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The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy Hardcover – Illustrated, June 9, 2020
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The leading thinker and most visible public advocate of modern monetary theory -- the freshest and most important idea about economics in decades -- delivers a radically different, bold, new understanding for how to build a just and prosperous society.
Stephanie Kelton's brilliant exploration of modern monetary theory (MMT) dramatically changes our understanding of how we can best deal with crucial issues ranging from poverty and inequality to creating jobs, expanding health care coverage, climate change, and building resilient infrastructure. Any ambitious proposal, however, inevitably runs into the buzz saw of how to find the money to pay for it, rooted in myths about deficits that are hobbling us as a country.
Kelton busts through the myths that prevent us from taking action: that the federal government should budget like a household, that deficits will harm the next generation, crowd out private investment, and undermine long-term growth, and that entitlements are propelling us toward a grave fiscal crisis.
MMT, as Kelton shows, shifts the terrain from narrow budgetary questions to one of broader economic and social benefits. With its important new ways of understanding money, taxes, and the critical role of deficit spending, MMT redefines how to responsibly use our resources so that we can maximize our potential as a society. MMT gives us the power to imagine a new politics and a new economy and move from a narrative of scarcity to one of opportunity.
- Print length336 pages
- LanguageEnglish
- PublisherPublicAffairs
- Publication dateJune 9, 2020
- Dimensions6.6 x 1.35 x 9.7 inches
- ISBN-101541736184
- ISBN-13978-1541736184
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Editorial Reviews
Review
"Stephanie Kelton is among the most prominent of the dozen or so economists associated with MMT. Her new book The Deficit Myth is intended to bring MMT to a broader audience. In addition to an impassioned call for a bigger, more active public sector, The Deficit Myth contains a number of distinct economic arguments."
―The American Prospect
"Clear and vigorously written book."―Foreign Affairs
"She has succeeded in instigating a round of heretical questioning, essential for a post-Covid-19 world, where the pantheon of economic gods will have to be reconfigured."―The Guardian
"Kelton and her colleagues have brought a great many non-economists into the economic conversation in a way that no other contemporary branch of heterodox economics has been able to....[Sh]e's dead right about a central political fact of our times: A large, active public sector is more needed today than ever, and unfounded fears of public debt are a big reason we haven't gotten it. Which means her eloquent, accessible book is performing an important public service."―The American Prospect
"Kelton certainly offers food for thought at a time when governments are spending eye-watering sums to mitigate damage from the coronavirus pandemic."
―Spear's Magazine
"The big thing she gets right is in the way she structures her book around our current beliefs. In addressing our current understanding of how the world works - interpretations she identifies as myths - Kelton leads us step-by-step towards a new understanding of how federal spending works."―Inside Higher Education
"Stephanie Kelton convincingly overturns the conventional wisdom that federal budget deficits are somehow bad for the nation. ...Kelton argues that our government's inability to provide for citizens isn't due to a lack for money; instead, our leaders lack political will."―Farhad Manjoo, The New York Times
"The Deficit Myth is simply the most important book I've ever read. Stephanie Kelton carefully articulates a message that obliterates economic orthodoxy about public finance, which assumes that taxes precede spending and deficits are bad. Kelton's work is on a par with the genius of DaVinci and Copernicus, heretics who proved that Earth revolves around the sun."―David Cay Johnston, recipient of the Pulitzer Prize, an Investigative Reporters and Editors Inc. Medal, and the George Polk Award
"A remarkable book both in content and timing. A 'must-read' that is sure to influence many aspects of policymaking going forward."
―Mohamed El-Erian, chief economic advisor, Allianz
"In a world of epic, overlapping crises, Stephanie Kelton is an indispensable source of moral clarity. Whether you're all in for MMT, or merely MMT-curious, the truths that she teaches about money, debt, and deficits give us the tools we desperately need to build a safe future for all. Read it--then put it to use."―Naomi Klein, author of On Fire: The Burning Case for a Green New Deal
"Kelton's game-changing book on the myths around government deficits is both theoretically rigorous and empirically entertaining. It reminds us that money is not limited, only our imagination of what to do with it. After you read it you will never think of the public purse as a household economy again. Read it!"
―Mariana Mazzucato, author of The Value of Everything: Making and Taking in the Global Economy
"The Deficit Myth is a triumph. It is absorbing, compelling, and--most important of all--empowering. Embracing a well-researched framework that focuses on how real-world economies actually operate, she lays out a realistic path to true economic prosperity. It is an approach that focuses on Main Street and not Wall Street and will permit us to not only revitalize the struggling middle class, but address critical social problems like chronic unemployment, poverty, health care, and climate change. We of course face many binding constraints on our ability to act, but Kelton argues that the intentional underemployment of our own resources that results from the pervasive influence of deficit myths should not be one. We have needed this book for a very long time. Everyone should read it, and then reread it, before it is too late to change course."
―John T. Harvey, professor of economics, Texas Christian University
"Kelton's mission in this powerful book is to free us from defunct orthodox thinking about fiscal deficits rooted in the bygone era of the gold standard. Her theoretical canvas is modern monetary theory. At its core MMT offers a simple proposition: In a fiat currency world, the finances of we the people ain't the same as a summing up of our individual budget constraints, because we the people can't go broke, only deficit-spend our collective self into inflationary excesses. In the prevailing era of too-low inflation, the macro policy implication should be obvious: We the people presently have far more fiscal space than the deficit scold, pay-for crowd preaches. Kelton is a gifted writer and teacher and I confidently predict that The Deficit Myth, brilliantly written and argued, will become the defining book on what MMT is--and what it is not."―Paul Allen McCulley, retired managing director and chief economist, PIMCO, and senior fellow, Cornell University Law School
"Clear! Compelling! Eye-opening and persuasive, The Deficit Myth is an adventure in the world of budgets, jobs, trade, banking and--above all--of money. With the great force of common sense, Stephanie Kelton and the MMT team have broken through the closed circles of so-called sound finance, a stale orthodoxy that has weakened and impoverished us all. This book shows how they did it, and it blazes a path forward, toward a better world built on better ideas."―James K. Galbraith, The University of Texas at Austin
"A robust, well-reasoned, and highly readable walk through many common misunderstandings. A 'must-read' for anyone who wants to understand how government financing really works, and how it interplays with economic policy."
―Frank Newman, former deputy secretary of the Treasury
"[A] provocative, engaging, and thoroughly readable new book on modern monetary theory, economic policy, and job creation...Kelton... does a masterful job of challenging conventional wisdom with new facts, trends and data. You may not end up agreeing with her, but Kelton most certainly will make you think."―Larry Gennari, Boston Business Journal
“I really can’t recommend it (or time with the kids, for that matter) highly enough. It’s one of those books that seems counterintuitive until it suddenly clicks, after which it seems obvious. And if it’s broadly correct, which I think it is, then we have a much larger world of political possibility than we realize.”―Matt Reed, Inside Higher Ed
About the Author
Kelton was chief economist on the U.S. Senate Budget Committee (minority staff) and an advisor to Bernie Sanders's 2016 and 2020 presidential campaigns. Kelton is a regular commentator on national radio and television and speaks across the world at large gatherings of people interested in global finance, political economy and public policy. She has superb connections in all areas of print and broadcast national media. Her op-eds have appeared in The New York Times, The Washington Post, The Los Angeles Times and Bloomberg.
Product details
- Publisher : PublicAffairs; Illustrated edition (June 9, 2020)
- Language : English
- Hardcover : 336 pages
- ISBN-10 : 1541736184
- ISBN-13 : 978-1541736184
- Item Weight : 1.2 pounds
- Dimensions : 6.6 x 1.35 x 9.7 inches
- Best Sellers Rank: #82,477 in Books (See Top 100 in Books)
- #57 in Economic Policy
- #70 in Money & Monetary Policy (Books)
- #97 in Theory of Economics
- Customer Reviews:
About the author

Stephanie Kelton is Professor of Economics and Public Policy at Stony Brook University. She was formerly Chief Economist on the U.S. Senate Budget Committee (Democratic staff). In addition to her many academic publications, she has been a contributor at Bloomberg Opinion and has written for the New York Times, The Los Angeles Times, U.S. News & World Reports, CNN, and others.
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This idea is the key one behind Modern Monetary Theory, of which Stephanie Kelton is a prominent exponent. She has no time for arguments that Social Security is going to run out of money unless it's cut back, or that we lack the money to rebuild our decaying national infrastructure of roads and bridges and airports, or that we can't fund some version of health insurance for all. When we need to, just print it, she says. The real limit is running out of resources -- that is, running out of additional productive capacity -- not running out of money.
An important caveat to the above is that this model only works for central governments of countries that have have their own sovereign fiat currencies AND have a history of paying their debts (particularly if they want to sell debt instruments to foreigners). So, this excludes the Eurozone countries that don't have their own individual currencies, but rather a shared one. It excludes places like Venezuela and Argentina and Zimbabwe that can't borrow in their own currencies because of their weak economies, high inflation and lousy credit. It excludes countries that use another country's currency, like El Salvador and Panama and Ecuador that use the US dollar. And it excludes governments that are not in charge of their country's currency, such as state/provincial and local governments.
Kelton does NOT think that governments should stop taxing, however, for several reasons such as: One, taxes help to redistribute income and wealth to limit inequality, which she thinks is not only corrosive to democracy but is also bad for the economy, because as inequality rises, the great mass of consumers will simply have so little money to spend that the economy starts sputtering from a lack of aggregate demand. Two, taxing the population ensures that consumers don't consume so much of the economic output of the country that there are not enough resources allocated to government to carry out its functions. Three, the need to pay taxes motivates people to work more. (This is not one of her stronger arguments). Four, targeted taxes help to raise the price of products that have negative, costly side effects that are not otherwise priced into the product, such as cigarettes, fossil fuels, and alcohol -- with the increased price helping to discourage consumption of these products and offset the cost of curing the damage they cause.
The counter-argument to the "print more money whenever you run short" argument is that doing so will trigger inflation, with too many dollars chasing too few goods and services. Inflation is taken to be a bad thing for most people, especially on the grounds that it erodes buying power for those on fixed incomes or who have too little market power to keep their incomes rising at the same or faster rate as inflation.
Her answer to the inflation argument is simple: the US economy always runs with some amount of "slack", that is, some amount of unemployed human and capital resources, which of course is true. The real involuntary unemployment rate in the US is about 10% today, in these Covid times. So, she says, print money up until the point that you see inflation above some acceptable threshold such as 2%, and then ease up on the presses. But in the process, you will have brought into production a large part of not only the unemployed, but also those who are no longer counted as unemployed because they have simply given up on finding a job. The added 5-10% of production -- forever -- will largely pay for those expanded government programs AND will increase the productive capacity of the economy further by making it more efficient through creating, for example, a national transportation infrastructure that actually works well, a health insurance system that covers everybody, and an education system that is better resourced.
Embedded in the idea of managing to the optimal amount of slack in the economy is that the real hard limit on how much a country can consume is how much much it produces (ignoring the effect of trade). The combined use of goods and services by government, consumers and business investment can'be be more that the goods and services produced. Trying to consume more just results in rising prices a.k.a. inflation. So, Kelton says, worry about the country using up all its resources of productive capacity, not about accounting entries. So, for example, Social Security won't "run out of money" until the ability of the economy to produce can't keep pace with the resources required by the program, not when some magical balance in the Social Security fund runs dry.
There's more to the book than this, of course, notably the idea of a federal jobs guarantee, which is more controversial, but her core idea is the one above. Her arguments are very Keynesian, in the main, in that she is advocating that it is part of the role of government to stimulate the economy through added spending when aggregate demand is too low and therefore resources are sitting idle. The only difference -- which is a big difference -- is in saying the government doesn't necessary need to pretend that it's financing itself with a budget that pays for all these expenses through taxes or borrowing by selling bonds. Her argument also draws on the experience such as that of the FDR era in the US in the 1930's, when programs such as the Civilian Conservation Corps directly employed masses of Americans in carrying out public works projects, such as building infrastructure in parks. This theory makes sense at a high level, but whether it's a good idea to provide a guaranteed job to all who want one, at a minimum of $15/hr, by hiring job-seekers directly, or instead to do it by spending through 3rd parties such as private social service agencies and construction companies building roads/bridges and the like is highly debatable.
All in all, this is a very refreshing book, and has caused me to look through a different perspective at how we finance government and how we might therefore be able to fix our shredded safety net, infrastructure and public services. Even if you disagree with some or all of her thesis, this book will challenge you to think a lot more deeply about the role of national governments -- in the US and other country with a similar strong sovereign currency -- and how to finance what they do.
I had a sense that in the shadow of that crisis that we were bounded by only being to push at the edge of the status quo. The bailouts, both TARP and ARRA were real money that had to be paid back, so the democratic-led government in 2010 and through pressure from their political opponents, started to roll back the funding that was on offer through the state. “Austerity” was the name of the game and big debts were scary and more important than the mass of Americans who were still without jobs in the economy that had been showing “green shoots” every quarter for 18 months.
I was unemployed and reading as much as I could about economics and especially the crisis. There were scores of books written by commentators and economists trying to get their hands around just what happened and why it happened. But it was not the first crisis. I eventually found myself making my way through Keynes and Minsky – with some understanding but not 100% of it. Keynes had some integrals I just skipped over and hoped that he was explaining all of them in the text. It was during this time that I came up with what I thought was a fairly novel idea that the household metaphor that politicians used was completely wrong. The government lives forever, I said, and it creates money. A worker is constrained in the money they have and the only way to get more is to work more even if the can temporarily increase their spending by borrowing they eventually have to pay it off (or pass down the debt once they die). I created an imaginary currency called “EdgarBucks” and knew my biggest problem was making sure that people accepted these “EdgarBucks”.
My insight about the fallacy inherent in the household fallacy was not novel it seems. While politicians and many economists talked about spending money being the constraint, there was a then little-known school of thought who had fleshed out the idea that money is not the constraint in the economy, but real resources are that constraint. You cannot run out of money if you are a currency issuer, but you can run out of factories. It brings to mind Keynes looking at idle workers and idle factories and realizing that you can have suboptimal equilibria where resources are underutilized. But what this little-known school of thought had done was flesh out that idea, and it has a name – Modern Monetary Theory (MMT).
The basics of MMT are that the real constraints are the real economy and in the book Professor Kelton works through the implications of the idea that money is more a record keeping device than some sort of fetishized commodity through simple, easy to understand metaphors. What is dangerous through the world as described through MMT is inflation and not debt, and the way to pull that back is to increase taxation. Also embedded in the structure is a call for a Job Guarantee to make sure that people have and can spend money. I personally am not for a Job Guarantee but lean more towards a Basic Income, but that is outside the realm of this review but I think within the realm of possible debates, so MMT is not strictly dogmatic.
I was receptive to the ideas of MMT because I was not a slave to the old orthodoxy and especially because I thought that the old orthodoxy was in a large part to blame for not preventing and not really being able to predict the crisis of 2008, I was ready to throw it all out and find an explanation for how capitalism worked and if possible how it could be made better for people if we were going to keep putting off the eventual worker’s revolution. MMT was, and still is centered on a couple of institutions like UMKC and Bard College in the US and has a couple of figureheads like Professor Kelton but also Warren Mosler and Scott Fullwiler. Despite this, MMT punches above its weight in policy discussion because it has many passionate adherents in both the blogosphere and on Twitter. It is, to me, also inherently commonsensical as we are not constrained by the amount of a shiny rock in the vaults of the Federal Reserve in New York or in Fort Knox.
I was sitting, unemployed though the summer of 2011, smart and a hard worker and ready to be put to use so I could get money to pay my rent but no one was answering my applications. It was confounding and scary and just a total failure of policy because there were tens of thousands of people like me who wanted to work. But I was reading. The biggest problem for me when I was learning more about different economic schools in terms of learning about MMT was that there was no centralized place to start learning about it. People would talk about it in blog comments and you would ask where to go for more details and they would send you a link to a pdf or a self-published book on amazon and that did not inspire a lot of confidence. If someone was asking where to start to learn about Marxism you could point them to many different publishers who had put out versions of the Manifesto but this was like if the only resource available was Marxists dot org. What “The Deficit Myth” does is not just synthesize the ideas of MMT in a simple and easy to read format, but it also formalizes the school as something to be taken seriously by readers of levels. And for that reason, it is an especially important and necessary book.
Reviewed in the United States 🇺🇸 on July 26, 2020
I had a sense that in the shadow of that crisis that we were bounded by only being to push at the edge of the status quo. The bailouts, both TARP and ARRA were real money that had to be paid back, so the democratic-led government in 2010 and through pressure from their political opponents, started to roll back the funding that was on offer through the state. “Austerity” was the name of the game and big debts were scary and more important than the mass of Americans who were still without jobs in the economy that had been showing “green shoots” every quarter for 18 months.
I was unemployed and reading as much as I could about economics and especially the crisis. There were scores of books written by commentators and economists trying to get their hands around just what happened and why it happened. But it was not the first crisis. I eventually found myself making my way through Keynes and Minsky – with some understanding but not 100% of it. Keynes had some integrals I just skipped over and hoped that he was explaining all of them in the text. It was during this time that I came up with what I thought was a fairly novel idea that the household metaphor that politicians used was completely wrong. The government lives forever, I said, and it creates money. A worker is constrained in the money they have and the only way to get more is to work more even if the can temporarily increase their spending by borrowing they eventually have to pay it off (or pass down the debt once they die). I created an imaginary currency called “EdgarBucks” and knew my biggest problem was making sure that people accepted these “EdgarBucks”.
My insight about the fallacy inherent in the household fallacy was not novel it seems. While politicians and many economists talked about spending money being the constraint, there was a then little-known school of thought who had fleshed out the idea that money is not the constraint in the economy, but real resources are that constraint. You cannot run out of money if you are a currency issuer, but you can run out of factories. It brings to mind Keynes looking at idle workers and idle factories and realizing that you can have suboptimal equilibria where resources are underutilized. But what this little-known school of thought had done was flesh out that idea, and it has a name – Modern Monetary Theory (MMT).
The basics of MMT are that the real constraints are the real economy and in the book Professor Kelton works through the implications of the idea that money is more a record keeping device than some sort of fetishized commodity through simple, easy to understand metaphors. What is dangerous through the world as described through MMT is inflation and not debt, and the way to pull that back is to increase taxation. Also embedded in the structure is a call for a Job Guarantee to make sure that people have and can spend money. I personally am not for a Job Guarantee but lean more towards a Basic Income, but that is outside the realm of this review but I think within the realm of possible debates, so MMT is not strictly dogmatic.
I was receptive to the ideas of MMT because I was not a slave to the old orthodoxy and especially because I thought that the old orthodoxy was in a large part to blame for not preventing and not really being able to predict the crisis of 2008, I was ready to throw it all out and find an explanation for how capitalism worked and if possible how it could be made better for people if we were going to keep putting off the eventual worker’s revolution. MMT was, and still is centered on a couple of institutions like UMKC and Bard College in the US and has a couple of figureheads like Professor Kelton but also Warren Mosler and Scott Fullwiler. Despite this, MMT punches above its weight in policy discussion because it has many passionate adherents in both the blogosphere and on Twitter. It is, to me, also inherently commonsensical as we are not constrained by the amount of a shiny rock in the vaults of the Federal Reserve in New York or in Fort Knox.
I was sitting, unemployed though the summer of 2011, smart and a hard worker and ready to be put to use so I could get money to pay my rent but no one was answering my applications. It was confounding and scary and just a total failure of policy because there were tens of thousands of people like me who wanted to work. But I was reading. The biggest problem for me when I was learning more about different economic schools in terms of learning about MMT was that there was no centralized place to start learning about it. People would talk about it in blog comments and you would ask where to go for more details and they would send you a link to a pdf or a self-published book on amazon and that did not inspire a lot of confidence. If someone was asking where to start to learn about Marxism you could point them to many different publishers who had put out versions of the Manifesto but this was like if the only resource available was Marxists dot org. What “The Deficit Myth” does is not just synthesize the ideas of MMT in a simple and easy to read format, but it also formalizes the school as something to be taken seriously by readers of levels. And for that reason, it is an especially important and necessary book.
Top reviews from other countries
Central to the rigidity of both economists and politicians has been a myth that governments have to budget like a household. Kelton starts her book by demolishing this myth. Households cannot spend more than they bring in, without incurring debts that have to be repaid. In contrast, governments with monetary sovereignty can simply issue the money they need. How much they take back, in taxes or in debt repayment, is a political choice. The only constraints, Kelton argues, are real (resource availability and inflation) not budgetary.
Kelton goes on to demolish other myths - that government deficits result in insolvency (rather than inflation), or that national debt is a burden (rather than a vehicle for private savings deposits). She draws on her experience as chief economist on the US Senate Budget Committee to provide detailed evidence to back up her arguments. Obviously, much of this evidence is from the US, but the same principles apply to the UK and other countries whose governments have monetary sovereignty.
Towards the end of the book, Kelton explores the political choices that monetary sovereignty makes possible. Instead of striving for debt reduction and a balanced budget, with all the austerity that entails, Kelton suggests that governments should be using public spending and taxes to re-balance the economy. That means prioritising aims like full employment, a fairer distribution of income and wealth, quality health, education and housing, and decarbonisation. These are political choices, she emphasises, which are constrained by real resource and ecological limits, not artificial limits on the ability of governments to issue money.
We are living through a time of acute crisis - both immediate (Covid-19), and longer term (climate change). Addressing these crises will require governments to spend money, money that they can and should create. And the constraints on that money creation are weak at present - inflation and interest rates are near zero, and there are huge under-employed resources. The last thing we need is a return to austerity, justified by out-dated notions that we need to reduce the deficit.
Stephanie Kelton’s book could not be more timely.
1 The US government is the monopoly creator of dollars (actually it isn’t because all banks create money through fractional reserve banking)
2 It can create as many dollars as it likes and spend them on anything it likes (e.g. a “jobs guarantee”, under which everyone who wants a job can have one at a decent salary and with good benefits, paid for with these dollars)
3 As long as there is spare capacity in the resources of the economy (e.g. labour), it can inject unlimited numbers of dollars without any resulting inflation.
There are some big problems with this. I fully accept that money (notes, coins and bank account balances) has no intrinsic value (you can’t eat it, live in it, power your car with it etc). Nevertheless, it is treated by everyone as if it does have intrinsic value. In a sense it is like a giant confidence trick. But that word “confidence” is at the very heart of why the illusion works.
In order to maintain that confidence, it follows that Governments cannot be seen to be able to “print” money to support their own spending, so that power to create money resides exclusively with the Central Banks (such as the Federal Reserve). There are differing degrees of formal independence of such banks, but the fiction has to be maintained that (even if the bank is technically an arm of government) there are at least “Chinese walls” between them. So, if the Government needs dollars for its spending plans, it can’t just issue them, it can only borrow them from the Central Bank or other lenders. That’s exactly what it does and has always done. It issues bonds. The bonds carry interest and have to be paid back. And the Central Bank cannot just buy the bonds and then write them off as the author contends (because the bank would go bust).
Every accountant and most businessmen understand that there is a difference between profit/loss and cash. A profitable business can go bust if it runs out of cash, even though it is making profits. The author is right to say that the government can never run out of money, but equally it cannot sustainably run up losses (deficits) continuously and increasingly. At some point (and nobody knows where that lies), confidence in the currency falls through the floor and the citizens of such a country are in a world of pain.
The author throughout the book refers to “Modern Monetary Theory” as MMT. But MMT also stands for Magic Money Tree.
The book is based on what passes for American fiscal policy but also ANY country that is a sovereign issuer of its own currency (like here in the UK) could do what Stephanie Kelton and other pro-Modern Monetary Theorists (MMT) advocate in this book. EU countries whose currency is issued by the European Central Bank cannot carry out MMT.
I have learnt about MMT chiefly through Richard Murphy's blog (highly recommended) but I also bumped into Warren Mosler and his book 'The Seven Deadly Innocent Frauds of Economic Policy' earlier and this to me opened up the subject, as did looking at Economist Bill Mitchell's blog although Mitchell is not convinced of the role of taxation.
I choose to go with Kelton, Murphy et al on the latter - tax is fundamental to MMT because the cash injection can cause inflation: tax however is the cooling agent - the other half of the coin - what you put in at one end has to be taken out at the other, otherwise like a bucket over filling with water, money will overflow and inflation will happen. The other issue is that this is spending and then taxing - the Government is not taxing to spend - another lie that is constantly told to people in the USA and the UK - if not world-wide.
This is why Thatcher and the Neo-liberals wrongly thought that using unemployment (very cruel and unnecessary) and curtailed state spending (a dereliction of a Government’s promise to provide) plus just using interest rates (monetarism) would control inflation when they took power in 1979. It did not. Why? Because Thatcher also reduced taxes, especially for the rich. Much of Thatcher's boom was created by privately created debt - whether from the expansion of consumer debt in households or leveraged take overs of public utilities and an exponential growth in the real estate sector- a lot of it was under taxed rich money pouring into the City of London as private investment to help the rich's money make more money AND relaxed credit and banking rules and that is why inflation was a continuous problem for even Tory Chancellors. Inflation came about because of a lack of tax and more credit being available. These were all Thatcher's decisions. Bad ones that persist to this day because politicians of all colours do not understand tax.
In the practice of MMT, tax is not needed for spending - just for controlling inflation. Spending is from printing fiat money - money that the Government just creates by choice (or not!) out of thin air for its policy choices, for its people. Because it can. It always could since the day the State was founded. And there are people with money to save who can act as the counter party and buy Government bonds and gilts with confidence because they will always get their money back.
The pivotal part in this book for me though is from p.142 where Kelton explains the facts of sovereignty (the power of the Kings of old) to enable a State to print its own money for its people. She says it is key to understanding MMT and I totally agree with her. At a time where most politicians (whether Right or Left) seem to agree that the States they are meant to be in charge of are not as good as the market at allocating resources, this is a breath of fresh air. A State printing enough money for its people (all of them - not just enabling the rich to get richer by under taxing them and allowing the rich through their under-taxed income to charge us poorer folk through privatised utilities they buy and pay day loans they fund) is what we want both now during the Covid crisis and in the future.
BREXITEERs will tell us that sovereignty is in our laws and borders. But the most powerful form of sovereignty in a country however is printing your own money - whether the pound or the dollar (Kelton contrasts this by telling us what happens in countries that don't print their own cash). And rather than leaving money to be circulated by un-elected and greedy not to be trusted private sector (think now about 2008 and all the crashes we had up to then, as well as the accounting fiascos and money laundering of criminal money as well as how the rich have got richer after 10 years of austerity whilst the rest of us lost it and jobs), MMT puts YOUR Government firmly in the seat of responsibility for ensuring that all our services (the NHS, Adult Social Care, schools and even our needs over Covid -19) are funded sufficiently.
BTW - that Government could be Left or Right - MMT is politically neutral - it explains a factual, extant, practical State power that any British Government could use - Tory, Green, Labour, Marxist, Trotsky, The BREXIT Party, The Official Monster Raving Lunatic Party - ANY of them could choose to use this power for the good of its citizens.
If MMT is such a good idea then, why is it not more widely known? Why do people - even the supposedly well read middle class and those who go to Oxford, Cambridge and Harvard still think - politicians included - that tax pays for everything?
Well, there are a number of reasons for this. Kelton thinks that efforts to add contributory and qualifying payments to citizen's State funded help has helped to muddy the waters and helped certain politicians over-egg the contribution side because those contributions have become a means by which we might choose to elect them (tax cutting/service cutting competition in elections). But there is also the Neo-lib myth of the State 'crowding out' the private sector - that when the State prints money into its society, the private sector does not get the opportunity to turn that activity into a profit making enterprise. So, States are encouraged to privatise, spend less money on direct support, turning over those budgets to the private sector instead for what can be a worst service. If we look at the amount of privatisations over the years, it is clear that rich capitalists - the same ones that fund parties of all persuasions who don't mind privatising (and financially support leading universities too) - are having their needs met before millions of voters.
Look at British Rail today - it receives more state subsidy as a private concern than it did when it was owned by the Government even at pre-privatisation prices; look at how those water & utility bills have gone up since privatisation; Crowded out? The private sector has been 'crowding in' more like - to grab hold of money that should be being used to help people like me and you.
There is also the inherent anti-Statism seen in Neo-liberalism - one of the dominant but not necessarily right economic philosophies of our time - the State bad/private good mantra for example.
Kelton goes on at the end to advocate MMT being used to address the increasing pauperisation of the commons in America but also prevalent in the UK - we can look around most inner city areas and outer regions in the UK and see that lots of work needs to be done; there are potential jobs everywhere. We need new green technology start ups to deal with globalised climate change. And we need to realise that deliberate unemployment and constant market collapse is leaving people increasingly angry and frustrated - ripe for exploitation by neo-Fascism and potential social breakdown and instability throughout the world.
So what to do?
Start by reading this book but also buy it (from Amazon!) for your family, your kids (especially for them) your friends and even work mates if you can. We have to start by raising our expectations of our politicians - expecting them to know about MMT, sovereign currency creation and demanding that, in return for our votes, they use MMT to help us and those we love and value - not just the well heeled who lobby politicians and make donations and push to the front.
Expecting better than we have now - that is where we voters have to start in my view. This may well help us to have a proper public debate on MMT and see it put into practice to the point that it reaches its objectives - full, well paid employment and inflation controlled by a progressive tax system and happier, supported people with a future.
Buy it and spread the word. It's worth a go. We can't go on like this.












