The Myth of Big Government Deficits – A TED Talk
This is quite the tale. I’m sure Ms. Kelton studied her economics but here with MMT she takes a few basic truths and spins an elaborate fantasy. Essentially her argument is that debt is no obstacle to economic policy and economic outcomes. You want a Ferrari? No problem, the Fed can write a check and it’s yours, no taxes, no worries. Advocates will hate this simplification but that’s essentially what Ms. Kelton is selling. (You can substitute free healthcare, free college, whatever you want, but I’d go with the Ferrari 365GT.)
MMT is utopian economics. Yes, in theory it can make sense, just don’t go too far down that rabbit hole. Govt debt is not like private debt because it never has to be paid back, only serviced and rolled over. So the debt in $ terms doesn’t matter, but the productivity of that debt matters a lot (the debt to GDP ratio is a good indicator – it looks worse every day).
She lauds the pandemic stimulus because that essentially was an MMT experiment. Look, no recession! But recessions are measured in monetary terms (not value), and if the Fed keeps pumping out money, voila! No recession. But value creation matters and in value terms, we are suffering an extreme recession and stagflation. How many small businesses have closed in the past 2 years? How much price inflation are we experiencing? 5-9%? Have you tried to buy a house lately? 20% price increases. Tried to get a plumber or electrician?
Yes, when the government spends $28 trillion, that money goes somewhere in the private sector. And yes, we’ve seen it skimmed off by the banking industry, the asset-rich who have merely leveraged 3% debt, and the securities markets that have bubbled up even as production has declined. This is what is driving inequality to new heights as the global elites suck up this cheap credit courtesy of the central banks. Check out the number of mega yachts plying the oceans.
Yes, we’ve seen the fantasy of MMT in action and that’s why we’re having a political revolution. Kelton and the handful of economists selling MMT are assuming a utopian political world where everybody always does the right thing. Ultimately, intellectual dishonesty like this is extremely damaging.
Read her book, there’s nothing there that will address these false assumptions. Credit and debt are tools that the market uses to restrain profligacy. Without those restraints, the party will eventually implode.
I read this comment to an article on cultural conflict and politics (the article was a UK perspective and not that insightful – see link below). I was struck by this reader’s comment because it hits the nail on the head, despite its rudimentary tone and language. I could write an empirical and theoretical analysis that would bore readers to tears but it would all support this view.
It’s US$ monetary policy that is driving the distributional consequences of deficit spending along with globalization and technology into the cul-de-sac we find ourselves in. Think about it: when the government borrows and spends $28 trillion, where do we think it goes? Into private pockets controlled by those at the top. (All those real estate assets we own are merely keeping pace – it’s still the same four walls and roof.)
There’s probably not more than a handful of politicians in Washington DC that could explain this well or understand it, but they’re all setting the policies in ignorance.
Money Printing, the ability to spend more than is taken in has had a vast set of consequences – and almost all the problems can be laid at its feet. Really Nixon in 1971 taking US off the ‘Gold Standard’ to fund Johnson’s ‘Great Society’ and the Vietnam War. Both these make the rich richer. The Military-Industrial Complex goes directly to the wealthy, and the increased Social Spending $ always trickle-up while paying the poor to be poor traps them in poverty.
And so it has progressed till the National debt is 28$ Trillion! About equal to 8 years of all USA’s tax revenues. At the current ZERO percent interest rate it takes 1.5$ Trillion to service the debt! About half of all the Fed Tax revenues! Biden wants to add 4.5$ Trillion on human infrastructure (waste, pork, corruption, and free money to minorities, to trickle to the super-rich (and China, via Amazon and Walmart)). This on top of the monthly 120$ BILLION purchases of Treasuries and mortgage-backed securities the Fed buys – and the 1-3$ Trillion budget deficit! (If, when, interest rises to 5% it will take all the gov tax revenue just to service the national debt – )
Anyway, the printed $ all rise to the super wealthy, they get all of it. The poor just get addicted to the drug of the Welfare Trap, and become multi-generational poor. The working class and middle class have all their savings and pensions harvested by the stealth Tax called Inflation (now officially 5%, but really 9) because interest must be kept at Zero for the debt to be serviced. So all workers’ savings get eaten up by inflation Tax of 5% – (minus the bank and bond interest of 1% = MINUS 4% savings growth). Their pensions and savings melting like snow as the printing inflates the money supply….
But the above just scratches the surface of the harm. USA will eventually lose ‘Reserve Currency Status’ over this. The foreign trade deficit is a Trillion – how can that continue – the hard assets and Equities so inflated – and the wealthy own them. The rich have hard assets which appreciate, they carry HUGE debt at 3% interest while inflation eats the debt basis away – and Dividends, so make money while everyone goes broke.
This is what Lefty/Liberal MMT is doing – the death of America. The Left economics is always same – all the money to the elites, and the rest go broke.
Why Does America Hate Itself?