The video of this presentation can be found here.
Transcript copy-edited by Ben Szioli
SLIDE 1
Thank you, everyone, for coming. Thank you especially to Kim and Ambrose for hosting this. My name is Jeff Epstein. This is an introduction to Modern Monetary Theory, or MMT. Oh, and I should say, I’m normally hosted by Our Revolution: South Jersey.
[VIDEO START]
Republican Senate Majority Leader, Mitch McConnell: “When are we gonna get serious, Candy, about the debt?”
Former President Bill Clinton: “We’ve got to deal with this big long-term debt problem, or it will deal with us.”
Glenn Beck, Fox News Host: “But it’s very simple: the government works like your house works. Our government has promised far more money than it actually has or probably ever will have.”
Former President Barack Obama: “We have to reduce our deficit. We have to get back on a path that will allow us to pay down our debt.”
Former Republican House Majority Leader Eric Cantor: “We understand America is broke.”
Democratic Speaker of the House Nancy Pelosi: “There is an urgent need for us to contain the growth of the deficit.”
Sarah Palin, former Alaska Governor and vice-presidential candidate: “Taking money from our children and borrowing from China…”
Former Secretary of State Hillary Clinton: “Our rising debt levels… poses a national security threat.”
Former Republican House Speaker John Boehner: We’re broke. America’s broke.”
President Obama: “… is to take down a credit card from the Bank of China in the name of our children driving up our national debt.”
Former Republican House Speaker Paul Ryan: “When we raise and borrow all this money 42 cents out of every dollar come out of Washington. It’s borrowed. 47% is coming from other countries like China.”
[VIDEO END]
SLIDE 3
Thank you, Geoff, for putting that together for me.
Geoff: “Mine is much longer.”
These are things you have heard your whole lives. They should be very familiar to you. By the end of this presentation, you will begin to understand why pretty much every single word that was said is completely wrong.
SLIDE 4
Mainstream economics says that big things are not possible without causing economic Armageddon. Modern Monetary Theory (or MMT) demonstrates that big things are possible. They’re possible now, they have always been possible, and it’s possible to do without causing economic problems. Therefore, much of what most of us understand to be true is completely wrong. And not just wrong, but wrong in a way that serves the wealthy few, so they remain the wealthy few.
SLIDE 5
So first, I want to thank for helping me improve this presentation: Virginia Cotts, James Feal-Martinez, Erin Taylor, Ben Szioli, and Esha Krishnaswamy, among others. I especially want to thank MMT economist Steven Hail, who helped me ensure that what you’re about to see is entirely accurate.
SLIDE 6
Thank you for being here. Thank you for listening with an open mind. I do know what I’m talking about, but I encourage you when we’re done to be skeptical, do your homework, and decide the truth for yourself. Most of your questions will be answered by the presentation itself. I am asking you to postpone your questions until the end. Geoff and I will stick around until there are no more questions, no problem.
SLIDE 7
MMT is easy. It’s simple, and it’s elegant. The only thing that is hard is letting go of our lifetimes of miseducation.
SLIDE 8
MMT is a school of economic thought based on the ideas of Warren Mosler. He took ideas that some of which have been around for more than 100 years, brought them back; mixed them up. Now it is a school of economic thought based on 25 years of research and scholarship developed by these economists and experts, among others. You will find most of these people are on Twitter and more than willing to answer your questions. And all of them will confirm what I tell you today.
SLIDE 9
I’m not an expert. I don’t pretend to be an expert. I discovered MMT in February of last year when Geoff introduced it to me. What I am good at, what I can do, is I can introduce the basics of Modern Monetary Theory as I learned from the economists. I can express what they taught me. When your eyes are open to MMT, however, it is time for you to move on to the experts to learn more.
SLIDE 10
So, first. What is money? What gives it value? And where does it come from?
SLIDE 11
Money is a tool that the government uses to provision itself. They need things to be done; they have the people do them. And since we define the government, we are the government. We need these things to be done. We need to be defended, we need rule of law, we need infrastructure, scaling up cool inventions for bigger purposes, we need to gather intelligence; we need to take care of the people. Lots of other things.
SLIDE 12
The government needs things to be done with the resources that we have, and it has the people do them. We sell our productivity and our resources to the government, and they give us their money as incentive. In exchange.
SLIDE 13
Money has value because it is backed by the full faith and credit of the government. That’s true. More specifically, money has value because if we do not pay our federal taxes in the money that the government gave us, then we have faith that there will be severe penalties. That’s what gives money value: federal taxes.
SLIDE 14
This means you must get a job, in order to get their money, in order to pay your federal taxes with their money, in order to avoid those penalties.
SLIDE 15
In other words, federal taxes “drive money.” They force the people to need the money, and they establish and legitimize its use.
SLIDE 16
Notice the order of operations: you cannot pay your taxes until you get money from the government.
SLIDE 17
Like a paycheck from your job, you do what the government asks you to do, they give you money in exchange. That money is yours to keep. You can do whatever you like with it, no strings attached. You owe it to no one. It is debt-free. Debt-free. That’s important.
SLIDE 18
So where does it come from? In 1971, the United States, along with many other countries, went off of the gold standard and became a fiat currency. Fiat just means that the money is not backed by anything physical.
SLIDE 19
I’m going to answer this specifically for the United States, but there is a similar answer for many economies. The Constitution of the United States, Article 1, Section 8, defines the powers of Congress. Two of those powers are: to coin money, and to provide punishment for counterfeiting.
SLIDE 20
To coin money. “To coin” means “to create.” It doesn’t mean metallic. As in, “to coin a phrase.” So this means that Congress can create all kinds of money: paper bills, metallic coins, whatever else.
SLIDE 21
Who creates the United States dollar? The answer is the central bank. In the United States, the central bank is called the Federal Reserve. But the Federal Reserve doesn’t just create money because they want to create money. They create money when they are commanded to do so by the Treasury. The Treasury is commanded to do so by a law that the President signed, and after the federal budget is passed.
The law that the President signed was originally a bill written by Congress – and in our corrupt system, Congress is under the influence of big-money lobbyists and donors. The answer to who creates the dollar is the central bank. The answer to who authorizes the creation of the dollar is Congress.
SLIDE 22
So, Congress has the power to create money and to punish anyone else who tries to create money. This means that they are the only ones in the world who are allowed to “authorize” or “appropriate” the creation of the United States dollar.
SLIDE 23
If resources are available, Congress can create as much money as they want to purchase those resources to do what needs to be done.
SLIDE 24
This is an actual bill currently under consideration. This screenshot is from last year. This is the section of the bill for Elizabeth Warren and others, regarding the opioid epidemic. This is the section called the “authorization of appropriations.” Two billion, seven hundred million for fiscal year 2019. Same amount for subsequent years.
SLIDE 25
This is the amount of money that is authorized to be created when this bill is passed into law and after the federal budget is passed. That amount is created because someone sat at a computer and typed that number into this document. This is the amount of money that the authors of the bill believe is necessary to purchase the resources that are necessary to implement this bill. Money is always created for a purpose, not just because they want pocket change.
SLIDE 26
Everyone except Congress – everyone except the currency issuer (and I’ll say more broadly the federal government) – is a user of the currency: me, you, families, our households, cities and towns, states, and even other countries. When it comes to the dollar, we are users of the currency. We are currency users. All in the same position, aside from the amount that we have.
SLIDE 27
Finally, all money comes from the currency issuer, even if you work at a company that does no business with the government. Say you work at a grocery store or a restaurant. Another company does have a contract with the government. They do whatever they’re supposed to do, they get money from the government. They then use that money to pay their employees; their employees go shopping. One of their employees gives a big tip to a waitress at a restaurant. That waitress goes shopping at your grocery store, and then you get paid with that money. All money in the economy comes from the currency issuer.
SLIDE 28
That’s where money comes from. Now let’s talk about how money is created and how it works its way through the economy. This is done by a process called reserve accounting.
SLIDE 29
You have a calculator. You have 900 on your calculator. You want to add a hundred to it so you can make a thousand. Where does that 100 come from? Do you need to find it? Do you need to borrow it from another calculator? Do you need to pay for it? When you press 1, 0, 0, it is. It is as if you are the god of numbers on that calculator…
SLIDE 30
…and that is pretty much how the currency issuer creates its own money. The money exists when they will it to be. They are the god of their own money. For the issuer only, the word “spend” is exactly equal to the word “create.” They spend money into the economy; they spend money into existence, they emit money into the economy.
SLIDE 31
Think about it. If you were totally broke… Pretend you are totally broke. You have no money in your bank account, in your pockets, nothing. But you are granted the power to create money [PSSHT! MONEY APPEARS IN MY HAND] whenever you need it. You can’t keep it. You can only give it; you can only spend it. My question is, if you had this power, do you really care that you have no money?
SLIDE 32
So, reserve accounting occurs at the country’s central bank. How is the central bank relevant to us? I have a bank account at my local branch of Wells Fargo in my town, on Forklanding Road; along with a lot of other people and businesses.
SLIDE 33
There are local branches of Wells Fargo all around the country. All of these branches with all their customers and all their bank accounts are managed by Wells Fargo corporate.
SLIDE 34
Wells Fargo itself has a bank account at the central bank. They have about $600 billion in their bank account, which is a significant percentage of all the bank accounts at all their branches.
SLIDE 35
Every bank in the country has a bank account at the central bank.
SLIDE 36
More accurately, it’s a spreadsheet. Two columns: the name of the bank, how much it has.
SLIDE 37
So, I have a thousand dollars in my bank account and my local bank. My bank has $600 billion in their “reserve account” or their “reserves” in the central bank.
SLIDE 38
The central bank is the bank of the banks. It’s also the top bank. There is no “earth bank,” there is no “universe bank.” The central bank in each country is the top-most bank that creates that country’s currency.
SLIDE 39
We’re going to show three examples of reserve accounting: one where money is created, one more money is destroyed, and one more money is transferred.
SLIDE 40
Example number one: Gramom is owed three hundred dollars in Social Security benefits. How does the government give Gramom those benefits?
SLIDE 41
Social Security Administration determines that Gramom’s due three hundred dollars. They communicate that to the central bank, the central bank communicates that to Gramom’s bank, and this is what happens.
SLIDE 42
Gramom’s bank’s reserves are increased by three hundred dollars. Gramom’s bank account is increased by three hundred dollars.
SLIDE 43
And that’s it. This is called “marking up an account.” Money is created because a number was made bigger, with your finger, on a keyboard, on a computer, and in today’s technology, on the Internet.
SLIDE 44
Example number two: destroying money. We’re starting over again. Gramom now owes federal taxes to the government. A hundred dollars. How does Gramom pay those taxes? This is example one, exactly opposite.
SLIDE 45
Gramom sends in her tax return and a hundred dollar check to the IRS. The IRS communicates with the central bank, the central bank communicates with Gramom’s bank, and this is what happens.
SLIDE 46
Gramom’s banks reserves are reduced by one hundred dollars. Gramom’s bank account is reduced by one hundred dollars.
SLIDE 47
And that’s it. This is called “marking down an account.” When numbers are made lower, money dies or is destroyed or disappears. When numbers are made bigger, money is created or born.
SLIDE 48
Here’s Ben Bernanke. He was the chairman of the Federal Reserve during the Great Recession in 2008.
[VIDEO START]
Scott Pelley (voice over): “… commitments of a trillion dollars doubling the size of the Fed’s balance sheet.”
Pelley (to Bernanke): “Is that tax money that the Fed is spending?”
Fed Reserve Chairman, Ben Bernanke: “It’s not tax money. The banks have accounts with the Fed much the same way that you have an account in a commercial bank. So to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. So it’s much more akin, although not exactly the same, but it’s much more akin to printing money than it is to borrowing.”
[VIDEO END]
SLIDE 49
“To lend to a bank we simply use a computer to mark up the size of the account that they have at the Fed.” When he says “not exactly the same,” he just means not physical money; he means on the computer.
SLIDE 50
So what happens when money “dies” or is “destroyed”? A child draws a bill onto a piece of construction paper. Money’s created. They erase that bill. What happened to that money? Where did it go? At the end of a game, the score is lowered down to zero again. What happened to those points? Where did they go? You have a thousand on the calculator, you minus a hundred from it; now you have 900. Where did that hundred go?
SLIDE 51
The answer is, it didn’t go anywhere, because it never existed to begin with. To us, to currency users, money’s real. To the currency issuer, money is not real. It’s a concept.
SLIDE 52
Final example. Transferring money. This time, my company gives me a paper paycheck for a hundred dollars. We have two separate banks. This is nothing more than the first two examples put together.
SLIDE 53
I get my paper paycheck from my company. I give that to my bank. My bank says: “You’ll get that money in about 24 hours.” My bank communicates that check to the central bank, and this is what happens.
SLIDE 54
On my company’s side, the company’s bank account is lowered by a hundred dollars. Their bank’s reserves are lowered by a hundred dollars. Now, on my side, my bank’s reserves are raised by a hundred dollars, and my bank account is raised by a hundred dollars.
This is reserve accounting. This is how money moves from one bank’s reserves to another’s.
SLIDE 55
Five trillion dollars moves through the the Federal Reserve System, the central banking system in the United States every day. That’s about two quadrillion dollars a year.
SLIDE 56
Next chapter: created currency.
SLIDE 57
In the 1990s, economist Stephanie Kelton discovered Warren Mosler’s ideas and thought that they were wrong. She tried to prove them wrong, and in the course of doing so, she ended up proving him right.
SLIDE 58
This is the result of that research. This is her 1998 paper called “Can taxes and bonds finance government spending?” This is most of the abstract. We’re going to focus on just one sentence: “… modern governments actually finance all of their spending through the direct creation of high powered money.”
“… modern governments actually finance all of their spending through the direct creation of high powered money.”
SLIDE 59
Another way of saying this is, “Every dollar of federal spending is and has always been financed with created currency.” Every federal benefit, every time it’s paid. Every federal program and agency.
SLIDE 60
Every federal salary. Every paycheck that has ever been received by a federal employee.
SLIDE 61
The military is a federal program. The salary of every military personnel, and every piece of equipment, is and has always been financed with created currency.
SLIDE 62
Yet we often hear, “I don’t want my taxes paying for war. I want my taxes paying for healthcare and education.” But the military is a federal program, so how does that make sense?
SLIDE 63
We also hear, “I don’t want my taxes paying for your big programs.” But if it is a federal program, how does that make sense?
SLIDE 64
Social Security is a federal program. Every Social Security benefit since the law was passed in 1935 has been financed with created currency. So how can Social Security ever “go broke”, “be stolen from”, “be borrowed from”? The same is true with all federal benefits.
SLIDE 65
How can its funds ever “be squandered,” and why would it ever need to “save today in order to be able to pay tomorrow”?
SLIDE 66
And finally, why do we pay FICA taxes?
SLIDE 67
Next chapter: federal taxes do not fund federal spending. Federal spending funds federal taxes.
SLIDE 68
This is not just a cute statement; it’s precisely true. Remember the order of operations: you cannot pay your taxes until you get money from the government.
SLIDE 69
Same abstract, different sentence: “… it is argued that the proceeds from taxation and bond sales are technically incapable of financing government spending.”
SLIDE 70
And when she says “technically incapable,” she means “impossible.”
SLIDE 71
Economist Pavlina Tcherneva: “Taxes are not stockpiled in any material sense for future respending.” Economist Randall Wray: “Indeed, if government spends and lends currency into existence, it clearly does not need tax revenue before it can spend.”
SLIDE 72
Stephanie Kelton, same paper: “Taxes are not even capable of financing government spending, since their collection implies their destruction.” And destruction in the same way that that hundred is destroyed in our subtraction problem.
SLIDE 73
All federal spending is financed with created currency. Which means, which logically extends, that federal taxes do not pay for anything. Here’s some evidence to emphasize this: during the Great Depression, the people had no money. Yet, this is exactly when we paid for two of the most ambitious programs in the history of our country: World War II and FDR’s New Deal.
SLIDE 74
Here’s the entire abstract. Federal taxes do not pay for anything, because all federal spending is financed with created currency, which is proven by the realities of reserve accounting. That’s the entire purpose of Stephanie Kelton’s paper. Notice the sentence right before the two that we just analyzed: “After carefully considering the complexities of reserve accounting…” these are the conclusions that we draw.
SLIDE 75
Next chapter: since federal taxes don’t pay for anything, then why do we pay federal taxes?
SLIDE 76
Federal taxes “drive money.” Taxes make people need the money so they do what the government needs. What we need.
SLIDE 77
Federal taxes control inflation, one of many tools to do so. We can raise taxes on a product or on the people themselves to reduce demand on a product. We could do the opposite. We can lower taxes on the product or on the people themselves to increase demand on that product.
SLIDE 78
Federal taxes can also impose moral decisions. If we don’t want the people to do something, the government can raise taxes on that activity in order to make it more expensive to do so.
SLIDE 79
We could do the opposite. If we want the people to do something, the government can lower taxes on those activities to make it less expensive to do so.
SLIDE 80
We can also tax the rich to discourage wealth inequality. We need to tax the rich because they’re too damn rich. They profit off of our suffering, they purchase our politicians and laws, and they’re making it such that we can’t live on the planet anymore.
SLIDE 81
Taxing the rich reduces their power, which instantly increases our power. We need to tax the rich because it is the moral and right thing to do – not because we need their money. Because, with our current economy, it is not possible to get their money at the federal level.
SLIDE 82
This is a graph representing the individual wealth of our members of Congress, their personal wealth. 535 members total. 37 of those members (in yellow) have a personal wealth in the bottom eighty percent. Eighty percent of the country is 260 million people, and they are represented by seven percent of Congress.
SLIDE 83
Next chapter: the Pony for All Act of 2018.
So Hillary Clinton in her book regarding the 2016 campaign said to Bernie Sanders, “It’s so nice that you want to give everybody a pony, Bernie. Everybody would love a pony. But how are you going to pay for it?”
SLIDE 84
I want to do a thought experiment. Let’s write the Pony for All Act. Let’s give every citizen a free pony if they want one, because it can be done. Maybe not literally for every single citizen, but it certainly can be done to a very large scale. So what would it take to do so? The first step is to understand our current situation. We can’t know where we’re going if we don’t know where we are.
SLIDE 85
I’ll use the United States as an example. We have 320 million Americans. We have about 500,000 ponies. This is clearly not going to work. Demand far outstrips supply. We must make these roughly equal.
SLIDE 86
the Pony for All Act by design is “for all,” so we don’t want to decrease demand in this case. We must increase supply, so how do we do that?
SLIDE 87
That’s a big ask. A half million has to go up to 320 million. We have lots of options, but given our current state of technology, and given the scale that we need to do, the only option is reproduce. Mommy and daddy ponies are going to have to do their things over and over and over again.
SLIDE 88
Another question we have to answer: “How long will it take?” In order to answer that, we must understand the biological realities of ponies. How many are there currently? What is their gestation period? How long after giving birth does can a mommy do her thing again? What’s the minimum age for giving birth? What’s the mortality rate? So, given our current situation and given these biological realities, we determine it will take roughly twenty years.
SLIDE 89
So, let’s get started. We’ve been taking care of a half million ponies, no problem, but now the population is exploding. This has enormous consequences. It means that we will need a lot more supplies. It means that we will need to educate millions of more people to help us develop and maintain this. It means that we will need to distribute all these things around the country, to avoid overcrowding, and to bring it closer to the people that need them.
So, the Pony for All Act will create a new industry with lots of good new jobs, which is a good side benefit. We have something much more important that we’re trying to get at.
SLIDE 90
So now it’s twenty years later. We now have 320 million ponies. It’s time for the people to pick them up. They go to Ponies R’ Us. We have the best staff, it’s perfectly organized; that’s not what we’re talking about here. But the people don’t know how to take care of ponies, so we need to train them. Their houses aren’t prepared to take care of ponies, so we need to prepare them.
So all of the supplies and labor and services that we just spoke about are now needed by everyone. And finally with 320 million, it is a serious question, what happens when they die?
SLIDE 91
So it takes twenty years. This is the full lifecycle. This is what goes into our bill. And we have not said a word about money. But now that we have determined the resources that are necessary to make it happen – now we can estimate, as a final step – estimate the cost of those resources and put it into a section of the bill called “authorization of appropriations.”
SLIDE 92
Let’s say some powerful person says, “Twenty years is unacceptable. I will make my little girl wait five years, but I am NOT going to make her wait twenty years. You will make this happen; I don’t care what it takes.” So what are our options? We could make it the law, we could threaten severe consequences, and we could throw money at it. Ten trillion dollars, whatever it takes. So the question is, if we force it to happen faster, what happens?
SLIDE 93
The answer is, nothing. Forcing it to happen faster simply won’t work. Because no amount of money can change biological processes. No amount of money can change how quickly people can be educated, how fast we can distribute these things around the country, how long it takes to train citizens, and how long it takes to prepare their homes.
SLIDE 94
This is what’s important: to the currency issuer, the only thing that matters is real resources, not money. Because to currency users, money is real. To the currency issuer, money is not real.
SLIDE 95
If the resources are available, then creating the money to purchase them is not inflationary. If you have the resources to do it, do it. If you don’t, don’t. When I say real resources, real tangible stuff. Raw materials, labor, technology, and time. Because you could have the stuff but it takes time to make it happen.
SLIDE 96
Nothing can make the Pony for All Act happen in less than twenty years. The realities of real resources are outside of human control.
SLIDE 97
Money and rules are human-created concepts. How many rules you have, how good those rules are, don’t matter. Because when it comes down to it, there is no way to ensure that humans follow human created rules. But no matter how corrupt an individual is or how corrupt an organization is, there is no way to violate the realities, the limitations, of real resources.
SLIDE 98
So as silly as it is – as resource-intensive as it is – we can actually give every citizen a free pony. So why in the world can we not give them universal healthcare and college, and especially, since it requires no resources, directly speaking, why can’t we cancel student debt?
SLIDE 99
Alan Greenspan was the predecessor to Ben Bernanke on the Federal Reserve. Here he is, speaking with former Speaker Paul Ryan on the subject of Social Security. This is in congressional testimony, so it is under oath. He is, in his own way, going to confirm everything that we just discussed (pretending that this is a discussion).
[VIDEO START]
Ryan: “So having personal retirement accounts is another way of making a future retiree benefits more secure for their retirement, and also do you believe that personal retirement accounts as a component to a system of solvency does help improve solvency? Because when you have a personal retirement account policy, it’s a company with a benefit offset. With that feature in place, do you believe that personal retirement accounts can help us achieve solvency for the system and make those future retiree benefits more secure?”
Greenspan: “Well, I wouldn’t say that the pay-as-you-go benefits are insecure, in the sense that – there’s nothing to prevent the federal government in creating as much money as it wants and paying it to somebody. The question is how do you set up a system which assures that the real assets are created which those benefits are employed to purchase? So it’s not a question of security. It’s a question of the structure of a financial system which assures that the real resources are created for retirement, as distinct from the cash. The cash itself is nice to have but it’s got to be in the context of the real resources being created at the time those benefits are paid so that you can purchase your resources with the benefits which of course are cash.”
[VIDEO END]
Audience member: “Is that the same question?”
Oh, Paul Ryan regrets asking that. Because, “My donors really want me to privatize this. Please tell me that there is an economic justification to please my donors?”
SLIDE 100
“It’s not it’s not a question of economic security. It’s a question that the real resources are created for retirement, so that you can purchase the real resources with the benefits, which is money.”
SLIDE 101
So Alan Greenspan, in his own verbose way, came to exactly the same conclusion: To the currency issuer, the only thing that matters, the only thing that is real, is real resources. Not money. Generally speaking, seniors don’t need money. They need the things that they can purchase with that money.
SLIDE 102
Next chapter: the federal deficit.
The federal deficit is the amount of money spent into the economy, minus the taxes that they collect back. Example: the government spends three trillion, they tax back 1.7 trillion, so the federal deficit is 1.3 trillion. That’s the money left in the economy – left in the people’s pockets.
SLIDE 103
Too much spending, a “ballooning deficit,” is not the problem. The only thing that matters is what our government does and doesn’t do, and who they do it for and who they don’t do it for. The problem is that their spending is immoral, unjust, inequitable, and inefficient. And it’s funneled to the wealthy few, because the wealthy few legally bribe them to do it.
SLIDE 104
Too much spending is not the problem. The problem is income inequality… and poisoned water, poverty, suicide, and so on. That’s reality!
SLIDE 105
What the government does is more important than what’s left over. The federal deficit is like our federal paycheck. It is, and really should be called, our national income.
SLIDE 106
So when you hear someone important say, “it is urgent that we reduce the deficit,” what they are really saying, whether they know it or not, is that “it is urgent that we reduce the people’s income.” That we stop giving the people income.
SLIDE 107
Next chapter: the national debt.
So currency users require income before we can spend. We must get money from somewhere before we can spend. If we don’t get it from the government, we must get it from somewhere else.
SLIDE 108
An example is we can get a loan from a bank. So we, currency users, go to a bank, and we ask for a loan. Say $1,000. The bank analyzes our histories and our net worth, and they decide, if they believe that we are likely to pay it back, they give us that money.
SLIDE 109
When we get that money, we are instantly in debt to that bank $1,000 plus interest. We are in debt to a private, for-profit corporation. This kind of debt is scary, because the bank will do whatever it takes to get their money back. This is called “private debt.”
SLIDE 110
Currency users getting a bank loan… there is no equivalent situation for the currency issuer. It’s just, there’s just nothing that makes sense or is compatible. There is no bank above the currency issuer. In the United States, the Federal Reserve must do as Congress commands them to do.
SLIDE 111
And, I mean, it’s just a ridiculous idea. The God, the one and only God of money, has to go to one of its subjects to ask for the money that only it can create?
SLIDE 112
Alan Greenspan again:
[VIDEO START]
Commentator: “Are US Treasury bonds still safe to invest in?”
Greenspan: “Very much so. I think there’s a – this is not an issue of credit rating. The United States can pay any debt it has, because we can always print money [Editor: “create money in a computer”] to do that. So there is zero probability of default.”
[VIDEO END]
SLIDE 113
“The United States can pay any debt it has, because we can always create money on a computer to do it. There is zero probability of default.” He didn’t say “low probability.” He didn’t say “remote probability.” He said “zero probability.”
SLIDE 114
As long as the government exists, it is impossible for them to not be able to pay its bills.
SLIDE 115
Currency issuers such as the United States do not have a debt. They just don’t. Not in any way that means like a debt does to me and you.
SLIDE 116
But practically speaking, the national debt is the accumulation of every federal paycheck from the beginning of the country. In the United States, the first dollar was created in 1796. The federal paycheck – what we used to call the federal deficit – all of the federal paychecks that have ever been spent; that’s, practically speaking, what the national debt is.
SLIDE 117
The national debt is the debt-free savings of the citizens: literally, the money in our bank accounts, investments, and wallets. Savings by definition means debt-free. Like a paycheck from our job; we do what’s asked, we get that money. After taxes, we get to do whatever we want with it. No strings attached. We don’t owe it to anyone. It’s debt-free. The national debt is and should be called our “national savings.”
SLIDE 118
So the national savings is what we the people own, not owe. The problem is not “too much wealth.” The problem is never too much wealth! The problem is wealth inequality. Who has too much of it? Who doesn’t have enough of it?
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So that’s, practically speaking, the national debt. It’s our national savings. Technically speaking, it is roughly an accounting and reflection of the national savings. We can talk about that after. The real national debt, however, that really will bankrupt our grandchildren…
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…has nothing to do with money.
SLIDE 121
Next chapter: inflation.
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Those who don’t understand MMT, or don’t want you to understand MMT, will say things like the following:
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“Creating money causes inflation, and when you create more than that, it will cause hyperinflation.” So if you create a dollar it will cause inflation, and if you dare create a second dollar, it will cause hyperinflation.
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The idea that creating money causes inflation is just as ridiculous as saying birth causes crime. All criminals are born.
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The only thing that causes inflation, can be inflationary, is persistently spending money on resources that do not exist or there are not enough to go around. Spending money on resources that are “fully employed.”
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Inflation is not when the price of bread goes up. It is not when the price of all products in an industry go up. Inflation is defined as “the continuous rise in price levels of goods and services over the period of time that the price rise is observed.” Roughly speaking, this means everything an average family purchases.
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This is inflation. Is this a bad thing?
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You have $20,000 in debt. Is that a bad thing? Not if you have $50,000 in assets, because in that case, you have $30,000 in net worth. You need the full picture before you can draw conclusions.
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This is inflation. Your wages are going right up with prices. Do you care about inflation in this case?
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This is also inflation. Your wages are going up even faster than prices. Do you care about inflation in this case?
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This is inflation as well. This is clearly a bad thing, but why is it a bad thing? Prices are going up normal, but our wages have stagnated. They are being suppressed. Our wages are artificially low.
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This is inflation. This is also a bad thing. Our wages are going up normal but prices are going up way faster than that. Prices are artificially high.
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An example of this is the pharmaceutical industry price gouging American citizens and the government doing nothing to stop it.
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Inflation can also be a good thing. The government can increase taxes on things that are harmful to society, choosing to create inflationary pressure for the greater good.
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This is inflation in the United States since 1960. The only two inflationary episodes that we have experienced in this country were the OPEC oil shocks in the 1970s. OPEC deliberately withheld its product in retaliation for our support of Israel. That was coupled with our misguided decision to make our society dependent on that one product. That caused problems.
Other than that, there has not been any substantial inflation since 1960, even though during this entire time every dollar of federal spending was financed with created currency.
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In 2018 alone, 100 trillion dollars in US Treasuries were paid back. No inflation.
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“Inflation the Boogeyman” has nothing to do with inflation in reality.
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We understand the nature of inflation. We have many tools to manage it. And many of those tools can be automated to bypass fickle and corrupt politicians. Finally, hyperinflation occurring in an economy such as the United States is not just unlikely, it’s absurd.
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Economies such as the United States do not need to raise taxes for the purposes of revenue. They also have an abundance of resources. Because of these two things, they can provide for all of their people without causing substantial inflation. And when I say provide, I do not mean “luxury,” I mean “stop their suffering.”
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But even with the best designed policies, you cannot predict the future. Resources are destroyed and created, and there are new inventions every day. At some point, it may be necessary to increase taxes in order to offset inflation. But the overall burden on citizens will be much lower. And if MMT economists get their way, it will be much lower still after the Federal Job Guarantee is passed into law.
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So that is pretty much MMT. I now want to say, after learning it for a year and looking again and our government and society, the conclusions that I personally draw. So, much of the rest of this is what I believe, not what MMT says.
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We’re gonna watch the video from the beginning one more time, and I hope there will be a little bit of a different perspective now.
[VIDEO: SAME TRANSCRIPT FROM THE BEGINNING OF THIS DOCUMENT – ABOVE]
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Okay, so are they lying? Do they not know better? It doesn’t matter as far as I’m concerned, because I give benefit of the doubt to the powerless. I will not give benefit of the doubt to the powerful, who benefit when the powerless are ignorant about how the economy works.
SLIDE 144
Our federal representatives tell us that they can’t give us what we need to survive – even though they really want to – because they tell us that not even preventing our suffering in reality is more important than their made-up “fiscal responsibility.”
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Not only do they pretend that they can’t give us these things, they also pretend that they do not know how to give us these things. “How are you going to pay for it?” is the question that our government (who does understand how the economy works) asks the people (who don’t understand how the economy works). Somehow, the people need to figure it out for the government, before the government can give the people what they need to not die.
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Our governments have an abundance of resources, but they choose to withhold that abundance, because they are legally bribed to do it. This leaves the people to fight over the scraps, which causes behavior like this. Please take a moment to read that:
TWEET TEXT: “You think the reason there are poor people is that it’s some grand conspiracy by the wealthy. It’s not. People are poor because they either lack the work ethic to become wealthy or they lack the brain power.
Rich in the USA = work hard. Be smart. Take measured risks. Repeat.”
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“I deserve more than you. I deserve more than you. Not because society is unjust and we’re all doing the best we can in a really terrible situation. No, I deserve more than you because you are less than me – you are less than me.”
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We come up with justifications for our comfort when others needlessly suffer, and we come up with justifications for our suffering when others needlessly comfort.
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And while this behavior is disgusting, what’s really disgraceful is the system that allows to happen. Our government allows their people to fight over the scraps when they have more than enough to provide for all. They shame and punish their people from making bad decisions when they could easily prevent us from having to face those decisions in the first place.
Our governments manufacture scarcity. Because of this, we have to be terrible to each other, to our families, to ourselves, and to our environment – just to survive.
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So our government won’t provide for us, so who’s left but for-profit, private industry?
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We are forced into private debt. Our lives are placed on the altar of their profit. They legally bribe our politicians, so they can legally steal from us.
SLIDE 152
The wealthy few sabotage our government with big money, and then they turn around and tell us that “government is the problem.” But they shut us out of the government so that we don’t have a chance to make it better, but it doesn’t matter because “the government is the problem.” Then they tell us that the only possible solution is the “free market,” which, coincidentally, enriches those who sabotage the government.
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The problem is not “the government,” the problem is those who have stolen it from us and locked us out.
SLIDE 154
Currency users have to worry about money. We have to worry about our bills, debt collectors, and bankruptcy. We have to worry about what will happen if we can’t afford to pay our bills. For us, fiscal responsibility is critical. For us, private debt can be ruinous.
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Currency issuers have a lot of things that they need to worry about – but not money! “Fiscal responsibility” for a currency issuer is nonsensical. Public debt is nothing.
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So if you remember nothing else from today, please remember: a currency issuer is totally different than a currency user.
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Congressional appropriations.
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Here is the technically correct answer to, “How are you going to pay for it?”. “Every federal program is paid for with congressional appropriations. We are a sovereign fiat currency. If we have the resources to do it, you can choose to create the money, – to purchase those resources – to do it.”
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But here’s the answer that I believe should be given to this terrible question: “We will ‘pay for it’ by getting you out of office and replacing you with someone who will never ask us that question again. They will do whatever it takes to just get the job done. Until that day, 100 percent of our energy will be spent making your life a living hell.”
SLIDE 160
There is nothing wrong with opposing federal programs, such as a Federal Job Guarantee and so on, but if you oppose them because of economics – if you oppose them because they will “raise our taxes,” because it “is too expensive” – MMT demonstrates that that argument is invalid. So either you should reconsider your opposition or come up with a more honest argument for your opposition.
SLIDE 161
Great things are possible. They’re possible now, and they have always been possible. But they will only happen if we stand up and demand them. We will never stand up and demand them until we believe that it’s possible. Modern Monetary Theory demonstrates that it is possible.
SLIDE 162
MMT is non-fiction economics. Learning MMT will not stop the corrupt from doing bad things. It won’t. Learning MMT will stop the corrupt from stopping us from doing good things.
Thank you.
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