Video: An intro to MMT, as presented at September’s International MMT Conference in NYC

By Naked Capitalism reader and contributor Jeff Epstein, aka aliteralmind. Jeff is a progressive writer and podcaster with Citizens' Media TV (on Facebook and Twitter). He ran on the ballot with Bernie Sanders during the 2016 Democratic primary and was a pledged delegate for him at the DNC. Jeff just "Dem-entered," winning a write-in campaign for Democratic County Committee, and currently spends much of his time introducing MMT to anyone who will listen.

I presented this MMT-101 (Modern Monetary Theory) lesson at the Second Annual International MMT Conference (#MMTConf18), held on September 28-30 of this year and hosted by the Modern Money Network at The New School in New York City. I gave this presentation informally over lunch on all three days of the conference, as a representative of Real Progressives. On the first day, I had the honor of doing it immediately following Stephanie Kelton’s keynote address in the main conference room (this is the version in the video below).

Here is the full presentation, which is 56 minutes long:

Link to YouTube video

Here are the accompanying slides (7 MB PDF), including all corrections. A full transcript can be found at the bottom of this post.

The video lesson is also available in chapters:

  1. Chapter 1: Introduction: Where does money come from?
  2. Chapter 2: The Pony For All Act of 2018 (as inspired by Stephanie Kelton).
  3. Chapter 3: Why do we collect federal taxes?
  4. Chapter 4: The Big Lie.
  5. Chapter 5: Conclusion: How you gonna pay for it?

(Note that I am no longer a member of Real Progressives.)

Two Requests for Comment from the Naked Capitalism Commentariat

First, the comments I received from you on my primitive yet well-received MMT lesson with Graham Elwood greatly contributed to making it what it is today. Frankly, I was overwhelmed with insightful feedback. This latest version is much more more accurate and concise. However, any further suggestions on improvements or corrections would be appreciated.

Second, I am particularly concerned about being appropriate in my role of teaching MMT as a non-expert/activist. A July article by Ellis Winningham (see Section II in the linked article) got me thinking seriously about this topic. I also participated in a workshop panel at the conference on this same subject: teaching MMT as an expert versus a non-expert (recorded by Real Progressives).

I need to be honest with what I know and don’t know and especially do not want to step on the toes of the experts and economists that I (and all of us) learn from. I “introduce” rather than “teach.” Similarly, someone who teaches piano to beginners does not need to be an expert; they just need to be significantly more advanced than a beginner. A beginner may see that person as genuine teacher, which is not necessarily inappropriate. (It should also be noted that another important part of this role is conducting myself appropriately in public and on social media.)

If there is anything further I can do in this regard, I would like to know.

Thank you for helping make this lesson what it is. Enjoy.

To Learn More about MMT


At the end of this lesson I received feedback that resulted in some small but important corrections. These corrections have been integrated into the slides and the words that you see on screen.

—SLIDE 2 (referring to the number at the bottom-middle on each slide, AS IN THE VIDEO.) —

My name is Jeff Epstein. This is an introduction to Modern Monetary Theory. I am with Real Progressives. You may know me on Twitter as Citizens’ Media TV (@CitizensMediaTV)


First, I would like to thank especially Rohan Grey and the Modern Money Network for allowing me to give this talk. My own MMT teachers Geoff Ginter and Ellis Winningham. I want to thank Real Progressives and Steve Grumbine for giving me the platform and access to a lot of really amazing people. Also to the many many supporters who have given me so much feedback in improving this lesson.

I’ve given this pretty much every single week since the end of June and, although it’s made an impact from the beginning it has dramatically improved and sharpened since then.


First, I am not an expert. I am not an economist. Like many of you, I am a student. I never heard of Modern Monetary Theory before February. It is therefore not my job to teach. That job is left to the experts and the economists. However, my one and only job is to help you understand all of the mis-education and the misconceptions that we have been taught for our entire lives. After your eyes are opened to MMT, it is time to send you off to the experts. My job is done.


For those who want to know what MMT is but don’t have time to listen to a lesson, I give them this elevator pitch:

Modern Monetary Theory, or MMT, is the study of how our economy actually functions. MMT shows why the powerful always get what they want and why the people only get crumbs, nothing at all, or even less than that. MMT shows exactly how we can actually get the programs that we need to survive. It also shows that our government can easily give us these things tomorrow (if they wanted to) and could have given us these things decades ago (if they wanted to).

The powerful have always known MMT for war and for tax breaks. They just do it (no pay-fors in any of those bills). But when it comes to health care, education, forgiving student debt, and a job tguarantee, suddenly they forget about MMT. Suddenly, it’s, “How you going to pay for it? How you going to pay for it? How you going to pay for it?”

The way that I like to summarize this all up in a cheeky kind of way is,


“MMT for the rich, rugged neoliberalism for the poor.”


We’re going to do this in five chapters.


First, where does money come from?

So you and I, we get our paycheck from our company. Most of us get a paycheck from our company. Some of us sell merchandise so we get money from the people who purchase that stuff from us. Patrons, monthly patrons, we might get monthly contributions. Or one-time only contributions. So we get the dollar from our employers. Where do our employers get it from? They get it from their customers, those customers get it from their paychecks, and on and on and on and on.

But the ultimate answer is the Federal Reserve. The Federal Reserve creates the United States dollar. But they don’t just create it because they want to create it. They are instructed to do so by the Treasury. The Treasury is instructed to do so by the budgetary process, which represents the numbers that are in laws that were signed by the president. Those laws were originally bills that were written by the Congress.

So Congress is the ultimate answer of who creates the United States dollar. Through a series of steps, the Federal Reserve actually does it but the Federal Reserve is at the command of Congress. So just to give a tiny bit of the details of how this works: the Federal Reserve creates the money, distributes that money to the state reserves, the state reserves distribute that money to the banks, the local banks. They put them in the bank accounts of companies who implement these laws, and then we get it for our paychecks.

—SLIDE 10—

A critical distinction is that the Congress has no bank that they go to that they ask for money. We go to a bank and we ask for money. If they feel like we can handle it they give us a loan. The Federal Reserve is the bank of the country but they only work at the command of Congress. This is a critical distinction. There is no bank above the Congress.

—SLIDE 11—

So Congress writes a number into a bill and then that bill is signed into law by the President and then through the budgetary process the money is created. So for this example (this is a bill on Elizabeth Warren’s congressional website): $2.7 billion for fiscal year 2019, same for 2020, same for the next and the next and the next. I believe that these are non-discretionary, so once this law is passed, this money is created without voting or debate.

—SLIDE 12—

Writing a number into a bill is very similar to a child drawing a trillion dollar bill, or $100 bill, on a piece of construction paper. It is very similar to choosing to tick up the score on a scoreboard.

—SLIDE 13—

They can create the money because they want to create the money. The money exists because they want it to exist. So according to the Constitution of the United States, Article 1, section 8, the Congress is the monopoly currency issuer. This means that they are the only ones in the world that are allowed to create the United States dollar.

So the Congress – I’m going to say Congress and federal government interchangeably. The Congress can create the dollar as much as it wants, whenever it wants, for whatever it wants, and it is the only one in the world that is allowed to do it.

—SLIDE 14—

The Constitution. Article 1, section 8. This is what declares that the Congress is the monopoly currency issuer. Also, through a series of some Supreme Court cases, further clarifies that they can create coins, bills, and electronic money.

—SLIDE 15—

We are a fiat currency. Fiat means by decision or by decree. We can create the money because we decide to create the money.

A fiat currency has a monopoly currency issuer and the currency is not backed by anything physical, such as gold. And the currency is not pegged to any other economies. In August of 1971, the Nixon administration took the United States and a lot of other countries off of the gold standard. These currencies include the United States, Canada, Australia, New Zealand, England, and others. The European Union is a more recent fiat currency.

—SLIDE 16—

Monopoly currency issuer. They create the money. The only one that’s allowed to create the money. Everybody else and everything else is a currency user. So me and you, our families, our households, our companies, municipalities, which means towns and cities or states, and even other countries such as China and Russia, as far as the US dollar is concerned, we are all currency users.

—SLIDE 17—

So currency users must get income in the United States dollar, from somewhere, something, or someone else. We must get income before we can spend. We are not allowed to create the currency. If we tried to do so, we would go to federal prison for counterfeiting.

Congress, however, is the currency issuer. They are the one and only source of the United States dollar. They don’t need income before they can spend.

—SLIDE 18—

To the Congress only, to the currency issuer only, the terms spend money and create money are exactly the same. So when you say the Congress created $100 that is exactly the same thing as saying that Congress spent $100 into the economy.

—SLIDE 19—

So the Congress doesn’t require income, which means that they don’t need to borrow from anyone or anything. We don’t need to borrow from China because we create the money (as much as we want whenever we want for whatever we want). China doesn’t create the dollar anyway. They have to get it from us. And again, there is no bank above the Congress.

The federal government also does not need to get money from taxpayers, because we don’t create the currency. Taxpayers don’t create the currency, we have to get it from the government. But hypothetically, even if we could get it from taxpayers or from China, there is no difference between saying Congress created $100 and spent it into the economy or Congress created $50 and spent it into the economy and then somehow collected income of $50 and then spent that also into the economy. There is no difference. There’s no benefit in collecting anything. They can just create it.

—SLIDE 20—

Federal taxes do not fund federal spending.

Federal spending funds federal taxes.

So what do I mean by that?

—SLIDE 21—

When the United States government was first formed, when the Constitution was just signed, but before the first dollar was created. It is not possible for the federal government to come to the people and say you owe us a hundred dollars in taxes and it must be paid in the United States dollar. Because then they turn to the government and they say, “What’s a United States dollar?” you have never given me one. I have never seen one. So how can I possibly pay your taxes? the people must be given the dollar before they can pay taxes.

—SLIDE 22—

Another way of saying this is:

The people do not fund the government,

the government funds the people.

—SLIDE 23—

Chapter two.

—SLIDE 24—

The Pony For All Act of 2018. Hillary Clinton in her book said to Bernie Sanders, “It’s so nice that you want to give everybody a pony Bernie. Everybody would love a pony. But how are you going to pay for it?” That inspired Stephanie Kelton’s article in 2017 and that article inspired this chapter.

—SLIDE 25—

Good news. The Congress and the president have gotten together and they have decided that they will be giving every single American citizen, every man, woman, and child in the United States, a free pony if they want one. You and I are members of Congress and it is our job to write this bill.

—SLIDE 26—

So here is the current situation. We have around 320 million Americans and we have approximately 500,000 ponies. Demand far outstrips supply. We must make these things roughly equal. Demand must roughly equal supply or we’re going to have a very big problem.

—SLIDE 27—

There’s only one of two solutions. One is to increase supply and one is to decrease demand, or some combination of the two. We could decrease demand but that goes against the whole point of this law, the Pony For All Act of 2018. So that that doesn’t really make sense. We could deport or kill hundreds of millions of Americans as well to decrease demand, but we’re not going to do that.

So we are going to increase supply. We could import ponies from other countries. Probably won’t make that much of a difference. We could create robotic ponies. Probably won’t make much of a difference. The most obvious solution is to reproduce.

—SLIDE 29—

Our current population of 500,000 ponies must be increased to 320 million. How do we do that? Well the obvious solution is that mommy and daddy ponies are going to have to do their things over and over and over again.

If we’re going to figure out how long this is going to take, we have to figure out the gestation period for a pony, which is roughly 10 to 11 months. After giving birth how quickly can the mommy do it again? Say roughly two months. So every cycle is about a year. So given these biological constraints, how long will it take to it reproduce five hundred thousand to three hundred twenty million? Very roughly, we’ll say twenty years. That’s how long it’s going to take.

—SLIDE 30—

So now the population of ponies is exploding and that has enormous consequences. Because we can feed and shelter and care for five hundred thousand ponies no problem. We’ve been doing it forever. But now the population is exploding. Now we’re going to need many more supplies. More food, more water, more farms, fencing, shelter, horseshoes, caring for the land. Which means we’re going to need to educate millions of more blacksmiths and veterinarians and caretakers and breeders.

Which means that now we’re going to have to distribute these things across the country. So trucking and shipping. So a new industry is being created with lots of new jobs, which is a wonderful benefit. But that is not the important point.

—SLIDE 31—

Now it’s 20 years later and the people are going to pick up their ponies. We have the best staff, the best people. It’s not going to be chaotic. It’s going to be perfectly organized. That’s not a problem. But the people don’t know how to take care of ponies, so we have to train them. Their homes are not prepared to take care of ponies, so we have to prepare them. All of the supplies and services that we just spoke about now have to be reproduced at a micro level all across the country. And finally, what do we do when they die?

So this is the full lifecycle. This is what it takes to create this bill. This is what it takes to give every single American a free pony. It genuinely could happen. As silly as it is, it genuinely could be done.

This is our bill.

—SLIDE 32—

However, let’s let’s say someone comes in and says 20 years is not acceptable. It’s got to be done in five years. Okay, so we write a law that says it must be done in five years. We threaten the people and say, “If you don’t do it in five years you’re going to have severe consequences.” We’re also going to say, I know it’s going to be hard so we’re going to throw ten trillion dollars at it.

So what’s going to happen?

—SLIDE 33—

No amount of money or laws or threats can change biological processes. The gestation period of a pony doesn’t change because you’ve give it some money. No amount of money can change how fast all of these things are distributed around the country. No amount of money can change how fast we can educate millions of people to be veterinarians and blacksmiths and so on. And no amount of money can change how fast to prepare the people, training, and their homes.

This is the point. Nothing can make this happen quicker than 20 years. It is out of human control.

—SLIDE 34—

To the federal government, the only thing that matters is real resources. To the federal government, money doesn’t matter. When I say real resources, I mean raw materials, labor, technology, and time. Because we can have those things but we need time to make it happen. In this case 20 years.

So there is often an argument made against MMT, which we’ve heard a couple of times already today, that MMT says that we can spend as much as we want without consequence (which I inaccurately said before). We can spend as much as we want without consequence. We can have everything we want which of course is going to cause hyperinflation. Often this argument is done in bad faith.

If the Congress does not spend more money into the economy than our real resources can handle, our productive capacity, our capacity to produce – more than that can handle, then there is no inflationary risk. In fact, in many cases, it is simply impossible to spend more money into the economy than our real resources can handle.

The problem is not worrying about inflation. That’s not our real problem. Our problem is that we leave so many resources idle that could be benefiting the people. So much labor that is simply unemployed or unhappy, ready to do good work for the people and we let them sit idle. That’s the problem.

And finally we can tax back money to give te government extra space to give the government space to spend more money.

—SLIDE 35—

To the federal government money doesn’t matter. Only real resources matter.

If we can give everyone in the country a free pony then why in the world can’t we give Americans free healthcare and college? Why can’t we forgive student debt when directly speaking there are almost zero real resources involved in doing so?

—SLIDE 36—

Next chapter.

—SLIDE 37—

Why do we collect federal taxes?

When I give this lesson one-on-one to people, before I begin, I ask them why are federal taxes collected and what are they used for? The answer that they almost always give me is that they pay for things. They give us Social Security and Medicare and Medicaid. They pay for the military. They pay too much for the military. They pay for federal employees salaries. FBI and Social Security employees and the politicians and the president. They help us fix our bridges and give us infrastructure and fix our roads. But we now know that this is not true. So why do we collect federal taxes?

—SLIDE 38—

There are three major reasons that I’m going to talk about today. First the purpose and then two important uses.

—SLIDE 39—

The purpose. The purpose of collecting federal taxes is to drive the currency and drive the economy. To almost all the people that I speak to, they have no clue what that means. When I first heard it, I had no clue what that means. And how could we because we’ve never been taught this.

Before we go into what that means I want to talk about the purpose of a government. The purpose of a government is to compel the people to use the real resources at its disposal for the benefit of society. Money, the US dollar, is the incentive that the government gives to the people for doing so. Money is a less violent form of coercion than a gun to the head or threats. So some of that money is taxed back but the rest of it the people get to do whatever they want with. There are no strings attached. It is an interest-free grant.

—SLIDE 40—

When Britain went into the countries that they tried to colonialize, how did they get those people to use the British Pound? When the United States began, how did they get the people in the thirteen colonies to use the dollar? because they were perfectly happy using the state currencies they were using at the time.

What they said to the people was, “You will pay taxes and you will pay them only in our currency. Because if you don’t you will face severe consequences. Such as penalties, confiscation, andjail.”

—SLIDE 42—

Severe penalties for not paying federal taxes that is what forces the people to care about the money. That is what forces the people to find a job so they can get more of that money because they have to pay federal taxes in that money. The federal government however only cares about is its real resources and productive capacity.

—SLIDE 43—

I have heard a number of times the US dollar has value people say because people have faith in the US government. But what that is more accurately stated as is that the US dollar has value because people have faith that the US government will do something really severe if you don’t pay your federal taxes with the US dollar.

—SLIDE 44—

Critical use one. So that is driving the currency and driving the economy. Now we’re going to go into critical use one. Controlling demand.

—SLIDE 45—

At the end of the depression through World War II, the United States only went off of the gold standard. In 1971 a whole bunch of countries did. During World War II, car manufacturers stopped making new cars and they used all of their real resources (steel, rubber, plastic, paint, and so on). Instead of making new cars, they made tanks and boats and planes and artillery. No new cars were produced during the war. However, roughly speaking, demand for new cars was about the same.

—SLIDE 45—

Before we move on we need to define inflation because the term is often misused. Inflation is not when the price of bread goes up. Inflation is not when the price of gas goes up. Inflation is not when the price of everything in an entire industry goes up. Inflation is when the price of everything, everything available for sale in the US dollar, goes up and continues to go up. It is a macroeconomic phenomenon. Inflation is a big deal.

—SLIDE 46—

So there were a lot of new people that wanted new cars and we had no new cars to offer them. We must make these roughly equal or we’re going to have a big problem. The only two solutions are to either increase supply or decrease demand, or some combination of the two. In this situation, however, increasing supply is simply not an option. We have decided that fighting the war is the only thing that matters.

—SLIDE 47—

So therefore, we must decrease demand. So how do we do that? We can compel the people, we can force them or we can entice them to stop buying new cars. What are some examples of compelling them? Using a stick instead of a carrot. We could raise taxes, we could make new laws, more regulations, and we can threaten them. That’s not what happened. We used a carrot. We tried to entice them to stop buying new cars. What is more appealing than a new car so people use their money for that instead? During the war, the answer is patriotism.

—SLIDE 48—

The government offered the people war bonds. They were marketed as “Support the troops, support the war effort.” but as we now know, they didn’t pay for anything. They didn’t actually pay for things, even though it was very strongly implied that they do.

—SLIDE 49—

Here’s an example war bond or bond. Ten years, 3.25% annual interest. So if you purchased one of these war bonds in 1945 for $1,000 in 1955, they would mature and you would get back $1,377.

—SLIDE 50—

War bonds removed the people’s money from the economy and reduced demand for new cars avoiding this big problem. Bonds are very similar to taxes. Both remove money from the economy. Bonds are voluntary, taxes are compulsory, bonds have a specific length of time that the money leaves the economy, taxes do not. The money for taxes leaves the economy for infinite length. They never come back. And bonds offer a bonus of interest.

But there is one crucial difference between bonds and taxes.

—SLIDE 52—

Both bonds and taxes remove money from the economy. But when you pay $1,000 in your taxes, you write $1,000, your name on your tax return, you mail it in to the federal government, the federal government puts that tax return into a folder in a filing cabinet or into a folder on a computer. Then through your bank they go into your bank account and lower your bank balance by $1,000.

—SLIDE 53—

Nothing happens on their side. They don’t raise anything by $1,000. That money does not move from your bank account to the government’s bank account. However, they have your tax return and they know, they’ve notated on your tax return how much you’ve paid. They know how much you’ve paid and when you’ve paid it, but they don’t have that money. It simply disappears from you.

—SLIDE 54—

When Congress writes a number into a bill and it’s signed into law by the President (and through the budgetary process) money is born. On the other side, the opposite side of that is when it is taxed back. It dies. I want to emphasize we are only talking about federal level, not state, not local. So taxes are the opposite of money creation. And if you think about it, it has to have an opposite, otherwise we’re going to accumulate infinite money and lose control very quickly.

So taxing is like a child erasing that bill off of a piece of construction paper. It is like ticking down the score on a scoreboard to zero. The money disappears because we want it to disappear.

—SLIDE 55—

Critical use number two for federal taxes. Imposing moral decisions. Some of the following examples are more applicable to state and local, however the concepts are exactly the same. So we could increase taxes to discourage behavior by making it more expensive. We could decrease taxes to encourage behavior by making it less expensive.

—SLIDE 56—

Examples of increasing taxes to discourage behavior. We could discourage use of vices: alcohol, gambling, smoking, drugs. We could discourage activities that cause pollution and climate change by raising taxes on those activities. We could decide how much do we want to raise taxes? How much do we want to discourage it? Do we want to stop it or do we want to just slow it down and raise it a little bit?

—SLIDE 57—

We could also decrease taxes to encourage behavior. We could decrease taxes on gym memberships. We could decrease taxes on activities that prevent pollution and climate change, such as solar panels and electric cars.

There’s one more example of discouraging behavior, going back with raised taxes:

—SLIDE 58—

And that is to increase taxes on the super wealthy to discourage immoral levels of income inequality. For example, we as a society could decide on three thresholds. And we as a society could decide on the specific specific numbers for those thresholds. Let’s say that this is what we came up with:

The top threshold is 1 billion dollars. Everything above that. If you have a billion dollars or more and we decide that the consequence of this is that, if you had that much money, you can buy politicians and you can create the laws in your favor. That is simply unacceptable. We decide that that is called obscene wealth and we’re going to tax almost all of it. However we are only going to tax the portion above 1 billion dollars, not below it. We are only talking about the obscene portion.

Threshold number two. Below that. 500 million to a billion. This threshold is not quite as obscene, however it is really difficult to become even more wealthy unless you harm other people in the process. By extracting off of their well-being. So we decide that this is simply too rich. It’s not obscene but it is too rich and we’re going to tax a lot of it. And finally, zero to 500 million dollars. If you have that much money, enjoy it. That’s the American dream. It’s reasonable. We’re going to tax a modest amount of it but you can basically keep it and enjoy it.

—SLIDE 59—

An important aside. MMT is knowledge. MMT does not say whether or not we should tax the rich. It also does not say how much we should tax the rich. I as a progressive, however, take the knowledge of MMT and say, yes, we must tax the rich. Our corrupt politicians take the knowledge of MMT and choose to give tax breaks to millionaires. They use the knowledge of MMT to help the rich. They don’t want to help the people. Or they don’t help the people. We can choose to do with that knowledge or not do with that knowledge whatever we feel is right.

—SLIDE 60—

You don’t blame medicine, or choose not to learn medicine, because Nazis took that knowledge and chose to conduct horrible experiments. What you should do is learn medicine and cure people. You don’t blame MMT, or choose not to learn MMT, because our corrupt politicians choose to take that knowledge and help rich people instead of the people. You should learn MMT and help the people.

Besides, you can’t fight the cheaters if you don’t know the rules.

—SLIDE 61—

So I as a progressive say, yes, we must tax the rich. We must tax the rich to reduce their power, which would therefore increase our power. We must tax the wealthy because it is moral and just and equitable and right. We cannot and should not tax the rich because we need their money. Yet that yet that is all we ever hear.

—SLIDE 62—

Not only shouldn’t we tax the rich to get their money, it is impossible to tax the rich to get their money. Yet this is all we ever hear. I as a progressive also say that we should reduce the military – not MMT, I do – because we are the bullies of the world. The military is supposed to protect the people. We must reduce the military because it is moral and just and right. We should not and cannot reduce the military in order to get that money…so we can have health care or education.

—SLIDE 63—

All federal programs are funded by created money. These are numbers that were written into bills that are already on the books. Money is created for federal programs whenever it is needed, every single time. Whenever a Social Security benefit is paid out the currency is created. Whenever Medicare benefits and all other federal benefits are paid out, currency is created. Whenever federal employee salaries are paid (FBI, military, judges, congressman), currency is created. Same with military funding.

—SLIDE 64—

Next chapter.

—SLIDE 65—

The Big Lie. The Big Lie is all we ever hear. They say that money for the federal government (the currency issuer) money is exactly the same as money to me and you (currency users). They say that the economy for the federal government is exactly the same as the economy for me and you. A budget for the federal government is exactly the same as a budget for me and you.

This is The Big Lie. To say that these things are different between me and you compared to the federal government, is an understatement. There is simply no comparison. Yet all we ever hear is that these things are exactly the same. Every other lie is based on The Big Lie.

—SLIDE 66—

The national debt and borrowing.

You and I go to a bank and we ask for a loan. We say, “Can I please have $100?” they analyze our history and they decide, “Sure you can have $100.” we are instantly in debt to the bank for $100 plus interest. A hundred percent of that money. The bank will do whatever it takes to get that money back.

there is no equivalent situation for the federal government. A reminder of the government’s purpose. The government’s purpose is to compel the people to use its real resources for the benefit of society. Money is the incentive that people get to do so.

—SLIDE 67—

The Congress creates the currency. They are the source of the currency. What does it even mean to say that a currency issuer is in debt? What does it even mean to say that the currency issuer needs to borrow money? Who does a currency issuer owe their debt to? Who do they borrow it from?

No one else can create the United States dollar. There is no bank above the Congress. To those who say we must pay back the debt or our country is going to go bankrupt, our grandchildren are going to go bankrupt. I want them to explain, I think they should be pushed to explain, exactly how, logistically, step-by-step. How do you pay back that debt? How do you pay back the national debt and to who?

—SLIDE 68—

Our politicians, media, academia, and so-called experts, constantly panic about this national debt that we must pay back. They talk about how it will bankrupt our nation and our future generations. Yet we never hear any protests or demands from this mythical bank that we supposedly owe this money to.

—SLIDE 69—

Here’s the technical definition of the national debt. The national debt is the total of all money that the Congress has spent into the economy since our country began that has not yet been taxed back. That’s the technical definition. But here is the same thing in an easy-to-understand version. The national debt is about $15 to 20 trillion of American citizens’ (all currency users’) investments, bank accounts, and wallets.

—SLIDE 70—

The national debt is a large part of the American people’s value. If you truly wanted to pay down the national debt, if you truly wanted to get it down to zero. First of all, we could write a twenty one trillion dollar bill on a piece of construction paper. I don’t know who would give it to, but we could do that. But if we really wanted to get it down to zero, then by definition, that means we have to take $15-$20 trillion out every single American citizens’ investments, bank accounts, and wallets.

—SLIDE 73—

The Big Lie. A balanced budget, surplus, and deficit for me and you is exactly the same as these things for the federal government.

For me and you. Balanced budget, surplus, and deficit. At the beginning of the week we budget $100 for food, gas, children, everything. With a balanced budget, at the end of the week we ended up spending $100. Exactly what we budgeted. We were fiscally responsible and probably a little lucky. With a surplus, we budgeted $100 at the beginning of the week at the end of the week we spent $85. We have $15 left over. We can give ourselves a treat, we could treat our family. We were even more fiscally responsible and probably a little more lucky.

A deficit. You and I, we budget $100 at the beginning of the week. At the end of the week, unfortunately, we had to spend $120. We went over-budget. We were fiscally irresponsible and probably had some bad luck. A deficit for me and you forces us to dip into our savings, use credit, take out a loan, call in favors, depend on charity, beg, and steal.

—SLIDE 74—

And now let’s go into opposite world.

A balanced budget, surplus and deficit for the federal government. The federal government spends $100 into the economy so people do what benefits society. With a balanced budget, in April, they tax back $100. All of it. What do people have left in their pockets after they pay their taxes? they have nothing. They have no money to invest or spend or save or survive. Yet this is what we are told is called fiscally responsible.

A surplus. The government spends $100 into the economy so the people do what benefits society and in April they tax back $120. What do the people have in their pockets? They have less than zero. They can’t even pay their taxes with the money that the government has given them, let alone survive. But this is what is called even more fiscally responsible.

Finally, the deficit. The government spends $100 into the economy – or a billion dollars, whatever it is – it spends $100 into the economy so that people do what benefits society. In April they tax back $30. What do the people have in their pockets? they have $70. After paying their taxes, now they can invest and save and spend and survive. And this is called fiscally irresponsible.

—SLIDE 75—

The federal deficit is the people’s income. It is the only thing that gives the people value. Yet this is the only thing that we are told is fiscally irresponsible. “We are going to blow a hole in the deficit!” What they’re saying is, it is irresponsible to give the American people value.

—SLIDE 76—

The federal deficit is not just important. It is critical to the functioning of society. Without a deficit people have no incentive to do what benefits society. The government might as well put a gun to their heads. Why would they spend $100 into the economy, given the purpose of a government, if they’re just going to take it all back?

—SLIDE 77—

Without a federal deficit, Americans are forced to dip into their savings, use credit, take out loans, depend on charity, beg, and steal, just to survive. This puts pressure on states and cities who depend on that tax revenue from their citizens, because they do need income. They are a currency user, just like us.

I would call the federal deficit our national income. I would call the national debt a large part of our national value or savings.

—SLIDE 78—

Last chapter.

—SLIDE 79—

Racism. Racism is a tool to tear the people apart. Xenophobia is a tool to tear the people apart. Don’t be angry at the boss that chose to hire an immigrant over an American, screwing both of them, be angry at the powerless immigrant. Classism is a tool to tear the people apart. Homophobia and sexism. These are all tools to tear the people apart.

—SLIDE 80—

Economic ignorance is a tool to tear the people apart. For our entire lives we have been taught the perfect storm of misinformation to get everybody fighting with everybody. There is nothing wrong with disagreeing on policy. That is a good thing. But there is a big problem when we disagree on the reality of how our economy actually functions.

—SLIDE 81—

Examples of how we fight.

Progressives and Democrats say, “Please raise my taxes. Because I want my taxes to go to healthcare. Don’t raise my taxes for war, but I want to give everybody healthcare. Please raise my taxes. I’m a nice person. It’s not just for me.” And that triggers a huge population of people that are genuinely terrified of raised taxes. They are convinced that it will bankrupt themselves, their families, their businesses, and the whole country.

So they stand against our big programs because they are convinced that it will raise our taxes and most progressives and Democrats agree that it will raise our taxes. But it won’t. This is this makes no sense, yet we fight over it.

Take money from the rich. Bernie Sanders still says (although he is doing better) Bernie Sanders still says, “we must tax the rich so they pay their fair share in taxes so we can have infrastructure.” which triggers a huge population of people that say, “How dare you penalize success. Who do you think creates the jobs anyway?”

—SLIDE 82—

Take money from the military. We must reduce the military. “Just imagine what we could use that money for.” And that triggers another population of people to say, “How dare you jeopardize our national security and how dare you jeopardize our troops?” none of this makes economic sense because we don’t need to take money from the powerful. We don’t need to raise taxes, necessarily, for these big programs.

—SLIDE 83—

Most progressives. The Young Turks for example. Bernie Sanders. What they do so well is they clearly articulate what is wrong. We don’t have health care and this is why that’s so wrong. We don’t have free education and this is why that is so wrong. And on the other side, they clearly articulate how the world could be better if we had health care (and this is why) if we had education (and this is why). They help us envision the world that could and should be.

—SLIDE 84—

But the one thing that most progressives get wrong is when we actually try to get these programs. The one critical step at the very end, to actually make these things happen. Why don’t we actually have any of these programs that we need to survive? These things that we have been talking about and preaching about for decades?

—SLIDE 85—

The answer is that we spend most of our time arguing and debating over, and analyzing these economically inaccurate things as if they are more important than the genuine benefits that these programs will provide to us – like survival. We incorrectly believe that these economically inaccurate things are a prerequisite to getting what we need. So our progressive leaders and the media, along with most progressives and most Americans, sabotage our actually getting these critical programs that we need to survive.

—SLIDE 86—

So when we march on the Congress and demand single-payer health care – and we demand it tomorrow – our Congress member turns to us and says, “Oh how I wish I could give it to you. There is nothing more in the world that I want to do then give it to you. I know how much you want it and need it and how much it will alleviate your suffering. But I can’t. I can’t give it to you. Because of the debt and the deficit and fiscally responsible. How are you going to pay for it?”

—SLIDE 87—

Almost all of us fall for this pay for trap – and it is a trap and a trick. Our federal politicians ask us, how are you going to pay for it?, and most of us go back to the drawing table and try and figure it out. We spend most of our time trying to figure it out. Coming up with better numbers. And every time we do this, it just makes the people fight more.

—SLIDE 88—

The truth is they just don’t want to give it to us, because they’re paid to not give it to us. They hide behind these economically inaccurate things to pretend that it’s somehow out of their control.

—SLIDE 89—

Here is the technical answer to how are you going to pay for it? The answer is we are a fiat currency. If we have the real resources to do it then you could create the money to do it. If you wanted. That’s the technical answer. But this is the answer that I believe should be given to the how are you going to pay for it? question.

—SLIDE 90—

We will pay for it by getting you out of office and replacing you with someone who will never ask that question again. They will do whatever it takes to just make it happen. Until that day 100% of our energy will be spent making your life a living hell until you either get out of office or you give it to us.

—SLIDE 91—

So why don’t we have single-payer health care? Because it has nothing to do with healthcare.

First, they want to profit off of us. They want to profit off of our sickness and our suffering and our death. But that’s not the biggest thing. What’s bigger than that is that it chains us to our jobs and therefore we can’t stand up to our bosses. Because if we dared try we risk health care for our whole family.

But that’s not the biggest thing. In my opinion, the biggest reason that we don’t have single-payer health care is that it chains us to our jobs and makes it unaffordable to leave our job and run for office. Because if we did that then we could get our corrupt politicians out of office and create a government that actually cares about the people more than it cares about money and power and donations.

—SLIDE 92—

That’s why we don’t have health care and free college and forgiven student debt and a federal job guarantee. Power. Power is relative.

—SLIDE 93—

The only way that the powerful can stay powerful is to actively keep the powerless powerless.

—SLIDE 94—

We don’t need to fight the powerful, we just need to stop fighting ourselves. We don’t need to take money from the powerful, we don’t need to take power from the powerful, we just need to empower ourselves. There is nothing wrong with disagreeing on policy. That’s a good thing. There is a big problem, however, in disagreeing on the reality of how our economy actually functions.

Thank you.

—SLIDE 95—

So just I’m going to leave this up I’m not talking about this but I put this at the beginning and at the end. I hope that you can see how how critically this relates to the situation.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. William Beyer

    I came to MMT years ago and partially through NC. Once I understood the basic “big lie,” I devoured everything I could read on MMT and economics in general, starting with Joe Firestone at Daily Kos, Stephanie Kelton and her colleagues at New Economic Perspectives, Randy Wray, Bill Mitchell and several others. To me, the key concept is constitutional – money has always been a creature of the state; money is POWER, and the creation of money is an enumerated POWER granted by “we the people” to the Congress. The misuse of that POWER and the cowardice of the Congress in failing to acknowledge it are ongoing sources of dismay. Yves made it clear in “Econned” that the economics “profession” is corrupt, so I would take minor issue with Mr. Epstein referring to economists as experts in much of anything, except deliberately opaque and irrelevant math. My real pet peeve is the continued use of the terms “borrow” and “national debt.” You don’t borrow your own money; you manage it.

    1. aliteralmind

      When I say economists, I mean very specifically, Kelton, Mitchell, Wray, Fullwiler, Kaboub, Hail, Forstetter, Tcherneva, and the like. And experts such as Mosler, Winningham, Tankus, Carillo, Grey, etc. There are indeed many “economists” that are nothing of the sort.

      1. Hamford

        Thanks for your transcript… specifically slides 59-60 and the end of your presentation.

        I would add as a crucial caveat to your slide 67- When the federal reserve only mandates 10% reserves for the banks (fractional reserves), the banks are allowed to create money in the form of debt (up to 10 dollars for every one they actualy hold)! As Michael Hudson (who needs to be on the top of your list of economists) would remind us- this debt is crippling our economy and society right now. When households dont have enough regular dollars for healthcare etc., the banks create debt dollars for us… and indebt us for the rest of our lives. Let’s not forget the benefit that banks have in the current arrangement: MMT for the banks (“too big to fail”, bailouts, and quantitative easing), neofeudalism for the poor (paying interest tribute on our lifetime rolling principal of homes, student debt, and healthcare).

        Thuycides holds true today, “The Strong do what they will, and the weak suffer what they must.”

        Thanks again for your work!

        1. aliteralmind

          Thanks for the kind words, Hamford.

          Fractional reserves, according to Ellis Winningham and other experts I learned from, are not reality. Bank debt is indeed crippling the people because the government does not provide for their survival. The people are therefore forced into the hands of the banks and private corporations. As I say in slide 77:

          Without a federal deficit, Americans are forced to dip into their savings, use credit, take out loans, depend on charity, beg, and steal, just to survive.

        2. John Zelnicker

          October 28, 2018 at 12:50 pm

          The fractional reserve theory states that the loan-making capacity of a bank is constrained by its reserves. This is false. Banks will make a loan to any credit-worthy borrower who asks, and get the necessary reserves later. And, the Federal Reserve will always provide the necessary reserves. If they did not the entire dollar payment system would crash.

          1. Hamford

            Thanks! The link aliteralmind shared indicates that banks create “money”, but only the fed creates “currency”, and the banks are more constrained than 10-1, because they need to pay each other (e.g, pay the auto dealership’s bank for a car the debtor bought). I understand when the principal is paid back, it’s a wash, but the principal (at large) is never paid back, and in the mean time banks collect tribute. Banks don’t want principal paid off- e.g., lifelong credit card debt or “developing” countries forever paying back the “global investors”.

            Then OTOH John indicates banks may be more leveraged than 10-1, because even if they don’t have the “reserves”, they will create them or the fed will.

            So it seems like we have two schools of thought- I am still learning and need to do more research.

            Nonetheless, do we agree that banks collect perpetual interest from principal “money” they create that wasn’t necessarily hard “currency” or “reserves”? When we can’t pay for healthcare, tuition, etc., we are forced to pay interest for principal that the banks created or “lended”? And that the banks are benefactors of MMT via “too big to fail” policy, bailouts, and helicopter money (Q.E.)?

            I would appreciate insights or anything else you guys could share, because I am still learning! Thanks!

    2. Mel

      There’s space for expertise in economics. Bill Mitchell will frequently go over recent figures of national accounts, labor statistics, trade statistics. I don’t usually read these in detail, because I don’t have the knowledge to link them up into anything like a full picture of a country, or the world. I keep thinking that if I’d had a useful education in economics, I’d know where to find these statistics, I’d know how they were gathered and computed, what the error bars were, how to make creative use of them to understand the world.
      I appreciate that a huge amount of what we read from economists isn’t like that.

  2. JEHR

    Excellent overview of how money works. It would be nice to have some references to adaptations for other countries that also use fiat currency; e.g., Canada. That way we could see how all democratic countries that use fiat currency could afford to have universal healthcare, prescriptions paid for, free university and college education, good infrastructure, etc. When all the monies are diverted away from military expenditures, then we may even have universal peace!

  3. Brian (another one they call)

    Thank you, I think I understand it a bit better. I must ask however, how is value applied to something that has no value and is constantly being printed in larger quantity every day to satifiy the “desire” to be better off, yet finding that inflation is in constant and contradictory conflict with the plan? This nation gave billions to enough banks to make it trillions. Not one citizen benefitted from this decision because they were instead targeted to relieve them of what they had left. Savings is an anathema to modern bankers and governments. They are desparate that you spend all you have to keep the magic of GDP alive at least on Halloween.
    I have always understood a budget. But one must become old enough to realize the pay can not keep up with the cost. Why did we start out in this nation with gold and silver being money, and then working in all the options of creating a new kind of money by printing it on a linen rectangle in ever increasing quantity? Or, why did my favorite candy bar start at a nickel and is now 25x as expensive as the years go on? To get the similar taste as the original 4 ingredients, they have had to add “constructions” of natural flavor and texture, chemicals and binders, mold retardant and colors. It had enough sugar in it to prevent most biological life from taking root on it.
    I am concerned that the explanations of MMT are justifications for money creation that by definition leads to inflation and now that we are 21 to 42 trillion in debt, Hyperinflation. Who benefitted from all that largesse? Not one person that works for a living who no longer has a voice in what is done in their name. Is there really a plan to keep government profligacy in check? Do you believe it possible? How do you save for your future by hoarding things that have no intrinsic value within an ever changing monetary interpretation of reality?
    Add the robots to the mix and jobs disappear. I notice many of these issues are not being discussed within the MMT.
    and for the last question, What in the hell good is growth to this planet when it guarantees we destroy more than we can protect? 20 years appears to be all we have folks. Might we be arguing only to distract ourselves?

    1. Grebo

      So many misconceptions. I don’t think you have understood the article at all.

      Money has value because of tax.
      As an economy grows it needs more money.
      Inflation is not normally caused by government spending.
      The US started with gold and silver money because they didn’t understand money.
      Credit money is older than metal money.
      Government “debt” is not like your debt.
      Neoliberalism is the plan to keep government “profligacy” in check.
      Money is not a good long term store of value. Plan accordingly.
      Robots are just the latest excuse for maintaining high unemployment. Ever met one? Think it could do your job?
      Growth is an issue that goes beyond MMT. We need to increase wealth (at the bottom) and reduce resource use and waste (everywhere). Our present trajectory will do neither.

  4. Synoia

    When Britain went into the countries that they tried to colonialize, how did they get those people to use the British Pound? When the United States began, how did they get the people in the thirteen colonies to use the dollar? because they were perfectly happy using the state currencies they were using at the time.

    What they said to the people was, “You will pay taxes and you will pay them only in our currency. Because if you don’t you will face severe consequences. Such as penalties, confiscation, and jail.”

    Really? I seem to remember most British Colonies had their own currency, and settled their trade debt in Gold.

    1. Mel

      The colonial hand was not light. You can read a monograph by J.M.Keynes, Indian Currency and Finance, from 1913, which explains in detail how the Rupee was managed. The situation there might have been the same as the couple of African Francs managed now by France.
      There was also an article (maybe here) four or five years ago, about an immunization project in Nigeria. It had to be managed very differently in the south vs. the north. The south part of the colony had been rich, with a huge population. Colonial tax authorities had been content to tax the merchants, and hadn’t concerned themselves with individuals. So now it was tough to find accurate data about who needed immunization.
      The north had been poor, but tax authorities did not give up; they didn’t surrender and say “No business? No tax.” They implemented a poll tax. The modern result was that there were accurate records of the population. The quip in the article was “No representation without taxation.”
      (Sorry, no cites. I should have kept better notes.)

    2. Gary O.

      “Direct taxation was used throughout Africa to compel Africans to produce cash crops instead of subsistence crops and to force Africans to work as wage laborers on European farms and mines. . . . The requirement that taxes be paid in colonial currency rather than in-kind was essential to producing the desired outcome, as well as to monetize the African communities, another part of colonial capitalist primitive accumulation and helping to create markets for the sale of European goods. . . . Colonial governors and other administrators were well aware of this ‘secret’ of colonial capitalist primitive accumulation, although they often justified the taxation on other grounds, some ideological and others demonstrating the multiple purposes of taxation from the colonial point of view.” Mathew Forstater, “Taxation and Primitive Accumulation: The Case of Colonial Africa,” The Capitalist State and Its Economy: Democracy in Socialism, 2005, 58–59,

  5. Boothroyd

    Slightly off topic, but how does MMT work within the context of the recent IPCC report on climate change? It would seem that time is of the essence in having such a discussion. Thank you.

    1. Mel

      Not very much. It’s just a monetary theory. But it will say that if you’re a sovereign nation, and you have the means in your control to do something about climate change, do not try to tell us that you can’t find the money.

      Not that it’s easy for everybody. Some nations don’t control many resources or means. Some nations are so bound by foreign debt that you could almost say that they’re not circulating their own currency. But MMT denies that one excuse, at least.

      1. Boothroyd

        Thanks. I’ve looked for a synthesis of MMT with environmental sustainability and haven’t found much, at least not in practical terms that would be deployable within the time constraints outlined by the report. If anybody can point me to something that suggests otherwise, I would be most appreciative.

        1. Skip Intro

          I agree with Mel, MMT and environmental sustainability are orthogonal. You could use pre-MMT politics to just decide that a transformation to sustainable infrastructure and lifestyles are a priority, and spend the money by ‘borrowing’ it, as if the climate crisis was some pesky government sitting on resources we wanted and thus needed to be regime changed. Or you could just create the money under MMT. Either way, it is only the political will that is missing, not the money.

          1. Boothroyd

            Agreed it’s a political problem, however have seen some good discussion of MMT around the feasibility of healthcare and education and was hoping to find something similar about the environment, which is complicated by issues that transcend definitions of sovereignty, etc. Thanks again.

    2. aliteralmind

      An excellent interview with Graham Elwood and Australian MMT economist Steven Hail (that I arranged, thank you very much). Hail goes into the urgency of climate change in part two.

      Part 1.
      Part 2.

      I also spoke to Hail privately about this very subject for a couple hours at the MMT conference last month. Basically, we either elect a president like Bernie Sanders in 2020, or the long term prognosis of organized society is not very great.

  6. Thorleif

    Thank you very much,

    We have a lot of work in front of us educating the public. But today, thanks to the frontrunners, we are
    getting a bigger momentum for every day. Would love to see a serious tv debate-serie on my tv at 8 a´clock pm! “What is money and how is it produced” would be a nice title!

    Where is public service-tv? People(and management) don´t understand after 50 years of brainwashing!

  7. Jeff W

    So when we march on the Congress and demand single-payer health care…our Congress member turns to us and says, “Oh how I wish I could give it to you. There is nothing more in the world that I want to do then give it to you.….But I can’t. I can’t give it to you. Because of the debt and the deficit and fiscally responsible. How are you going to pay for it?”

    Here is the technical answer to how are you going to pay for it? The answer is we are a fiat currency. If we have the real resources to do it then you could create the money to do it. If you wanted. That’s the technical answer. But this is the answer that I believe should be given to the how are you going to pay for it? question.

    Actually, I haven’t heard a lot of Democratic representatives say they can’t give us single payer because of “how are we going to pay for it?”—that’s usually the domain of disingenuous journalists or idiotic propagandists. The representatives I’ve heard usually say something like they’ve got to focus on saving the Affordable Care Act (or, in the case of Sen. Diane Feinstein, falsely equate it to a “government take-over” of health care). So the technical answer doesn’t address those (more typical, from my point of view) “concerns.”

    Raising taxes or simply creating the fiat currency to fund single payer still results in a system that puts a large sector of US economy, donors to both major political parties, out of business—whatever response, technically correct or not, we give to the smokescreens put up by our representatives doesn’t address that. We’re acting as if the content of what our representatives say matters when, clearly, they’re operating on some other basis. (Using the fiscal space afforded by fiat currency to pay off our representatives or the health insurance companies or both to acquiesce to single payer seems to lie outside the scope of your technically correct response.)

    But, if we’re forced to act as if the content matters (or show that it doesn’t), I think the technical answer puts the issue on shakier ground than the conventional answer, which is also correct. Single payer is cheaper, by a wide margin, than what we are doing now. So the “How are we going to pay for it?” question, if asking about relative cost, is itself nonsensical—it shouldn’t even be an issue and is astonishingly easy to address. (As Jimmy Dore says, “We’ll pay for it with the same money we’re using now—just less of it.”)

    But the technical answer—”If we have the real resources to do it…”—raises the thornier issue of not having enough doctors, hospitals, and so on. The actual facts don’t matter, of course—we’ve just seen that with the “how are you going to pay for that?” gambit for something that is, inarguably, cheaper—the point is that we’ve now raised the issue of real resource constraints, something that people can argue about, in good faith or not, till the cows come home. So we’ve shifted the frame of the debate from something that is really easy to argue and dispense with (i.e., single payer is way cheaper)—again, something that actually shouldn’t even be argued about at all—to something that raises far scarier, if imagined, concerns (i.e., we might not have the “real resources”), all in a situation where, perhaps, neither answer matters much because, as you say, “they’re paid not to give it to us.” Personally, I’d rather argue on the easier (and narrower) grounds than the more difficult but technically correct ones.

  8. Susan the other

    Thank you for this very readable intro to MMT. It comports with everything I have learned over the years here on NC by reading the most sensible people on the planet. From the very first moment a reader on NC gave me a schematic of how money really works, I have been enlightened. Such a lovely state of mind. I can hardly wait for “I’m a capitalist”-Hillary and “we live in a capitalist country”-Nancy( to name only two political dolts) also are enlightened. They are gonna apply themselves in meaningful ways. Not the old ways of marketeering wheel spinning. But focused, meaningful progressive ways. And just a reminder to all – there is nothing in the Constitution that says we have to be a “capitalist” country. There is a lotta stuff on freedom from oppression, however. When, in the course of human events, your politicians become full-blown idiots, it is time to get rid of them without ceremony.

  9. nonsense factory

    MMT seems to miss the point about investment capitalism and the structure of power and wealth in the American Empire. The Federal Reserve should print money and establish accounts for middle class Americans to invest and earn 5-10% returns on, and we can all live happily ever after?

    Investment capitalism only works for about 1% of the population. It’s not an economic theory, it’s a system of social control. Empires are not known for distributing the spoils of empire to the masses are they? The cash flows to the aristocratic class in every Empire in history.

    MMT seems to miss this entirely; and if you look at countries like Venezuela, or Argentina, which have had currency devaluation crisises, MMT looks very spotty indeed. If the petrodollar theory is partially correct (the value of the US dollar is propped up by countries that force buyers to use US dollars to buy oil), and the petrodollar theory is due to US support for regimes like Saudi Arabia, then where does MMT sit with that world? It sure seems like an argument that only applies to the world of the US dollar, which we can agree is backed up by military power and economic intrigue, right? Hardly a sustainable path forward, is it?

    I think more basic steps like separating the world of investment capitalism (Blackrock, JP Morgan, State Street, Vanguard, etc.) from that of commercial banking (i.e. reinstating Glass-Steagall) and writing off the student loan debt bill are more concrete things to focus on, as well as cutting the military-industrial budget by 50% and directing that money into infrastructure, health care and education.

    1. Yves Smith

      Argentina and Venezuela borrowed heavily in foreign currencies. This is a trap. Governments who borrow in foreign currencies because the interest rate at the time is cheaper lose big time when their currency falls (which is the market expectation; that’s why borrowing in their currency was pricier in the first place).

      You also ignore that MMT practitioners say that the constraint on money creation is real domestic resources, as in inflation. So a country creating too much inflation does not disprove MMT.

      We debunked the petrodollar thesis here. It’s patently false although it is quite possible that people in the military-industrail complex promote it to justify the US’s huge military spending. So if you want America’s military expenditures to be cut, you need to stop giving it lip service.

      The dollar is the reserve currency because the US runs persistent and large surpluses which gets a lot of cash in the hands of people overseas, and the US has the deepest and best regulated capital markets in the world, so people who hold dollar can hold them in something other than cash if they want to.

      Fund managers are involved in lending via credit funds. Goldman was the fifth biggest bank in the US in 1980, in era of Glass Steagall, by virtue of being the biggest commercial paper dealer.

  10. UserFriendly

    —SLIDE 67—

    The Congress creates the currency. They are the source of the currency. What does it even mean to say that a currency issuer is in debt? What does it even mean to say that the currency issuer needs to borrow money? Who does a currency issuer owe their debt to? Who do they borrow it from?

    No one else can create the United States dollar. There is no bank above the Congress. To those who say we must pay back the debt or our country is going to go bankrupt, our grandchildren are going to go bankrupt. I want them to explain, I think they should be pushed to explain, exactly how, logistically, step-by-step. How do you pay back that debt? How do you pay back the national debt and to who?

    —SLIDE 68—

    Our politicians, media, academia, and so-called experts, constantly panic about this national debt that we must pay back. They talk about how it will bankrupt our nation and our future generations. Yet we never hear any protests or demands from this mythical bank that we supposedly owe this money to.

    It’s not a bank we owe money to. The government sells bonds to whoever wants to buy them, that is who needs to get paid back. Of course there is essentially no difference between congress/the fed creating dollars to pay for things and creating bonds to pay for things outside of the fact that the bonds pay interest. Which is why I’m not really sure the war bonds thing is all that great to mention because it implies that the current use of bonds dampen demand in general while in reality they don’t because anyone that buys bonds now wasn’t going to spend that money on goods. War bonds might have given an incentive for Americans to forgo things during the war but that is more a consequence of rationing than bond issuance.

  11. vidimi

    thanks for this.

    regarding the part about suppressing demand for cars during war, building a public transport system could have done the trick

  12. Skip Intro

    I want to stick up for Bernie. He is extremely careful to make arguments that are going to be heard by the 99%. MMT isn’t there yet, and if he were to be as bold as dick Cheney (or which ever other dick said it) and say ‘deficits don’t matter’, it would be turned against him in an instant.

    I think another argument both he and the MMT presentation might make revolves around the well-documented scourge of wealth inequality, and its self-amplifying nature (a la Piketty). This is a reason to tax the rich which was barely alluded to in the slide that talked about obscene wealth buying intractable political influence. Taxes could serve to adjust the returns of capital, reversing or reducing the Piketty R>G inequality. I understand that is tangential to the essence of MMT as a simple explanation of the bookkeeping of a currency issuing nation, but it seems essential to the politics necessary to allow MMT to be adopted and used for something other than war and Wall St. bailouts (as if there were really a difference…).

  13. pdxjoan

    I would like to suggest that there is a pervasive lie that needs to be regularly struck down when presenting MMT to anyone within earshot. In addition to the “How dare you penalize success” meme in Slide 81, MMT needs to strike down the idea that the government redistributes taxes from the “makers” to the “takers.”

    This lie has been drilled into our heads for decades. I hear my rich friends complain about tax redistribution. I hear people who are struggling to make ends meet complain about tax redistribution. This lie about the government taking money out of the paychecks of hard working people and turning around and handing it over to people who lie around all day and wait for their government checks to arrive has seriously damaged our country. And, it has been a twofer for the donor class and the Republicans (and now the Democrats as well). It gets it’s citizens to loath their government, and it gets people who can barely rub two dimes together to vote against their own best interests.

    I think that if this myth, and the visceral anger that it engenders, can be destroyed by MMT, then we, as a country, might finally be able to focus our collective energy on a future that benefits the many, not the few. Not everyone will understand the concept of fiat money and MMT no matter how many times you explain it to them, but if they understand that the taker/maker tax redistribution story is a lie, then that in and of itself is a potential game changer.

    1. aliteralmind

      The concept of redistribution is closely related to much of what I conclude, but I agree this could use more emphasis.

      1. Greensachs

        Thanks for that timely recognition that multiple trillions have been extracted and redirected upwards

  14. Greensachs

    Thanks Jeff and all that push virtue and truth in economic education.
    One reflection, as words matter and emotive reactions have painstakingly been guaranteed by decades of deep pocketed mythical narratives being shoved into our collective discourse by well compensated water carriers (and behavioral psychologists) Likely billions have gone into disparaging words like “progressive” or phrases such as “give us what we want” (we can contemplate others) that assure that knee jerk rancor.
    Throughout your presentation the use of “benefit society” or “progress” seemingly reflects “best choice words”. Those which may deflect or disarm, so as to cultivate a climate for communication.
    It may seem minor but if I am too uninformed or misinformed to know that I am (too stupid to know that I’m stupid…I’ve been there and may be again) we need to avoid those intentionally placed pitfalls and potholes…remembering that when a ruling class becomes so detached from society’s needs solidarity is the elixir that frightens them most. …keep going!

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