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(people chattering)
- It's in a sense risky to try
to change the entire narrative.
When I show up for an appearance, it's like walking
into the lion's den.
But because I've done it
so many times, I get a good response.
It depends a little bit how much time they give me.
If they give me 45 minutes, it's a little tougher.
If they give me an hour and a half,
I can almost convince the whole crowd.
With two hours, everybody's pretty comfortable
with the ideas.
So much of the public discourse, it's like we're going
through life with one eye shut and one eye open
and we're only getting half the picture.
And then somebody like me comes
in and says, "Well, let's make sure we see the full picture."
For as long back as I can remember
there's been this drumbeat of a narrative.
When politicians talk about spending more money
on healthcare for all,
inequality, housing,
or our climate crisis,
the first question they're usually confronted with is,
how in the world could we possibly spend more?
We're already trillions in the hole.
And people point to the size of the national debt.
- We must begin to make some
payments on our enormous national debt if we are to avoid
passing on to our children an impossible burden of debt.
(audience clapping)
- New worries today over
the exploding federal debt.
- [Newscaster] Already the national debt is at record high.
- We wanna lift this crushing
burden of debt off of our children and grandchildren.
- The national debt is exactly the opposite of what
the orthodox story tells us.
(upbeat music)
- An unconventional economic
theory is gaining some traction.
Modern Monetary Theory, MMT.
- [Host] And one of its leading proponents
is Professor Stephanie Kelton.
- [Host 2] One of the most influential
and indeed controversial economists in America today.
- In conventional wisdom, surpluses are good,
deficits are bad.
- Deficit spending should not be a feature of our budget.
(audience clapping)
- They think of the federal government like a household.
Government deficits are completely different.
- We must bring those deficits down.
If we don't, we will leave an unconscionable burden
of national debt for our children.
(audience clapping)
- The government debt is not a burden on anyone.
- We're borrowing trillions of dollars from China.
- Does the government have to borrow dollars?
No, of course not.
The federal government is
where the money comes from.
- When a fringe economic theory goes mainstream,
you better pay attention.
- Six presidents have come before you to warn
of the damage deficits pose to our nation.
- We owe it to our children and grandchildren to act now.
- To make sure we aren't buried under a mountain of debt.
(audience clapping)
- It is very difficult to reverse a paradigm.
- We will address the catastrophic
crisis of climate change.
- How do we pay for climate mitigation?
- How are we gonna pay for it?
- You're asking the wrong question.
Finding the money is the easy part.
- They don't find the money they create it.
- The true story of money is not
the story that I've been told.
(upbeat music)
(plastic crinkling)
- That's beautiful. (Twitter notification beeping)
I love stuff like this because how can you have more fun
on Twitter to be honest?
I would like to work on my book project
and I know that my publisher would like me working
on my book project and spending less time on Twitter,
but I think I have to engage in these battle of ideas.
(Twitter notification beeping)
People don't make the connection that the
national debt is nothing but all these safe assets.
It's just our savings.
You could take the national debt clock that scares everyone
and just rename it the US dollar savings clock.
And I think everybody would have a very different
kind of reaction.
And so I think 95% of the problems
that we have getting better policy is probably down
to the words we use to describe what's actually happening.
(upbeat music)
- Thanks everyone for coming.
Tonight we have with us, Stephanie Kelton.
She is a professor at Stony Brook
She's also an economic advisor
to the Bernie Sanders campaign.
You've probably heard in the news
about Modern Monetary Theory.
- Modern Monetary Theory. - Modern Monetary Theory.
- You have this Modern Monetary
- What do you think of that idea
Because it's being bruited as a way to spend more money
on infrastructure on the Green New Deal.
- What is MMT about
and why has it suddenly sort of exploded?
MMT starts with the understanding
that the federal government is the issuer of the currency.
- Every dollar that exists was created by the US government.
- We issue the US dollar.
The federal government can issue more dollars
at any time it likes.
People like Alan Greenspan
or Ben Bernanke have said the same things we■re saying.
- There's nothing to prevent the federal government
from creating as much money as it wants
and paying it to somebody.
- We simply use the computer to mark up the size
of the account that they have with the Fed.
- We won't run out of money.
- [Kelton] But usually the narrative
goes something like this.
- A national debt of $11 trillion dollars
At what point
do we run outta money?
- Well, we're outta money now.
You know, we're operating in deep deficits.
- We're broke. America's broke.
- The federal government is broke!
- We're bankrupting our country.
- We have no savings account.
Congress has spent all the money
- What MMT is trying to say is,
of course, the US has its own currency.
Of course it can't run out of money.
Of course it can't end up broke.
- In her talk, Professor Kelton will cast a different light
on the ongoing fueds
over the budget deficit, arguing that Democrats
and Republicans are both missing the bigger picture
when it comes to paying for our future.
(audience clapping) - Thank you. Thank you very much
What can we afford?
If we have all of these ambitious things
that we as a nation might like to do,
the really important debate is do we have the resources
to do it?
Because the US government is never going
to run out of the US dollar.
- Hi everyone. Thank you so much for joining us.
- Congress holds the power of the purse.
They don't need to come to the rest of us
to get dollars in order to be able to spend dollars.
They're the source of the US currrency.
Yeah, in a real sense, it is as simple as that,
but you have to be able to trace through all
of the implications of that observation
and that's where the story gets much richer.
- Today, I nominate Jared Bernstein. An old
friend who's been with me a
long time, a brilliant thinker.
- [Presenter] White House economic advisor,
Jared Bernstein joins us now from the White House.
- Thanks so much.
The US government can't go
barnkrupt because we can
print our own money.
- It obviously begs the question
why exactly are we borrowing
in a currency that we print ourselves?
I'm waiting for someone to stand up and say,
"Why do we borrow our own currency in the first place?"
- [Director] Like you said, they
print the dollar, so why
does the government even borrow?
- Well, um, the uh,
- So the, I mean, again,
some of this stuff gets,
Some of the language
and concepts are just confusing.
I mean, the government
definitely prints money. And it
definitely lends that money.
which is why, um, the government
definitely prints money
and then it lends that money
by uh, by selling bonds.
Uh, is that what they do?
They, they um
They yeah they, they um,
They sell bonds.
Yeah, they sell bonds, right?
Since they sell bonds
and people buy the bonds
and lend them the money.
Yeah, so a lot of times,
at least to my ear with MMT,
the language
and the concepts can be kind of unnecessarily confusing,
but there is no question that the government prints money
and then it uses that money to um,
uh...
So, um...
let■s see, uh...
Yeah, they print money and they use that money to...
Um.
They sell bonds, they borrow.
Um.
Yeah, I guess I■m just, I can't really talk.
I don't get it.
I don't know what they're talking about like
'cause it's like, the government clearly prints money.
It does it all the time and it clearly borrows
otherwise we wouldn't be having this debt
and deficit conversation.
So I don't think there's anything confusing there.
- We were always asking ourselves the question,
do conventional economists understand
what we're speaking of, but yet not talking about it?
Or is it that they actually don't understand?
- I believe some of the things that are preventing us
from taking bolder action are really just myths
and misunderstandings about how our monetary system works.
(upbeat music)
- It's an honor to be here
in the presence of future Senators and Congresspeople.
I grew up in the Middle East.
This is what the map looks like in the summer
when they show the weather forecast.
Within my lifetime, the Middle East will be uninhabitable
within the summer months,
which means hundreds of millions
of climate refugees will be moving across the planet.
A Green New Deal was proposed as an ambitious set
of policies to improve everyday Americans■ wellbeing
and prosperity while we transform
and decarbonize the economy.
The planet is on fire.
Millions of people want to work and can't find work,
and yet we're told,
"There's nothing we can do.
It's too expensive.
We can't afford this.
We're broke. The government doesn't have money.
We have to borrow from China."
- Democrats unveiling their
radical, extreme
Green New Deal today to address
catastrophic climate change.
- [Newscaster 2] The Green New Deal has
an estimated price tag
of $7 trillion.
- Where's the money coming from?
- It's gonna mean big time taxes
- It is unrealistic.
- How do you pay for it?
- I can't 'cause there's no way to pay for it.
- MMT goes, "Hang on, hold up."
The question that we should all be asking
of a currency issuing government, is not
how are we gonna pay for it?
We should replace that question with
how are we going to resource it?
Not the financial resources, but the real resources.
- How did we pay for World War II?
World War II came right after the Great Depression.
- This was a time of desperation
Uncle Sam didn't take his hat off and go around
to the population in the depths
of the Depression asking people
to chip in just a little bit.
This is when the economist, John Maynard Keynes wrote
that little book and he called it "How to Pay for the War".
And just judging by the title of the book
you would think, oh, it's gonna tell me
where the government got all the money
to pay for World War II.
And it turns out it has nothing to do with that.
It wasn't about how to pay for the war,
where to get the money, it was about
how are we gonna spend all of this money to win the war
without causing inflation?
That's what the whole book is about.
- So where did the money come from?
The federal government has the authority
to spend money into existence.
The federal government is the only issuer of the currency.
- Since war production began, we've had more money
than there were things to spend it on.
- The war started and we start spending money
into existence like crazy to build for the war effort.
- The government was gonna spend a lot
of money, hire a lot of people.
- By the end of the war, they tell me
that we Americans will have billions of dollars saved up.
- [Fadhel] So if you wanted, you'll be going out
on a shopping spree and bidding up car prices
and home prices, you'll be causing inflation.
- And the government was like, "Wait a minute.
I don't want you trying to spend a lot of money
at the same time."
- [Fadhel] Step two.
The government started selling freedom bonds
or war bonds.
- [Kelton] The war bonds weren't
about financing the government spending.
They understood really well
the purpose of the war bonds.
- [Narrator] There are things we
as individuals can do right now.
First, continue to save our money.
To buy and hold all the war bonds we can afford.
- Do me a favor.
Delay your consumption.
Wait until after we win the war.
- [Narrator] Buy only what we really need.
And pay no more than ceiling prices.
- Economists understood,
the government can't run outta money.
They were focused like a laser on finding the resources
and releasing resources from other uses
so that we could build the tanks and the fighter planes.
(plane engines roaring)
- The city of Detroit was completely transformed.
Detroit didn't produce any new cars between '42 and '45.
To solve climate change, we need
to move probably around 10% of GDP
or the nation's production,
to decarbonize transportation, energy, agriculture, housing.
- We've done this before.
- We had to move 50% of the nation's production
to fight the war.
We did it.
- So the experts tell us that we have less than a decade
if we're gonna avert the worst impacts of climate change.
The clock is ticking.
Do we have the resources to do what needs to be done?
Finding the money is the easy part.
That's the simplest part of this whole conversation.
Where will the money come from?
What matters is whether any proposed new spending
carries heightened inflation risk.
What doesn't matter is whether it adds to the deficit
or whether it increases the size of the debt.
(upbeat music)
- Well, the hottest debate
in the economics world
right now is over MMT
or Modern Monetary Theory.
Many economists have pushed back
on some of MMT's core ideas, including Larry Summers
formerly Treasury Secretary and
an advisor to President Obama.
- I think MMT is today's
version of voodoo economics.
It promises a free lunch.
- [Gundlach] This crackpot Modern Monetary Theory idea.
- Most Republicans rightly lampoon this quackery.
- The weird thing about MMT is I still can't figure out
what it actually is.
- The last thing we need
is some harebrained theory
that basically says
there's a free lunch.
You don't need to worry about it
- First they ignore you, then they ridicule you,
then they fight you,
and then you win.
Previous years we were taking off.
The wind was at our backs.
Now it's more like a hurricane.
Okay. Hi.
It's more interviews than I can keep up with.
Nice to meet you.
Thanks everybody. Nice to talk with you.
- Thank you. - Okay.
And it's a lot of work because with each new day
there's some people who encounter the ideas
for the very first time.
- [Journalist] So what is the role of taxation?
- So in MMT, we don■t think about taxation
as providing the government with revenue.
A government that issues its own currency clearly does
not need to tax me in order to get the dollar.
They■re the issuer of the dollar
Next one is here? Okay.
- Thank you so much. - You are so welcome.
- Thank you so much. - Thank you very much.
- [Journalist] Thank you so much
- Okay, I'm so sorry.
- No problem. - You■re my third.
Come on in.
There's a lot of confusion
and sometimes opposition to MMT,
which I actually understand
because when I first came across these ideas,
I was skeptical too.
- [Helfand] So the story I'm writing
I want to introduce the concept of MMT,
and also trace the intellectual origins of it.
- Where do I start?
At the beginning? (laughs) - Yeah.
- Warren Mosler.
That's where MMT I think really in a sense is born.
(upbeat music)
(car engine revving)
I was a graduate student
at Cambridge University, the first time
that I remember hearing Warren Mosler's name.
It was 1996 and Warren was getting active
on this listserv, We called it the PKT,
the Post Keynesian Thought list.
Mat Forstater was there,
and Randy Wray.
- And this guy named Warren Mosler started posting comments.
- [Kelton] He starts floating these ideas
and he starts saying things like
- The government doesn't need your dollars
to be able to spend.
- [Kelton] "It's not the government that needs
the dollars.
It's the rest of you that need the dollars."
And everybody's like, "Wait, what?"
- I did not fully understand everything
that Warren was talking about on day one.
It took me quite a while before it seeped all the way in.
- [Kelton] Warren Mosler wasn't trained as an economist.
He worked in finance.
He was a bond trader.
So financial markets
and monetary operations were his bread and butter.
- For me, the story starts in college.
- One of my students, Pavlina Tcherneva
- I was looking for an internship.
I went to work with Warren.
He would come in and he would say,
- Here you've got these Congressmen saying they need
to get dollars first by taxing or by borrowing
in order to spend them.
- That's the only story I'd ever heard.
- In fact, it's the reverse.
The government, which is the issuer of the currency,
has to spend first before it can collect taxes.
- Immediately, it sparks a lot of debate.
It sounds too easy in a sense.
I remember thinking, "This has got to be wrong,"
but I couldn't quite figure out why,
and I couldn't let go of it.
So I told Randy it can't be right.
- It was all a little bit puzzling
- And Randy said, "You should write a paper.
You should write it up because if he's wrong,
he would wanna know it."
- It's not obvious from just watching from a distance,
but it's fairly simple
if you think of the government from the beginning.
(film roll whirs)
(Townspeople voices and sounds)
- In the American colonies,
colonial paper notes were widely used.
Colonial governments collected
their taxes in these notes.
But where did the notes come from in the first place?
Americans didn't have colonial currency.
and they couldn't have colonial currency,
until that currency was spent into the economy.
- [Pavlina] The government didn't collect taxes
before they spent.
- Governments have to spend first.
How can you tax money
that no one has?
- Then people would pay their taxes with the paper money.
When the paper money came back in,
once those notes are returned to them,
they burn 'em.
They burn all of them.
(dramatic music) (fire crackling)
I don't know if that's gonna bother people to find out
that when they pay their taxes,
the government just burns it.
But we'll come back to that.
- All right.
You wanna go work?
Warren always said
he wasn■t proposing a new way of doing things.
He was just trying to explain
accurately how the monetary system works today.
The one we have already.
But it all felt really backwards to me.
So I sat down and I thought
that I was gonna do this more carefully than Warren had.
I spent most of the year reading
Treasury and Fed manuals, really digging into the mechanics
of the federal budgeting process
and the clearing of payments and all the balance sheets,
and just the how it all works.
I started getting on the phone
and talking to people at Treasury, at Fed.
- Modern Monetary Theory, even the proponents admit
that it's not necessarily a theory
as much as it is a description of reality
of how things appear to work.
The US government is not like a household.
The government creates the money
You don't have to ask the question of
where do you get the money.
These are factually correct statements
so it's very hard to argue against them.
- Then I started writing, the title of the paper was
"Do Taxes and Bonds Finance Government Spending?"
Naturally, I thought the answer was yes.
That's what I had been taught to believe.
And I didn't know when I started this paper
where it was gonna end up.
I just let the story take me wherever it's gonna take me,
and when I worked out all
of the operational mechanics,I ended up
at exactly the same place where Warren ended up.
The government does have to spend before it can tax.
Going through the mechanics, although it flips your world
upside down, makes everything seem more clear.
(rooster crows)
- Hey everybody, this is Barack Obama.
I've got my chief economist, Jason Furman here.
- I mean, Modern Monetary Theory is not something
we teach our students.
It's not something that's in our textbooks.
I think the biggest issue is that sometimes
Modern Monetary Theory seems to play a word game.
where it says, oh, we don't need to worry about the deficit
for this reason, but actually we do need to worry about it
for some other reason, like inflation.
Well, all of those get you to roughly the same place
in your thinking about budget deficits.
- No, I mean the difference is not a trivial one.
It changes everything.
- It changes our view of the nature of money.
- [Director] What is money and what gives money value?
- Money is what you use for transactions and it has value
because we all believe it has value.
If suddenly we decided
that it didn't have value, it would not have value.
- Money is this really important
mode of interacting economically
so we don't have to barter.
I don■t, you know, I think if you drill too far down into some
of these questions, I feel like you lose the thread.
- Didn't they tell you?
(footsteps) (dramatic music)
You never touch the money question.
When Paul Krugman was a student at MIT, one of his peers
in graduate school was an economist named Bernard Lietaer.
- Paul Krugman, told me personally
- And Lietaer wanted to talk about money.
- [Both] "Didn't they tell you?"
- Never touch the money system.
You can touch everything else.
- There's a theory that says we
should not be looking too closely at money
or almost even talking about money too much.
- What is money and where does money come from?
- We could rip off the veil of this thing
and openly look at how it works,
but maybe that would lead us to some dangerous places.
- It's just best to let that be.
- When I wrote the first book on MMT,
I wrote a letter to Robert Heilbroner and asked him
if he would write a blurb for the book.
and he said, "I can't because the topic is money
and your book is going to scare the hell out
of everyone, okay?"
And he was right.
- There are two words that
scare the pants off of people.
They are the national debt
and the deficit.
- We don't talk about finance, banking, debt, money.
These are questions that will put you on a path
that leads you to Siberia.
- You don't wanna step out
and contradict the entire underlying principles
of your profession.
It's a very dangerous kind of lonely place to be.
- You're killing yourself academically
if you touch the money system.
- We coalesced at the University of Missouri in Kansas City
where Fadhel and Lua were students of ours,
but for many years we felt ignored.
This is what Bernard Lietaer said.
He said they took all the MMT people,
and they put them in the equivalent of Siberia
because MMT starts with the money question,
the question you're not supposed to raise.
(dramatic music)
(upbeat music)
- [Narrator] The first kind of business was barter,
but what would you trade in a hardware store
for a gallon of paint?
Money has evolved from an age old search
for a satisfactory medium of exchange.
Money should be something of value.
Gold and silver emerged
as the most durable, most satisfactory money.
For greater convenience, men started eking out gold
and silver coins with values imprinted on them.
Later, governments took
over the exclusive function of coining money.
- (laughs) Everything is wrong with that story.
- If you look at any economics textbook
it's almost exactly always the same story.
- The barter story fits into the mainstream ideology.
They want to start with the market, the private market
with no government, and then
much later in their story, the government comes along.
- To use some of that money like the rest of us.
- The problem with that story,
number one, when was there ever this barter market?
- Money has existed for thousands of years
before markets were developed.
And rather than gold for most of time people have used clay,
or sticks or shells or paper.
Things that don't have apparent intrinsic value.
Why?
(wind and sand blowing)
There are monies that you will not even see
in physical form.
If we take ancient Egypt, the Deben never changed hands.
It was simply a virtual record,
and the reason is because money is not a physical object.
It's a unit of measure.
(film roll whirs)
And it's a record of a social debt relationship.
The earliest forms of money
that we find are Mesopotamian clay tablets.
- [Randy] It appears that in the very beginning,
the authorities would impose taxes
in kind, say two goats or maybe one cow.
- [Pavlina] You could think of money much the way we think
of centimeters, inches, pounds.
- [Randy] The development of a money unit of account
is conceptually a bit more difficult.
Because you can use it to value things
that have apparently nothing in common.
A bushel of wheat versus a goat.
- [Pavlina] Ancient Mesopotamia
had complex social organization structure, production systems,
and like every society, they had to keep track of things.
The clay tablets were accounting records.
They were like little ledgers.
- [Randy] In fact, these are
the earliest records of writing.
So writing wasn't invented by poets,
it was invented by accountants.
- [Pavlina] To solve the problem of producing
and distributing real resources
like bread, labor,
livestock, beer.
- Money is not itself a real resource.
Money is a tool invented by political authorities
to organize and mobilize real resources.
I was not originally interested in economics,
but many of the issues
that I was concerned about, poverty, unemployment,
environmental sustainability, came down to economics.
But I didn't know the terminology,
so I couldn't argue against it.
Joan Robinson famously remarked, "We study economics
so as not to be fooled by economists.
I, early on, a young assistant professor
and still trying to grasp the ideas myself,
I would observe Warren explaining these issues
and see how people reacted, the questions
that they would ask.
For example, if government can create the money,
then why do we have to pay taxes?
(piano music)
- Let's say a colonial government wants
to hire people to build roads.
They have a new colonial currency and they offer people
so much a day to come work building roads.
- But the people looked at their currency
and they say, "Why would we work hard
in order to get your money?
What would we do with that?"
- In fairly short order, they were like, "Oh wait, taxes."
- [Mat] They impose a tax that is only payable
in the colonial currency.
- We only take this special thing.
We only take this money thing.
- [Mat] Now everyone has to obtain that money
to pay their tax
or go to jail.
- Suddenly they had a demand for the currency.
What do you get? Folks who need the thing
that the sovereign is demanding in payment.
The government did not need the money.
What the government wanted and what they needed
for their purposes was for the people to need the money.
(ax chopping trees)
- [Mat] Now the authority can go out
and purchase the goods or labor it wants, when it wants.
- The tax is that motor,
that engine of transferring those resources.
Money is really the vehicle.
(engine starts cranking)
- [Lua] It is the taxation system
that gets the whole monetary system going to begin with.
(city noises, honking)
(dramatic music)
(clock ticking)
- The federal deficit is on track
to exceed $1 trillion next year.
The deficit is the difference
between the amount the
government takes in
often through taxes,
and what it spends.
- [Lua] If you total each of these yearly deficits
over the history of the United States,
we call that the national debt.
- Our nation's out of control debt.
- The debt is the biggest threat
to our economy.
- Those debts get passed on to our kids.
- I refuse to leave our children
with a debt that they cannot repay.
- We have piled deficit upon deficit, mortgaging our future
and our children's future.
- We are mortgaging our future.
We're mortgaging our children's future.
- I need more coffee.
Nice to meet you. - Nice to meet you too.
- Absolutely.
- [Deborah] So I'm at the New York Times
and I'm working on a piece about budget deficits.
Do you mind if I record you?
- No.
- [Deborah] All right. There we go.
- If someone said, what's the strength of MMT?
It's monetary operations.
No question about it.
It's how it all actually works.
People will sometimes say MMT is the school of thought
that says deficits don't matter.
Obviously that's wrong.
Deficits do matter.
They can be too big, they can be too small.
So if the government is running a budget deficit,
it just means they're spending more
into the economy than they're taking out, right?
That's all the deficit is.
(upbeat music)
It's like we're going through life
with one eye shut and one eye open.
Well, let's make sure we see the full picture.
(upbeat music)
- [Host] Please join me in welcoming Dr. Stephanie Kelton
to the stage.
(audience clapping)
- First, what is the deficit?
People naturally think, "Wait, government deficit bad.
This is a negative thing.
Let's stop this right now."
And I say, "Hang on, let's open the other eye."
So I want us to suppose that I'm the federal government.
If I'm government and I
spend a hundred dollars
into the economy...
The government spends a hundred
into the economy, taxes 90 back out.
We record on the government's ledger
a budget deficit of 10.
Minus 10, government deficit.
But we forget that on the other side of the ledger.
Guess what?
When they spend a hundred in
and they only tax 90 out,
somebody gets left with 10,
that's your surplus.
Their deficit is your surplus.
Oh, right, you got your surplus
from the government's deficit
and all of a sudden they start realizing
that they've been missing part of the story.
That's when I show the sector balance graph to audiences.
It's the most important chart in the world.
Government deficits are almost always seen
in a negative light, nothing but a sea of worrying red ink.
That's not how I look at it.
Here's what I see.
I see what's happening on the other side
of the government's ledger.
On the other side
of the government's deficit is a non-government surplus.
Their minus 10 is matched by a plus 10 on
somebody else's balance sheet.
So my red ink is your black ink.
That graph is really the one that when I show it
to audiences, it changes everything.
So when you see a headline like this one.
"Trillion Dollar Deficits Could Be The New Normal."
This is meant to shock and frighten,
but take a breath and read it this way.
Watch the word deficit.
Don't you feel better?
Trillion dollar surpluses
to the private sector could be the new normal.
Oh, all right. I'm down.
- We were trying to figure out
how to communicate these ideas
and Warren came up with the suggestion
that our department create our own currency.
So welcome everyone,
back to principles of macroeconomics.
Around 2000, we decided
to organize our community service program
through a monetary system.
We decided to impose a tax
of 20 Buckaroos per student per semester,
or you don't get your grades.
And that was enough to enforce it.
Here's the Buckaroo because we here
at UMKC are the kangaroos or the Roos, right?
There were so many things
that you could explain through this.
For example, it was impossible,
from the very beginning,
for the UMKC Economics Department
to run a surplus.
Suppose that you perform 10 hours of community service.
Okay, 10 Buckaroos.
Now the economics department is running a deficit
of 10 and the student population has a surplus of 10.
I can collect 10 Buckaroos back at the end of the semester,
but I cannot collect back 11.
How can you collect more in taxes than you've spent
into the economy?
It's impossible.
So if you all the students want to save any Buckaroos
for a future semester or in case you would get sick,
if the currency issuer does not run a deficit,
then people cannot save in that currency.
So the normal situation for a currency issuer is
to be in deficit.
(upbeat music)
- Tonight I come before you to announce
that the federal deficit will be simply zero.
(audience clapping)
Now we are on course for budget surpluses
for the next 25 years.
(audience clapping)
- During the late nineties
and early 2000s, most economists
to them, this looked like a Goldilocks economy.
- We ran a surplus for four years
and I was Comptroller General then, ok.
We paid down debt two of those four years.
My name's Dave Walker.
I think I may have the record for the most testimonies
in Congress by an individual.
I've got about 350.
- [Multiple] (voices)
- [Chair] I recognize David Walker
the former head of the Government Accounting Office.
- After nearly 30 years of deficits,
the combination of hard choices
and remarkable economic growth
has led to a budget surplus.
- A lot of people missed what was going on at the time.
- You know, we had a surplus when Bill Clinton was president.
- That means extra money. - Extra money.
- The government sector is in red in this graph,
and except for the Clinton years, it is always
in deficit below the line.
Private sector is blue.
It's almost always in surplus except
for the decade after 1996.
- It was the private sector
that was spending more than its income.
We were running the deficits.
- The sectoral balances approach
means every time you say the government
should run a surplus, you are saying
that everybody else should collectively run a deficit.
- This is an accounting identity
The total spending has to equal the total income
because every dollar spent is received
by somebody as income.
It doesn't end up on Mars or something yet.
So it has to be here somewhere.
- No. Never seen it before.
Never heard of it.
You know, doesn't make sense to me.
- Nobody could possibly disagree because just a fact.
- I'm in the Accounting Hall of Fame
and it isn't common knowledge.
- If the government runs a budget surplus,
it will be reducing our income.
- Go and look at the United States.
How often have we put the government's budget in surplus?
Seven times in our nation's history.
We did it from 1817 to 1821.
What happened?
Had a depression that started in 1819.
We did it again.
Depression, depression, not recession, depression.
The last time we did it was under President Bill Clinton.
Randy could see the writing on the wall.
- [Randy] We knew the private sector
was vastly over-indebted.
By 1998,
we were predicting a big crash would come.
- What happened?
The economy went into recession in 2001,
and we ended up with the great recession just a handful
of years later.
- Because it's actually not possible
for the government sector to be saving, running a surplus
and the private sector to be saving,
that is running a surplus.
This is not possible for the United States.
- If you're not thinking
about it, you can be led into mistakes.
- The idea that when the government ran a surplus,
that that was negative for the private sector,
uh, I don't get it.
- If you put the budget in surplus
it means you're drawing down
the non-government surplus.
That's what it means.
- [Lua] It doesn't mean the government is looking around
and successfully finding more dollar bills out in the world
so that it has a bigger pile of dollars that it can spend.
- Because money, it's not something we dig out
from the ground, we create it.
It's an accounting device.
And money always has two sides.
- Most people think in medieval Europe,
that kings collected gold coins in tax payment.
In reality, most of the spending
and taxing was done in tally sticks.
Tally sticks were hazelwood,
and first they would put score marks on it.
Then they would split the stick in two.
Into stock and stub.
The king would purchase a wagon
by issuing half of a tally stick
You will take the stick
if you can use that to pay your taxes.
And the treasury would keep the stub or debt half.
So when tax time came, the kings would send
out the tax collectors.
They would match the stock and stub
to make sure nobody had counterfeited.
Once you had delivered back your half
of the tally stick, your taxes were paid.
So although most of the revenue was in the form
of tally sticks, there's no reason
to collect them and save 'em.
Once the stock and stub were matched,
they were always burned.
(upbeat dramatic music)
- And still today,
when the government receives tax dollars,
they are destroyed.
- That's the nature of IOUs.
When they come back to the issuer, they're just destroyed.
(upbeat music)
- [Lua] Imagine a group of people living
in an organized community.
They decide everyone should contribute weekly chores
like gardening, cooking, or cleaning.
So doing your chores is like paying your taxes.
The Community Center, like a government,
could record when each person finished their chores.
Or the Center could pay chore credits.
Say each adult needs to turn in 10 chore credits a week
to meet their obligation.
Some might choose to earn more credits than they need.
So they could use the credits to pay other members
for special things they produce, like baskets.
Those members can then pay their own tax
with the chore credits.
The value of the chore currency
is determined by what you have to do to get it.
For example, one chore credit for one hour of labor.
The chore credit would be an I.O.U. of the Community Center
It says I owe you
a reduction in your chore obligation account.
The currency is simultaneously
a credit and debt relationship
based on a two sided
accounting ledger.
The Center tallies a liability
when they create their I.O.U.
the chore credit, and it circulates around the community.
whenever the I.O.U.■s come back
from any member to be
redeemed for tax payment,
the credit debt relationship
is complete.
The numbers on the balance sheet
go back down,
and the credits and debits
disappear.
Government spending operates exactly the same way.
Currency is the government's IOU
The US dollar is a US tax credit
Money always has two sides
and so the currency itself is the government's debt.
That green piece of paper, we call it the dollar bill,
that is a debt of our Fed.
- [Randy] Nobody can hold a financial asset
unless somebody has issued a debt.
- I don't think so, no.
- [Randy] That's just plain wrong
Anyone can look at the Fed's balance sheet
and reserves are on the liability side.
- [Pavlina] Currency notes
are a liability.
What is the Fed liable for?
- [Lua] They're liable for redeeming the government■s
outstanding tax credits.
- [Randy] Once these come back to the government,
they're not assets to the government.
- [Kelton] It's not that the
government gets something
when you pay taxes.
It's just that you have fewer
credits on your account.
- [Randy] The government is no longer in debt
when it receives back its I.O.U.
so it burns it.
- [Director] So federal reserves and cash, are those
recorded as a liability
on the Fed's balance sheet?
- Yes. They're again accounting.
- It's accounted for by the Fed,
but it's not an asset or a liability, okay?
- Money is always a two-sided relationship.
- It's a medium. It's a medium.
- And so that's what most people
are probably not understanding.
They're thinking of physical notes changing hands.
- I'm talking about the currency notes, okay?
A means of exchange.
- [Pavlina] Which I think goes back to the myth of barter.
- [Narrator] Gold and silver emerged
as the most satisfactory medium of exchange.
- The media of exchange is relatively unimportant.
Money has always been the debt of the issuer.
The only thing that has changed is the technology used
to store and transfer records
of the debts and the credits.
- [Narrator] For greater convenience, men started
eking out gold and silver coins with values imprinted on them.
- The oldest coins never had a value stamped on them
and the issuer would often change the value.
Just announce a new value for the coins.
They were worth whatever the emperor said they were worth
in payment of taxes.
So even the gold coin was a debt of the king that issued it
because there is no such thing as money without debt.
- [Chair Yarmuth] The hearing will come to order.
- I will emphasize that debt is
on an unsustainable course
in CBO's projections.
- Mr. Hall, what are the consequences of high debt?
- The most important is that if people start asking
for a premium to lend the government money
to run the government, interest rates could be much higher
than we project at the moment.
- When the government runs
a budget deficit,
it pushes interest rates up.
That's because the government's
trying to borrow more money
and interest rates are like the price.
And whenever people want more of something,
the price of it goes up.
There's a big debate as to how much interest rates go up,
but that's definitely the direction they go.
- How can he he say that?
How can he say it knowing
what we have been doing for decades?
- As our debt has risen
in recent years, interest rates have fallen
to historic lows.
- The national debt goes like this,
and the interest rate the whole entire time,
decade after decade.
- What is the reason for that?
Well, I don't know.
What is shocking though is
that even expert economists can't really explain it either.
Here is the former chief
of the IMF basically admitting as much.
- Interest rates on bonds have come down steadily
since the mid eighties.
It's a very long trend.
And we have no explanation.
- Yeah, economists really have no fucking idea.
- Why did we have near zero interest rates?
Why does Japan have near zero interest rates for 25 years?
It's because the central bank sets the interest rate.
It's wherever the central bank
wants it to be.
It's not set by the market.
- [Kelton] What they're talking about is
something called the loanable funds model.
There's this finite supply of savings.
- So when the government is borrowing,
it's borrowing part of that pool of private savings.
That means there's less private savings
for other things.
- When the government spends money on something
some business or private person has less money to spend.
- It is exactly the opposite.
- The reality is,
it is the budget deficit
that increases the private sector's saving,
dollar for dollar.
- Deficits don't shrink the supply of savings.
It's augmenting, It's adding to private saving, you see?
It's exactly the opposite
of what the orthodox story tells us.
- We owe the Chinese massive amounts of money.
- We're borrowing trillions of dollars from China.
- Like America's in so much debt
at this point, I'm waiting for China to pull up
and just tow one of the states away.
Just gonna be like, "Yeah, you didn■t pay.
We're repoing this, man."
- No, the US government is not borrowing dollars from China.
- Okay, all right.
So let's start with trade.
China holds all this US government debt, right?
And people get anxious about that.
- It could impoverish future
generations because they would
need to pay back monies to
the foreigners we borrowed from.
- So why does China have all of these US Treasuries?
Where did they get them?
They bought them. Using what?
US dollars.
Where did they get the dollars?
- It's 'cause we buy stuff from China.
We buy more from China than China buys from us.
- They end up with US dollars.
So when Donald Trump talks about trade,
how does he think about trade?
- When was the last time anybody
saw us beating let's say China?
China's killing us.
- When he says China's killing us.
- And if you look at China.
- And Japan is killing us,
- You look at Japan.
- And Mexico's killing us.
- And if you look at Mexico,
they're killing us.
Every country we lose money with
- The dollars are going out to the rest of the world.
What is he missing?
So when I was watching the debates with my son who was nine
at the time, and there is Donald Trump and he's saying...
- They send their cars over by the millions.
- Japan is sending us all these cars and what do we get?
And my son turns to me and he goes, "The cars?"
And I said, "That's right, Bradley."
The cars, right?
This is the piece he's missing.
There's stuff that's coming in.
- If you look at what your real wealth is as a nation,
you can consider your real wealth your pile of stuff.
Your imports add to your pile of stuff that you have
and your exports lower it.
Our policy makers have this completely backwards.
- Why did China end up with so many dollars?
cause they sent us so much stuff
So they end up with effectively
a checking account at the Fed.
- Then usually the Central Bank of China will ask the Fed,
"We would like to have some government bonds instead
of reserves because we would like to earn some interest."
It's like a checking account and a savings account.
- Debit their checking account at the Fed
and credit their securities account.
We've borrowed from China.
- China doesn't create any US dollars.
Every dollar that China got came from the US.
And all that happens when they buy a bond, it's not
that they're lending to the government
so Uncle Sam can spend in America,
it■s that we■re allowing them
to transfer funds from their checking account
to savings account and they get to earn some interest.
- That's all it means to borrow from China.
(upbeat music)
- We can't keep borrowing and borrowing.
- We are borrowing from the American future.
- We should not even use the term borrowing.
- We refer to the government
selling Treasuries as borrowing.
But here's what's really happening.
The government says, "Okay,
whenever I run a deficit, I "borrow".
I did $10 worth of deficit spending
so I have to sell this $10 Treasury.
Who wants it?"
And sure enough, there's someone in the economy
that's holding $10 in cash,
it was put there by the government's deficit.
So the reason we don't wanna call it "borrowing" is
because the government is first putting the money in
and then taking the money back out and replacing it
with a bond.
So the $10 comes out and a $10 bond replaces it.
That's just interest bearing currency.
That's part of someone's financial wealth,
part of their savings.
- [Morganthau] The bonds you buy, they're an obligation
of the government in the same way as a dollar bill
in your pocket, but with special privileges.
- [Narrator] You can name someone in the family
to own it with you, which means
that you both own the bond
like a joint savings account.
- But we call that borrowing
and we label the bonds, the national debt.
And that's where everything starts to go haywire.
- [Narrator] What's the national debt?
It's a monster.
♪ School House Rock ♪
- [Newscaster] Reporting from the debt clock
in New York City,
- You know we're already 14 and
a half trillion dollars in debt.
- The national debt is now $15 trillion.
- I want you to take your attenttion
to these debt clocks that are here.
- When I began this campaign,
it said it was 15 trillion.
- Our debt just crossed the $20 trillion mark
and it ain't stopping. - Now we're gonna have
21 trillion in debt.
We don't have any money.
- We're now at 27 trillion. - We're about
$28 trillion in debt.
- 2024, $45 trillion.
- Wow.
So what I would like this afternoon
to be is essentially a form of group therapy
because we need it, okay?
The national debt is nothing more than a historical record
of all of the times the US government spent more dollars
than it took out, and those dollars got transformed
into US Treasuries
Whether bonds or cash,
they're both our assets.
(audience clapping)
- Under my proposal,
the national debt will be completely eliminated
by the year 2012.
- We're saying let's get back to
a path of paying the debt off.
a debt-free nation for your children.
- The US government debt that we're leaving
to our grandchildren is their financial wealth.
- That's absolutely correct.
It turns out that all that debt
on that debt clock, it's also private sector wealth.
So that debt clock may
as well just say private sector wealth.
- Now that you know what the national debt is,
You can look at that debt clock and watch the name.
It becomes the US dollar savings clock.
So now we don't have to get so anxious
because it doesn't have the word debt any longer.
Now we know it's just recording all of the dollars
that are currently being held as somebody's savings.
So now don't you feel better?
If you can get people to that understanding,
this thing is not a monster, it's not a cancer,
it's not a threat to future generations,
it's not immoral.
It's just our savings.
Then you start getting people
focused on the things that matter.
We're still gonna have disagreements about the best way
to use the deficit,
but at least we would be having the right debate.
What can we afford?
The question isn't, will it increase the deficit?
The question is, will it increase inflationary pressures?
At that point, I'm gonna take a deep breath, huge sigh
of relief and I'm gonna go spend some time with my kids
because I'll know we finally did it.
(dramatic music)
(car engine rumbling)
All right, good boy, let's go.
(dog panting)
That's how he sleeps.
I don't know if it's the breed
or if this is just a particularly weird dog.
Whoa baby.
- [Host] Thank you so much Professor Kelton
for joining us here today.
I wanna ask,
why is it that we're letting everybody, you know,
continue with this misunderstanding
of how things work?
- You know, who's gonna align with you,
if you step out first?
You're gonna be a target.
Those ideas are gonna be a target.
But MMT it■s always been a group of us
that sacrificed a lot to make the professional decision
to say things that are so different from
what everyone else is saying.
Knowing that you're gonna be not just challenged
but ridiculed along the way, you gotta have some thick skin
to get through it.
But if you're convinced
that the work that you're doing is important
and that the ideas will hold up to scrutiny,
then you just keep pushing forward.
- I wanna talk about Modern Monetary Theory,
which basically states
that countries can finance their operations
by continuously printing money
without really the fear of inflation.
- We can print as much money
as we want and we can spend
as much money as we want,
and there are no consequences.
That's crazy.
- That's not what we say.
We would say,
sure, Congress can always authorize the spending,
but if they authorize too much, you'll get inflation.
It's at the center.
It's inflation is the constraint
We're not removing the limits.
- [Randy] The true constraints
on government spending are the resources that are available.
- [Lua] Our people, our land,
water and agriculture, our factories, our infrastructure
and transportation, education
and technology, our healthcare.
All of us recognizing
that we don't want punishing inflation.
We don't want inflation to get outta control.
And the MMT position is
that the best defense against inflation is a good offense.
It's to think about it ahead of time.
It's to consider before you allow a vote.
If you wanna do $2 trillion of infrastructure investment,
what are the real resources that we're going to need?
Where are you gonna get the contractors
and the architects, the engineers,
the steel, the concrete, the machines?
Show me that you have access to the real resources
or are you gonna have to compete for those?
And that tells me that you're gonna be bidding up prices.
If they say,
if you do this trillion dollars
without raising taxes, inflation will go to 3.5%.
Then you go, "Whoa, okay.
I need some offsets before we vote on this."
You do it before the vote.
And that's why it's so important
to have a careful evaluation.
And economists can do this.
- [Lua] You have to analyze
where the economy is at the moment.
If we're in a recession with lots
of unemployed people and resources, and factories,
the government can spend a lot more,
no matter the size of the debt.
Whereas if we're in a boom
when the economy is already close to full capacity,
the government needs to be much more careful about
how much and what they spend on.
- [Randy] Some kinds of spending will be inherently
more inflationary than other kinds of spending.
- [Lua] But private banks also create money
that can add to inflation too.
- Banks create bank money.
They create it every time they make a loan.
- [Lua] But this isn't in the textbooks either.
- [Mat] This mainstream textbook reads,
"A primary job of banks is to take in deposits from
people who want to save and use these deposits to make
loans to people who want to borrow."
- No, it's not correct.
Banks don't lend other people's money.
- If they operated that way,
we wouldn't get global financial crises.
We would not get speculative bubbles in housing.
- I would have my students rip that chapter out of the book
and then I would teach them how banking works.
If you walk into a bank and you sit down
with a loan officer, the loan officer doesn't look to see
if they have money available to lend to you.
They look at you. They look at your employment
and your income,
and if a bank thinks you're a good credit-worthy customer
and I can make money by granting this loan to you,
then the loan officer
acquires the loan.
That is, they put it on the asset side
of their balance sheet and they say, "This is now my asset.
$50,000 loan to Mr. X."
And Mr. X on the other hand has his own balance sheet
and he's just taken out a loan.
So he's added a liability to the liability side
of his balance sheet.
$50,000 has been added in debt.
And they put $50,000 in
the customer's bank account.
They simply change the numbers in Mr. X's bank account.
That's on the liability side of the bank's balance sheet.
Balance sheets have to balance,
so both of their balance sheets are in balance.
Where do the banks get the money that they loan out?
They get it from their chartered authority
to issue deposits.
That's where it comes from.
Got the money from the keyboard.
- Your checking account deposit is your bank's I.O.U.
That is their liability or debt.
And when you repay the loan,
just like the I.O.U.s,
the money disappears.
Because they have this ability
to create money, banks need to be regulated.
They can make good loans and they can make bad loans.
In the lead up to the crisis, Wall Street financed all
of these fraudulent mortgages, trillions of dollars
of bad loans that went bad.
- We start 2009 in the midst of a crisis
unlike any we have seen in our lifetime.
Many businesses cannot borrow or make payroll.
Many families cannot pay their bills or their mortgage.
Many workers are watching their life savings disappear.
- In the 2000s,
I was a lawyer at a really big law firm.
I'm on Wall Street.
The task that I got was
to explain how did this financial crisis
that we've been plunged into happen?
Millions of people lost their jobs.
It was horrible.
The deficit and debt automatically go up
as people are thrown into unemployment.
- This past weekend,
the federal debt passed the $12 trillion mark.
- At the beginning of 2010, in the midst
of this terrible deep recession, Obama's team pivoted
to the deficit.
- We will not be adding more to the national debt.
Because in these hard times,
we have to do what families across America are doing.
Save where we can so that we can afford what we need.
- And I think it's a fair bet
that the United States will default.
- If foreign lenders lose
confidence in our ability to
put our government's financial
house in order,
we could experience a dramatic
increase in interest rates.
- That's what he was hearing.
- You know, Greece was borrowing at relatively low
rates until it wasn't.
[All] A debt crisis.
A ruinous debt crisis.
- Fiscal policy turned negative.
- We're trying to cut the deficit by $4 trillion dollars
over the next decade.
- This freeze will require painful cuts.
- [Lua] This was a time when bank money was
rapidly disappearing.
Because households were trying
to pay back unsustainable private debts.
And banks weren't making many new loans,
as jobs, income,
and prices were down.
Spending was in a downward spiral.
- Good afternoon. My name is Reverend Delman Coates.
I'm the senior pastor of Mount Ennon Baptist Church
in Clinton, Maryland.
Prince George's County, where I pastor leads the state
of Maryland in foreclosures.
I would have these sessions here
at the church and we'd have thousands of people here.
- At the height of the Great Recession,
800,000 Americans were losing their jobs each month.
Our factories weren't operating
anywhere near their full capacity.
Machines were lying idle.
We had a housing bubble burst
so we had all these contractors and engineers
and architects and electricians.
All these people are outta work.
We have lots of people who know how to build stuff.
The US easily could have spent $2 trillion
into the US economy,
repairing, modernizing America■s
third world infrastructure,
with no new taxes,
because we had all the slack in the economy
to absorb that spending,
without the risk of inflation.
- We have work to do
in society, work to address our greatest existential threat
right now, which is climate change.
The federal government has the power of the public purse
to put every American
who desires a dignified job
to work.
- [Lua] But people were the most worried
about the national debt at precisely the time
when the federal government could have spent more than
at any time since the Great Depression.
- That was a disastrous missed opportunity
to employ those resources to benefit the country
That was a tragic mistake.
But Stephanie Kelton was not speaking to
Obama at this stage of history.
(Twitter notification beeping)
- You know, I have a computer screen, I have a phone,
I have an iPad, and I have a laptop.
So without being on Twitter, I can be aware of Twitter.
(Twitter notifications beeping)
- For several years
after the financial crisis, the MMT people had a lot
of small victories,
but they didn't really have a major breakthrough.
- You know, we were writing and publishing
and we were largely ignored.
We wanted to have a voice in the policy debates.
And the way to do that is not to write a journal article
that goes under review and two years later gets published,
that doesn't get you kind of in the debate.
You had to thrust your way in somehow.
I remember going to Randy
and saying, "I'd like to start a blog, will you contribute?"
And he said, "What's a blog?"
- The blogosphere, that's where I came across it.
- [Randy] And it was fun.
- Hey, what's that new group over there that■s
saying something different?
We were making some pretty big calls,
and what people call finance Twitter
they paid attention first.
(Twitter notification beeps)
- Wall Street seems very receptive,
more so than the economics profession.
- They just wanna get their bets right.
That made people pay
a little bit of attention.
And then they started laughing at us.
- Modern Monetary Theory, kinda like a kid coming up
with a modern dietary theory that says it's okay
to eat cookies for every meal.
- And we sort of celebrated
because we said, "Okay, well, we left the first stage.
We're not ignored anymore.
Now we're to the, 'then they ridicule you stage.'"
So that was actually moving on up.
That felt kind of good.
- No, you know, this is the thing.
It's a matter of emphasis and rhetoric.
You can look at the pronouncements
of people like Stephanie Kelton
saying "Look, we keep repeating
that real resource constraints
are what really matter."
The modern monetary theorists do say
there's ultimately scarcity of resources.
But too often they treat the world as if the norm is one
of generally unemployed resources and plenty of 'em.
But I must say in the last 20 years
of course, since 2008, there've been more times
when we haven't been constrained than when we have.
But the question is, all right,
what do they think we should do
to actually control inflation when it's upon us?
- Breaking news on the economy.
At any moment now,
the Federal Reserve is expected
to raise interest rates
for the sixth time this year.
- The Fed's goal to tamp down
inflation which is now
at a 40 year high.
- [Newscaster] Americans are paying more
for gas, food, clothing, and cars.
- In the US, Congress has given the Fed a dual mandate.
We want full employment, we want low inflation.
Go get 'em, tiger.
We say to the Fed, "It's your job."
They have one tool.
One tool.
The overnight interest rate.
Find the magic interest rate
that puts the whole US economy in balance.
- The Fed cannot tax, the Fed cannot spend.
The Fed can only set interest rates.
Interest rate policy's a very blunt tool.
- I mean, you have to understand
what the driver of the inflation is.
- [Lua] When you have a water leak flooding your basement,
you better identify the correct source of the leak
if you wanna solve the problem.
Is the inflation coming from an increase in demand?
Or a decrease in the supply
of goods and real resources?
- [Fadhel] Perhaps from a global
that disrupted factories, workers going to work,
supply chains and shipping.
Perhaps its severe flooding that cut food production
in a country by 90%.
Or is it OPEC
or an oil embargo increasing the cost of energy?
- [Narrator] In 1973, the price
of oil jumped four times higher than before.
- [Lua] So what policies can address inflation
by targeting where it's coming from?
If it's coming from a shortage in the energy sector.
- [Fadhel] We can reduce our consumption of oil
with policies to conserve, drive less, fly less, no fees
for public transit, work from home, shorter work weeks.
And we can also increase the capacity of that sector
to relieve some of the
pressure and bottlenecks.
- [Kelton] You can actually spend money
and reduce inflationary pressures
- Money that builds new capacity, building mass transit
and converting to a hundred percent renewable energy.
So healthcare,
education, housing,
and energy and transportation.
The Green New Deal includes those areas specifically not
because it's the favorite shopping list
of the progressive movement.
Well, because these are the sources of inflation.
We■re gonna include them in the Green New Deal
because that's how you increase availability, reduce cost.
- [Lua] Or are corporations taking advantage
of a natural disaster, war,
or pandemic,
to mark up prices much higher
than the cost of production?
In World War II, they didn't just leave it to the market or
the Federal Reserve's one tool
of raising interest rates,
to manage inflation
and allocate scarce resources.
That would never have worked
to prevent real shortages
or rising prices.
- Don't grab for more than your share.
- [Lua] But what if we want to increase government spending
and the economy is already at full capacity?
- Then the resources have to be freed up or created.
How do you do that?
- [Lua] We can first look at where are we wasting resources?
- You know, I think of Medicare for All
as a huge opportunity in this respect.
We have the biggest, most expensive healthcare system
in the entire world, roughly 18% of US GDP.
If we were to transition
to a leaner, more efficient form of healthcare delivery,
it's gonna save us a lot of resources.
You know, eliminating the middleman.
- If you want to fight inflation
you need to release resources.
- [Kelton] Defense, the military industrial complex,
and we have this behemoth of a finance sector.
- [Mosler] We got like
over 20 million people tied up in this stuff
that could be doing something else.
They could have cured cancer, built out
all the green infrastructure.
- And remember, private banks create money
that adds to spending pressure as well.
Banks have a special banking license
that allows them to issue credit
and that license was given to them by the federal government
for a specific public purpose.
But over time, we forgot about the public purpose
and we just let them loose.
Government spending on bricks and mortar
to build hospitals is not more inflationary
than private spending on bricks and mortar to build casinos.
If we're really at full capacity
we have to prioritize
how do we use the physical capacity?
Like we did during World War II.
And that means reregulating the kinds and quality
of loans that banks create.
Do we really need 20 more casinos this year?
Maybe we should have 20 more hospitals instead.
- [Lua] But the ultimate inflationary pressure in front
of us is climate change itself.
So we will need to very carefully manage our real
resources, while we decarbonize the economy
if we wanna keep prices stable in the future.
(clock ticking)
(somber music)
MMT doesn't solve all our problems.
Being able to create money doesn't solve all our problems.
But finding the money is often
the least important challenge.
The real challenge revolves around
how we can organize our collective resources
to allow humanity and the rest of the living world to thrive,
within planetary boundaries.
If we have a vision for a better future, money is
not the scarce resource we need to go out and find
before we can start building it.
Money is the organizing tool we can use
to mobilize our people and real resources to make
that vision a reality.
So what role does the government play in the economy?
- [Randy] The textbooks tell you
that money originates in private markets.
- And then later, much later
in history, governments came in.
- [Narrator] Later, governments
took over the exclusive function of coining money.
- [Randy] But when you actually
look at the historical record.
- What comes first is law
and a decision to organize the social provisioning process
through this mechanism called money.
- Only later did markets develop
and markets could really only develop after you had money.
- Now why does it matter that we tell the right story?
- [Lua] Because this story is the basis
of free market ideology.
- The state is not some force
that steps into market relationships
that disrupts the market mechanism.
Markets don't spring up on their own.
- [Lua] They need laws enforcing
and protecting private property in order to operate.
- [Randy] There has never been a market economy
with no government.
- But we have been tricked into believing
that the government shouldn't have anything to do with it.
- Economics originally was called moral philosophy.
The reason why economics tries to claim
that it is a science studying natural laws is
because they want to pretend
that they're not making moral judgements.
- These are the laws of the economy
and they produce these outcomes, inequality,
and we make people believe that that's just nature.
Then people will just accept
there's nothing you can do about it.
- If money is natural, who has the money is natural as well.
- The economy is extremely complex, but it's important
to understand that it's a human creation, guided
by rules and laws.
We can change those rules and laws.
(cutlery clinking)
- Bernie called two weeks before Christmas, 2014.
- It was definitely a pivotal moment when Bernie Sanders
contacted Stephanie Kelton to offer her the job as
chief economist of the Senate Budget Committee.
I think the first question he asked me was,
"What would you do if you were me?"
And so I just immediately said, "Second Bill of Rights."
- A second bill of rights.
The right to a useful and remunerative job.
The right of every family to a decent home.
The right to adequate medical care.
- Saying that people have rights to a job, rights
to housing, rights to healthcare
It's very powerful language.
- We must take up the unfinished
business of the New Deal
and carry it to completion.
And two weeks later, I had an apartment in DC.
- [Newscaster] Bernie Sanders last night on Fox
laying out his policy proposals.
But how much would those plans actually cost?
- [Newscaster] All the presidential candidates
want to spend much more of your money.
- You know, whose money are we spending?
And the simple answer is: your money.
The government is not some entity that has its own money.
The government only has money because people pay taxes.
- He's just absolutely wrong.
- Government spends by creating money,
and when it taxes, it destroys money.
- Really making absolutely clear
that the government does not need your money to act.
(upbeat music)
- [Host] Our next speaker is Stephanie Kelton.
- We believe the government has no money of its own.
That's what Margaret Thatcher told us.
- There is no such thing as public money.
- [Both] There is only taxpayer money.
- She told us.
The only way government can fund programs is
if it can "find the money".
So naturally you have to go where the money is
and that means tax the rich.
Without them, we can't afford to feed a hungry kid,
care for our planet, meet the imminent threat
of climate change.
None of these things can be accomplished unless
and until we get your money.
You people are nice, you're lovely,
but the truth is, we don't need you.
We don't need you.
- We don't need the rich people's money.
We need to tax the rich people because they're too rich.
- We don't want an oligarchy.
We don't want a world where a smaller and smaller number
of people have a larger and larger concentration
of the wealth and income.
It screws up the functioning of our economy
and it screws up the functioning of our democracy.
- But how much should we tax?
- It's not that they're not paying their fair share.
It's that they're taking more
than their fair share, much more than their fair share.
- So you have to decide, what is too rich?
What threatens democracy?
And you remove that and then you leave the rest.
And it's not because Uncle Sam needs the money, okay?
You don't stop when you get enough revenue.
If we get revenue from them, we're gonna burn it anyway.
(upbeat music)
[Protesters chanting] Our air
- [Speaker] We are the generation
that will lead international action.
- [Protesters] Now!
- [Speaker] We demand a Green New Deal.
(Protesters chanting)
[Protesters] When I say save you say Earth. Save. Earth.
- Change is coming whether they like it or not.
(Protesters chanting)
- And then this debate blew up.
And MMT got fired at from all angles by everybody.
- Bill Gates recently took exception
with MMT, calling it crazy talk.
- That's garbage.
- Trash, garbage.
- [Gundlach] This theory is complete nonsense.
I don't even think it's a theory
- Free money for everyone.
- We already know it doesn't work.
- And so we■re in the "fight you stage".
- They defy the laws of arithmetic.
- A bunch of malarkey.
- So do I think we're gonna win?
I won't say no, but it's gonna be a hell of a fight.
(upbeat music)
(protesters chanting)
- We should not be servants of money.
Money is fundamentally a public utility.
- The true story of money
makes it a political decision, a political choice.
- We have to shift from their money to our money.
Money belongs to us.
It's the people's money.
Our money. - Our power.
- Our money. - Our power.
- In a democratic society, we get to
decide what the priorities are
for the national provisioning of resources.
- In Dr. King's words, "We deserve an economic bill
of rights." Good jobs promoting the public good,
restoring our neighborhoods and our ecosystems.
- What do we want? - [All] Jobs.
- When do we want 'em?
- MMT economists come in
and show you what kind of a world is possible.
- What can we do to improve our educational system?
What can we do to improve our healthcare system?
- Money is a tool and we need to figure out how
to deploy that tool.
- [Kelton] I just want to empower people
to fight back against all of the kinds of things
that stand in our way
of building a better future, building a better world.
And many of the reasons that we've been told we can't build
what we would like to build are not legitimate obstacles.
- One of the biggest obstacles is this idea
that the government simply can't find the money.
Once we drive a stake through the heart of this myth,
then we open up the possibilities for public policy
that can deliver the public good.
- There's a famous quote of
Keynes, I'll have to paraphrase.
He says, when I find new evidence
I change my mind.
What do you do?
(upbeat music)