MMT could be used to pay for the Green New Deal

guest post by Joel O’Bryan PhD

NPR news is running this story on Green New Deal financing by writer Scott Horsley:

When Rep. Alexandria Ocasio-Cortez rolled out her “Green New Deal,” calling for clean energy, universal health care and guaranteed jobs, one of the first questions she got was: How do you plan to pay for it?
The New York Democrat argued that ambitious programs can easily be financed through deficit spending.
“I think the first thing that we need to do is kind of break the mistaken idea that taxes pay for 100% of government expenditure,” Ocasio-Cortez told NPR’s Morning Edition in February.
In doing so, she shined a spotlight on a once-obscure brand of economics known as “modern monetary theory,” or MMT.

The NPR story by Mr Horsley goes on to try to describe in populist terms what MMT is:

There was something of an Oprah effect when she (AO-C) said that,” said economist Stephanie Kelton of Stony Brook University. “People immediately probably started Googling ‘modern monetary theory’ to find out what she was referring to.

Run that Google search and you’ll quickly find Kelton herself. The economist, who advised Bernie Sanders’ 2016 campaign, is one of the best-known evangelists for the theory. Kelton says paying for big government programs is the easy part. If Congress has the will, the Federal Reserve can effectively print the money.

If Congress authorizes a few billion dollars of additional spending, or a few hundred billion dollars, then the Fed’s job is to make sure that those checks don’t bounce,” Kelton told NPR.

Well, right there our “economics expert”, the person who advised Socialist Bernie Sanders, tells a whopper. While the US Congress can and does spend with abandon, it is not the job of the Federal Reserve to “fund the government and “make sure that those checks don’t bounce.” That job goes to the US Treasury, an executive branch under the Secretary of the Treasury, reporting to the President.

The roles of the Federal Reserve and the US Treasury are fundamentally different. The US Treasury has existed since the US was founded in 1789, the first Secretary of Treasury being Alexander Hamilton, the architect of the US Constitution. The US Treasury manages revenues (via the IRS primarily, but also things like import duties) and pays (via revenues and borrowing) the bills for appropriations made by Congress – it is the US Treasury that actually writes the checks to pay the bills. The US constitution expressly says this in the Appropriations Clause:

“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”

Article I, Section 9, Clause 7

Secretary Hamilton brought discipline to the young US Government by ensuring war debts were paid to foreign governments. This earned the US government much needed international trust and future support when the British were still intent on re-taking the “colonies” when the time was right. Without that trust, things might have turned out much different in the War of 1812 when the US had to repeal the British Army from US soil once again. International financial trust is vitally important to the strategic position of any nation in our interconnected world today even more so than in 1812.

Since its creation in 1913 by an act from Congress, the Federal Reserve is a quasi-independent agency that is congressionally empowered to promote the stability of the US dollar. Congress’s latest amendment to that act directs the Federal Reserve to “Promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”
The Fed carries out this responsibility primarily via adjusting short term interest rates that banks and chartered financial institutions are charged for over-night loans and how much they’ll receive in interest for “parking” their liquidity (funds not invested elsewhere) with the Federal Reserve banking apparatus. Via these many complex banking transactions, the Fed’s rate controls are the levers on the amount of US dollars flowing in the banking system, and thus encouraging economic growth or pulling it back to keep inflation in check and thus stabilizing the US dollar’s value. The Fed currently does not have a role in “to make sure that those checks don’t bounce” as Ms Kelton falsely claims. That is the US Treasury’s job — always has been, and unless some serious amendment of the US Constitution occurs, it always will be.

That Ms Kelton, supposedly a highly educated academic, makes such a fundamental mischaracterization of the role of the Federal Reserve simply cannot be chalked up to ignorance. I’ll leave it to the reader to ascertain what the proper characterization of Ms Kelton’s assertion might be. That Scott Horsley of NPR, a long-time reporter there, would repeat her mis-characterization of the Fed without challenging it, as a journalist should do when dealt an obvious whopper, likely speaks to Mr Horsley’s motives and/or his own ideological blinders.

Now back to the topic of Modern Monetary Theory (MMT) and how it’s adoption by the Federal Reserve (the Fed) and the US Treasury via Congressional spending would (not “might”) fundamentally alter our entire financial system stability and the promise the US Treasury makes when other’s buy-up US debt instruments in order to fund US government deficit spending as envision by GND and MMT advocates.

To start one must understand the foundational difference of monetary policy versus fiscal policy. Monetary policy is generally consider the setting short-term interest rates to control the amount of liquidity in the banking system. In the longer term this serves to stabilize the US dollar’s value relative to foreign currencies by controlling inflationary growth. The Fed is supposed to carry out these rate actions independent of concerns or desires from the two political branches, Congress and the US President, and it generally does so for themes part.

On the other hand, Fiscal Policy is set by the US Congress via appropriations (spending) and authorizations to the US Treasury to borrow money (via sales of bonds, T-bills, etc). A current news topic lately is indeed the current “debt ceiling” authorized by Congress to the US Treasury to borrow to pay the bills is rapidly being approached again according to recent reporting on discussions between Speaker of the House Nancy Pelosi and Treasury Secretary Steven Mnuchin. But that’s another story, for another time.

The key point is the US Treasury must borrow (offer bonds/T-bills/notes to buyers at interest rates to attract them to the auctions with their money) to fund deficit spending as part the US Congress’s fiscal policy for the federal government. In the bond market where the Treasury operates everyday, the buyer’s demand a suitable rate of return on the money they lend to US Government. But without the trust that US government won’t just “start printing money” on wild spending demands from Congress, many lenders wouldn’t endure the risk and would walk away and put their money elsewhere to work for them. Those lenders that don’t walk-away will demand very high interest rates under the very real risk of high inflation/erosion of US dollar value compared to other currencies like the Euro, the Japanese Yen, etc. Such high interest rates to the US Treasury sales it would set in motion what is termed “fiscal dominance” at the Federal reserve. Fiscal dominance is where normal monetary policy of dollar stability, controlling inflation concerns are replaced by simply a re-write of the Fed charter by Congress to simply “assist the US Treasury in printing money.” In other words, the fiscal demands of paying for things like GND and Medicare-for-All overrides the normal monetary policy of dollar stability, thus the term “Fiscal Dominance” is very bad place for a government to find itself. As the downward spiral would be a trap that would be extremely painful to reverse.

Once the bond market’s confidence in the US Government’s “full faith and credit” is shattered by an adoption of MMT to pay for everything the Progressives want, high inflation will return to the US, just as it was in the late 1970’s economic malaise of “stag-flation”. Maybe even hyper-inflation if the economic insanity goes on too long. This is because any human run market is governed as much by human behavior and psychology as it is real values. Just look at how the crypto-currencies (Bitcoin, etc) undergo daily wild swings simply based on psychology for proof of that statement. And long-term values of the US dollar would be shattered by simply printing dollars, regardless of what useful idiots Ms Kelton, Bernie Sanders, or AO-C claim.

High inflation (and its worse form, hyper-inflation) rapidly destroys savings accounts as bank CD and money market interest rates do not keep up with the rising cost of living for those living on their fixed incomes and retirement accounts. This is how the Left intends on stealing the Trillions of dollars the US middle class has tucked-away in their IRA’s and 401k’s. They don’t need to change the laws on IRAs or 401k to actually taking the money via altered tax codes, that would provoke a vicious middle class backlash at the ballot box for Democrats. The Progressives simply plan on doing it by stealth, by adopting MMT which will destroy private retirement accounts’ values with high (hyper) inflation as they print Trillions of dollars without going to bond markets to pay for every socialist wish list item they can imagine to buy more political power, and leaving the Federal Reserve powerless to stabilize a plummeting US dollar value on the world’s currency markets.

This is exactly how Venezuelans were lured to support Hugo Chavez’s socialism for so many years as their country lurched towards the ruin it now suffers, by promising people free stuff while the government stole their future and their savings from Venezuela’s once vibrant middle class right under their noses. It was all fun and good times until they literally ran out of OPM (the bank accounts they were stealth stealing from essentially became worthless via inflation). It just happened faster in Venezuela than it would in the US because they had to borrow money in foreign currency. That the US has what many economists call a “fiat” currency doesn’t change that ultimate dynamic, it just would delay the outcome, and make a recovery from an MMT adoption catastrophe even harder than Venezuela’s will ultimately prove to be.

That Socialist Bernie Sanders openly admired and praised the Chavez government’s stealing their citizens’ futures is also why he embraced the economic theft of MMT for the US, as advocated by Ms Kelton at Stony Brook his campaign economic policy advisor in 2016. And it is now MMT that the economic illiterates like Congressperson Ocasio-Cortez (a Sander’s ally) also embraces to “pay” for their Green New Deal destruction of the US economy and work ethic … Venezuela-style.
Climate Change and the “green” policy prescriptions offered for it have not been about the “science” for several decades now. Climate Change is the economic vehicle by which progressive democrats and outright socialists like Sanders and AO-C intend to take-over the country. They are using irrational “climate crisis” fear-mongering on an ill-informed populace, promises of OPM-paid “free stuff” which thus they will drive the US into the dirt with all the misery, despair, and deprivation that socialism always brings. MMT is magical money drug that they intend to use to bring that destruction in the pursuit of their raw political power.

Joel O’Bryan, PhD
Tucson, Arizona

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Patrick MJD
July 17, 2019 10:36 pm

There are lots of documentaries around discussing MMT and how utterly wrong it is. Here is one;

July 17, 2019 10:38 pm

The problem with excessive magical MMT, especially a fraudulent one like thinking they can just throw money at a cause to magically change the weather somehow is that in the end, the correction is always equal and opposite to the deception that preceded it. Sort of like one of Newton’s economic laws, had he been an economist instead of a scientist. We still have to absorb a lot of the excessive money printing since the last 50+ years, especially incorporating a lot of the losses/costs of the 2008 economic meltdown and the expansion of the money supply and debts it generated. We are in better shape now with a healthier economy, but let’s not blow this rebound on catastrophic climate change policies.

Reply to  Earthling2
July 18, 2019 8:52 am

Here is the U.S. debt clock in real time

Do not even think about following the ideas of this lunatic theory and make the digits turn round even faster.


Reply to  tonyb
July 18, 2019 11:00 am

The debt clock shows the US isn’t paying its bills.

Reply to  Robertvd
July 18, 2019 11:51 am

yes and sooner or later people and countries always want their bills paid, normally at the most inconvenient time for the debtor


Reply to  Robertvd
July 18, 2019 11:57 am

Actually what the debt clock does is tell us how far from “the budget and income” we are moving. If we were not paying our bills our economy would collapse. How long we can keep borrowing is difficult to say and made more complicated with far left whacko academic supposed economists. Few people appreciate that just the interest on our national debt will soon exceed our military spending.

Reply to  Robertvd
July 18, 2019 4:00 pm

The debt is being paid as it matures. No need to start spreading groundless rumors.
The problem is that we are generating new debt faster than the old debt is paid off.

Piet Strydom
Reply to  Earthling2
July 19, 2019 5:20 am

Explain to me how Japan manages with a debt of 200% of GDP?

Reply to  Piet Strydom
July 19, 2019 8:45 am


Because japans debt is mostly owed internally to its own citizens.

Mind you there is a limit and if the panic spotlight were to be shone on Japan consistently then it might cause big problems


Al Miller
July 17, 2019 10:41 pm

Well said Joel. This truth needs to be shouted from the rooftops. I have been telling my children for some time that the war their generation will face, and I firmly believe it will be war, is f these nut bars are not stopped now. Should the climate scaremongers succeed in stealing power from the people there will be green hell to pay and it will take he blood of many people to right things again. Hopefully this does not come to pass, but I cannot help feeling that we have let our children down by not teaching them history at home, but instead let our “education system” and worse yet our universities indoctrinate them.

Rod Evans
Reply to  Al Miller
July 18, 2019 12:02 am

“The long march through the institutions” the policy advanced by the Frankfurt School Marxists/socialists has been running for three generations as they predicted it would. They knew, it would take that long to capture the control mechanisms needed to shape society as they desired it.
Media, Education, Academia, The Public Sector, the Security services, were all targets and all have been taken in by the “progressives” constant demand for change.
We have a lot of repairing to do before we find the common sense needed, for safe sustainable life.
Neither Venezuela, or Zimbabwe are examples anyone should regard as sensible economic options to follow.

Charlie Adamson
Reply to  Rod Evans
July 18, 2019 11:18 am

Excellent Mr. Evans! The Frankfurt School members, who have kept their Marxists/socialists/wet dreams of tyranny secret from the general population was indeed slipped into American society way back in the early 1900’s. That “School” was actually a huge experiment in applied research in propaganda and how to break the human psyche. That dream/nightmare extends way back to the likes of Stalin and others like him. WW II was in many respects a war between psychopaths set into motion by even worse people who most people would find to be sickening on many levels.

Most people I talk to have no idea what brainwashing is or how it works, let alone how it is carried out on people. They do not know that the human experiments carried out on people during the Third Reich WERE in fact real and a number of the experimenters survived to move to other countries including the United States.

The Frankfurt School Marxists set as their goal the systematic infiltration of societies throughout the world with America being their most prized “Ripe Peach” to infect and rot from within, so they set about their plan to infiltrate the very foundation of it’s society. What better way to do so than blending in with the “war refugees”? These along with the scientists that were brought over from Europe were welcomed to further the industrial complex that was born in America during the war effort.

Basically the more that I and others look into those who developed the Frankfurt School, the more dark it’s intentions appear. They HATED everything that the west and America demonstrated everyday during the war and beyond. The fevered dream of “Modern Monetary Theory” is but one more example a system of thought that cultivates the decay that is envy and entitlement and is at the core of Cultural Marxism.

It is good that you interjected this topic. It needs to be kept in mind today when dealing with the political environment all over the world. I have found that the Frankfurt School spread like a virus and it needs to be brought into the light of everyone’s awareness who has the strength and courage to handle what they discover.

Thank You.

Reply to  Al Miller
July 18, 2019 12:42 am

re: “Should the climate scaremongers succeed in stealing power from the people”

Heh. To borrow from HBO: “The man in the Green Castle …”

Craig from Oz
July 17, 2019 11:02 pm

“Without that trust, things might have turned out much different in the War of 1812…”

Yes, the White House might have been burnt down or something!

Reply to  Craig from Oz
July 18, 2019 3:26 am

I’m convinced the money changers didn’t want to win the war in 1812 by Britain. It was much cheaper to let ‘free’ people pay for conquering The West. Once the difficult part was done they took over again in 1913. Since then The People have been enslaved again in the direct tax system

Slavery was never abolished it just changed the way it looks.

Tom in Florida
Reply to  Robertvd
July 18, 2019 5:49 am

One of the vehicles of the take over was the passing of the 17th Amendment. Originally, U S Senators were chosen by the state legislatures to represent their State in the federal government. This was one of the many checks that were put in the Constitution to prevent centralization of power at the federal level. In 1913, under the guise of being more democratic, the 17th changed the way Senators were selected to a popular vote. This change allowed the special interests with loads of money to corrupt and influence those Senators who would become dependent on those special interests to be reelected. Without term limits we have seen Senators spend decades in their position without any allegiance to their State or its people.

Reply to  Tom in Florida
July 18, 2019 9:06 am

And also with no means to recall a senator. 6 years without recourse of the electorate.

Reply to  Robertvd
July 18, 2019 7:58 pm

The problem with MMT is that markets have a say.

July 17, 2019 11:10 pm

If someone has a dozen different policy initiatives, and what they all have in common is the destruction of the economy and impoverishment of the people, then at some point you have to start considering that this is the actual goal.

Izaak Walton
July 17, 2019 11:26 pm

How does quantitative easing fit into this? Between 2008 and 2014 the US Federal Reserve bought 4.5
trillion dollars worth of assets by essentially printing money. This did not cause run away inflation and
interest rates have remained at historical lows. Thus it is perfectly possible for the government to print trillions of dollars without there being any obvious ill-effects.

Reply to  Izaak Walton
July 18, 2019 12:51 am

Ever go shopping?
They lied through their teeth about inflation. Do you not remember the games they played?
1) Fixes to the CPI: The “basket of goods” was constantly getting “adjusted”.
2) Electronics were getting faster and more powerful, so the govt. said this was equivalent to the old product becoming “cheaper”. The “cheaper” price was used as a “proxy” for a whole raft of goods and services, and used as a wide chunk of the CPI. Shameless.
3) Housing prices, the 400 lb Gorilla. When prices went down, it was included. When prices went up, it was excluded, because not everybody buys a home every year, so it was not “relevant”.
Good Lord Above. How could anybody have missed this?

I am a chemist by training and experience. I have exactly 0.00% expertise in finance and economics, yet I was horrified by the abuses I was witnessing.
Someone who has real expertise in this area could greatly expand on my list, I am sure.
Interest payed by banks to savers cratered at less than 1.0%, and even threatened to “break”. That is to go negative! What was that all about? Perhaps an effort to maintain the spread between interest gained from loans and interest payed to deposits. The govt. puts down pressure on interest from loans, so interest to savers has to give ground. *BUT* if interest to savers goes negative, the system explodes.

Reply to  TonyL
July 18, 2019 1:24 pm

That’s how it works all right. It stinks. It cheats people on Social Security out of a righteous COLA. (Not that I want one – it’s an increase for the state, not the recipient because the state takes it from the poor immediately in triplicate through the various programs – Thomas Sowell calls it the highest tax rate of all:

Reply to  TonyL
July 18, 2019 1:32 pm

Another article on the Quality Adjustment Method. What they do to the numbers is fraudulent beyond belief.
“The successful functioning of the U.S. economy is incompatible with the continued application of the QAM. Introduced in 1967 by the financier oligarchy during Arthur Burns’s regime at the Federal Reserve, and spread by statisticians, it is set up to exclude anywhere from one-quarter to three-quarters of true inflation. It works from the continuous assumption that the quality of goods is improving: therefore, if the price of a product rose 10%, and the statisticians of the BLS claim two-thirds of the price increase was due to improved quality (the veracity of that statement will be explored below), the inflation of that product’s price is reported as only 3.3%

But this is only half the use of the QAM; it represents another major problem. As Lyndon LaRouche shows in this Feature, any accounting system that attempts to measure footprints of economic activity, rather than the transformative activity of human beings who make the footprints, has a fundamental problem.

The pricing results of the Quality Adjustment Method, once fabricated, are turned over the Commerce Department’s Bureau of Economic Analysis. The BEA makes the assumption that improved quality is the equivalent of increased output. So, if it is assumed that the quality of the product cited above improved by 6.7% per year, then the output is assumed to have increased by 6.7% (or more) per year. The BEA will apply this method to hundreds of products, and the increased output attributed to each of these products is added to Gross Domestic Product (GDP). That is a prime reason why real physical production is falling, but GDP is rising.

Further, the QAM is turned over to the Federal Reserve Board of Governors, which publishes the Industrial Production Index. The Fed uses the QAM to “increase” industrial production in a manner similar to the Department of Commerce’s hiking of GDP.

Therefore, the QAM is central in the calculation of three of the most important and closely-watched gauges of the economy: inflation, GDP, and industrial production. The fraud of pervades each of these three.
Exposing the QAM”

Joel O'Bryan
Reply to  Izaak Walton
July 18, 2019 12:52 am

Quantitative Easing (QE) was Bernanke’s using the Federal Reserve to “purchase” those U S Treasuries. This created demand, driving bond (30 year instruments) and notes (3-5-10 year instrments) prices up, and thus long-term interest rates were forced down even further. The Fed has a much more difficult time trying to control long-term rates, so Bernanke’s QE was the stick to do that.

The thing that helped prevent an inflationary trap under QE (a downward dive of US dollar to foreign currency) was the rest of the Western world (except Australia) was generally in an funk as well. Many European governments (Greece, Ireland, Portugal, and few others) were having to get bailed by the EU Central Bank as well. There was bad debt everywhere, and Central Banks everywhere were in stimulus mode. It was not just a Sub-Prime melt down in the US and the freezing up of liquidity in the US banking system, there was real central bank monetary policy pain everywhere.

The key though is what the Fed did with those QE Treasury notes and Bonds it purchased .
Starting October 2017, the Federal Reserve slowly began working that QE debt off its balance sheets as the Treasury instruments naturally retire at their maturity dates, and also slowly selling the QE bonds on the bond market a little at a time.

This is how the system must work if bond investors are to have faith the the US Government will maintain the value of the US Dollar, and not go off into inflationary hell of MMT. If this faith is shattered by MMT, all bets are off in the international finance mayhem and uncertainty that would unless on the world’s financial systems and foreign Central Bank operations.

No market likes uncertainty. And when uncertainty is high, fear is even higher. And fear would take over then in the bond markets with the world’s fiat currency government adopting the insane MMT to pay for free stuff for Americans. Free stuff that would be paid for not just on US savings accounts (IRA, 401Ks), but also on the backs of people in other countries (like Germany, Canada, UK, etc) who hold US Dollar-denominated debt. Thus everyone would dump US debt. And the downward spiral of the US economy would be almost impossible to correct at that point.

There can be no doubt this is what the Chinese and ultimately the Russians want; an emaciated US economy no longer able to afford a SuperPower first-class military and the power projection we now have. Thus China has every strategic motive to push the Climate Change hysteria.

Izaak Walton
Reply to  Joel O'Bryan
July 18, 2019 1:21 am

So do you agree that the Federal Reserve printed over 4 trillion dollars to buy assets
from the banks between 2008 and 2014 with no ill effects and in fact stopped a worse
economic collapse?

Which would suggest that there are some cases in which the government can in fact
print money to pay for things without there being serious adverse consequences? Hence
some aspects of MMT might be correct at least some of the time.

Joel O’Bryan
Reply to  Izaak Walton
July 18, 2019 2:14 am

If the Federal Reserve, under orders from new laws by Congress, had torn up (shredded) that $4.5 Trillion in QE Treasury paper, that would have de facto amounted to “printing money”.

There would have been no hiding that fact from the bond markets and investors. That would’ve destroyed the Faith in the US Government’s willingness to maintain the value of the US Dollar by investors.
Rational investors would then flee US Dollar denominated debt, even corporate debt denominated in US$. US corporations borrowing on the international market would have had to borrow in Euros or some other currency, driving their costs up quickly as the dollar goes into free fall.

QE was not printing dollars as long as the Fed plays by the accepted rules and it is now doing so by selling this debt back into market.

MMT would break those rules, and thus break the status of the US $dollar as a fiat currency. The result would be a downward spiral of the dollar igniting high/hyper inflation in the US.

Reply to  Joel O’Bryan
July 18, 2019 11:28 am

…sort of like Jimmy Carter and his Fed Chair pick in G. William Miller.

David A
Reply to  Joel O’Bryan
July 20, 2019 12:09 am

A good teacher says the same thing at least twice, and in simpler terms to some.

Izaak, did you get it?

Also the current tarrifs, and responses to those tarrifs are a contemporary factor in holding inflation in check.

Reply to  Izaak Walton
July 18, 2019 5:46 am

QE swopped long-dated assets for short-term liquid assets ( like cash) . No new money was created, that is widely misunderstood. The BIS and CBs in general are preparing the way for MMT to be introduced by wide spread use of negative interest rates. Negative interest rates acts on inflation ( ie creation of money) by destroying money. Imagine a system where nearly everything is electronic, no physical cash. 100% edollars at the start of the year could be made 0.97 edollars by the end through -3% interest rates. Physical dollars would be worth 3% less.
If $, Euro, £, Yen, etc were all doing the same, coordinated by the CBs ( like QE was coordinated) there would be no run on the $ because there would be nowhere to run to.
Its a frightening future, ordinary folk will have no control over their assets, completely dominated by the decisions of those controlling the edollar and the -ve rates.

Reply to  Izaak Walton
July 18, 2019 6:45 am

You have missed the point. While they did print money for a short time, they stopped, then started to pull back the money they printed.

MMT proposes to open the floodgates many times wider, and do it forever.

Reply to  MarkW
July 18, 2019 7:16 am

The difference now is the crypto alternatives. If fiat currencies are not to be truste, there are alternatives, and I don’t mean Trojan horses like Libra, which is really an attempt to make Facebook the sovereign.

Patrick MJD
Reply to  Joel O'Bryan
July 18, 2019 1:50 am

I think you have hit on what is called “The Big Reset”. The US $ will be replaced with another currency for world trade and anyone with US$ debt will return that to the US. People, I guess you could call them “Dooms Day Preppers”.

Reply to  Patrick MJD
July 18, 2019 4:57 am

For most of the last 3,000 years the world currency for trade was gold. It worked perfectly. The only people that don’t like it are central bankers and politicians.

Reply to  Izaak Walton
July 18, 2019 6:42 am

If 4.5Trillion doesn’t cause runaway inflation, then obviously 140Trillion won’t either.

William Astley
Reply to  Izaak Walton
July 18, 2019 1:18 pm

I am of the belief, that this time is not different. Many of those alive now have never lived in times of high interest rates that were close to being out of control.

20 years ago there was real thoughtful discussion of economic issues and the limits of printing more money, in the news, particularly PBS.

Printing money is a sign of out of control government, chaos.

The problem starts when governments are forced to cut spending because it is no longer possible to borrow more money. When it happened in the past, small countries with poorly run governments such as Italy and Greece start the crisis.

Reply to  Izaak Walton
July 19, 2019 5:27 am

Or explain how China and Japan has been following mmt and has kept inflation at or below 2% while growing their economies. China has already passed USA as the number 1 economy with purchasing power

J Mac
July 17, 2019 11:28 pm

Joel O’Brien,
Excellent financial analysis, with real examples for illustration of key points.
If Moron Monetary Theory becomes the financial fad du jour, we are in deep schist indeed!

Steve Richards
July 17, 2019 11:39 pm

A very good summary.

July 17, 2019 11:52 pm

Occasional Cortex

Never miss on opportunity for instant gratification you can make future generations pay for.

Chris Hanley
July 18, 2019 12:01 am

Shouldn’t that be Stephanie Kelton of Stony Broke University?

July 18, 2019 12:10 am

The greatest strength of a fiat currency is that it is not dependent on production. The greatest weakness of a fiat currency is that it is not controlled by production.

Once you get it through your head that this is not a paradox, you have a start on creating a sane monetary theory.

Leonard Charlap
Reply to  Writing Observer
July 19, 2019 1:25 pm

Actually WO, MMT is all about the relationship among fiat money, inflation and production. If any of the idiots writing comments here ever took the time to read what MMT actually says, they would realize that are talking nonsense. MMT says that a country that has fiat money can create money and send it to its private sector so long as the economy is not CONSTRAINED. By that they mean as long as the new money can increase production. If the economy is constrained, then either you stop spending or you increase taxes to take some of the money back out of the private sector, The purpose of taxes is to control the amount of money in the economy, not to raise revenue.

While prices are proportional to the amount of money in the economy, they are inversely proportional to production. So if adding money to the economy increases production, prices will not rise too high.

July 18, 2019 12:18 am

The postmodernists point out that there are infinite possible explanations for anything. Jordan Peterson points out that the vast majority of those explanations are not viable. So it is with the economy.

We know from experience that when the government prints too much money, inflation results. If it gets bad enough, you need a wheelbarrow full of money to buy a loaf of bread.

If there is underutilized productive capacity plus under-met demand, stimulus has been shown occasionally to work … maybe. Did WW2 spending actually end the Great Depression?

There’s plenty of evidence that economists are almost always wrong. MMT and Marxism and neo-liberalism and all the other schools are in some way defective.

My hunch is that renewable energy is a highly inefficient use of money and will result in poverty creation rather than wealth creation. The medieval kind of farming so beloved of the environmentalists will result in most people living like dark ages peasants.

I would contend that the whole of our modern wealth comes from our increased ability to efficiently create wealth due to fossil fuels.

It’s like the difference between us and chimpanzees. We invented cooking so we can do something productive rather than spending our whole lives chewing leaves just to survive. link Once you start considering the many things that affect economics, you fall into a bottomless rabbit hole. Cooking … who knew?

Reply to  commieBob
July 18, 2019 2:04 am

For those who want to learn economics.

Peter Schiff

Reply to  commieBob
July 18, 2019 3:39 am

“There’s plenty of evidence that economists are almost always wrong.”
commie Bob,
There is plenty of evidence that Paul Krugman is always wrong.

Joel O’Bryan
Reply to  KcTaz
July 18, 2019 8:58 am

Krugman has been objectively wrong so many more times than he’s been correct or even close to correct. Basically you can play the opposite of whatever Krugman claims and come out the winner -85% of the time.
He’s an embarrassment, yet it is quite fitting the NYTime keeps him on as an editorialist. They are after all fully into the “All the Fake News that fit to print” business model.

Reply to  Joel O’Bryan
July 21, 2019 12:36 pm

Contra Krugman: The Podcast that Refutes Paul Krugman’s column, week after week

John Tillman
Reply to  commieBob
July 18, 2019 4:07 am

Between late australopithecines and H. erectus were habilis-grade Homo species or subspecies, living from about 3.4 to 1.8 million years ago. It’s possible that some control and use of fire arose during this early interval in the human lineage.

Two of the three key mutations leading to increased brain size and linguistic ability occurred in this period of human evolution.

We know that late erectus-grade Homo used fire, whether capable of making it or not. Earlier H. habilis made crude stone tools, so might well have learned how to make fire as well.

Johann Wundersamer
Reply to  John Tillman
July 20, 2019 5:27 pm

Habilis not only “makes” fire. There’s 2 advances only Habilis possess:

– CONTROL of fire

– long-range weapons

Reply to  commieBob
July 18, 2019 6:48 am

There was plenty of deficit spending prior to the outbreak of WWII, it didn’t help.
What got the US out of the depression was government tearing up the vast regulations they had imposed on the economy in order to “get us out of the depression”.

Samuel C Cogar
Reply to  commieBob
July 18, 2019 7:59 am

commieBob July 18, 2019 at 12:18 am

We invented cooking so we can do something productive rather than spending our whole lives chewing leaves just to survive.

Yup ….. when our early human ancestors no longer had to spend all of their awake hours trying to evade being eaten by a predator and/or searching frantically for something to eat to keep from starving …… they then had enough “free” time to discover and invent things that greatly improved their health, wealth and longevity.

Dave Miller
Reply to  commieBob
July 18, 2019 9:59 am

Prometheus was an australopithecine!

Who knew, indeed.

July 18, 2019 12:22 am

A very nice summary, my compliments.
How well does the Fed hold price stability? Good question.
Want to buy a gallon of gasoline for 35 cents?
In 1972, the price of gasoline was floating around 29 -33 cents. the standard US currency was such that both dimes and quarters were both solid silver, 10 cents and 25 cents respectively. So a quarter and a dime would easily buy a gallon of gasoline.
The price of gas is up near $3.00, more or less a 10x increase.
So can you buy a gallon of gas with a quarter and a dime?
IF, IF, *IF* the quarter and dime are 1972 issue coins. The silver in the coinage held it’s value, the currency did not.
And that is how badly we have been getting ripped off.

Reply to  TonyL
July 18, 2019 2:18 am

Your basic premise is correct, but your dates are off a bit on the silver content of U.S. coinage.
The last general issue 90% silver coins were minted in 1964.

Reply to  Miles
July 18, 2019 5:48 am

That’s true but the coins continued in circulation until the Hunt brothers tried to corner the silver market in the 1970s. link At that point, every gram of anything silver was melted down and sold for its silver value. Silver coins quickly disappeared from circulation.

Reply to  commieBob
July 20, 2019 9:50 am

Not entirely… they occasionally show up in my pocket change, but it’s a very rare event.

Joel O’Bryan
Reply to  TonyL
July 18, 2019 2:21 am

The US Mint stopped producing full silver dimes and quarters in 1964.

That said, I am also NOT a fan of gold and silver IRA’s for reasons not related to inflation or the threat of MMT adoption.

Reply to  Joel O’Bryan
July 18, 2019 3:27 am


Why are you not a fan. I have some guesses but would like to hear what you have to say. What about actual gold and silver?

Reply to  Joel O’Bryan
July 18, 2019 4:50 am

True, my mistake.
Silver quarters and dimes were gone after 1964.

Reply to  TonyL
July 18, 2019 2:29 am

Exactly. The Private federal reserve has miserable failed to do its ‘job’ and should therefore be abolished.

Direct taxation also was a consequence of the enactment of the private federal reserve. It took liberty away because it gave those in power the right to know EVERYTHING about you which is unconstitutional.
Form 1040 tells you you are less than a slave and you do it voluntary.

Not snow but We The People is a thing of the past as long as Big (Brother) Government has all their unconstitutional power.

Reply to  Robertvd
July 18, 2019 3:32 am

“Form 1040 tells you you are less than a slave and you do it voluntary.”rt

I would say we do it sort of voluntarily. I wouldn’t call it voluntarily since, let’s fact it, we do it because a gun is pointed to our heads and a long jail sentence awaits if we fail to pay. Unless, of course, one is a favored politician or a friend of certain politicians, then, it is OK, it seems.

Reply to  Robertvd
July 18, 2019 6:43 am

Doesn’t sound like a free country

Why do you think they call it ‘ tax return’ ? Like the Patriot Act it’s never what the name may suggest. God only knows what will be hidden in the “Green New Deal” .

Hugh Mannity
Reply to  Robertvd
July 18, 2019 10:24 am

Lots of red: Ink, blood, communism, et al.

That’s what’s hidden in the GND. They’ve already admitted it’s not about saving the environment, but about creating a socialist “paradise”.

Samuel C Cogar
Reply to  TonyL
July 18, 2019 8:39 am

A $20 US gold coin contains 0.9675 troy oz of gold.

The current price of gold is $1,423.90 per ounce.

So, what you could purchase for $20 long time ago now costs you $1,377.62‬

Thus, I just hafta ask, just who has benefitted by/from that inflated $1,357.62 increase?

Gunga Din
Reply to  Samuel C Cogar
July 18, 2019 9:39 am

I was going to say something like that.

Put another way, imagine it’s 1900. One of your Great Grandpas hid $20 in the form of a $20 gold piece (They were used in circulation back then. They were not collectors’ items or investments.) in a desk.
Another did the same but he hid a $20 dollar bill.

You inherit both desks and find the money. The value to a collector aside, which find has more buying power?

The incentive to save has been killed. $20 dollars hidden in a desk today won’t have the same buying power 10 years from now.
Earn interest in a bank? Even if you earn interest the bank will take some of that buying power (rightfully) as payment for their service.

Samuel C Cogar
Reply to  Gunga Din
July 19, 2019 3:31 am

And the IRS and State Tax Authority will try to get “a piece of the action (interest)”

July 18, 2019 12:38 am

Several times, several different places, misuse of the apostrophe where none is needed; does Grammarly check for proper use of an apostrophe?

Awfully distracting for this pedant … (Words means things, and even though I am just a lowly engineer)

Reply to  _Jim
July 18, 2019 3:37 am

Jim, they do but you can’t really believe them. I’ve found them to be wrong numerous times and, then, I quit using them because they didn’t always work well with some web sites and interfered with functionality and not at all on some on which I really wanted to use them.
There is a new one I’m going to try out called Free Check.

July 18, 2019 12:47 am

Sustainability means handing on to our children no more debt than we ourselves inherited.

What the “Greens” intend doing is EXTREMIST and totally UNSUSTAINABLE.

Their whole idea is to borrow large amounts of money today to pay for crocodile tear green policies which they then intend their children to pay for … in an economy they wrecked by their crocodile tear policies.

If it were put before a script writer for James Bond as the plot of a film that the baddy wanted to destroy the whole economy of the western world and ensnare them in debt by creating a Climate Cult, it would appear so absolutely preposterous that it would never be considered. But Greens are happy to accept just that as their own political policy.

Reply to  Mike Haseler (Scottish Sceptic)
July 18, 2019 1:38 pm

The whole of government is a pyramid scheme that is unsustainable. It’s a pyramid scheme at the city, county, state, and Federal level. They are always adding more government employees, more government spending and more government programs. Trump is trying to reduce its size, but it’s going to collapse as all pyramid schemes do.

July 18, 2019 1:45 am

The basic problem with MMT is that it is answering the wrong question. “Money” is not the issue, it is what money represents. I can be say a doctor. I get paid say $100k for that. Printing another $100k doesn’t mean I can now be a windmill engineer as well. However much money we print, each person can only do one job and each piece of steel can only be part of one machine. If you use a person and a bit of steel in the Green New Deal you can’t use them anywhere else. Printing money doesn’t increase the supply of resources.

All it is is inflationary, with the illusion of increasing resources.

What makes us richer is doing more with less, not less with more.

July 18, 2019 2:01 am

The Bretton Woods 1944 conference layed out the post war monetary policy. During that conference John Maynard Keynes was repeatedly blocked by Dexter White. MMT is simply Keynesianism on steroids.

Just yesterday the French finance minister has seen the writing on the wall – Bretton Woods is simply dead, especially after Nixon fatally wounded it and Clinton dumped Glass-Steagall in 1999.

It is urgent to start a new Bretton Woods this time with the BRI countries onboard – a much bigger deal. At the same time Bretton Woods only functioned as Glass Steagall bank separation was in effect. Tump campaigned on Glass-Steagall (ironically Bernie too).

The attempt to use a New Bretton Woods for a Green New Deal is attempted mass suicide. Instead it must be used for a crash program, Manhattan style, with Hamiltonian banking methods, for fusion and the Moon. Main ingredient and product being Optimism, and a future without a lid over the head (as Collins put it), insead of the mass GND pessimism with no future.

The Four Horsewomen of the Apocalypse (Trump’s tweet) are indeed just that.

MMT and GND believers are the reason a shampoo bottle has a how-to. (heard this week…).

July 18, 2019 2:22 am

Both Keynes and Hayek (Austrian school) both were London School of Economics stooges. The attempt today to control the narrative with these battling Moe and Curly is becoming a spectacle.

Goldbugs (British Gold Standard, von Mises) slugging it out with “fiat” fanatics (British Keynes) hides the reality of the Gold Reserve System of FDR’s Bretton-Woods. FDR refused attempts at a British Gold Standard in the 1930’s setting up the RFC (ReconstructionFinanceCorp) based on Hamilton, likely noting the Specie Resumption Act catastrophe of the late 1800’s.

July 18, 2019 2:29 am

Modern Money Theory (MMT) – aka: MCCT ( Maxedout Credit Card Theory).

Gerry, England
Reply to  Alasdair
July 18, 2019 6:05 am

Magic Money Tree

Reply to  Gerry, England
July 18, 2019 3:24 pm

Exactly. Worstall tagged it years ago.

July 18, 2019 2:40 am

‘Secretary Hamilton brought discipline to the young US Government by ensuring war debts were paid to foreign governments. This earned the US government much needed international trust’

As long as the world was on a gold standard.

Now the world gets paid in worthless dollars. Why do you think prices go up. And don’t blame capitalism because we don’t live in a free market system. It’s all ‘big government’ controlled.

July 18, 2019 3:10 am

Thanks, WUWT!
This is an excellent article and one of the best explanations I’ve seen of the Socialist insanity of Sanders, AOC and the Democrats to date. I love how it explains the effects of their policies on the middle class and retirees and savers.
The great Socialist, Chavez, left his daughter over 4 Billion. Gee, I wonder how he made all that money while being a man “for the people”? Well, not really. It should be noted that his daughter, the richest woman in Venezuela, put all of that money in the US and Andora and got to all out of Venezuela and far away from the currency her father and Maduro devalued to the point that it is now so worthless, it is littering the streets of Venezuela.

Ewin Barnett
July 18, 2019 3:47 am

MMT is embezzlement by dilution similar to when a bar waters down the booze. But it is far worse because it enables the dangerous mirage the government can create wealth out of thin air. This leads to the attempt to have a government with no limits. That always leads to tyranny.

It also sends the moral signal that people do not need to be prudent with their own personal finances.

Reply to  Ewin Barnett
July 18, 2019 6:51 am

The purpose of government is to take money from those who work in order to buy votes from those who don’t want to.

Wiliam Haas
July 18, 2019 4:03 am

Stealing our money through inflation is still stealing and should be as illegal as bank robbery. The federal government is already very deep in debt and every year a higher portion of our tax dollars goes to servicing the debt. The federal government is already virtually bankrupt. Before the federal government can even consider something like the green new deal, the Federal government needs to pay off its debts and balance its annual budget. That may take many decades to accomplish. The United States must also stop the huge trade deficit and start running an annual trade surplus so that we can pay off our accumulated debts. So before the USA can consider any new spending programs the USA must get its own economic house in order which may take many decades at best. The first step the federal government needs to take is to decrease spending and start posting annual surpluses that will be used to pay down the debt and hence lower the percentage of our annual tax dollars that goes to servicing the debt.

The green new deal hopes to lower CO2 emissions by spending trillions on wind and solar, But even if the USA stopped using fossil fuels it would not stop the amount of CO2 in the atmosphere from increasing. If they were really serious about reducing CO2 emissions then they would all be in favor of gradually replacing ageing fossil fuel based power plants with nuclear power plants.

Even if they could stop the Earth’s climate from changing, extreme weather events and sea level rise would continue because they are part of the current climate. Rather than killing the economy we should be trying to improve the economy so as to be able to pay for infrastructure improvements that will helps withstand the ravages of extreme weather events. The socialism that they are talking about will kill the global economy resulting in billions of early deaths. There are better ways to decrease human population than through mass starvation.

The reality is that the climate change we have been experiencing is caused by the sun and the oceans over which mankind has no control There is no real evidence that CO2 has any effect on climate and there is plenty of scientific rationale to support the idea that the climate sensitivity of CO2 is zero. This is all a matter of science. So if the green new deal is fully implemented globally, and CO2 levels in the Earth’s atmosphere stabilize the climate will continue to change as it has for billions of years. The green new deal provides no real benefits to mankind.

holly elizabeth Birtwistle
Reply to  Wiliam Haas
July 18, 2019 3:55 pm

Right on Wiliam.

July 18, 2019 4:22 am

The big employers and merchant bankers are fully to blame. Filling the USA with cheap workers who live for the next giveaway is the epicenter of the rot.
The USA is now on a clear path to ruin.
As I say to my yank mates; get out while you can for the sake of your kids.

July 18, 2019 4:30 am

One of the reasons Bitcoin was created 🙂

Reply to  Derg
July 18, 2019 7:12 am

🔴Peter Schiff’s LIVE Bitcoin Challenge!

Reply to  Robertvd
July 18, 2019 3:10 pm

I lost respect for Peter after QE where he want on and on like a prepper about end of the world inflation.

July 18, 2019 5:07 am

AOC is a bimbo. I’m sure that she thinks money comes from the ATM. The more twaddle she and her bestie Bernie spout, the more convinced I am that he is not the only incompetent twit in the room. He’s simply one of many, and she is right behind him in line.
She has a degree in international economics? How did she manage that? Who did she snowball into giving her that? As dumb as she is about the world in general, and the fact that she’s doing what her “handlers” tell her to do, she has the lasting value of a wad of dried chewing gum.
However, the louder she and Bernie shout, the more aware we can be (if we so choose) of the damage they will cause. If she wants to turn a thriving economy into a cesspit, we need that awareness to push her right into failure.
Never take anything for granted. It’s too easy to lose what you value most.
Thanks for the article.

Reply to  Sara
July 18, 2019 6:51 am

As horrifying as it is, AOC graduated from Boston University. Well, some of us have considered BU to be hopelessly overrated for decades. Now we have firm empirical proof that a BU education confers negative educational value, a situation once considered impossible. It was always a debatable proposition as to whether an education could make you smarter. Now it is obvious that an education can make you dumber.
Her degree is two-fold – International Relations, and then, Economics.
The International Relations portion explains her chumming around with those vicious anti-Semites and Israel haters who are also part of AOC + 3.
The Economics portion explains her BFF status with the communist Bernie.
Word on the street in Boston is that AOC went by the name of Sandy Cortez. No need for Pretentious-First-Name Hyphenated-Last-Name.
Boston University has a lot to answer for with AOC.
There is a cautionary tale here as well. What if BU does the the Sciences that it has done to the Liberal Arts, which is producing graduates with negative knowledge? If BU produces Biology, chemistry, physics graduates with the same negative knowledge, within 10 years our modern high tech society will collapse into a near singularity then explode as the core goes Nova.
This is the true warning of AOC and Boston University.

Walt D.
July 18, 2019 5:07 am

‘The Congressional Excess Card”
Don’t leave home without it!

Clerk: “Will that be cash or charge?
General Custer: “Charge!!!”

John the Econ
July 18, 2019 5:16 am

Just more of the Progressive War on the poor and middle class.

July 18, 2019 5:16 am

A primer on what MMT is and is not, is an article by Karl Smith (descendant of Adam?) in National Review The Uses and Abuses of Modern Monetary Theory.  Article is at
My synopsis

GREG in Houston
July 18, 2019 5:32 am

Minor spelling error: “…when the US had to repeal the British Army from US soil once again…”. Should be repel

Reply to  GREG in Houston
July 18, 2019 6:33 am

Maybe they were trying to de-legitimize the British Army?

Gunga Din
July 18, 2019 5:33 am

I remember my teacher in my HS freshman Political Science class back in ’68 or ’69 saying that, “The beauty of deficit spending is that you owe the money to yourself.”
That didn’t make sense then. It doesn’t make sense now.

July 18, 2019 5:35 am

I don’t know about inflation. I do know that the value of money has decreased dramatically. For instance, in the 1950’s, a family could have a nice home and live comfortably off a single income. Today, in some areas both husband and wife have to work long hours to pay for place not much bigger than a hotel room. I have met many people who lived in New England, sold their home that they were able to buy when the value of the dollar was higher, move to one of the southern states and buy a bigger house with enough money leftover to significantly add to their retirement.

I don’t know about inflation. But if you ask me, I believe it has been massively understated and it is different for different parts of the country.

Hugh Mannity
Reply to  Wade
July 18, 2019 11:30 am

I’m in the process of selling my small (2 bed 1 bath) house in metro Boston and moving to Phoenix where I can buy a 3 bed 2 bath house for about 80% if the market price for my current house. And by way of a bonus, pay 1/3 as much in RE taxes.

I’ve been in my current house for 21 years — I’d have paid it off if I hadn’t replaced the roof and renovated the bathroom in the past 2 years. Oh well…

Michael Ozanne
July 18, 2019 5:37 am

Forward to our glorious tomorrow…

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The world has been here before… but this time the jew haters advocating national scale socialism are advocating economic destruction rather than profiting from it…

July 18, 2019 5:45 am

The more pertinent question is why AOC thinks the Green New Deal needs to spend all that money just to reduce carbon emissions by a gigantic amount. Electric cars are the obvious future and there is no need for govt to spend money for the transition of the fleet – it will occur naturally. As to power production, we already have 30% carbon free power via conventional nuclear and hydro. Disregard solar and wind – they aren’t needed or desired for the electrical grid. The future power will come from molten salt nuclear reactors and they can be built and installed very rapidly, practically anywhere. Less than a trillion dollars will build enough molten salt reactors to provide 70% of current demand plus the demand required by an electrical transportation fleet.
Voila! Obama spent two $trillion during one of his terms and accomplished nothing.

Reply to  ColMosby
July 18, 2019 6:51 am

It is not about creating carbon free power but about creating very expensive power. A former US president wanted it to sky rocket.

Martin Cropp
July 18, 2019 5:49 am

Who – what holds the current 22 trillion, and advancing by 1.2 trillion this year, and continuing to accelerate, USA debt.
Does the Federal reserve supplt-support any of that debt?

John Tillman
Reply to  Martin Cropp
July 18, 2019 6:54 am

Of total, 73% was public debt last year, of which 40% was owned by foreign investors and governments, for 29.2% overall.

Tom in Florida
July 18, 2019 6:02 am

Excellent article Joel. I would like your opinion on the current push for the minimum wage to be $15/hr.
In my view, that is nothing more than a SS take increase without the political pain of actually having to pass a tax hike. If everyone who currently makes less that $15/hr gets the pay increase, the federal government gets a massive influx of SS dollars. And that increase comes directly out of the pocket of all business owners. Not only do the businesses have to fund the wage increase, they must match the SS deduction taken from the employee. All without any increase in productivity or gross income to balance the new expenditure.

Reply to  Tom in Florida
July 18, 2019 4:46 pm

It will make everything you buy more expensive also for those people now earning 15 dollars. It will make it much more difficult to find a job for those without skills not worth the 15 dollars they cost. Many will lose their job and some businesses could even close or leave the country. So it will be a lose lose result.

July 18, 2019 6:36 am

<blockquote.and it generally does so for themes part.

“for the most part” perhaps?

Auto complete is killing ya dude.

July 18, 2019 6:41 am


Thanks so much for the overview. Well done. I’m having trouble understanding the connection between MMT and the devaluation of middle America’s savings. I mean, I understand that savings would be effectively wiped out by MMT, I just don’t understand how that equates to “theft” by the government.

I assumed that the devaluation is more of a Thanos-snap than a theft…all the wealth vanishing out of existence rather than being consumed by the government. Can you offer any additional insight into this so I can understand it better?



July 18, 2019 6:49 am

Get a better spell checker. So many misspelled words.

July 18, 2019 6:54 am

Joel’s summary starts with AOC’s statement about a concept that taxpayers pay “100% of government expenditure”.
Which reminds of Ludvig von Mises quip that if government can obtain all the funding it needs through the printing press, then taxation only exists to confiscate wealth. That’s from his weighty “On Human Action”.
With a bachelors in Geophysics I got into mining exploration and made some money on a stock deal. Rather than working in the bush I joined an investment dealer, more than 50 years ago. In the early 1970s I got interested in how the financial markets really work. Spent about 6 month reading economics. Wrong! This is essentially the history of ideas.
The history of financial markets is profound. Booms and busts. And on severe examples of the latter some intellectual will come up with the theory that more credit from some invented agency will make a credit contraction go away.
The 1618 Crash was severe with the hardship of high unemployment, Edward Misselden theorized that more credit would make it go away. The reckless banker, John Law, said as much in the early 1700s. Then the esteemed editor of the “The Economist” said the same thing in his “Lombard Street” published in 1873 at the height of that bubble. As usual the contraction was lengthy and in 1884, Brit economists began calling it the “Great Depression”. This lasted until 1896 and was still being analyzed as the “Great Depression” until as late as 1939. When intellectuals were at last diverted by the next Great Depression.
Then with the Post-1929 contraction, Keynes confected the same stuff as Misselden. Hayack has stated that Keynes was ignorant of financial history.
Market history records the big events, which recur.
Boom in commodities ( 1711 and 1929 are examples. Then a great bubble (1720 and 1929). There are four in between and the key commodity boom completed in 2008 and another great bubble seems to be completing at about a decade out.
All of the great bubbles were followed by lengthy contractions and high unemployment.
In setting yet more recurring patterns, all five of the great bubbles as they occurred in London peaked in May-June. After churning around in the summer, all, repeat all, crashed in the fall.
Financial market history was on the path to a magnificent bubble, which is being accomplished.
It now seems to be on the path to a classic contraction, the first step of which would be the sudden discovery of a liquidity problem after late August.
This will trash the current follies of central banking which is approaching MMT anyway. But such notions have been around since at least 1618.
Some of this history can be reviewed at

July 18, 2019 7:06 am

Evidently no one remembers when Germany printed excessive amounts of money to pay war reparations. Inflation got so bad it required a wheel barrow or more full of money to buy a single loaf of bread.

Gunga Din
Reply to  RHS
July 18, 2019 9:14 am

My step-Grandpa came to the US between WW1 and WW2.
He said he remembers when the price of a glass of beer went from 4000 marks to 8000 marks overnight.
Such conditions set the stage for the power struggle between the Russian backed Communist and the “home-grown” Nazis.
(I feel a “moderation” coming on.8-)

Leonard Charlap
Reply to  RHS
July 19, 2019 1:35 pm

Gosh, nobody here seems to know any history. Germany did NOT print excessive amounts of money to pay war reparations. You think the allies would have accepted marks in payment? They wanted gold which Germany did not have. The bill for financial reparations hung around until Hitler said, “Fogedda about it.”

During and right after WWI over 1,000,000 Germans died from starvation. Germany simply did not have enough arable land to feed its people and the allied sea blockade prevented it buying it elsewhere. Food prices went through the roof. Then there were reparations in kind which required Germany to send steel and cattle to France and the UK. But these were the only things that Germany was producing in any quantity. When Germany failed to send the steel, in 1923, France invaded the Ruhr and seized the steel mills. They forced the workers to work without pay and took the steel back to France. There was clearly no way to increase S. But people were starving. So the Weimar government began to print money. Of course, this raised prices further and we got 1,000,000,000 mark stamps. But it is important to note that inflation caused the printing of money. Then the printing of money caused more inflation.

History shows that hyperinflation is not caused by the excess printing of money, by excess government spending, but by some other factor. Then as prices rise, governments do begin printing money, usually because its citizens are starving, but the economy is constrained so this exacerbates the inflation. Let’s look at some examples:

In 1972, the anchovy harvest off the coast of Peru failed. Since anchovies form one of the principal component of livestock feed, ranchers had to buy other food like corn & wheat to feed their valuable stock. This shortage raised the price of food worldwide. Then we had the oil embargo which not only raised the price of all products made from oil, but more generally of all products that had to be transported. Adding more money to the economy would not have increased production and just would have raised prices even further.

In Venezuela, oil was practically their only product. When the price of oil fell 60%, S fell correspondingly, and they got instant hyperinflation which they exacerbated by printing more money.

In Zimbabwe, the farms were taken from those who knew how to run them and given to those who didn’t. S fell, and printing more money could not increase it.

And so on.

Leonard Charlap
Reply to  Leonard Charlap
July 20, 2019 6:07 am

I forgot to say that S is production.

Reply to  Leonard Charlap
July 20, 2019 8:36 am

My mind must have made all that up about ‘wheelbarrow loads of marks to buy bread’ then.

Why not cite as being in error the poorly written history (in text books) we were force-fed instead?

Leonard Charlap
Reply to  _Jim
July 20, 2019 9:35 am

How am I supposed to know how you learned all the false stuff you know? You might have made it up.

Try google before commenting.

Anyway you seemed to have missed my main point that the Weimar inflation was not CAUSED by the excessive printing of money. Excessive amounts of printing was done in response to inflation caused by the shortage of food. That caused further inflation.

Reply to  Leonard Charlap
July 20, 2019 9:59 am

re: Leonard Charlap

“How am I supposed to know how you learned all the false stuff you know? You might have made it up.”

Because I’m telling you; I don’t have ‘a dog in the race’; when it comes to a German inflationary period after WW1 and before WW2 so it makes no difference to me. The argument you have, therefore, is the HISTORY as WRITTEN by others and NOT my recall or REPRESENTATION of same.

“Try google before commenting.”

Non-sequitur; Google does not access my memory, man; I recall IMAGES from the damned TEXTBOOKS, man.

“Anyway you seemed to have missed my main point that the Weimar inflation was not CAUSED by the excessive printing of money. Excessive amounts of printing was done in response to inflation caused by the shortage of food. That caused further inflation.”

At this point, I think you are in error on all this. Change my mind; Cite some “period” articles translated from original German or something … At the moment, and for the time being, you are coming off as a “goof ball”.

Leonard Charlap
Reply to  _Jim
July 20, 2019 11:57 am

I am not sure what you doubt. That a million Germans died from starvation? That Germany had to pay reparations in kind? That Germany productive capacity was ruined by the war especially in regards to food?

I thought we were talking about MMT. It says that if you create money when the economy is constrained, that will cause inflation. I am saying that Weimar is an example of this, not a counterexample to MMT.

Also I said Germany printed money anyway because it had an humanitarian crisis. People were starving.

You claim of “wheelbarrows full of money” in no way contradicts any I said. What does contradict history is that Germany printed money to pay the financial reparations. The Treaty of Versailles (signed in 1919) and the 1921 London Schedule of Payments required Germany to pay 132 billion GOLD marks in reparations to cover civilian damage caused during the war. They could not PRINT GOLD marks. In 1933 Chancellor Adolf Hitler cancelled all payments. They had only paid about 19 or 20 billion marks at that point.

There are tons of references. A standard is Boemeke, Manfred F.; Feldman, Gerald D. & Glaser, Elisabeth, eds. (1998). Versailles: A Reassessment after 75 Years. Publications of the German Historical Institute. Cambridge University Press. ISBN 978-0-521-62132-8. Look at page 424.

Parth Trivedi
July 18, 2019 7:43 am

The problem with this article is that IRAs and 401Ks would not decrease in value during inflation. On the contrary, they would increase in value, because inflation is a general increase in prices. Most of the holders of financial assets are the wealthy and old. Meanwhile, the poor and young earn cash wages and have most of their savings im cash with little to no assets. Therefore, they would lost their purchasing power and the value of their savings as a result of inflation.

Tom in Florida
Reply to  Parth Trivedi
July 18, 2019 2:32 pm

Of course they would decrease in value. The monetary amount would be the same but the value of that monetary amount would decline.

July 18, 2019 8:29 am

Deficit spend all you want. The Net Interest was $240 Billion in 2016. It could be $500 Billion in 2020, nearly 100% increase in 4 years.

Mask everything else, but Net Interest payments will eat up the budget and crowd out all the feel good programs very quickly.

John the Econ
July 18, 2019 9:57 am

Someone should point out to AOC that when the Weimar Republic tried this, they ended up with the real Hitler.

Leonard Charlap
Reply to  John the Econ
July 19, 2019 1:36 pm

Hitler was in Jail. He came to power in 1933 after the start of the Great Depression which was DEFLATION, not INFLATION.

July 18, 2019 10:59 am

Republicans and the few responsible Democrats in the House have been trying to broadcast the seriousness of the Debt Crisis all summer (a real potential country killer…and world economy killer).

The MSM easily kills this communication effort by simply ignoring the issue…no coverage…no discussion. The press will be the economic death of us…and is working 24/7/365 to destroy our basic freedoms. Anyone not fighting the press today is unAmerican.

Crucially, Trump has not been directing any energy (Tweets, etc.) on behalf of this critical issue. It’s not a fun issue to run on…telling parasites that they will have to back off…telling producers that they will be asked to pay more…telling predators that their prey is broke. A Trunp second term would open the door for some real action, but I’m not optimistic. If the Democrats win…you’d best find some acreage to grow some survival food on.

The profligate Democrats love the prospects of an economic collapse. They (foolishly) see the coming economic collapse as a great opportunity for taking over power with false promises of a GRAND SOCIALIST RECOVERY. Of course, this will only prolong the misery nearly forever…just like the Roosevelt New Deal prolonged the Great Depression by a decade (saved by a bloody war).

Steve S.
July 18, 2019 12:43 pm

The connection between MMT and socialism is tenuous at best. MMT actually acknowledges the connection between budget deficits and inflation and therefore interest rates. What the MMT “experts” fail to recognize is the importance of productivity and productivity growth. There is a canyon of difference between borrowing money to enhance productivity and borrowing money while stifling productivity.
MMT is probably, for the most part, correct. The mistake is thinking that it can be used to justify reckless economic policy

holly elizabeth Birtwistle
July 18, 2019 1:56 pm

The only thing I would add to your thorough explanation Joel, is that AOC, Sanders, possibly Pelosi and Schumer, Trudeau, Macron, and many other ‘leaders’ are Globalists. They are not Democrats, Liberals (Canadian government) etc. They are supporters and promoters of the UN’s (and EU’s) efforts to control humanity through one or two ‘world governments’. It is the latest default to Tyranny and Oppression that is humanity’s entire history, until Freedom and Democracy came along recently. As jefferson said,” the Price of Freedom is Vigilance”. Globalists, as all other Tyrants before them as well as present-day dictators, do not trust citizens of countries to ‘do what Globalists think is best for the planet’. Hence, always through deception, they plot and strategize how to gain power, because they couldn’t persuade anyone used to individual freedom to go along with their plan to re-take power from citizens and have it only in government.
I agree with you that ‘climate change’ is the main vehicle that Globalists are using to transfer wealth to fund their Globalist Agenda of ‘sustainable everything’ to ‘save the planet’ from Humanity. Trudeau can’t open his mouth without mentioning ‘climate change and emmissions’, and his government bought a proposed pipeline owned by private industry – so that it would never be built, while pretending he is going to get it built. At the same quashing all other proposed new pipelines in Canada by supporting environmentalists/Indigenous objections. Any amount of deception is justified to Globalists – because they see themselves as more knowledgable, competent, and morally superior to ordinary citizens.

July 18, 2019 3:01 pm

For years now, I have been wanting to get a few thousand Zimbabwean million dollar bills (billion dollar bills would be acceptable, too) and hand them out in poor neighborhoods, on buses, etc.

Who wants a million dollars?

To teach them that what they really want is goods and services–and somebody has to produce those.

When producers can keep more than half of what they make (80% is better), then there is abundance for everybody.

Linda Goodman
July 18, 2019 7:41 pm

Clean energy is an imaginary carrot and eco-totalitarian world government is the goddamn stick! The fascist green new deal is insane but everyone’s covering it like it’s not. It’s like the emperor’s new clothes without the little boy, so on and on it goes with no end in sight. Fu@king Clownworld!

“The prospect of cheap fusion energy is the worst thing that could happen to the planet.” – Jeremy Rifkin, New York Times journalist on climate change

“Giving society cheap, abundant energy would be the equivalent of giving an idiot child a machine gun.” – Prof Paul Ehrlich, Stanford University

“Complex technology of any sort is an assault on human dignity. It would be little short of disastrous for us to discover a source of clean, cheap, abundant energy, because of what we might do with it.” – Amory Lovins, Rocky Mountain Institute

Robert of Texas
July 18, 2019 9:37 pm

The entire idea “printing money” is a form of taxation. Instead of a real, durable good that has some intrinsic value you have a piece of paper that represents virtual value. Since inflation of at least 2% is the goal of the FED, your printed money is constantly devalued – a form of tax.

What the brilliantly stupid people who believe you can just print more money do not get – this is also a taxation on anyone that holds wealth in the form of printed money or its electronic equivalent. Sure you can print money and devalue the money already out there, but that hurts the poor and middle class, but not the rich who own real properties like companies.

So instead of taxing the “rich” to pay for their grand new deal, they tax the middle class and poor. The poor do not need to worry as they will become the most powerful voting block (given democrat policies) and therefore will get increased subsidies, which yes are payed for by the remaining middle class. Given a few years to work its magic, and you now have a lot of poor, very few middle class, and a few inordinately rich people – i.e. you have reproduced any South American country’s demographics.

Now the poor rise up, insist on socialism to take more from the rich, the rich flee, and you have Venezuela. Yeah, go idiots!

David Wright
July 19, 2019 12:13 am

Good article. Except for all the typos. The typos will allow opponents to dismiss it as badly written nonsense. Why didn’t you proof read it?

Leonard Charlap
July 19, 2019 1:59 pm

Virtually nobody posting here has any idea what MMY really says and that certainly includes Joel O’Bryan, Ph.D.. What don’t you guys save your pennies and buy “Macroeconomics” by Mitchell, Wray, & Watts. It’s an introductory college level economics text so it should strain your brains too much.

I’ve thrown in a few random comments, but it is far too much to try and correct all the nonsense being written here. Let me just try to explain to DOCTOR O’Bryan what Prof. Kelton meant.

When I was young, the Treasury could print money so its job was to insure that its checks did not bounce. But in 1973 or 4 (I forget which), Congress took that ability away so only the FED could create money outside the private sector. There is no limit on how much they can create although it may or may not be a good idea to do so. Then it became the FED’s job to make sure the checks do not bounce by buying Treasury bonds as needed.

As for the FED’s independence, here is what the FED says on its WEB Site:

“There are three key entities in the Federal Reserve System: the Board of Governors, the Federal Reserve Banks (Reserve Banks), and the Federal Open Market Committee (FOMC). The Board of Governors, an agency of the federal government that reports to and is directly accountable to Congress, provides general guidance for the System and oversees the 12 Reserve Banks.”

So by a simple act of Congress, the whole FED system could be redone.

Leonard Charlap
July 19, 2019 2:05 pm

I doubt if anyone here is interested in what MMT really says, but here is a very brief description:

One of the myths that leads any discussion of taxes astray is the idea the taxes pay for government operations. If someone proposes a federal government program, the first question asked is, “How do we pay for it?” This idea is believed by practically everyone. In fact, so thoroughly do they believe in it, they never offer any facts or even arguments to support this belief. “Everybody knows!” I understand that they believe this because it is true that they must pay for the stuff they buy. This belief, however, is responsible for not only many of our economic problems today but has been responsible for the economic disasters of our past.

Let me offer the history which supports my last sentence. The US has had 6 real depressions–6 or more quarters when the per capita GDP decreased. Every single one of them was preceded by a period of “fiscal responsibility.” By this I mean that like a responsible family, the government spent no more than it took in, and significantly (10% or more) paid down the national debt. In fact, it works the other way, too. Every period of “fiscal responsibility” has been followed by a real depression.

The reason these “kitchen table” economic ideas are wrong for the federal government is because there are two significant ways the finances of the government differ from our family finances.

The first is that (through the FED) the federal government can create as much money as it needs out of thin air. I am fond of saying that the US government will run out of money the day after the NFL runs out of points. Unless you have a printing press in your basement, you cannot do this.

The second is that we need money to conduct commerce and so the banks can make loans. Furthermore, as the economy grows, we need more and more money. Where does the money come from, and how does it get to us? Why, it comes to us from the federal government, and we get it when the government spends money and does not take all the money back by taxation, i.e. when the US government has a deficit. So federal deficits are usually necessary (but perhaps not sufficient) to avoid financial disasters.

Because of the first fact, the government does not need your money to pay for government operations. It has an infinite supply. We do have to be careful since too much money chasing not enough stuff will cause prices to go up. We may get excessive inflation. Well, one way to avoid that is for the government to take some back, to tax it back. We may not, however, have to have high taxes.

(Let me make a parenthetical remark. In the interest of brevity I have neglected the issue of federal borrowing. There is really no need for the federal government to borrow. In fact as one economist has said,”Treasury bonds are just a service of the government that provides risk free savings.” So in what follows, you should probably think that the federal deficit is the amount of money created minus the amount taken back by taxation.)

It is certainly true that prices are proportional to the amount of money in the economy, but they are also inversely proportional to the amount of stuff we can produce. In terms of algebra, there’s this little equation:

P = (MV)/S

where P is prices , M is the amount of money in the economy, V, the velocity of M, measures the frequency that money changes hands usefully, and S is the amount of stuff, goods and services, we can produce in some time period.

If we spend the new money in a way that facilitates more production that will yield more money chasing more stuff which does not lead to excessive inflation.

Why is this important?

Using the “kitchen table” ideas, if we want free child care and it costs $X, then we have to tax or borrow $X dollars to pay for it. If we use the way the finances of our government actually work, we have to see how much free child care would increases our production which is probably quite a bit since it would allow more people to work. When we do the figures, it may turn out that if we have to raise taxes at all, it may be a lot less than $X.

The point is that we are asking the wrong question. “How do we pay for it?” The right question is “How much will it increase the value of our production?

There are occasions when money creation of any kind will cause unwanted inflation. If the economy is constrained, if there is no way to increase production, the increasing M will not increase S as it usually does. For example, during and after WWI, the German economy was constrained by the allied sea blockade and the lack of arable land. Over one million Germans died from starvation during this period. Then the economy was further constrained by reparations in kind in which Germany was forced to send much of what it did produce, mainly steel and cattle, to France and the UK. Prices were rising rapidly. In the midst of this humanitarian crisis, the Weimar government decided to print a lot of money which led to further inflation. But the important fact to note is that like most (all?) cases of hyperinflation, the initial cause of the hyperinflation was not the excess printing of money. The excess printing of money was caused by the initial inflation.

Today our economy is not constrained, so the federal government could spend a lot more money. If this money is spent in such a way that it goes to the people who need it and will spend it and not to the people who do not need it and will use it to specute, not only will will production increase and prices not rise too much, but wealth inequality will be reduced.

So, we see that the main purpose of taxes is not to raise revenue, but to control the amount of money in the economy to avoid excessive inflation. Taxes can also have side benefits. A carbon tax would help combat climate change. A wealth tax as Senator Warren proposes would reduce inequality which is bad for the economy since the Rich spend less and speculate more, but that is a topic for another discussion.

Reference: Balanced Budgets and Depressions

Thayer, Frederick C., The American Journal of Economics and Sociology, Vol. 55, No. 2

“… since 1791, there have been six significant economic depressions among the innumerable “business cycles.” Each sustained period of budget-balancing was immediately followed by a significant depression. There are as yet no exceptions to this historical pattern.

This is the record of six depressions:

1. 1817-21: in five years, the national debt was reduced by 29 percent, to $90 million. A depression began in 1819.

2. 1823-36: in 14 years, the debt was reduced by 99.7 percent, to $38,000. A depression began in 1837.

3. 1852-57: in six years, the debt was reduced by 59 percent, to $28.7 million. A depression began in 1857.

4. 1867-73: in seven years, the debt was reduced by 27 percent, to $2.2 billion. A depression began in 1873.

5. 1880-93: in 14 years, the debt was reduced by 57 percent, to $1 billion. A depression began in 1893.

6. 1920-30: in 11 years, the debt was reduced by 36 percent, to $16.2 billion. A depression began in 1929.

The question is whether this consistent pattern of balance the budget-reduce the national debt-have a big depression is anything other than a set of coincidences. According to economic myths, none of these sequences should have occurred at all. How on earth, for example, could we virtually wipe out the national debt in the mid-1830s, then fall immediately into one of the six recognized collapses in our history? …”

Gunga Din
Reply to  Leonard Charlap
July 20, 2019 1:33 pm

“MMT could be used to pay for the Green New Deal”

So AOC is a genius after all?

PS My kitchen table and kitchen it is in is paid for.

Leonard Charlap
Reply to  Gunga Din
July 20, 2019 2:04 pm

Did you print the money you used to pay for the kitchen and the table therein?

Gunga Din
Reply to  Leonard Charlap
July 20, 2019 2:45 pm

If I did then my “room” wouldn’t be a kitchen and I’d be pretty depressed. 😎

Gunga Din
Reply to  Gunga Din
July 20, 2019 3:58 pm

But my kitchen was in my PS.

““MMT could be used to pay for the Green New Deal”

So AOC is a genius after all?”

When asked how she’d fund the GND, one of her early of many answers was, “Just pay for it.”
Her degree is in economics. Are talking about genius or tulips?

Leonard Charlap
Reply to  Gunga Din
July 20, 2019 4:44 pm

Please focus. I have been trying to talk about MMT, not AOC. You may want to consider my comment a little above these where I point out that “How do you fund it?” Is the wrong question to ask, Actually since the we have a fiat currency, AOC’s answer makes perfect sense since the government can just create as much money as it needs. A better question is ,”How much inflation will the new funds cause?” A still better one is “How much of an increase in production will the GND and its funding cause?”

But perhaps you may prefer to talk about your kitchen. What kind of counters does it have?

Gunga Din
Reply to  Gunga Din
July 21, 2019 12:26 pm

AOC only wants to apply what you and MMT proposes.
Including not letting the people who earn it keep but rather giving it (via the Robbing Hoods in Big Government) to those who don’t want to work.
(No wonder they “need” it!)
Great way to “produce” votes!

PS I remember Obama claiming, “You didn’t build that.” Was he a proponent of MMT?

Leonard Charlap
Reply to  Gunga Din
July 21, 2019 12:32 pm

I don’t see any need to reply to mindless boilerplate that has no place in a discussion of the economics of MMT.

Gunga Din
Reply to  Gunga Din
July 22, 2019 2:58 pm

I’ll take that as a “yes”, they are inline with MMT but I can’t defend the actual application of the theory.

Johann Wundersamer
July 20, 2019 5:47 pm

At the beginning of the interglacial gold literally lay openly accessible under every tree root. It was only useful to hold flapping tent ends. With each pharaoh’s tomb, gold disappeared under the soil, the rest disappeared into vaults.

At some point, the gold standard had to prove as illusory. As a real benchmark today government bonds are fitting. And nothing else.

July 21, 2019 12:23 am

Damn glad I don’t have much time left, according to that clock, I’m 224,000 dollars in dept!

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