene in the private sector's surplus. So just refuse to hear out someone talking about the "public debt" since it's completely ambiguous. Which "public"? You and me or the government Treasury account? There is only Treasury debt and household+firm surplus. Keep this sectoral split clear and then you can talk to people aout the 32 trillion dollar USA surplus in the economy. It is still outrageous though, for a completely different reason. The problem is *_distribution._* If too few people 10% say have all of the surplus, then 90% of us are going to be in actual debt.
@@Achrononmaster Wrong again with MMT based argument. The government's debt is not a credit or a surplus for the private sector because the private sector is forced to pay for every cent of debt the government gets itself into when the bonds they sell actually maure which is what you have ignored. By the principle you try to argue with your own faulty understanding you should be arguing that privates ector debt is surplus for the government - But you don't.
Have the book on order, should see it in a few days.
But David Cay Johnston understands it ! ! ! ! ! ! !
An interview she did on Feb 8, 2024 titled “Was MMT right about inflation?” at 12:25 she says, “We are getting real GDP numbers that are eye popping”---She is ignoring the elephant in the room which is, how much debt was incurred to get those “eye popping numbers”? In 2023 the US government borrowed $3.2 Trillion, of which only $2.4 Trillion of GDP was recorded. The remaining $800 Billion generated ZERO economic activity whatsoever. She talks about the “multiplier effects” yet every 5 year period since 2006, GDP grew by much less than the increase in the debt which means that money vanished without generating any GDP activity. We would have been far better off taking the entire $3.2 Trillion borrowed and spent it entirely on battle tanks and aircraft carriers. We would have gotten at least $3.2 trillion in economic activity from such wasteful spending and that is with no economic multiplier effect, which is pretty hard to do. This consistent, horrific economic multiplier effect of less than 1, for the last 18 years goes against MMT theory. This theft from the US populace shows that government cannot, and should not manage all but the smallest amount of public money since they are evaporating money in a way that not even the Mafia could do.
Just ordered this book. This is so deep i will need to read/listen to it many times to be able to understand all of this!!! Unbelievably fascinating
The book was fantastic. It would change the world. Have to weed out corruption too though
Agreed. The MMT lens is likely I think to be put to use understanding the existing monetary systems in a smaller country. If the USA follows, then we'll see massive progress.
agree, political graft is the biggest problem for political progress on the big issues in USA, UK, Canadian and Australia political systems. Citizens United was a disaster for democracy.
anybody have the timecode for when Kelton talks about how MMT concepts in her book were definitely not taught in standard classes during her undergrad economics degree, masters or PhD? (refuting all the "there's nothing new about MMT" claims from economists who never learnt out in the first place).
Honestly - Why would other serious economists waste their time learning about MMt after looking at it 's absurd claims which ignore the facts of historic reality. It would be like spending years learning that a white pointer shark is a friendly animal who just wants a cuddle and ignoring the real facts about it being a wild dangerous predator.
@@Rob-fx2dw Why should physicists take the time to learn about Einstein's Relatively when it makes the absurd conclusion that gravity bends space, much less time. That's just crazy and should be ignored -_- Despite your irrelevant feelings, MMT actually seems to do a pretty good job modeling how sovereign fiat currency actually works. If you want to argue against it, you need to actually make an argument based on facts PS: Also worth noting that just like Newtonian Mechanics and Relativity both work equally well explaining most of the motion we see every day, MMT, Keynesian, and even Austrian economic theories all work in a lot of situations. You have to look at when one or more fail to see if another does better.
Glad to see DCJ is an MMT guy!
What percentage of GDP are deficits too large?
That's not the question. The question is, are there enough goods and services available in the economy, or that can be produced, to absorb the deficit spending? Depending on the productive capacity of the economy, deficit spending will have to be more or less. Too much deficit spending, and you have too much money chasing too few goods and services. Too little deficit spending, and you have too little demand for what your economy could be producing (which leads to un- and under-employment, among other things).
Everybody talks about the US deficit but a few people talk about ie the US GDP of 23 $ trillion is adding roughly one $ trillion to this GDP as a result of the economy growing 4.5 percent
Wow!!!
The point of bonds is that they're not money - you can't spend them. So your savings are not demanding that the economy do anything for you until you sell the bond to somebody else, and then his savings no longer demand that the economy do anything for them. It's how inflation is prevented, with dollars only in one place at a time.
The money you pay to acquire the bonds is being spent.
@@lepidoptera9337 But not by you. That's just part of the normal velocity of money. How fast does a dollar turn over. Or, you sell to a Treasury open market operation, they may burn the money.
@@yclept9 It's being spent by somebody else. Same difference. :-)
@@lepidoptera9337 Your money is being spent by somebody else, bond or not. The bank loans it out until you take it from them and put it in a bond or spend it yourself. It's all put into the term velocity of money. If you put it in a mattress, the Fed notices the money supply is a little low and replaces it by buying back that amount of debt with newly printed money.
@@yclept9 If I put it in a bond somebody else spends it. Same difference. :-)
This guy knows where all the bodies are buried. He should be given a half hour every day and we'd learn something.
Can we all agree that the inflationary events of the last two years show she was wrong?
It sounds like traditional economics has been turned on its head. Can economists explain why creating money in the private sector through borrowing (the private banking system) is better than the central bank creating and then spending it into the economy. Can they explain why Japan’s inflation is only about 2%, even though its government debt is running at 263% of GDP.
Another example of the failure of MMT thinking is given by Kelton herself when she says 'the spending comes first ' and then makes a case for having some sort of fiat money that is devoid of debt. The reality is the government has no money other than taxes and money it has borrowed. The very nature of the money today which is fiat credit which itself a purely financial asset and not a real asset like property or natural resource or a workforce. It is fundament to understanding finance that pure financial assets are always dependent on the existence of a debt and cannot exist without it. Nobody in the world has a pure financial asset that is not backed by a debt obligation yet she pushes the line that there is way of having some financial asset i.e. money that is not also a debt. It is easy to see an example of the need for financial assets to be backed by a debt obligation (backed by debt) unless one has had one's stuck in the sand in the last twenty years because the evidence has been presented by the loss of value that occurred in the GFC where sub prime financial assets fell massively in real value due to default of the debtors who could not pay back the amount they borrowed on the mortgages they took out.
MMT what could possibly go wrong ask John law?
@15:00 noooo! Inflation is a psychological--political problem mainly,[^] not a real resource problem. Monetary inflation acts exactly like a tax on hoarded wealth _and_ a tax-benefit for those in debt, it's a good progressive thing if it comes from boosting lower wages or a job guarantee program. The real problem with 'overheating' the economy is real resource depletion, high carbon emissions, unsustainable agriculture, air pollution, and other ravaging of the Earth's "free" resources, not purely monetary inflation. MMT'ers are correct to frame the problem as inflation rather than deficits, totally correct. But the only problem with inflation is a _certain particular cause,_ if it caused by resource depletion and hence supply shock, that's the real problem. But that's _real inflation,_ not _nominal inflation._ Nominal (monetary) inflation can be sustained indefinitely if you are a currency-issuer, it re-gauges the currency and levels the wealth inequality. [^] Rich people do not like inflation because it lowers the purchasing power of their hoarded wealth. That's a purely political problem, not an economic problem.
MMT understands all that. the knee-jerk reaction from anti-MMT pundits is "hey what about Weimar Republic, Venezuela and Zimbabwe" they suggest something that is a convenient fallacy, they suggest that government deficits created price inflation in these three historical hyperinflation scenarios. That's a rewriting of history. What happened is that each of these countries, for separate reasons, saw massive productive capacity shocks of food and essential goods. It's like this: supply constraint on essential goods -> demand shortfall -> consumer price index inflation. we can go into what caused the productive collapse in each country, it's well known and uncontroversial but people need to join the dots in order, not make silly stories up.
Conflation: "WE" Either make it the ppl or the goverment plus the ppl...don't interchange them. We who are beginners need to be carefully educated. : )
I took economics in school, but it was so long ago I forgot what it stood for, missed school that day, or wasn't paying attention. According to dictionaries, MMT means: MMT methylcyclopentadienyl manganese tricarbonyl, CHMnO, a lead-free, toxic antiknock gasoline additive. (My personal favorite) MMT Micro Miniature (``micromin'') Transistor. MMT Multiple Mirror Telescope. MMT Macchine Movimento Terra (Italian: Construction Equipment) MMT Methadone Maintenance Treatment (My second personal favorite) MMT Manual Muscle Test MMT Million Metric Tons MMT Meyer Memorial Trust MMT Metro Mass Transit (Ghana) MMT Makes Me Think (online community) MMT Magical Mystery Tour (Beatles album) Son of a gun. OOPS, a questioner named it "Modern Monetary Theory" which explains my ignorance because when they taught economics to people like me, it wasn't modern yet.
Ha. Ha. and other meanings - Mad Money Theory, Mucky Money Theory, or Most Maniacal Theory .
MMT to manage aggregate demand will work as long as inflation in the prices of basic basket of goods and services do not exceed the consensus of an acceptable level. Obviously this can be done insofar as quantitative easing and spending stimulus have NOT caused an unacceptable level of inflation. The question is whether or not economists can reasonably predict when inflation will exceed such acceptable level. Taxing is just a lever to control excess currency due to spending that could cause. People must pay taxes to have a viable collective life and a common currency. No taxes, no society. Private banks and monopolists are not capable of regulating the economic cycles based on demand and supply equilibrium bullshit of right wing libertarians.
federal taxes also anchor the value of the sovereign currency with a non-negotiable demand for said currency.
Yep. It isn't that deficit spending doesn't matter, it just works a bit differently than most people seem to think. And if MMT is more correct, the level to control inflation is actually a lot easier to manage (assuming we set dumb politics aside). We are currently doing a lot of things which really don't seem to make any sense, or work. How about not doing those things.
WHAT HAPPENS WHEN WE ELIMINATE TREASURY BONDS IN ORDER TO CONVINCE CHINA TO USE THE DOLLAR AS AN INVESTMENT AND HELP KEEP IT AS THE WORLD'S PRIME CURRENCY?
Stephanie Kelton does not understand the difference between wealth and money. Wealth is the difference between production and consumption. A fiat currency is a representation of the wealth of the country. If the country produces more than it consumes, the wealth of the country grows. If you increase the money supply, the wealth of the country does not grow. the value of the currency reduces.
The idea that barter did not exist or in fact doesn't exist today is sheer denial of reality. People barter today in one form or another when they mutually agree to exchange services with others. Tis is evident in the home where people cooperate on an agreed basis to do such things as look after each other's children which is a very common practice. People even get live in child minders and cleaners and agree to accommodate them with lodgings without money exchanging. These forms of barter are worth in dollar terms hundreds of billions of dollars per year in countries like the USA. Some tribes still barter between themselves without any money being used as an intermediary. Yet despite this MMTer's deny it because it does not fit their badly though out false narrative. It irks me that MMTers out of their ignorance and arrogance treat those in the past as somehow too unintelligent to be able to ascertain what there is in the form of value of goods when they barter and work out what favor or what they would consider in return for goods traded. The stupidity of MMT's origin of money which says barter did not exist and some government or authority money existed in place means no agreed form of exchange (e.g. barter) could have taken place for people to form a government or an authority but somehow there was an authority that without any resources or organization created a form of money despite the fact that exchange of resources are required to form any sort of authority.
Problem with MMT is that if interest goes up to 10%, then it costs $3 trillion a year, just to pay interest on $30 trillion in debt. Easiest way to pay for this is through inflation. Take 10% of people's savings each year, through inflation. That way the government can confiscate half of a person's savings in a mere 7 years. So basically MMT is theft
How is this related to MMT?
David Cay Johnston has his head stuck in the sand when it comes to barter. To be in denial of barter one must deny that people existed by exchanging goods and services before an authority used money as a substitute or in addition to barter. One only has to ask anyone pushing this denial of barter how that would be possible that authority preceded the existence of people in the economy. One would have to be either totally incapable of individual thought or unable to understand the time line and sequencing that occurs in the progression from barter to the medium of money.
He didn't deny that barter existed. They both deny that money developed via the simplistic story that economists have traditionally told.
@@tyz228 The MMT description IS the simplistic description. It is the description that a simpleton would arrive at by ignoring the details. Anything can be imagined if you ignore details just as flat earthers do when they imagine the details to arrive at an explanation that is only true if you ignore details. MMT ignores the fact that barter existed first and was significant and government only existed after that. For government currency to exist there must have been barter to enable a currency to be created and government to be created before that. Mosler's explanation about Pompei ignores those details like flat earthers ignore them. The MMT description of Treasuries (bonds) also ignores details and puts across several false narratives including the claim that the national debt (which is comprised of Treasury bonds) never has to be paid off. The reality is the Treasury bonds always mature and have to be paid off by taxes. Anyone who ignores this fact is simply ignorant or lying about the facts to cover their false narrative. MMT economists continue to put across this false narrative and fail to be able to address this fact because they are concealing the facts to hide a false narrative.
Just goes to show a PhD in Econ does not always equal intelligent thought!
Economist have one thing in common ...... they are always wrong over time, always So ..... here we go again
Also : They actually believe that Economics is a Science !
Except that they were mostly right over the last 80 years (since Keynes) but nobody is listening to them. ;-)
Despite MMT idea is based on some belief that somehow the government can rescue the economy when the reality is it has no resources itself to 'rescue' the economy. The reality is it is just a ploy to transfer more power into the hands of a central government who have nobody above them to regulate their running of the situation and don't have to worry about efficiencies at all because they are in effect a monopoly run by politicians. The only continual monopoly in the whole country.
Well, that’s fairly idiotic. 1. WE ARE THE GOVERNMENT. 2. ALL natural resources belong to US. 3. Our personal failures to impose our collective will on those we choose to represent us in OUR government falls into the “use it or lose it” category. We have collectively disregarded our responsibilities and as cover to shield us from our personal failure, we run about screaming “ the government is the enemy” ; which in some ways, is the truth. We ARE our own worst enemy. Complacency in a system that requires maintenance invites the fox into the hen house. So quit crying that it’s eating your chickens.
@@robertbritt6134 The' government' is an abstract construct of humans. It is not any one of us. There is little of the individual's will in government. The' collective will' is mish mash of compromises and mistaken and inaccurately applied ideas that become political policy. The most valuable natural resources do not automatically belong to the central government. They are the individual skills that have been achieved by individuals and they are Not owned by everyone else or government. Without those the rest of the resources would be worth nothing. You said:- " Our personal failures to impose our collective will on those we choose to represent us in OUR government falls into the “use it or lose it” category". You are talking about the power of the collective, a collective which is just an abstract imposing it's will (which does Not exist) on others. Only people's individual wills exist.
I thought that the interviewer did a great job, asking the right questions in a very soft tone. It is true that MMT is not Keynesiasism, it is a combination of Keynes + Marx. Dangerous. What has America come to :(
wow, big misread. MMT comes with no political ideology, its a mathematics of the money system with double entry accounting. It's also known as neo-charlatanism (see L. Randle Wray papers.ssrn.com/sol3/papers.cfm?abstract_id=1010334). Goldmann Sachs can apply an MMT lens (and have done to a certain extent for a long time), and Marxists or any other people of any other political ideology can apply an MMT lens to fiscal policy. You need to understand that what Keynes advocated is generally not what people mean by Keynesian today. Keynesians today tend to think the economy is self-correcting and Government interventions are detrimental. MMTers are more likely to be post-Keynsiens that is interested in what Keynes advocated, GOverment using the power of the budget for the good of the people, not what history has reduced his work to.
he is way more interesting to listen to than her.
This woman is evil.
There is NO such thing as "high powered money". Kelton is totally out of date claiming there is even if there previously was at all. She is perpetuating a false belief that she cannot support with verifiable facts. So is the MMT with their belief that the private banks need reserves to create new money for borrowers. They don't because the reserve rate that used to apply is now Zero. In many countries it has been so for some time and some countries don't even have a reserve requirement at all. Australia is an example of this where no reserves have been needed for the last 40 years. All of the sovereign money today is created out of debt because it is credit fiat money and that includes the money created by the Central banks such as the Federal Reserve Or it is credit fiat money created by private banks when they lend. The money from the Federal reserve is created for the borrowing requirement of the government and that is also a loan since the central bank (e.g. the Fed) requires a Treasury security (a treasury bond or note) to be sold to it for that money. The Treasury also sells bonds to anyone else who wants to buy them and this includes overseas entities. The reality is the sum of all of those bonds is known as the national debt. Despite Kelton's regular rant that it does Not have to be paid back the reality is she is perpetuating her false belief. The money borrowed by government all has to be paid back with any applicable interest when it matures. Those bonds all mature and the holder which is in this case the government is forced to pay them out with taxes collected by the government from the private sector. .
Kelton and the rest of the MMT crowd would have us believe that the law of supply and demand (at least with regard to money) has expired. Her "TABS" thing really should be TABSP, where the P represents "printing", meaning the creation of new money out of thin air by the Fed Res Bank. That's simply monetary inflation, which invariably (but not necessarily instantly) produces price inflation. She's not sufficiently perceptive (or knowledgeable) to recognize that monetary inflation is simply an alternative to conventional taxation as a means of financing the gov't...Monetary inflation is nothing more nor less than a tax levied on the national savings. Her crazy thing about the gov't "spending $100 into the economy, followed by taxing $90 out of the economy, resulting in a $10 'surplus', or 'profit' for the economy" is simplistic to the point of stupidity. Her readers need to ask her, "WHERE DID THE $100 COME FROM?, which causes her example to collapse into simplistic craziness.
Well where do you think the $100 comes from?
The False MMT claims of Kelton which evidently from this video David Cay Johnston from his lack of responses does not even understand properly himself despite him saying 'all assets are offsets by liabilities'. The penny has not dropped for Johnston when Kelton says the national debt is not a problem because all debt matures and people have to pay it out.. The False Claims: 1. That there is such thing as "high powered money". This is wrong since all the money in the economy has the same value. Has anyone seen different prices for goods bought with high powered money ? No ! It's all a concoction based on ignorance drawn from ascribing a value to money that is at a higher risk of being lost compared to that which is not at a high risk. All money in a fiat money system is created out of credit because it is a financial asset itself. The debt (Tresury bond debt) is created at the same time the money is created and there is No way around this because when a financial liability is created it is only worth what the value of the debt that backs it is able to purchase. Nothing else. 2. Keltons other claim Taxes put value into money. Incorrect and proven so because taxes put NO value at all into the money of countries where massive inflation made the value fall to absolutely Nothing at all and even their own governments ditched their own money for another country's money. 3. Keltons and Mosler's idea that bonds are for rich people is again wrong. Bonds are taken up in huge quantities by people saving for retirement through their pension funds who buy huge quantities of Treasury bonds and Treasury securities of varying types. People don't get very rich by purchasing bonds because they are a poor investment over time. Their value declines when compared with rising prices. The history of those Treasury bonds shows that they have fallen in purchasing power when held for even a medium term. Kelton calls the borrowings a debt obsession but fails to see her own claims are obsessive debt denial and only seem true if you ignore facts to paint a false picture. Kelton and any other MMTers cannot address any of these facts because these facts demolish her theory. They run away from facts to hide behind MMT fallacies.
Kelton's idea of money being made more valuable by being demanded as payment to one's self is totally absurd. for example:-- I give $10 to my brother. Then I demand $5 back. Is there any change in the value of that money? Kelton says Yes. That is because she has ignored the fact that Value only relates to the objects and services one can buy and not something attributed to money itself. So she is WRONG. The government demanding money back in taxes only transfers spending power to government who spend it to fund programs and not anything else. There is no increase in the goods or services available by money being transferred from someone to another.