Modern Monetary Theory (MMT)

© Brooke Clarke 2021 - 2022

Prior 2012 Issues MMT web page
        Reality vs. Policy
        Key Years
        Key Idea
        Tax Implications
        National Debt
        Fallacy of the Money Multiplier
        MMT Textbook
Falsification of neoliberal economics
MMT Refeences
    Warren Mosler
    L. Randall Wray
    Frank Newman
    Mathew Forstater
    Wynne Godley
    Michael Hudson
    Bill Mitchell
    Scott Fullwiler
    Stephanie Kelton
    Bernie Sanders & reform of the Federal Reserve
    Steve Keen
    Abba P. Lerner
    Paul Romer
    Mark Blyth
    John Quiggin
    Dean Baker
    Ann Pettifor
    Raghuram Rajan
    Thomas Frank
    David Graeber
Predicted the Global Financial Crisis
Other MMT References
Effect of Interest Rates on Home Values
Gold Standard
    Nixon Shock
    Global Capital Flows
    Global Finance
My Related Web Pages


When I ran for the House of Representatives in 2012 ((Wiki, FEC) I had never heard of Modern Monetary Theory (Wiki), but learned about it while studying the federeal government.  Of all the things I learned this by far is the most improtant.

As far as I can tell the ideas of MMT have always been in effect going back thousands of years.  It's not like something happened to change the rules.  In my opinion the observations done and papers written about how money works had a constraint that was not accounted for and that was how the value money was tied to gold (Spain) and silver (UK).

It was not until Nixon Shock in 1971 (Wiki) that decoupled the price of gold from U.S. currency that the constraint was removed.  It took a couple of decades after that for Warren Mosler (Wiki) to see a critical ramification that a sovereign government with it's own floating currency could only default on it's government bond payments if it choose to default.  That's to say a government with a monopoly on it's own currency can always print whatever amount of money it wants.   This made Warren and his investors a lot of money by buying Italian government bonds in the early 1990s, i.e. prior to the EU/Euro.

From his Wiki page: "He stresses that federal spending is in no way constrained by tax revenues, therefore the government will always be able to make payments in its own currency, stating "Federal Government checks don't bounce". He goes on to state that any and all debt passed on to future generations will never be burdensome, since they will undoubtedly consume whatever is produced."

Note this is very different from the budget of a household, state, county or city where they need to "pay for" whatever they want to spend.  This page is about federal monetary policy and does NOT apply to states, counties or cities.

The EU was setup in such a way that they shot themselves in the foot and so a key idea of MMT does not apply there (except for the UK which did not go to the Euro.  So the UK shot themselves in both feet, leaving the benefits of the EU without the problem of the Euro.

Purpose of Federal Taxes

I've discovered a number of reasons for the federal government to tax. Not in any order.

  • To punish sins, i.e. a Sin Tax (Wiki).  The Wiki page says it's an excise tax, but I see it in a much broader context.  The old thinking was that taxes were a way to "pay for" a related benefit.  For example Payroll taxes (Wiki) we are told "pay for" Social Security retirement benefits and Medicare coverage.  But MMT teaches us that's not the case.  I see Payroll taxes as a tax on something the U.S. government wants to punish.
  • To Stabalize the Business Cycle (Wiki).  Since the amount of Income Tax paid by individuals and businesses is a function of their income (really it's depends on spending because of tax breaks) it acts as an automatic regulator of the business cycle.  We want automatic regulators of the business cycle and do not want to rely on Congress to make new tax and spending laws on a cycle to cycle basis.
  • To give value to the U.S. dollar.  When money is owed to the U.S. government the only acceptable payment method is in U.S. dollars.  You can not pay using gold, silver or digital currency.
  • To create unemployment.  In societies where there are no taxes there is no unemployment.
  • Progressive Taxes work to lower inequality.

The Limit on Spending

The first thing people think of is that, given MMT, we can have the federal government do whatever we want.  What's to stop them.  The answer is inflation.  If the federal spending compets with private sector spending it drives up the price.  I think the limit relates to provisioining what we want.

For example currently there's a move to increase the number of electric cars in the hope that will reduce CO2 emmissions. But electricity is NOT a source of green energy, it's only a way to move energy.  If you want to replace all gasoline use with electrical use you will need to more than double the size of the electric grid.  That includes power generation stations, transmission lines and distrabution lines.  If you also want to curtail natural gas use by using electricity you wil need to more than tripple the capacity of the electrical grid.  (see: Electric Cars).  Just adding electric cars will not work, much more needs to be done.

For example if dental care is to be added to Medicare then more denists will be needed.  The key problem is not "paying for" it's provisioning.

Note that the Space Race (Wiki) required a vast infrastructure and took ten years.  A big part of that was educating scientists, engineers and many others to do what amounted to totally new job descriptions.  A similar thing happened when Semiconductors became a product.  A whole new crop of people and equipment was needed.

Prior 2012 Issues MMT web page

This is a cut and paste of the MMT section from a prior web page. I will be updating this section in the future.
PS Before finding MMT I spent many months studying a book and idea titled The Global Minotaur (Wiki) by Yanis Varoufakis (Wiki).  But, even after reading a book on Paul Volcker (Wiki) I could not find evidence that Volcker's policies amounted to American hegemony (Wiki).  The answer turned out to be MMT.

The Economy

The paragraph below on MMT came about after doing a lot of reading about the Global Minotaur (Wiki) which turns out to be a Greek myth (then and now).

2018 May - Prospect:  Rip it up and start again: the case for a new economics -

Modern Monetary Theory (Wiki: MMT, Chartalism)

MMT is a new way of looking at the economy of countries.  For sure it's a major paradigm shift (Wiki).  This means that it's difficult to convince people that hold the old fashioned ideas of economics that the new way offers a more accurate view.  This is demonstrated by making better predictions and explanations of factors that the old view has been getting wrong for about four decades.

For about 200 generations of economists the monetary system they were studying had an artificial constraint in that the money was tied to either gold or silver.  There have only been 2 generations of economists looking at some economies (like the US, Japan, China) where that's no longer true.  So it's easy to see how they missed the underlying ideas of MMT.

Prior to 1971 there was "classical economics" but after 1971 everything changed, but most people are still working on the old rules.  If you don't know how something works then it's hard to make predictions or fix a problem.  It's like a mechanic trained on a gas engine car horse and buggy trying to work on an electric car.  The economic policies of political parties are grounded in the old system and they can not "flip-flop" so have not adopted MMT yet.  But the time is coming when the failure of the old ideas to work as predicted will be clearly seen and a change will then occur.  For example the idea that the FED can influence "stability (aka: Inflation) or jobs is false, but a lot of people still think it's true.  Also the national debt is a good thing now, but is now seen as a bad thing.  The idea that the federal government needs to raise money to fund their spending programs is false.

Silver Certificate
Money based on gold and/or silver ended in 1971. Prior to 1968 they could be changed for silver, after than only into a Federal Reserve Note.
"Silver Certificate (Wiki)  this certifies that there is on deposit in the treasury of the United States of America One Dollar"
Note the Series (year) 1957 B on this case is not the year printed but rather related to the year the design was first introduced.  The newest $1 silver certificate is this one.

The replacement Federal Reserve Notes now used are not redeemable for anything.  But they say "This note is legal tender for all debts public and private"

This is an idea that came about post 1971 (Wiki: Nixon Shock), so does not agree with prior economic theories that go back thousands of years.  The benefits of MMT apply only to sovereign governments where there are no constraints on the money (for example not on the gold standard) and the government is the issuer of the money (not a user like the members of the EMU) .  But MMT can also be used to get insight into economies where the benefits do not apply, such as the EU.  The U.S. federal government operates using MMT rules but elected officials don't understand that.  MMT does not apply to the EU (Wiki), states, cities or households.  The key concept is that when MMT applies the government can always pay for what it wants, i.e. it's checks never bounce.  There's never a solvency issue.

I see MMT as a new framework or point of view in understanding how the US (and other countries) economy works.  It is not a policy.  That's so say how someone uses the ideas of MMT depends on them.  For example the quantity (G-T) government spending minus government taxes can be changed many ways.  Bill Clinton (Wiki) made (G-T) negative, i.e. he paid down the national debt, which MMT teaches us means he sucked money out of the private sector, not a good thing in a healthy economy.  So how you raise or lower spending and/or taxes is a policy decision.  MMT allows you to predict the impact based on (G-T).

Recognizing that MMT is the correct way of seeing the US government financial situation does not mean that there will be more money to spend but rather it makes much more clear how fiscal and monetary policy work.

The mood of society today (2016) seems pessimistic.  For example the movie Requiem For The American Dream (IMDB, Netflix) reinforces the pessimism.  While American manufacturing output is at an all time high in terms of dollars, employment in the private sector is down about 30% from 20 years ago.  That's to say there are a lot (tens of millions) of people out of work.  It's clear that the private sector has traded jobs for profits and they will not be the source of new jobs any time soon.  None of the presidential candidates has presented a concrete program for job creation.  But MMT offers a lot of hope for job creation.

Reality vs. Policy

I've heard from some people that they "don't like MMT" because if the government "adopts" MMT they will end up just printing a huge amount of money.  This mistakes the reality of how our economy works with a policy decision.  It's not that the government should adopt MMT, but rather MMT explains how a policy will impact the economy.  MMT is a description of how the economy currently works.  For example the FED currently has: " three key objectives for monetary policy in the Federal Reserve Act: maximizing employment, stabilizing prices, and moderating long-term interest rates. (Wiki)".  But after 1971 monetary policy has no effect on jobs, hence after all the Quantitative Easing (Wiki: QE) there has been no impact on jobs because the rules have changed.  In fact the only thing the Fed can do is control the overnight interest rate.  It does not have any tools that will do anything else.  There is talk of just folding it into the Dept. of the Treasury since what it does now is an automatic function.

If you don't know how something works and you try to fix or modify it the results may not be what you expect.  For example if you believe that when your car is going down the freeway it makes a lot of exhaust, so if you pipe the exhaust back into the engine the car will run better, it will not work the way you expect.  A good understanding of how things really work is necessary in order to make changes that will work the way you expect.  The economic ideas prior to 1971 were sort of OK for their time, but now no longer describe how the system really works.

Key Years
1776 - There were two revolutions, one summarized in the Declaration of Independence (Wiki) and the other in the book Wealth of Nations by Adam Smith (Wiki), which is the basis of  capitalism. (but with errors)
1946 - American Affairs Jan 1946 V VIII, No. 1 - Taxes for Revenue Are Obsolete (pdf), Beardsley Ruml, Chairman of the Federal Reserve Bank of New York - The experience of W.W.II showed that the U.S. could pay for the war without raising the needed revenue from taxes.  (for more see Other MMT references)
1960s - YouTube: The Spider's Web: Britain's Second Empire | Documentary Film, 1:18:01, IMDB, 2017- @36:30: "The government asked Chase to setup a branch in Saigon during the Vietnam war.  As you can imagine it didn't have windows.  It was sort of a fortress.  It lost money but the government went to Chase because it said 'If you don't get this money thrown off by the military in Vietnam then it's going into French banks and it will get to general de Gaulle (Wiki: US dollar crisis) and you know what he's going to do every month.  He's going to cash it in for gold.  That's what the United States is trying to stop." Michael Hudson (Wiki) - also see an out take: The Origins of Offshore (The Spider's Web deleted scene), 2:45
1971 - Another major revolution happened, but very few people really understood the implications.  It wasn't until 1992 that Warren Mosler, the father of Modern Monetary Theory (MMT) had an epiphany in relation to the bond market in Italy where he understood better than the Italian government that they could never default on their bond payments because they were at that time a sovereign government with a floating currency.  That meant that they could always pay their bills.
1998 - Forecast of 2008 Global Financial Crisis (Wiki): Goldilocks and the Three Bears - the 3 bears are: Asian debt deflation, belief that economy was strong 1996 - 1997, Clinton budget surplus
1999 - Forecast of 2008 Global Financial Crisis: Can Goldilocks Survive? - "Goldilocks is doomed"  forecast the Global Financial Crisis and cites the Clinton budget surplus as the cause
2001 - Forecast 2009 European Union debt crisis (Wiki), Rites of Passage financial problems would happen in the European Monetary Union (see EU below) in the exact way that they transpired.
           YouTube talk: Warren Mosler, The Euro: past, present and future. The Crossroads Workshop 1 in Zurich  
2003 - Iraq War:  taxes were not raised to pay for the war, the government just wrote checks to pay for it
2003 -
Convergence Going In, Divergence Coming Out Default Risk Premiums and the Prospects for Stabilization in the Eurozone - "Until something is done to enable member states to avert these financial constraints (e.g. political union and the establishment of a federal (EU) budget or the establishment of a new lending institution, designed to aid member states in pursuing a broad set of policy objectives), the prospects for stabilization in the Eurozone appear grim."
The Long and Short of It at Goldman Sachs (Ben Stein was very wrong) - Jan Hatzius of Goldman Sachs forecasts trouble with home mortgages based on Wynne Godley's Sectoral balances.  This is some years after the 1998 & 1999 papers making the same case.  I'm looking for the paper by Jan Hatzius.
2008 - Alan Greenspan when asked if taxpayer money was used to bail out the banks he said no, it was just keystrokes.

Key Idea
Governments operating under the MMT rules (see Scope above)  are the issuers of their currency.  They must spend money BEFORE they can collect it using taxes.  (see gold below for how it used to be) The current misconception that the federal government must tax in order to raise money so they can spend it on government programs appeared to be true prior to 1971, but that's no longer the case.  This is similar to a football stadium issuing tickets then collecting them, in both cases the issue comes before the collection.

Note that for a simple model of the economy where there is only the government sector and the private sector (i.e. assuming balanced imports and exports) any deficit in the government sector is balanced exactly to the penny with a private sector surplus.  This is an accounting identity, not a theory.  It's like looking at a transaction as if you are the government or the private sector.  So if the federal government balances the budget, or worse runs a surplus, the private sector is drained of money, that's not a good thing.  Since it's impossible for a government operating under the MMT scope to bounce a check there's no problem with a deficit.  In fact if the economy is healthy you would expect the federal deficit to grow.  That's to say the surplus in the private sector will grow.

The book The Deficit Lie points to the 1992 presidential debate where a question about how the deficit personally effected Bush can not be answered, and may be the reason he lost that election.

After W.W.II the U.S. invested heavily in Germany and Japan rather than punishing them like Germany was punished after W.W.I.  Since W.W.II the US has imported many products from Germany and Japan, and more recently from China.  The countries whose products we import are getting paid in US dollars.  The reason we are importing these goods is because they appear to be a good deal to us and the sellers are happy to get US dollars in exchange.  There is some current worry about the amount of US bonds and Treasury bills held by China.  But China can not ask the US to cash in their bonds/bills in gold (see Scope above).  Their options are limited.  They can buy US products or exchange the US dollar denominated bonds/bills for some other currency at the existing exchange rate.  Note that a large currency exchange will have the effect of making the Chinese money stronger (which has been the desire of the US government for a long time) thus making Chinese imports more expensive and also making US exports to China, Germany and Japan more attractive to them.

Trade allows for world wide competition so a free market allows consumers to pay a lower price.  So economists say it's a good thing.  But, when US workers compete in a world wide market they loose their jobs.  So, while it's true that in an economic sense everyone is better off (in terms of being able to buy goods at lower prices) it comes at the expense of jobs that are permanently lost.

MMT offers a solution to the unemployment problem (see jobs below).  Classical economics offers no solution to unemployment.  That's to say classical economics has blood on it's hands in terms of human suffering.

I expect that in the future a larger percentage of the population will be permanently out of work.  The existing support structure for the unemployed is far from adequate and needs to be improved.

Tax Implications

Prior to 1971 the government did need to use federal taxes to fund their spending (see Gold below), but that's very different since 1971.  I now think the ideas of MMT were in effect going back thousands of years.  It appeared like taxes funded spending when the money supply was restricted by fixing the price of gold.

Since there is no need to collect taxes in order to spend, the policy of taxes can be seen in light of two ideas. 

First, if the federal government did not require anyone to pay them using US dollars then the currency probably would not have value.  So if somewhere the federal government requires a payment in US dollars then the US dollar has some value.  Because MMT is such a new idea no one has really determined what level of payments to the government are required, if any, to give the US dollar official value.  Prior to 1971 this was not an issue.

Second, taxes should be used for progressive purposes and to punish "evils" such as alcohol, tobacco or other things society wants to discourage.  So when the purpose of taxes is seen in this light, payroll taxes are a very bad idea.  They penalize employers, employees, drive jobs off shore and encourage replacing workers with automation.   So a very progressive income tax would stop the extreme compensation packages that C-suite executives now get.  Prior to 1980 the marginal rate was 80% now it's more like 15%.  In my opinion is should be 50.0%.  I choose half because if the rate goes over half then the taxpayer is encouraged to waste money on buying tax losses.  That's to say people do stupid things when they are dealing with losses rather than gains.

A really simple solution would be to eliminate all payroll taxes and provide all citizens Social Security (medical then retirement) benefits and eliminate all the current payroll taxes and record keeping and replace that with an annual W2 statement of taxable income that would determine the retirement benefit amount.  Note "medicare for all" greatly simplifies the current record keeping both for the government and for the vendor (doctor, hospital, employer...).  I expect this simple idea would save billions if not trillions of dollars in record keeping costs alone.  Currently every medical facility in the country has a staff of people whose only job is to match up the different insurance payment rules with the procedure the doctor recorded.  In a similar way employers have record keeping expenses that really are not needed if this simple idea was adopted.

National Debt
The interest on the national debt is seen as a problem, but again a government operating under the MMT Scope there's no need to raise money by borrowing (or taxing) in order to be able to spend it.  So no borrowing is needed "to fund the debt" the government just makes the payments it desires.

Fallacy of the Money Multiplier
When a bank makes a loan thus creating money (see Money based on debt below), contrary to the current idea that they are somehow restricted by the reserve requirement, in fact the bank borrows whatever reserve it needs during the next week's bank clearing cycle.  The problem of the bank lending only the principal amount (they do not lend the money needed to pay the interest) is solved because the other source of money is US government spending.  The idea of a money multiplier (Wiki) is not valid because the reserve ratio (percent of loans covered by reserves) is a false concept if the bank does not restrict loans based on reserves.  That's to say changing the reserve requirement does not change the multiplier.

MMT Textbook

The first college text book on MMT was published in 2016: Modern Monetary Theory and Practice: An Introductory Text by Prof W F Mitchell (Author),‎ Prof L R Wray (Contributor),‎ Prof M J Watts (Contributor).

YouTube: MMT University and the New MMT Macroeconomics Textbook - MMT University -
William Mitchell - Introduction
(16:02) L. Randall Wray will discuss how the book treats Keynes
(36:02) Martin Watts will consider some topics such as the labour market and international trade.
(52:14) MMT University background
(58:47) Questions
H. R. 2990 National Emergency Employment Defense Act of 2011 - idea to change the law to allow MMT - not passed

Modern Monetary Theory and Practice - an Introductory Text -
Part 1 Introduction and Measurement
  • Public Purpose, How to think in a macro way.
  • History.
  • NIPA.
  • Labour Market measurement.
  • Methods, Tools and Techniques.
  • Framing and language.
Part 2 Currency, Money and Banking
  • We meet the government early on.
  • We reach an understanding of balance sheets and banking
Part 3 National Income, Output and Employment Determination
  • Keynes and the Classics
  • Effective Demand
  • Involuntary unemployment
  • AD and AS
Part 4 Unemployment and Inflation
  • Phillips curve.
  • Buffer Stocks - core MMT.
Part 5 Economic Policy in Open Economy
  • Core MMT
  • Fiscal space - real resources
  • Monetary Policy - balance sheets - reserves
  • Open Economy
Part 6 Economic Stability
  • Investment
Part 7

Part 8 Contemporary Debates

  • Range of topics
  • Macro and the GFC
  • Recap
Table of Contents:
Chapter 1: Introduction & Measurement
Chapter 2: How to Think and Do Macroeconomics
Chapter 3: A Brief Overview of the Economic History and the Rise of Capitalism
Chapter 4: The System of National Income and Product Accounts
Chapter 5: Sectoral Accounting and the Flow of Funds
Chapter 6: Introduction to Sovereign Currency: The Government and its Money
Chapter 7: The Real Expenditure Model
Chapter 8: Introduction to Aggregate Supply
Chapter 9: Labour Market Concepts and Measurement Chapter
10: Money and Banking
Chapter 11: Unemployment and Inflation
Chapter 12: Full Employment Policy
Chapter 13: Introduction to Monetary and Fiscal Policy Operations
Chapter 14: Fiscal Policy in Sovereign nations
Chapter 15: Monetary Policy in Sovereign Nations
It is intended as an introductory course in macroeconomics and the narrative is accessible to students of all backgrounds. All mathematical and advanced material appears in separate Appendices.

April 2016 -  just read The Seven Frauds book (Ref) and have a bunch of MMT books on order.
Here's an introduction to the idea:
YouTube: L. Randall Wray -- MODERN MONEY: the way a sovereign currency "works" & there are a number of others by The Modern Money Network (YouTube).
Here are the pop quiz questions asked in the beginning of the video:
1. Just like a household, the government has to finance its spending out of its income or through borrowing. [ ]True  [ ]False
2. The role of taxes is to provide finance for government spending. [ ]True  [ ]False
3. The National Government borrows money from the private sector to finance the budget deficit. [ ]True  [ ]False
4. By running budget surpluses the government takes pressure off interest rates because more funds are then available for private sector investment projects. [ ]True  [ ]False
5. Persistent budget deficits will burden future generations with inflation and higher taxes.  [ ]True  [ ]False
6. Running budget surpluses now will help build up the funds necessary to cope with the aging population in the future. [ ]True  [ ]False
See answers below.

When the US left the gold standard (see Gold below) a profound change occurred.  Maybe because of the way Nixon made the change most people did not recognize the HUGE  implications.  It may be more accurate to say that after 1971 how the economy really works was made clear.  It's not that the economy worked in a new and different way after 1971, but instead it was easier to see how it had always worked.

Keynes recommends deficit government spending (Wiki: Fiscal Policy) when there's a recession as does MMT.  But a faster way would be to reduce taxes, for example have the U.S. Treasury (Wiki) pay both employer and employee FICA (Wiki) taxes.  The idea is that if the FICA taxes were eliminated the determination of Social Security benefits would be difficult, but with the Treasury paying the records would be as they are now.  Note that there's no problem funding Social Security (Wiki) since the U.S. is a sovereign country and our money is not constrained to gold or the euro.  Note that employment taxes hurt the economy, not what you what any tax to do, by penalizing employers, employees and drives jobs off shore and encourage automation.

But the idea that lowering interest rates (Wiki: Monetary Policy, Quantitative easing) will stimulate the economy is wrong "you can not push a string" (Wiki).  If a business has no customers they don't care what the interest rate is.  Getting out of a depression or recession requires fiscal policy adjustments.

A sovereign government (U.S., Japan, Turkey, &Etc. but not EU) puts money into circulation by spending.  Banks can also generate money but that's a small fraction of the total money.  The money has value because it's what's needed to pay taxes and other government fees.

The purpose of taxation is not to raise money but rather to control the economy.  The government funds whatever it wants to do directly.  For example to pay for a war the government just writes checks to it's suppliers.  There was not a tax increase to pay for the recent wars.  The old idea that taxes are needed to pay for government programs is just flat out wrong.

The government buys some goods and services and what's left the private sector can buy.  In a hot economy, where the government competes with the private sector for goods and services inflation results.

The standard of living for U.S. citizens depends on the sum total of goods and services provided in the U.S. plus what is imported less what is exported.  Imports improve the standard of living for those getting them.  When China (or anyone) exports to the U.S. they are paid in U.S. denominated currency (dollars).  They can use those dollars to by treasury bonds which is many believe is funding the U.S. deficit, but that's not the case.  Suppose they get mad at us what can they do: buy stuff in the U.S., get U.S. paper money to take back to China, exchange U.S. dollars into some other currency.  If the later that would cause the exchange rate between China and the U.S. to change making the dollar weaker and Chinese goods more expensive.  But the U.S. has been trying to get China to increase the value of their money for many years and if they changed their dollars to something else it would have that effect, i.e. making Chinese imports more expensive and U.S. products less expensive.


MMT predicted the problem with the EU in 2001, see Key Years above.
When the EU (Wiki) was setup the European Central Bank (Wiki) was setup to maintain price stability.  But in times of recession the central bank needs to pump money into the economy, but the ECB does not have this power (limited to 3% of GDP) and the member countries in the EU do not have that power.  The problems will continue until there's a way to deficit spend money into circulation.  The IMF (Wiki) was founded at the Bretton Woods conference and was intended to work along side a gold standard, the Marshall Plan and other economics of the 1945 time frame, not the post 1971 non gold standard times.  It appears that the IMF is causing much more harm than good and needs to be shut down or totally revamped to take into account MMT.

Note the ECB only has monetary policy tools (Wiki), it does not have fiscal policy tools.  MMT (or Keynes) tells us that fiscal policy is needed it time of a debt crisis (Wiki) but the EMU has no fiscal policy tools.

The Stability Growth Pacts (Wiki) limit the debt of an EU member government so they can not use fiscal policy to recover from a recession.  The 2005 reform still kept t
he ceilings of 3% for budget deficit and 60% for public debt were maintained.

Falsification of neoliberal economics

2018 August 14 - The Week: The biggest policy mistake of the last decade by Ryan L. Cooper - This article is the first one I've seen that goes to the idea of falsification that Karl Popper (see Progress & Science) says is a good way to disprove something.  Note that Ryan does not invoke MMT, but everything he is saying is consistent with MMT.

The following "economists" got it very wrong:
Alberto Alesina (Wiki) and Silvia Ardagna (Wiki)- "expansionary austerity," arguing that governments could increase taxes, cut spending, and grow strongly. (cherry picked data)
Carmen Reinhart (Wiki) and Kenneth Rogoff (Wiki) - demonstrated an apparent trigger point of a 90 percent debt-to-GDP level beyond which more borrowing would cause economic stagnation (Causality backwards)
European countries that subjected themselves to severe austerity regimens saw their employment and production collapse, just like Keynes would have predicted
Michael Boskin (Wiki - Stanford), John Cogan (Stanford), Niall Ferguson (Wiki - Stanford), Kevin Hassett (Wiki) Douglas Holtz-Eakin (Wiki), Bill Kristol (Wiki), and John Taylor (Wiki)- signed open letter to then-Fed Chair Ben Bernanke warning that "[t]he planned asset purchases risk currency debasement and inflation."
Tyler Cowen -book: The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better
Robert Gordon - book: The Rise and Fall of American Growth The U.S. Standard of Living since the Civil War
The two books argue ...
that the slow post-recession growth problem was a structural one caused by lack of innovation, meaning the economy was running up against supply constraints. We simply couldn't grow any faster."
If the above "economists" were correct then we would be seeing hyper inflation, but that's not happened then or now and if fact inflation is low.
Barack Obama - claimed a "skills gap" (NYT: 16:30 Training Skilled Workers)
Bill McBride - "stay-at-home dads"
There's been no real wage growth to support the above two labor ideas. "There was no skills gap, nor an innovation shortage, nor an explosion of stay-at-home dads."
All the above "experts" got it very wrong.
The Deficit Lie: Exposing the Myth of the National Debt by Rick Boettger, 1994 (The Blue Paper?)
This book was published in 1994, probably before the term "Modern Monetary Theory" was coined.  Written during the Clinton high tax low spending years (Wiki).
Major Points:
1. The so-called "deficit" is a myth.
2. Our only problem is a shortage of cash.
3.The solution: Spend more and tax less.
In chapter 5 " The Big Lie: The inflationary Obsessions of the Economic Anorexics" Rick points out Milton Friedman's false idea that inflation is caused by the money supply without taking into account the total of goods and services.  Instead he has illustrations (Fig 6 Good Balance, Fig 7 Inflation Hawks' Nightmare, Fig 8 Recession &  Fig 9 Better Balance) showing a balance scale where goods and services are on one pan and money on the other pan.  It is not just the money but rather the balance between the money and goods and services that's important in relation to inflation. A rough cut is that the deficit should be about the size of the GNP (Wiki).

Mentioned is the 1992 presidential debate (CNN:  | Clip Of Presidential Candidates Debate) where an audience member asks “How has the national debt personally affected each of your lives?” (Perot, Bush & Clinton), “And if it hasn’t, how can you honestly find a cure for the economic problems of the common people if you have no experience in what’s ailing them?”  When Bush answers he hems and haws, i.e. has no answer. The moderator changes the question for Clinton to "I think she means more the recession -- the economic problems today the country faces rather than the deficit." which Clinton easily answers.  The book makes the point that a tax cut and/or government check to someone, i.e. things associated with the national deficit, are good things for the people who receive them.  The woman who asked the question mistakenly thought the financial hardship her friends were suffering was caused by the deficit.  But in fact the deficit is a private sector savings, a good thing.
Steve Keen: Debunking Economics: The Naked Emperor of the Social Sciences, 2001 -

John Quiggin: Zombie Economics: How Dead Ideas Still Walk among Us, May 6, 2012,

Andrew Yang for President 2020

While not an MMT person, Yang's ideas about the current state of the U.S. and his vision for our immediate future seem spot on.  But his support of Universal Basic Income is not as good a solution as the Job Guarantee.
See this YouTube: Joe Rogan Experience #1245 - Andrew Yang (1:52:02) -
YouTube - CGP Grey: Humans Need Not Apply, Aug 13, 2014

MMT References (and those who seem to be in line, but not necessarily promoting MMT)

Warren Mosler "Father of MMT" (Wiki, Mosler Economics, YouTube: Modern Money Network, Amazon, Facebook,
Wiki: Consulier GTP - Mosler Automotive - Knot My Problem catamaran (GC50WP) -
2019 September 13: YouTube: How Modern Monetary Theory (MMT) Actually Works (w/ Warren Mosler) -
2019 Sep 24 - YouTube:  Draghi: The ECB should look into helicopter money & MMT (Wiki: Mario Draghi) PS Italy benefited from MMT as a result of Warren Mosler.
2019 May 11 - Macroeconomics with Warren Mosler, Bill Mitchell and Martin J Watts, Birmingham - White Paper 4/25/19 - Slides - Gower Initiative for Modern Money Studies - GIMMS-Twitter -
2017 April 24 - YouTube:
Universal Healthcare Probably Requires LOWER Taxes, Not Higher -
2013 July 4 - NYT: Warren Mosler, a Deficit Lover With a Following -
2013 Feb 10 - HuffPost: The MMT Grand Bargain: Raise Social Security Benefits and Suspend FICA -

Soft Currency Economics II: The Origin of Modern Monetary Theory
(MMT - Modern Monetary Theory) (Volume 1) 2013 by
Warren Mosler - on order

The 7 Deadly Innocent Frauds of Economic Policy 2010 by Warren Mosler (free pdf version, Video) He's the father of MMT.

HuffPost - 2011 May 25: Why US Solvency Is Not An Issue - best details on the Italian bond story.
Is the Ryan Budget the Next Bachmann Budget? 2012 by Warren Mosler -

The Certainty of Debt and Taxes - The Fiscal Cliff Burden of Proof 2012 by Warren Mosler -

Demand Leakages: The 800lb Economist in the Room 2012 by Warren Mosler -

YouTube: Warren Mosler, Issuers vs Users of a Currency 2012 by Warren Mosler (5:28) - with inserted video clips of Bernanke and Greenspan (Recommended short video)

Italy Then and Now.pdf 2012 by Warren Mosler - how joining the EMU caused a lot of problems for them. "The euro zone is in 'Ponzi' until the ECB writes the check"

Rites of Passage 2001 by Warren Mosler predicting the problems now facing the Euro - "The market’s arrows will inflict an initially narrow liquidity crisis, which will immediately infect and rapidly arrest the entire euro payments system."

NEP: Warren Mosler’s talk in Chianciano, Italy, January 11, 2014 "Oltre L’Euro: La Sinistra. La Crisi. L’Alternativa" (Beyond The Euro: The Left. The Crisis. The Alternative)- his words are the text of the article.

Modern Monetary Theory.pdf - a Primer on the Operational Realities of the Monetary System by Scott Fullwiler (posted on Warren's web page) -
MMT Conference Oct 23, 2017 - Warren Mosler (about 1 hour) - His book Soft Currency Economics has been polished for over 25 years and it's all consistent with mainstream ideas.
  • The purpose of taxation is to create unemployment (in societies where there are no taxes there is no unemployment)
  • (15:26) "Unemployment is always an unspent income story",  not automation or productivity (which a good thing).
  • (16:51) Trade deficit a good thing.
  • (19:29) "MMT is prepared to answer the new questions that come up." Low interest rates create savings desire.
  • (24:03) Zimbawae & Reimar Germany - MMT has the only valid of explanation of inflation.
    The currency is a monopoly.  The people need the government's money in order to pay taxes.
    Better price stability if there's a buffer stock of workers rather than unemployed people.
    Right now we are using unemployment to control inflation but it does not do a good job.
    A "buffer stock of workers" (job guarantee) will do a better job.
    (24:21) Fox Business News - Stewart Varney (Wiki): Spending Necessary for Economic Recovery - Mosler asks for a payroll (FICA) tax holiday (0:35) and the host says "hold on, hold on, you want more spending".  The idea "printing money" is based on the linkage between gold and currency and is no longer a valid concept.
  • (25:39) MMT is the only valid explanation of inflation there is.  There's no dispute about.
  • (29:27) the book "Soft Currency Economics" has not had any part refuted. Sound bites: "the public debt is just the Dollars spent by the government that has not yet been used to pay taxes." "The only financial problem related to the debt is inflation."
  • (35:29) FAQs:
    How are  you going to pay for it? Credit account at the central bank just like all government spending.
    Aren't taxes required to fund the spending?  No.
    Would this cause inflation?  It might, but the Fed's inflation target is higher than where we are now, so a good thing.
    Why do politicians not switch to MMT? Because the voters have not yet embraced it.
    How does Social Security work? Just accounting, not money.
    Should the Fed be ended? All profits go to Treasury.  Fed works at the whim of Congress.
    How about the effect on the dollar? The exchange rate changes independently of us.
    There's no unemployment in non monetary societies (animals or human).
    If CBO scored medicare for all inflation would not change or go down.
MMT: Warren Mosler on why Quantitative Easing is NOT money printing, Aug 10, 2016
Warren Mosler joins Real Progressives Host Steve Grumbine to discuss Banking in a Modern -
  • GOP tax plan - not a favor to corporations, it's political, all corporate taxes are a pass through to consumers
  • (5:25) Sanders came out with medicare for all but adds big tax to pay for it - medicare for all is deflationary, no tax needed.  Headline left botched it. Paul Krugram, Dean Baker are other examples of left not understanding.
  • (26:55) Bitcoin - does not contribute to medicare for all or any other social program, it's just a money substitute.
  • (35:44) Steven Grumbine background
  • (41:42) Salient points of MMT:
  • (49:52) Petro Dollar (aka: reparation) -  nonsense  - apple example where their money is located makes no difference, no liquidity problem,
  • (1:00:42) "The public debt is the public money supply." Example: coins found in public places in Pompeii.  The government spent those coins and the taxes did not collect all of them so leaving some in private hands.
Why MMT? A discussion with Warren Mosler - 2018 February 24
over 200 questions answered.
YouTube: The Basics of Modern Money by Modern Money Basics (6:29)
YouTube: Warren Mosler MMT: Unemployment, dogs and bones 1:17 - 
YouTube: Warren Mosler: What Modern Monetary Theory Tells Us About Economic Policy - Published on Jul 23, 2013
YouTube: Mosler & Keen on Macroeconomics (edited) -
L. Randall Wray (Wiki, Amazon, UofKS, Levy Economics Institute of Bard College, Vimeo)
Mar 15, 2018 YouTube - Deficit OwlsWhat Caused The Global Financial Crisis?
Understanding Modern Money:The Key to Full Employment and Price Stability 2006 by L. Randall Wray (free KindleUnlimited version)

MMT, The Euro and The Greatest Prediction of the Last 20 Years (free html) based on a 1992 article by L. Randall Wray - predictions of MMT

Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems 2nd Ed - 2012, 2015, L. Randall Wray, Palgrave MacMillian, ISBN 978-1-137-53990-8  (see on line as MMT Primer, including responses to readers comments)
pg 131; "A government that operates with a nonsovereign currency, using a foreign currency or a domestic currency convertible to foreign currency (or to precious metal at a fixed exchange rate) faces solvency risk.  However, a government that spends using its own floating and nonconvertible currency cannot be forced into default. ...  This is why a country like Japan can run government debt-to-GDP ratios that are more than twice as high as the "high debt" Euro nations (the "PIIGS": Portugal, Ireland, Italy, Greece and Spain) while still enjoying extremely low interest rates on sovereign debt."

pg 141: "Ideally, it is best if tax revenue moves counter cyclically - increasing in expansion and falling in recession.  That helps to make government's net contribution to the economy counter-cyclical, which helps to stabilize demand."
YouTube: L. Randall Wray - Modern Money Theory: Intellectual Origins and Policy Implications - summary below:
Theoretical basis of MMT:
Georg Friedrich Knapp (Wiki) - The State Theory of Money 1905 - money must have no intrinsic value and strictly be used as governmentally-issued token, i.e., fiat money.
Abba P. Lerner (Wiki) - Functional Finance 1943 (Wiki) - government should finance itself to meet explicit goals, such as taming the business cycle, achieving full employment, ensuring growth, and low inflation.
Beardsley Ruml (Wiki) - Taxes for revenue are obsolete (free pdf)  1946 - We learned from W.W. II that taxes do not fund spending.
Hyman Minsky (Wiki) - Financial Instability Hypothesis (Wiki) - "Stability is destabilizing". 3 types of borrowers: hedge borrowers, speculative borrowers & Ponzi borrowers.  People are momentum investors by nature, not value investors.
Alan Greenspan (Wiki) - the Greenspan put (Wiki):supposedly eliminated risk in the financial markets, but, according to Minsky, that increased risk.  "Matt Taibbi described the Greenspan put and its bad consequences saying: "every time the banks blew up a speculative bubble, they could go back to the Fed and borrow money at zero or one or two percent, and then start the game all over", thereby making it "almost impossible" for the banks to lose money. He also called Greenspan a "classic con man" who, through political savvy, "flattered and bullshitted his way up the Matterhorn of American power and...jacked himself off to the attention of Wall Street for 20 consecutive years".
Ben Bernanke (Wiki) - The Great Moderation (Wiki) aided by the Taylor Principle (Wiki) - The pronouncement of a new stability caused instability.
Employer of last resort (Wiki) - the government offers jobs to anyone who wants one
On Taxes (goal is to drive the money, change behavior and be progressive):
Duping Dopes will not work - BitCoin will not succeed since that's their model
Taxing work is bad idea (Wiki: Payroll Tax, FICA) - regressive, discourages work, discourages employing people, favors moving jobs outside America, favors replacing people with robots
Taxing corporations is a bad tax: drives them out of America, encourages cutting deals
The Income tax: he's neutral
Likes taxing bads: alcohol, tobacco, pollution, financial transactions,
A Hut tax based on cubic feet of your house (eco friendly).
Inheritance tax to stop family fortunes he likes.
Movie: Boom Bust Boom (IMDB, Netflix, Trailer) - Randall Wray is one of the people interviewed & and some attention to Hyman Minsky (Wiki).

Levy Institute
The War On Poverty after 40 years, A Minskyuan Assessment, No. 78, 2004 (pdf) - "the real flaw in the WOP was that it lacked job-creation initiatives of the type developed by President Roosevelt during the Great Depression."..."Instead of providing the impoverished with an opportunity to work, it provided them with the opportunity to learn how to work."...“policy weapons which are sufficient to move an economy from slack to full employment are not sufficient to sustain full employment” ...
"Minsky’s fundamental argument is simple:
(1) poverty is largely an employment problem;
(2) tight full employment improves income at the bottom of the wage spectrum; and
(3) a program of direct job creation is necessary to sustain tight full employment. Thus, he argued that a program of direct job creation was “a necessary ingredient of any war against poverty” (Minsky 1965, p. 175).
As Minsky put it: “The New Deal, with its WPA, NYA, and CCC, took workers as they were and generated jobs for them....The resurrection of WPA and allied projects should be a major weapon of the War on Poverty” (1965, p. 195).

Improving Governance of the Government Safety Net in Financial Crisis, 2012(pdf)  -
Chapter 2. Summary of the Causes of the Global Financial Crisis: A Minskyan View -
Movie (YouTube):  John Maynard Keynes - Life, Ideas, Legacy (@52:48)
Paul Samuelson: "
“I think there is an element of truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked [that] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that the long-run civilized life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year, [then] in every short period of time. If Prime Minister Gladstone came back to life he would say “uh, oh what you have done” and James Buchanan argues in those terms. I have to say that I see merit in that view.”

In other words, the need to balance the budget over some time period determined by the movements of celestial objects, or over the course of a business cycle is a myth, an old-fashioned religion. But that superstition is seen as necessary because if everyone realizes that government is not actually constrained by the necessity of balanced budgets, then it might spend “out of control”, taking too large a percent of the nation’s resources. Samuelson sees merit in that view. Ref.: PAUL SAMUELSON ON DEFICIT MYTHS by L. Randall Wray)
Frank Newman (Wiki, Amazon, )
Six Myths that Hold Back America: And What America Can Learn from the Growth of China's Economy 2011 by Frank Newman - on order

Freedom from National Debt – May 2, 2013 by Frank Newman - on order

 Vimeo (2012, Suny Global Center): “Six Myths That Hold Back America- and What America Can Learn From the Growth of China’s Economy” - (1:20:26) Frank Newman (Title is book title)
The six myths:
1. Asian nations are bankrolling the U.S.
2. Treasuries "crowd out" financing for the private sector.
3. If everyone tries to save more, the nation will save more, and Investment, GDP, and employment will increase.
4. If the deficit is reduced, then national Saving and Investment will increase.
5. Deficits create great burdens of repayment and taxes for our children.
6. If the U.S. does not get its fiscal deficit reduced soon, U.S. Treasuries will face the same problems as bonds of Greece and Ireland.
Mathew Forstater (GISP, UMKC Pubs)
Little Book of Big Ideas: Economics 2007 by Mathew Forstater - 2 pages for each of about 5 dozen economists
Functional Finance and Full Employment: Lessons from Lerner for Today.pdf , 1999 (while not a prediction of the GFC it talks about problems with the classical view)
Wynne Godley  (Wiki, Amazon, ) - Wiki: Sectoral balances - Federal Reserve Economic Database (Wiki: FRED: MBST, ) -
Predicted the Global Financial Crisis

The Observer Aug 31, 1997: Curried Emu - the meal that fails to nourish by Wynne Goodley -

London Review: Maastricht and All That Oct 1992 by Wynne Godley - "The central idea of the Maastricht Treaty (1991 Wiki) is that the EC countries should move towards an economic and monetary union, with a single currency managed by an independent central bank. But how is the rest of economic policy to be run?"

Sectoral balances (Wiki) simplified version:  [Public/Government] + [Private] + [Foreign] = 0
This means when the US government runs a deficit then there is a surplus in the private and foreign sectors.
"According to the sectoral balances approach, austerity can be counterproductive in a downturn due to a significant private-sector financial surplus, in which consumer savings is not fully invested by businesses."
Michael Hudson (Wiki, Amazon, YouTube,
Predicted the Global Financial Crisis

Super Imperialism: The Economic Strategy of American Empire by Michael Hudson 1972 - may be the first book to describe American Dollar Hegemony (Wiki: Dollar hegemony)

Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy by Michael Hudson (Wiki: )2015 - looks very interesting

The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America--and Spawned a Global Crisis

 Episode #91.2 // Michael Hudson on Killing the Host - 1 hour audio interview based on the book
Government Debt and Deficits Are Not the Problem. Private Debt Is. - 2013 paper
The Economic Crisis & Crisis Theory II 2014 - includes a video Alan Freeman Consumption, Profit and Finance: why can't the left get it right? (0:00 to 21:45), Andrew Kliman Were Corporations--or Corporate Executives--Really Hogging a Bigger Share of the Income Workers Produce? No. (23:00 to 45:35), Michael Hudson The New Austerity: Feeding the FIRE sector overhead (46:45 to 1:50:00), Q&A (1:50:30 to end)
Banks through out history, even when Marx was writing, only lent money to already existing products, not to industry or business.
Michael Hudson, Financial Parasites, Left Forum 2014 Excerpts- Parasite different than Vampire Squid - an excellent 30 minute explanation of his idea
Michael Hudson: Money & Debt 2012 - historical overview and how canceling debts makes sense.
MMT vs. Austrian School Debate 2013 - Warren Mosler (Wiki, Amazon, home page) for MMT (Wiki) - The Austrian ideas work with fixed exchange rates, but not when rates float, so after 1971 no longer works.  In today's floating rate world MMT describes how things work.
Bill Mitchell (Wiki, Amazon, YouTube, Web Page, Newcastle, blog)
Excellent Intro to MMT: YouTube - Bill Mitchell: Demystifying Modern Monetary Theory - Bill coined the name MMT.  Weimar Republic (Wiki) and Zimbabwe (Wiki) inflation explained, employer of last resort background

Reframing the Debate: Economics for a Progressive Politics Q&A, London - Merge central bank with treasury, (0:17:59) do away with debt management agencies "Public debt is just corporate welfare".
There's a problem with merging the central bank into Treasury in that the treasury is controlled by politicians and without a well functioning government (which we don't have in the US) there will be runaway spending.
YouTube - Professor Bill Mitchell - The Government Chooses the Unemployment Rate -
YouTube - Professor Bill Mitchell - The need for full employment -
YouTube -
Professor William Mitchell - Fiscal Myths -
Billy Blog:
Modern monetary theory and inflation – Part 1 -
Billy Blog: The dreaded NAIRU is still about! - Non-Accelerating Inflation Rate of Unemployment (Wiki) is a false idea.
Billy Blog: The Great Moderation myth - (Wiki) - Bernanke should quit or be sacked -
Economic Outlook - billy blog: A surplus of trade discussions - "exports are a cost and imports are a benefit"
Scott Fullwiler (Wiki, Wartburg College, YouTube)
Scott Tweeted link to: Master's Thesis: Money and the Fiscal Space of Monetarily Sovereign Governments: The Case of Denmark (pdf) August 30, 2018, Asker Voldsgaard Ruge -
"Never let the facts get in the way of a good story is a well-known proverb. However, the story of the financially constrained government, rooted in metallism, is particularly debilitating for democratic politics. The deconsolidated government accounting convention is an institutional habit, which could be abandoned with no material effect to the economy, according to this analysis. However, it would remove the psychological effect on the public of having a government account that seemingly could reach zero if market confidence or taxes deteriorate. This psychological feature and misreading of the financial system galvanises politicians to implement otherwise unpopular and imprudent macroeconomic policies. A paradigm shift to functional finance may revitalise the post-democracies ridden with various legitimacy crises by encouraging citizens to deliberate over the state’s public purpose rather than taking a backseat to technocrats who claim to safeguard future welfare by ‘balancing the books’. Government spending should be constrained indeed, but by budgeting, accounting and democratic politics."
New Economic Perspectives - papers - Modern Money Theory: A Response to Critics -
CBO—Still Out of Paradigm after All These Years July 20, 2014 (re-posted April 2018 after the latest CBO paper)
Twitter: Explaining Medicare funding(US entitlements) -
There are 3 separate issues regarding ability to provide SS/Medicare in future years--financial ability to pay, legal authority to pay, & productive capacity to provide increasing standard of living to future workers & non-workers. Unfortunately, these 3 separate issues are not kept separate in public discourse by journalists, policy makers, SS/Medicare trustees, and even economists.

First, though, let's understand that the SS/Medicare trust funds are about the LEGAL authority to provide benefits. They are not about FINANCIAL ability to provide benefits . . .. In the future, when/if the payroll tax does not cover legal authority to pay all benefits & SS/Medicare "cash in" the bonds owned by trust funds, govt will get legal authority to pay benefits via general revenues or selling securities (deficit).  But this is exactly what govt would do WITHOUT trust funds--get legal authority to pay benefits beyond payroll tax revenues either from general revenues or selling securities (deficit).  Because govt does same thing w/ or w/o trust funds, trust funds do not provide FINANCIAL ability to pay, only LEGAL ability. But just as sufficient balances in trust funds provides no FINANCIAL ability to pay shortfall is not a legit argument against FINANCIAL ability to pay.  FINANCIAL ability to provide future benefits is NEVER in question for a monetary sovereign. FINANCIAL ability to pay is a POLICY CHOICE, not a constraint. Greenspan explains this here very clearly in the first 18 seconds
LEGAL authority to pay is also a POLICY CHOICE, not a constraint. For example, Govt could pass law giving trust funds 100% interest/year (remember, trust funds aren't about FINANCE, so not a problem FINANCIALLY), which would provide LEGAL authority to pay SS/Medicare FOREVER.  Another example of providing LEGAL authority to pay future benefits is to pass a law saying govt will pay full benefits. explains here that we already do this in some cases.  FINANCIAL ability to pay and LEGAL authority to pay future benefits are POLICY CHOICES. They are UNCONSTRAINED by anything other than policy makers simply writing a law saying the benefits will be paid. Anyone who says otherwise is muddling the 3 separate issues.  However, ability to provide future standards of living to retirees and rest of population w/o cutting benefits IS a constraint. If you just run deficits to pay benefits in future, if productive capacity is insufficient you will get inflation, not more real goods/services.  Greenspan again (B.C. tries to) explains this clearly here starting at 45 seconds in
Lastly, some are talking about Fed simply transferring its govt bonds to trust funds as way to ensure future entitlements. This is simply a transfer of assets from one agency of govt to another, and shows clearly that LEGAL authority to pay is always a POLICY CHOICE ...BUT, Fed transfer of its securities does not work under current law because to debit Fed assets you have to debit Fed capital (equity). Fed is legally required to send its retained earnings to Tsy, so they are part of govt budget position . . .So, if Fed transfers its securities and debits its capital, under current law, this would increase current and future govt deficits by same amount until Fed's capital was built back up.  Of course, yet again, you could simply change the law and do some creative accounting on Fed's balance sheet for this debit of assets and capital. So, again, LEGAL authority to pay is a POLICY CHOICE. 

In sum, always remember that govt ability to LEGAL authority and FINANCIAL ability to pay benefits are NOT CONSTRAINTS, they are CHOICES, just like govt chooses to pay for wars, cut corporate taxes, etc., all the time. It can ALWAYS choose to authorize and pay SS/Medicare.  The only actual hard constraint on future entitlements is PRODUCTIVE CAPACITY to pay these benefits and maintain standards of living for others at same time. 

Thus it is NOT useful for informed policy debates to have CBO & SS/Medicare trustees to forecast "solvency" of trust funds in the manner they do now.  However, it WOULD BE useful for them to say "our analysis shows govt has CHOSEN not to legally fund these programs in full after 20XX; if it CHOOSES to do so w/o taxes/spending cuts, given assumptions in our econ model we forecast inflation to be X%."
Stephanie Kelton (her home page, Articles, Book: The Deficit Myth, New Economic Perspectives, Wiki, Levy Economics Institute of Bard College, YouTube)

2020 June 9 - NYT: Why I’m Not Worried About America’s Trillion-Dollar Deficits -
2019 November 5 - New book: The Deficit Myth, Mdern Monetary Theory and the Birth of the People's Economy. -
2019 October 3 - New Republic:
Spreading the Gospel of Modern Monetary Theory - Mentioned Stephanie Kelton, AOC (Wiki)
Vimeo: Stephanie Kelton, Alan Greenspan vs Paul Ryan on pensions - a clip from "Angry Birds"

Forbes: Watch Out, MMT's About, As Bernie Sanders Hires Stephanie Kelton - Jan 2015: Bernie Sanders has appointed Stephanie as chief economic adviser for the Senate Budget committee's Democratic minority (Wiki).

YouTube: Stephanie Kelton -The Angry Birds Approach to Understanding Deficits in the Modern Economy - 2014 - video clips saying the national debt is a problem (including Cenk and Bernie).
"Capitalism Runs on Sales - Spending creates Income - income creates sales - sales create jobs"
Republicans say, We have a spending problem!"; Democrats say, "We have a revenue problem!" - both lead to fewer jobs
Calming Fact: "As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government cannever become insolvent, i.e. unable to pay its bills.  In this sense, the government is not dependent of credit markets to remain operational.  Moreover, there will always be a market for U.S. government debt at home because the U.S. government has the only means of creating risk-free dollar-denominated assets." St. Louis Federal Reserve.
"[A] government cannot become insolvent with respect to obligations in its own currency.  A fiat money system, like the ones we have today, can produce such claims without limit". Alan Greenspan 1997 congressional testimony

(50:33) "Every single time that the federal government's deficit gets too small, which here gets to be below it's average of 3.1%, we've had a recession.  Every single time."

Stephanie Kelton -The Economic Movement of Bernie Sanders - she was Bernie's economic advisor for his campaign
But Can We Afford It? Economic Priorities for the Next Administration, Jan 11, 2017 - Trump elected, but not yet inaugurated.
National Deficits, Debts and Dodo Politics by Dr Stephanie Kelton MMT, May 3, 2017 - similar to the above
Best Of 2017: What You Think You Know About Money is Wrong w/ Stephanie Kelton -

2018 March 19 - Stephanie Kelton is writing for Bloomberg: Use Fiscal Policy, Not the Fed, to Fight the Next Slump -
HuffPost - 2018 May 20:
Stephanie Kelton Has The Biggest Idea In Washington -


The American Interest - The Right’s Straw Left by Ben Judah (Tweeted by Stephanie) - mentions :
Great Democracy Initiative - Central Banking for All: A Public Option for Bank Accounts introduction - pdf -

"Currently, banks are allowed to have accounts with the Federal Reserve that come with a lot of privileges: higher interest rates, instant clearing, and the security provided by being nondefaultable. Authors Morgan Ricks, John Crawford, and Lev Menand argue for ending these exclusive privileges by offering “FedAccounts” to everyone. FedAccounts would be a public option for the unbanked and underbanked while also providing substantial benefits to businesses and our economy as a whole.

FedAccounts would provide the following features to all Americans, as well as American businesses: no fees or minimum balances; the same interest rate that commercial banks get; and no interchange fees for debit card payments. Also, payments between FedAccounts would clear in real time, and there would be no need for federal deposit insurance, as FedAccount balances would be sovereign and nondefaultable. The lack of fees and minimum balances would remove obstacles that exclude millions of Americans from our financial system, and the perks of central banking would greatly increase the cost and efficiency of transactions for businesses.

This report details the FedAccounts proposal and its benefits. It also discusses the merits of FedAccounts over other reform proposals like narrow banking, postal banking, and cryptocurrencies."

Bernie Sanders & reform of the Federal Reserve
October 20, 2011: Top Economists to Advise Sanders on Fed Reform - Joseph Stiglitz (Wiki, Amazon), Jeffrey Sachs (Wiki, Amazon), Robert Reich (Wiki, Amazon, TPP), James K. Galbraith (Wiki, Amazon), Lawrence Mishel (Wiki, Amazon),  William K. Black (Wiki, Amazon), Nomi Prins (Wiki, Amazon), William Greider (Wiki, Amazon), Jane D'Arista (Wiki, Amazon), Tim Canova (Wiki, Amazon), Robert Johnson (Wiki, Amazon), Dean Baker (Wiki, Amazon, TPP@13:25), Gerald Epstein (Wiki, Amazon), Robert D. Auerbach (Wiki, Amazon), Roger Hickey (Wiki, Amazon), Robert L. Borosage (Wiki, Amazon), Robert Pollin (Wiki, Amazon), L. Randall Wray (see above), Stephanie Kelton (see above).

YouTube: Minsky, Inequality, and the Monetary:Fiscal Policy Outlook, S4, April 2016 (Slides as pdf, Scott's slides.pdf) - about her time in Washington DC, CBO,
Steve Keen: Private Debt - Keen's solution People's 
Steve Keen (Kingston University, Wiki, YouTube, Steve Keen's Debtwatch)

Predicted the Global Financial Crisis
Debunking Economics: The Naked Emperor of the Social Sciences by Steve Keen, 2001 - Talks about the problem with the EMU before it happened.  Dec 2016, reading.  Highly recommended.  For more on this book see below.

Has a few areas that interest me.
1. new thinking about how the economy works, for example including energy in addition to labor and capital: "a worker without energy is a corpse, a machine without power is a sculpture".  Also the importance of private sector debt in relation to growth and GDP.

2. In college (San Jose State) Louis O. Kelso was promoting Two-Factor Theory: The Economics of Reality where the example I remember was two house moving companies.  One based on the use of a horse and buggy, the other on the use of a modern moving van.  At the end of a year's operation the two questions are: Who worked harder (ans. the horse and buggy company), and Who made more money (ans. the moving van company).
Kelso attributed the higher income of the moving van company to the higher amount of capital used to acquire the moving van.  But . . . Keen probably would say another difference was the difference in energy.  i.e. One horsepower (literally) vs. maybe 500 horsepower.  Thinking about this example a year or two ago I saw the idea that energy impacts not only a business, but also our day to day life, since there are many motors in pretty much every house.  746 Watts of electricity is equivalent to one horsepower.  A trained cyclist can produce about 400 Watts.  So each 400 Watts of electricity consumed for an hour is about the same as having a servant working for that hour.

3. modeling using the "Minsky" software.  But this appears to me like a first grader working with SPICE (Wiki, example) modeling that's very basic and he makes no validation to real world data.

   Note that when tube based electronics were at their peak there were no computers or SPICE modeling and so plots and equations were used to analyze tube circuits.  Early on the grid was treated as independent from the other electrodes, then Miller (Wiki) saw that there was capacitance between the grid and plate which explained tube operation much better than the old way.  The feeling I get watching the "Minsky" related videos is that they are far from discovering the economic equivalent to the Miller effect and so the models today do not have much value, maybe in a few decades they will.

Debtwatch Paradoy: CERN Discovers New Particle Called The FERIR -

"Now that economists have explained the persistence of the ZLB, they can now turn their attention to understanding its perverse effects. The real problem of the ZLB for economists has been that it inverts the status and behavior of all other sub-economic particles. In particular:

  • Growth, which was high, is now low;
  • Inflation, which was bad & everywhere, is now good & nowhere;
  • CBs (“Central Banks”) which prevent inflation, now try to cause it; and
  • HMDs (“Helicopter Money Drops”) which were mad, are now sane

These inversions are causing real problems for economists, who find themselves arguing for policies they used to oppose. Professor Summers hopes that knowledge of the existence of the FERIR will make it easier for economists to argue that night is day and rainbows are grey, as they provide policy advice in these troubled times."

CERN: Crazy Economic Ration­al­iza­tions for aNoma­lies (Paradoy)
FERIR: Full Employ­ment Real Inter­est Rate (Paradoy)
GFC: Global Finan­cial Cri­sis (Wiki) MMT says caused by high debt which in turn was caused by Clinton budget surplus (sucked much needed money out of private sector)
Growth: Economic (Wiki) MMT says "trickle down" (Wiki) does not work, but "bubble up) does work.
HMD: Helicopter Money Drops (Wiki)
Inflation:  (Wiki) MMT says caused by government competing with private sector
NAIRU: Non-Accel­er­at­ing Infla­tion Rate of Unem­ploy­ment (Wiki) - MMT says false concept
ZLB: Zero Lower Bound (Wiki)

Debunking Economics: The Naked Emperor of the Social Sciences by Steve Keen, 2001 - Talks about the problem with the EMU before it happened.  Dec 2016, reading.  Highly recommended.
This book shows that microeconomics (Wiki) is based on a number of false beliefs.  The first few chapters are devoted to supply and demand curves and the numerous false underlying assumptions.
For example that a factory making a commodity will first improve it's profitability after hiring more workers will increase, but at some point hiring more workers will decrease profitability.
The book does not mention that there are very few commodities being manufactured anymore.  I've heard a rumor that there is a local hardware store that sells nails from a bin.  The hardware stores near me all sell nails packaged in boxes with brand labels.  Propane is a commodity, but is delivered in trucks from different suppliers and there is a huge difference in the price depending on the supplier so, at least here, propane is not a commodity.
This book debunks microeconomics.

The book: Zombie Economics: How Dead Ideas Still Walk among Us, May 6, 2012, by John Quiggin debunks some key ideas of macroeconomics. Highly recommended.

Abba P. Lerner  (Wiki)

Father of Functional Finance (Wiki).
See the paper Functional Finance and Full Employment: Lessons from Lerner for Today, 1999 (above)

The following copied from Wiki:
The principal ideas behind functional finance can be summarized as:[1]
  • Governments have to intervene in the national and global economy; they are not self-regulating.
  • The principal economic objective of the state should be to ensure a prosperous economy.
  • Money is a creature of the state; it has to be managed.
  • Fiscal policy should be directed in light of its impact on the economy, and the budget should be managed accordingly, that is, 'balancing revenue and spending' is not important; prosperity is important.
  • The amount and pace of government spending should be set in light of the desired level of activity, and taxes should be levied for their economic impact, rather than to raise revenue.
  • Principles of 'sound finance' apply to individuals. They make sense for individuals, households, businesses, and non-sovereign governments (such as cities and individual US states) but do not apply to the governments of sovereign states, capable of issuing money.

Paul Romer (Wiki,, NYU Stern, World Bank, Aplia)

Known for Basic Income (Wiki) and Endogenous growth theory (Wiki

The Trouble With Macroeconomics 14 Sep 2016 - the source for some of Steve Keen's papers.
Trouble with Macroeconomics, Update, 21 Sep 2016 -
YouTube: Short-Run Shocks; Long-Run Pessimism Sep 19, 2016 related to the paper - the book mentioned is "Population Bomb by Paul R. Ehrlich (Wiki)

Mark Blyth (Wiki, Amazon, Brown University, Personal web page, YouTube:
Watson Institute & Mark

Austerity: The History of a Bad Idea, 2013 -
Mark Blyth: The Athens Live Intervie
w (Jun 26, 2016) -
YouTube: Blyth Devastates Congress' Approach to Budget; Mark Blyth ─ Global Trumpism (Sept 29 2016) -
Points out that "Greed" has been a constant over time and so can not be used to explain the GFC.
Talking tax reform with Mark Blyth and John Friedman, 15:48, Dec 5, 2017 -
Mark Blyth- Why Do People Continue To Believe Stupid Economic Ideas -

John Quiggin (Wiki, Univ of Queensland, Home page, YouTube

Zombie Economics: How Dead Ideas Still Walk Among Us, 2010 - Points out logical fallacies and examples where the idea is shown to fail in a big way, yet it is still believed.  Debunks key macroeconomic ideas.
Debunking Economics: The Naked Emperor of the Social Sciences by Steve Keen, 2001 - Debunks the core ideas in microeconomics.

A chapter is devoted to each of these:

  • the Great Moderation (Wiki) - Wiki has a paragraph "Possible_end" indicating the zombie nature of the idea
  • Efficient Markets Hypothesis (EMH)(Wiki) - Wiki has a paragraphs titled: Criticism and behavioral finance, Economic bubbles and irrational exuberance, Behavioral psychology, View of some economists (mentioned Quiggin, citing Bitcoin as a pure bubble), Late 2000s financial crisis where they all are critical of the idea, but the top paragraph presents the idea as valid.
    "Since Bitcoins do not generate any actual earnings, they must appreciate in value to ensure that people are willing to hold them. But an endless appreciation, with no flow of earnings or liquidation value, is precisely the kind of bubble the EMH says can’t happen."
  • Dynamic Stochastic General Equilibrium (Wiki) - Wiki has a paragraph titled: Controversy - but it's framed as a debate so still a zombie.
  • Trickle-down economics (Wiki) - If you read the Criticisms paragraph there is no question that this is a dead idea, yet the introductory paragraph calls it a political term and links to Trickle-down effect (Wiki) talking about fashion
    In 1890 the term was "horse and sparrow theory" - 'If you feed the horse enough oats, some will pass through to the road for the sparrows.'. 
  • Privatization (Wiki) - A sub-paragraph of "Opinion" is Opposition, but the overall view of Wiki is that the idea is still debatable, so a zombie.  Quiggin says there are a few cases where it makes sense, for example GM was privatized after being taken over, but the notable failures are: RailTrack in the UK, London Underground, Natioinal Broadband Network in Australia,  Edison Schools in the US, Crown Health Enterprises in New Zealand, police, prisons & mercenary military forces (Wiki). The 2017 US Dept of Education head supports privatization of the public schools.

YouTube: Boom Bust: [87] John Quiggin on zombie economics & Steve Keen talks reality of endogenous money Mar 25, 2014 -

Money for nothing? - Oct 18, 2011 - Why MMT can not provide unlimited money + many comments

Dean Baker (Wiki,, Center for Economic and Policy Research,

Predicted the Global Financial Crisis
The Nation:  Bush’s House of Cards - As bad as Bush's economic record is, it would appear far worse if not for the housing bubble, Aug 9, 2004

Getting-Back-Full-Employment: A Better Bargain for Working People, 2013 - debunks NAIRU,
False Profits: Recovering from the Bubble Economy, 2010 - they are: Alan Greenspan, Ben Bernanke,
Social Security: The Phony Crisis, 1999 - Ironically, the only real threat to Social Security comes not from any fiscal or demographic constraints but from the political assaults on the program by would-be "reformers".
The United States Since 1980, 2007
Plunder and Blunder: The Rise and Fall of the Bubble Economy, 2009, 2010 (Written Oct 2008)- Ch 2 The Clinton Era and the Origins of the Stock Bubble, Ch4 The Beginning of the Housing Bubble (In the late 1990s.."But in most areas around the country at that time, there was a close relationship between the cost of renting and owning comparable units",

CEPR - Getting Rid of the Budget Deficit the Clinton/Gingrich Way - "...we did not actually move from large deficits to surpluses by tax increases and/or spending cuts, we did it through a strong economy a..."
Robert Shiller (Wiki, Yale)
Predicted the Global Financial Crisis
Nouriel Roubini (Wiki, Stern School of Business NYU,

Predicted the Global Financial Crisis
Econo Monitor: The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster,  February 5th, 2008
Econo Monitor: Bob Shiller is Sharply Shrill…and the Risks of a Housing-Led Systemic Financial Crisis, Aug 30, 2006

Ann Pettifor (Wiki, PRIME, YouTube search,

Predicted the Global Financial Crisis
Book: The Coming First World Debt Crisis, 2006 (Amazon)

Started reading:  She mentions the UK  "Competition and Credit Control" in Sept 1971 as a turning point rather than "Nixon Shock".  I wonder if they are related?
She agrees with Michael Hudson
that bankers need to be removed from their current parasitic position and go back to serving the productive economy.  That's to say that making money using money is not productive.
As of 2017 it appears that we are still in a bubble economy where prices are inflated by the very low interest rates.  But raising rates will burst the bubble.
See Effect of Interest Rates on Home Values

YouTube: Apr 26, 2019 Economist Ann Pettifor: "GDP isn't the Problem, Capitalism is!", 12:46 - National self sufficiency is requires, shipping food between countries (except for small countries where regional trade is needed) is not sustainable.

YouTube: Ann Pettifor - How Society Can Break The Despotic Power of Finance - Warwick Economics Summit 2014 - If an airplane crashes because of how it's designed it would be an outrage to blame the crash on human error, but in the case of the recent financial crisis, economists blamed it on human error (greed) rather than on their policies.  Hyack, Friedman & Eugene Fama (2013 Nobel prize winner) are to blame.  Savings are not needed to fund investment.  There is no such thing as Fractional Reserve Banking since 1694.  Commercial banks do NOT lend the deposits of savers, they do not need deposits in order to lend. BitCoin is based on mistrust Ponzi).

YouTube: Austerity: Ann Pettifor - Debunking the myths - "Sovereign governments can not go bankrupt",

YouTube: TEDxUtrechtUniversity - Ann Pettifor - Decarbonising the economy: How we can finance it. - How banking really works, credit is not subject to the laws of supply and demand, Limits on money creation:
too much credit->Inflation, not enough credit->unemployment & deflation,  credit at interest rates too high to pay back-> defaults, ecological cost to to much credit
She says the Fed deregulated credit in 1971 causing inflation.  Household consumption rises dramatically starting in 1971 because of credit cards.
Need turn banks from being masters of the economy to servants of the economy.
Although she uses the year 1971 in many places, "Nixon Shock" is not mentioned, but rather the UK the adoption of "Competition and Credit Control" in Sept 1971 (Wiki) which used reserve asset ratios (a false concept according to MMT) instead of lending ceilings. 

Ann Pettifor Interview Feb 17, 2018 (13:34) -
Prime Economics: On tectonic plates, the economic system & the economics profession  25 April 2018 - "But while the theory is faithfully taught, and policies implemented, the economics profession collectively still fails to understand the operation of the system – or so it seems to both outsiders and insiders. The economics profession, it would seem, has reached the stage the geology profession reached fifty years ago – before the discovery of tectonic plates." . . ."... society demands to know why economists have not “discovered how the economy really works”

Twitter by Ann:
The Rise of Finance and the Fall of American Business – RAI with Rana Foroohar (1/6) -
2022 May 5: Tweet -
The Dollar System in a Multi-Polar World by James K. Galbraith

Raghuram Rajan (Wiki, YouTube,

Predicted the Global Financial Crisis
NBER: Has Financial Development Made the World Riskier?, 2005, (pdf)
He is NOT a proponent of MMT, but favors austerity.  That's to say he does not see the need for sovereign governments to directly create jobs.  In my opinion, his proposal to train displaced workers will only allow the more trained workes to displace a less trained worker, i.e. it will not create a new job.  It's also not clear if he made the prediction or if it was someone on his staff.

Thomas Frank (Wiki, home page, )
YouTube: Thomas Frank: What's the Matter with the Democrats? Mar 30, 2016 - Promoting book: Listen, Liberal: Or, What Ever Happened to the Party of the People?
YouTube: How The Democratic Party BETRAYED Workers & Its Base - THOMAS FRANK Interview by Jimmy Dore Part 1 (of 4)
YouTube Thomas Frank "What's the Matter With Kansas? - promoting that book
Thomas does not understand the importance of the Clinton surplus in MMT terms, but does get the damage done by Clinton.

David Graeber (Wiki, Amazon, YouTube)
Debt: The First 5000 Years, 2014 - while not an MMT person has an excellent short YouTube:
The Guardian: David Graeber: debt and what the government doesn't want you to know | Comment is Free, 3:26 -

Predicted the Global Financial Crisis

None of these people mention MMT, but some of them are using ideas that are a fundamental part of MMT and are not part of historical schools of economics.

No one saw this coming. Understanding financial crisis through accounting models - "his paper presents evidence that accounting (or flow-of-fund) macroeconomic models helped anticipate the credit crisis and economic recession. Equilibrium models ubiquitous in mainstream policy and research did not." see: Zombie Economics

The Bezemer 12 are

  • Dean Baker
  • Wynne Godley
  • Fred Harrison (UK) (Wiki) -  believes in not taxing jobs and corporations (MMT idea based on Minsky)
  • Michael Hudson
  • Eric Janszen (Wiki) - (2006). America's Bubble Economy: Profit When It Pops
  • Steve Keen (Australia)
  • Jakob Madsen (Wiki, )& Jens Kjaer Sørensen (Denmark) - When doomsday economist was right "The macroeconomic reality is generally difficult to be explained within the dominant neoclassical equilibrium model."  see: Zombie Economics 
  • Kurt Richebächer (Wiki) -
  • Nouriel Roubini (Wiki) - does not understand MMT and so have made what I (BC) feel are predictions that will fail
  • Peter Schiff (Wiki) - he does not understand MMT and has policies that are counter to MMT
  • Robert Shiller (Wiki) - preface to 3 editions of his book Irrational Exuberance offer predictions of bubble - not so much MMT

 Bezemer applied four selection criteria.

  1. Some account on how they arrived at their conclusions.
  2. Including an analytical account linking a real estate crisis to real-sector recessionary implications (eliminating John Talbott).
  3. Prediction in the public domain, and
  4. The prediction had to have some timing attached to it (eliminating Raghuram Rajan and Claudio Borio)
It seems strange that Ann Pettifor is not on that list. Why?

Other MMT References

American Affairs Jan 1946 V VIII, No. 1 - Taxes for Revenue Are Obsolete (pdf), Beardsley Ruml, Chairman of the Federal Reserve Bank of New York - The experience of W.W.II showed that the U.S. could pay for the war without raising the needed revenue from taxes.
"Taxation is one of the limitations placed by government on the power of business to do what it pleases.  There is nothing reprehensible about this procedure.  The business that is taxes is not a creature of flesh and blood , it is not a citizen."
"The necessity for a government to tax in order to maintain both its independence and its solvency is true for state and local governments, but it is not true for a national government.  Two changes of the greatest consequence have occurred in the last twenty -five years (since 1921) which have substantially altered the position of the national state with respect to the financing of its current requirements.  The first of these changes is the gaining of vast new experience in the management of central banks.  The second change is the elimination, for domestic purposes, of the convertibility of the currency into gold."
Purposes of taxation:
1. instrument of fiscal policy, i.e. price stability (goal: stable purchasing power)
2. public policy, i.e. progressive income and estate taxes (goal: wealth & income equality)
3. public policy, i.e. subsidizing or penalizing industries or economic groups
4. isolate and asses directly the costs of certain national benefits, such as highways ande social security
Taxing corporations is a Bad Tax.
Journal of Finance Aug 1946: Tax policies for Prosperity (pdf) by Beardsley Ruml - behind a pay wall
"Briefly the idea behind out tax policy should be this:  that our taxes should be high enough to protect the stability of our currency, and no higher...Now it follows from this principle that our tax rates can and should be lowered to the point where the federal budget will be balanced at what we would consider a satisfactory level of high employment."

Since countries differ in their export/import balance the above gets modified by MMT to be:
(from the MMT primer by Wray) "Tax rates should be set so that the government's budgetary outcome (whether in deficit, balanced, or in surplus) is consistent with full employment.
Reuters: Japan's government could run out of cash by October 2012 - can not happen according to MMT and did not happen.

Levy Economics Institute - MM Papers - Working paper 778 Modern Money Theory 101: A Reply to Critics 2013 (free pdf)
High Powered Money (Wiki) is mentioned in the paper and I didn't recognize the term and the Wiki page was less than helpful.  Warren Mosler has this to say:
"That's just cash plus dollars held by member banks in the reserve accounts at the Fed.  It was called high powered money because it was convertible into gold before 1934.  Randy (Wray) still uses it because his professor's initials were HPM (Hyman P. Minsky)."

Regarding the large upturn in HPM since 2007 (Wiki plot) L. Randall Wray says:
In any case what happened was that the Fed got confused and thought that QE would stimulate something. Exactly what, we do not know.
Fed also started paying interest on reserves--which makes them equivalent to bills. So think of the $4T of reserves as bills paying low interest.
That was the kink in the curve you saw. You could just as well exchange the reserves for bills and then the kink goes away.
Three UMKC Professors Among The Nine Who Predicted Eurozone Crisis -  and confirm that there was no profit recycling mechanism as Yanis says.

New Economic Perspectives

Center for Full Employment and Price Stability -

Centre of Full Employment and Equity -

email sent to Dan Kedmey 7/20/2016 about a TED ideas article related to Yanis and a Time magazine article about the possible US default and China.

Hi Dan Kedmey::

I saw your article
And want to point out that Yanis describes what happened to the economy after 1971 as "The Global Minotaur".   He is a very charismatic speaker and so I read his book, then a book on Volcker including communicating with the author and can not find any plan by Volcker for American hegemony.  My research into The Global Minotaur is at:

I then discovered Modern Monetary Theory (MMT) which offers a good explanation of what happened after 1971.  I believe that Yanis used Greek mythology because he didn't really understand what happened.

I see you have written a Time article:
That's about a possible default by the U.S.  According to MMT this can not happen because the U.S. is a sovereign country with a floating currency exchange rate so can never bounce a check.  See the books by Frank Newman for more on the  U.S. dollar and China.

For me the fact that MMT predicted the problems with the Euro in exactly the way they have happened and also predicted the Global Financial Crisis (one of the key factors was the problem created by the Clinton budget surplus) makes me a believer in MMT.  Here's some research on MMT you may want to study:

Please let me know you received this.

PS Most thinking on the economy is based on how it worked up until 1971.  So there's about 4,000 years of thought than no longer is applicable.  This may explain why so many people keep thinking the old way.  If  you don't know how something works it pretty much impossible to predict it's behavior or make make "improvements" to it's operation.

Have Fun,

Brooke Clarke

Effect of Interest Rates on Home Values

2018 good article saying there are two factors that drive housing prices: How economists (should) think about the housing market -

Rent = House price x (interest rate + depreciation rate)
So, house prices depend on equivalent rent rates as well as mortgage interest and depreciation.

[2017 - This paragraph added after I started reading the 2006 (pre Crisis) book The Coming First World Debt Crisis]

A home buyer approaches the housing market and the first calculation is "What can I afford".  This is determined by what monthly payment they can make based on the type of loan and downpayment.
Here is an example of the effect of the interest rate on affordability.

Payments do not include title, morrgatge insurance, taxes or property insurance, maintance, just principle and interest.
Rather than run the calculation for the loan amount it's being run assuming $1,000/month is available to buy a house, i.e. what can you afford.

Loan Amount
Total $
Total $
360,000 223717
360,000 193208
360,000 150539
360,000 89451

One way to view getting a lower rate loan is to allow you to buy a more expensive house. But when the mortgage is bought by investment banks in order to "financialize" it the low interest rate does not go to getting a "better" house but rather only goes to make the price of the house higher.  This can easily be seen by considering what a change of interest rate has on the price of a home you can afford.  For example a house that sold some years ago for $166,792 with a 6% loan, sells today for $209549 with a 4% loan (all other variables constant), so there's an increase in the price of the house of 26% soley because of the lower interest rate.

This same effect applies to anything were borrowed money is involved, such as the stock market.  This was origionally named the Greenspan Put (Wiki), but was renamed the Bernanke Put in 2007 and today might be called the Yellen Put since there has been no change in keeping the interest rates very low to promote higher capital asset "values".  Low interest rates support various "bubbles" (Wiki) (but do not cause them).

In the above table note the ratio of Interest/Loan.  I see a problem here relating to the lack of money to pay off the loan.  Note when you borrow money the bank only loans you the principle amount.  For example if you borrow $166,792 from the bank they "print money" in that they just make bookkeeping entries, one in your checking account and one in their asset account for the same $166,792 amout.  But the bank expects you to pay back $360,000 over the life of the loan.  The bank is creating new money in this process.  They are NOT loaning you money that someone has deposited in their bank. 

As of 2017 there are only two places the money used to pay the interest can come from.  Either someone else has to go bankrupt or the Federal government has to supply that money.  Note that the amount of interest is about the same as the loan amount for a 30 year fixed mortgate near 5% so is a considerable amount of money. As of 2021 better way to look at this is the federal deficit/debt puts new money into the economy.

If the economy has inflation then as the mortgate advances in years the money used to pay it back is inflated, making the true interest rate lower than the number shown on the loan documents.  But if there's deflation then the effective loan rate increases causing a deflationary spiral (Wiki).  Deflation is avoided as a matter of policy.  If allowed people would no longer borrow money, limiting it's supply.

Gold Standard (Wiki)

added 2019 October 23: YouTube 2017: The Gold Standard Mostly Ended in 1933-34 - explains how the US got around the $35/ounce of Gold.


Wiki has three definitions for "Gold Standard": specie (money is only gold coins), bullion (government will sell gold bars at fixed price), exchange (paper money in one country can be exchanged with paper money in another country at fixed rate).

Before and for some years after the Declaration of Independence and Constitution the US colonies (Wiki) used British Pounds (Wiki) as well as Spanish dollars (Wiki). 
"By far the leading specie coin circulating in America was the Spanish silver dollar, defined as consisting of 387 grains of pure silver. The dollar was divided into "pieces of eight," or "bits," each consisting of one-eighth of a dollar. Spanish dollars came into the North American colonies through lucrative trade with the West Indies. The Spanish silver dollar had been the world's outstanding coin since the early 16th century, and was spread partially by dint of the vast silver output of the Spanish colonies in Latin America. More important, however, was that the Spanish dollar, from the 16th to the 19th century, was relatively the most stable and least debased coin in the Western world"
Coinage Act of 1792 (Wiki) - An act establishing a mint, and regulating the Coins of the United States.  The coins contained either gold ($10, $5, $2.50) silver ($1, 50¢, 25¢, 10¢, 5¢) or copper (1¢, half¢) of a specified purity and weight (Wiki).  There were a number of following Coinage acts, but this one tied gold and silver to money.  Note there was no provision for paper money and the US silver dollar was to have a value the same as the Spanish silver dollar.
Ratio of the price of Gold to Silver
Wiki link

Coinage Act of 1792 Gold : Silver 15:1
Coinage Act of 1834 Gold ($20.67) : Silver 16:1
Coinage Act of 1849
adds Double Eagle gold coins
Coinage Act of 1857
Foreign coins no longer legal tender
National Bank Act 1863
Greenbacks 1862 to 1971: "This Note is Legal Tender for All Debts Public and Private Except Duties On Imports And Interest On The Public Debt; And Is Redeemable In Payment Of All Loans Made To The United States."
Coinage Act of 1864
In God We Trust
Coinage Act of 1873
ended bimetallism & standard Silver Dollar
Was the beginning of the Silver Certificate (1878 to 1964)
Federal Reserve Act of 1913
beginning of the Federal Reserve Banking system and Federal Reserve Note 
"this note is legal tender for all debts, public and private"
Coinage Act of 1965
ended silver in the dime and quarter
$20.67 / 16 = $1.29 Oz of silver
so silver quarters were worth 34.5 cents.

Executive order 6102 (Wiki, Text)  (March 9,  1933) required everyone to turn in all gold coin, gold bullion, and gold certificates in excess of $100 per person (at $20.67 per ounce, the then going rate) to a Federal Reserve Bank on or before May 1, 1933.  This was done using registered mail where special locks were used on the mail bags, not to stop theft, but as tamper indicators.

The Gold Reserve Act of 1934 (Wiki) Took the US off the specie  gold standard and fixed the price of gold at $35/oz.  "...outlawed most private possession of gold.  The act also changed the nominal price of gold from $20.67 (price paid to people turning in gold) per troy ounce to $35 (the dollar is pegged to gold, not floating). This price change incentivized foreign investors to export their gold to the United States, while simultaneously devaluing the U.S. dollar in an attempt to spark inflation. The increase in gold reserves due to the price change as well as the confiscation clause resulted in a large accumulation of gold in the Federal Reserve and U.S. Treasury. The increase in the money supply lowered real interest rates which increased investment in durable goods."  This removed the "gold standard" and left the value of gold at $35 per ounce which was maintained until the Nixon Shock of 1971.

For about 200 years (1792 to 1971) U.S. currency was tied to gold and/or silver.  Before 1971 the folding money in my wallet said Silver Certificate (Wiki) on the front (see photo above).  I could take it to the mint in San Fransisco (or any other US Mint) and get either silver dollars or silver ingots in exchange.  Prior to 1971 the measures of the money supply like M0, M1, M2 &Etc (Wiki) were important because the amount of money was limited by the gold and/or silver reserves held by the US government.  If the government ran a large deficit while the dollar was pegged to gold/silver there might be a problem if everyone turned in their currency and asked for silver.  So, back then, the government needed to use taxes to raise money in order to fund government programs because they could not just print more money.  So governments at all levels (federal, state and local) used taxes to raise money to fund their programs.  Prior to 1971 this was the correct way to think about government funding of programs, but not after 1971.

[side bar:  in 1946 Beardsley Ruml, Chairman of the Federal Reserve Bank of New York wrote a couple of articles pointing out that the US had paid for W.W.II without raising the money by taxation, see link above).]

The Federal Reserve System (Wiki) was created by the Federal Reserve Act of 1913 (Wiki) (Public Law 63-43, 63rd Congress, HR 7837) section 14(a). Open Market Operations: "To deal in gold coin and bullion at home or abroad, to make loans thereon, exchange Federal reserve notes for gold, gold coin, or gold certificates, and to contract for loans of gold coin or bullion, giving therefor, when necessary, acceptable security, including the hypothecation of United States bonds or other securities which Federal reserve banks are authorized to hold:  (b)..."  The current version of has the same paragraph 14a. BUT. . .  in 1971 gold was decoupled from our currency so the Fed no longer can do anything with gold (see Nixon Shock implemented policies below).

Nixon Shock

1971 (Wiki: Nixon Shock):  264 - Address to the Nation Outlining a New Economic Policy: "The Challenge of Peace." August 15, 1971 9 pm - Implemented:
  1. repeal excise tax on automobiles,
  2. speed up the personal income tax exemptions,
  3. a $4.7 billion cut in Federal spending,
  4. Tax cuts to stimulate employment must be matched by spending cuts to restrain inflation. To check the rise in the cost of Government, I have ordered a postponement of pay raises and a 5 percent cut in Government personnel,
  5. a 10 percent cut in foreign economic aid,
  6. Investment tax credit,
  7. a freeze on all prices and wages throughout the United States (for 90 days?)
  8. suspend temporarily the convertibility of the dollar into gold or other reserve assets (Doublespeak (Wiki): the word "temporarily" in this case means "forever")
I remember this.  The big thing was the freeze on wages and prices.  The company were I worked (Aertech) liked the investment tax credit.  The other things like the "temporary" suspension of convertibility of the dollar for gold was, as Nixon said, "very technical--what does it mean for you? " and had little impact on anyone except for Bob B. who panned gold on his vacations and prior to 1971 was not allowed to smelt  (Wiki) the gold dust into solid gold.  Now he and everyone else could hold gold as a metal.

I doubt that neither Nixon nor his financial advisers understood the impact of decoupling the dollar from gold/silver and allowing the currency to float.  For example:
Item 3 & 4 he is cutting taxes (T) and cutting spending (G) so G and T both go down.  MMT tells us that to create jobs G-T needs to go up, so the tax cut was a good thing but the spending cut was wrong.  Note it would have been correct with a fixed price of gold because all levels of government needed to raise money for spending by collecting taxes.  Nixon used the pre 1971 rules for the period after 1971 because no one understood the implications of the change.

Note that everything about this announcement seems designed to obfuscate its true meaning.  By making the decoupling of the dollar and gold the last of a bunch of items and using the word "temporarily" he did about everything possible to not draw attention to this change that would have implications for the world and also to discourage economists from figuring out the implications.   What's the point of doing a lot of theoretical work when the suspension is "temporary"?

The Bretton Woods System (Wiki) that tied the currency exchange rates of 40 countries to the U.S. dollar which was in turn fixed to gold at $35 per ounce.  When Nixon closed the Fed's gold window it impacted all of those 40 countries and especially the oil producing countries represented by OPEC (Wiki).  Since Nixon shock amounted to a devaluation of the dollar and they priced oil using $ per barrel.  This dollar devaluation and the
Yom Kippur War (Wiki) resulted in the 1973 Oil Crisis (Wiki).

The Oil Crisis resulted in the OPEC countries holding a lot of dollars which needed to be invested.  Here is a plot of the US government bond interest rates from 1950 to 2017:

Note with the U.S. paying high rates of interest the OPEC
countries sent the dollars back to investment banks in the U.S..  But this places a burden on the investment banks because they needed to make money on the deposits.  This started the idea of making loans to third world countries.  As part of the Bretton Woods System (Wiki) trade was encouraged and the only capital flows allowed were those to clear trade balances.  Global investment capital flows were not allowed.  So in order for the investment banks to make these loans the laws regarding global capital flows needs to be liberalized.  The people at Bretton Woods realized that there is a conflict between global trade and global capital flows and wanted global trade as it would improve everyone's life while global capital flows would hurt people.  When the third world countries went into competition with each other they ended up not being able to pay off those high interest rate loans.  The IMF (Wiki) which was founded as part of the Bretton Woods System and under the fixed exchange rates tied to the U.S. dollar which was in turn tied to gold imposed austerity on these delinquent countries, but that policy no longer was applicable because the rules had changed in 1971.  Austerity means cutting spending which in turn hurts economic output decreasing the money available to pay off their loan.

Here is a plot of the U.S. Import-Export trade balance aka Current Account (Wiki) for the same 1950 - 2017 year range:


Note that the Import-Export balance was zero until 1971.  This is because when the
Bretton Woods System was in effect there was a built-in mechanism coupling money and trade balance.  For example if a country was a net importer, like the U.S. prior to 1971, then we would need to export gold to pay for those products.  That causes the prices of imports to rise slowing down the imports.  This is the capital "Recycling" that Yanis is talking about.  The problem was that by 1971 the U.S. owed France literally a boat load of gold and Nixon was not about to give it to them. (Quora: Did France send a ship to collect it's gold?)
From the late 1800s on schools have been teaching economics based on a gold/silver backed dollar.  Even though that changed in 1971 they continue to teach the outdated ideas.  So even today the school economics curriculum pretty much everywhere is still teaching the same outdated ideas.   Also micro economics is based solely on industrial age manufacturing, i.e. before computers and automation, and so has fundamental problems.  Macro economics is also based on false ideas. see books above.

Global Capital Flows

2017 - I've been reading about how no bankers were invited to the Bretton Woods Conference (Wiki) because of the damage they did in the Great Depression (Wiki).  One of the key provisions was to limit capital flows between countries, i.e. to allow for the prevention of Globalization. 
States and the Reemergence of Global Finance: From Bretton Woods to the 1990s (Cornell Studies in Political Economy) Hardcover – June, 1994, Eric Helleiner (Wiki) -
Deutsche Bank, Markets Research: Dark matter: the hidden capital flows the drive G10 exchange rates -

Global Finance

One of the books cited by Ann Pettifor, and others who predicted the Global Financial Crisis of 2008,  a number of times is  "States and the Reemergence of Global Finance: From Bretton Woods to the 1990s" by Eric Helleiner, 1994 - Note this was written after 1971 and before the 2007/2008 crisis, but the author did not know about the ideas of MMT, but nevertheless talks a lot about how the Bretton Woods agreement spent a lot of time looking at the need for controls on global finance while at the same time liberalizing international trade.  They recognized then that global finance leads to destabilizing the global economy and restricting economic options and is not compatible with global trading which they promoted.  Helleiner gives a number of reasons why global finance was allowed while global trade is still regulated and it boils down to controlling global finance requires global cooperation and so can be defeated by a single country (like the policies of the U.S.).  Since global finance does not directly effect jobs, like global trade does, there is not much political will to restrict it.  Multinational corporations, oligarchs (Wiki) and people involved in money laundering (Wiki) are in favor of no global financial regulations so that they can move money to avoid rules they do not like.  Note that money laundering is a federal crime inside the U.S. In my opinion it is commonly practiced by IBFs (Wiki) even though they are not supposed to.  This recently (March 2017) was in the news in relation to Russian oligarchs making "wash transactions" in two different markets where they purchased using Russian money and sold in markets where the proceeds were in US$, thus moving their money out of Russia, i.e. a global financial transaction.


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Answers to MMT pop quiz:  They are all False.