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A New York Times Bestseller The leading thinker and most visible public advocate of modern monetary theory -- the freshest and most important idea about economics in decades -- delivers a radically different, bold, new understanding for how to build a just and prosperous society. Stephanie Kelton's brilliant exploration of modern monetary theory (MMT) dramatically changes o A New York Times Bestseller The leading thinker and most visible public advocate of modern monetary theory -- the freshest and most important idea about economics in decades -- delivers a radically different, bold, new understanding for how to build a just and prosperous society. Stephanie Kelton's brilliant exploration of modern monetary theory (MMT) dramatically changes our understanding of how we can best deal with crucial issues ranging from poverty and inequality to creating jobs, expanding health care coverage, climate change, and building resilient infrastructure. Any ambitious proposal, however, inevitably runs into the buzz saw of how to find the money to pay for it, rooted in myths about deficits that are hobbling us as a country. Kelton busts through the myths that prevent us from taking action: that the federal government should budget like a household, that deficits will harm the next generation, crowd out private investment, and undermine long-term growth, and that entitlements are propelling us toward a grave fiscal crisis. MMT, as Kelton shows, shifts the terrain from narrow budgetary questions to one of broader economic and social benefits. With its important new ways of understanding money, taxes, and the critical role of deficit spending, MMT redefines how to responsibly use our resources so that we can maximize our potential as a society. MMT gives us the power to imagine a new politics and a new economy and move from a narrative of scarcity to one of opportunity.


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A New York Times Bestseller The leading thinker and most visible public advocate of modern monetary theory -- the freshest and most important idea about economics in decades -- delivers a radically different, bold, new understanding for how to build a just and prosperous society. Stephanie Kelton's brilliant exploration of modern monetary theory (MMT) dramatically changes o A New York Times Bestseller The leading thinker and most visible public advocate of modern monetary theory -- the freshest and most important idea about economics in decades -- delivers a radically different, bold, new understanding for how to build a just and prosperous society. Stephanie Kelton's brilliant exploration of modern monetary theory (MMT) dramatically changes our understanding of how we can best deal with crucial issues ranging from poverty and inequality to creating jobs, expanding health care coverage, climate change, and building resilient infrastructure. Any ambitious proposal, however, inevitably runs into the buzz saw of how to find the money to pay for it, rooted in myths about deficits that are hobbling us as a country. Kelton busts through the myths that prevent us from taking action: that the federal government should budget like a household, that deficits will harm the next generation, crowd out private investment, and undermine long-term growth, and that entitlements are propelling us toward a grave fiscal crisis. MMT, as Kelton shows, shifts the terrain from narrow budgetary questions to one of broader economic and social benefits. With its important new ways of understanding money, taxes, and the critical role of deficit spending, MMT redefines how to responsibly use our resources so that we can maximize our potential as a society. MMT gives us the power to imagine a new politics and a new economy and move from a narrative of scarcity to one of opportunity.

30 review for The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy

  1. 5 out of 5

    David Wineberg

    We’ve wasted a century looking at government as if it were a family or a business. It isn’t. As the monopolist controlling American currency, the government doesn’t ever have to worry about running out of money. It can always fund social security and Medicare, and many other programs besides. Instead of fiscal deficits, we should be looking at the deficits in society, because we can do everything to alleviate them with our currency power and expanded deficits. This is the essence of the powerful We’ve wasted a century looking at government as if it were a family or a business. It isn’t. As the monopolist controlling American currency, the government doesn’t ever have to worry about running out of money. It can always fund social security and Medicare, and many other programs besides. Instead of fiscal deficits, we should be looking at the deficits in society, because we can do everything to alleviate them with our currency power and expanded deficits. This is the essence of the powerfully shocking The Deficit Myth, economist Stephanie Kelton’s book on Modern Monetary Theory. Written without a mathematical formula or spreadsheets to bamboozle the reader, this most readable book lays out how America came to this point, and how very much more it could do for itself if it would just open its eyes to it. Kelton is a proponent of Modern Monetarist Theory, MMT. She learned from Warren Mosler, who pieced it together over a lifetime of observations. She has been researching and speaking about it for decades, with little evidence of success. Kelton says America does not use and does not need taxes to fund its operations. Taxes simply create demand for the sovereign currency. All Americans need dollars to pay taxes at all levels. Without that necessity, no one would care for American money. Taxes do allow governments to provision themselves without the use of force, she says. But if the government manufactures the currency, it doesn’t need the tax money to operate day to day. It just creates dollars as it goes. That’s how it works today, and taking things to the next level would create wealth and comfort for all. Here’s the part that requires rewiring brains: Fiscal surpluses suck money out of the economy. If surpluses persist for too long, eventually the economy will hit a wall, she says. Less money circulating means slower business, and added debt for non-government entities, which they can’t pay off. In six major recessions, each was preceded by a period of balanced budgets. If surpluses take money out of taxpayers’ hands, fiscal deficits spread the wealth outside the government to the private sector and to other countries. (Instead, current wisdom says government sending crowds out other investment.) Deficits naturally drive interest rates to zero, she says. While not an MMT economist, I learned this the hard way (is there any other) in the 2008 financial crisis. When the Fed pumped a then incredible seven trillion dollars into the economy by magically creating new dollars it handed out to banks, I reasonably figured this would dilute the currency and cause it to fall. Interest rates should therefore rise dramatically, because US money would be worth so much less. You can’t suddenly print seven trillion additional dollars without it affecting the currency, I believed. History shows the dollar has gone only one way – up, and interest rates have gone only one way – down. This is Alice in Wonderland, unfathomable and upside down. But it’s the way things really work, not the way things are taught. Our lying eyes are all that keep us from the safety, security and prosperity that the world’s most powerful currency provides in the form of expandable deficits. It didn’t always work this way. History demonstrates how constrained the country was under the gold standard, when money could only be issued if there was gold stored somewhere to back it. It made growth minimal, and recessions frequent. (It’s why kings of olde had to borrow from international financiers to fund their wars.) American banks used to issue their own dollars, and when they failed, the money disappeared. FDR broke away from the gold standard and Nixon killed it, freeing the Fed, which was only invented in 1913, to manipulate the dollar and interest rates as needed. The Fed was given the monopoly. The Fed has since learned it can inflate its own balance sheet without damaging the economy, which seems to have never occurred to anyone before. Or they would have used it instead of struggling with outdated tools in every recession. Monetarists claimed to be able to manage the economy and deficits by throttling or increasing the money supply. Fed Chairman Alan Greenspan thought unfettered capitalism would allow him to sit on the sidelines and watch the economy grow controllably forever. This creeping evolution of fiscality also incorporates monopoly power over the currency, but pathetically, no government has taken advantage of that power except in crisis. It’s not just the budget deficit, Kelton says. The trade deficit is only a negative factor if the government’s fiscal deficit is smaller than the trade deficit. Otherwise it is harmless. The business of the trade deficit shrinking the economy is a leftover from the gold standard constraints. The trade deficit not only loudly proclaims the wealth of the USA, but provides US dollars to exporting partners, raising their standard of living as well as America’s. Focusing on reducing the trade deficit is not only a waste of time, it is harmful, as tariffs hurt American exporters, importers, producers and consumers alike. It is tariffs that shrink economies, not trade deficits. All federal spending is done the same way – the Fed credits the appropriate bank accounts. Gold is not shipped, nor are hundred dollar bills. It’s all done on a keyboard at the New York Federal Reserve. Nobody waits for taxes to be paid first. It’s the same in most countries that have their own currencies. So Japan and the UK operate the same way, and could use their currencies to boost everyone if they chose to. Countries that are users don’t have that power. The most notable mess that creates can be seen in Europe, where euro nations cannot print their own money. Ironically, the euro itself is a solid candidate for enlarging fiscal deficits for the good of all, but the European Central Bank is totally unwilling, so the power goes unused, and all the countries suffer the austerity of trying to keep their deficits within 3% of GDP. With the coronavirus pandemic, they are desperate to spread some wealth, but they can’t. And America is afraid to do more than send a small check to everyone – one time only. Finally in 2015, Kelton was invited to be the chief economist for Democrats on the Senate Budget Committee. She was invited, almost of course, by Bernie Sanders, one of the few who gets it. Deficit spending has the power to change government completely, and by extension, the lives of all its citizens. And all at no additional cost. It is, or should be, the privilege of being American. But Democrats are as hard a sell as Republicans. Kelton knew she would have a hard time on the Senate Budget Committee, and she was right. Getting this message through the skulls of senators who were elected on budget slashing and deficit reduction platforms is no small task. Kelton and Mosler demonstrated the near impossibility with a Congressman. She and Mosler called in a favor and met for an hour with a member of Congress. He squirmed uncomfortably at the facts they presented, until 45 minutes in, when the light suddenly came on. He got it. But he said he could never say it himself. He couldn’t be the voice of reason, the man with the solution, who stood out from the consensus (even if the consensus was clearly taking the country in the wrong direction). He would rather fit in and live the lie. Is there anything else voters need to know about their political parties? Kelton says: balance the economy, not the budget. The fiscal deficit is not nearly as critical as the welfare deficit, the healthcare deficit, the education deficit, the infrastructure deficit…. Medicare for all would not bankrupt the country, it would free up trillions to be spent on other things, saving many individuals from personal bankruptcy and others from death. It would boost the economy. There is risk in spending more freely. The biggest risk is inflation. The economy must be monitored to ensure the spending doesn’t exceed the country’s capacity to produce. That would create an inflationary spiral, cheapening the currency and causing interest rates to rise. So leaving the spending part in the hands of the politicians is not viable. Kelton calls for an automated response, like unemployment insurance, which expands in hard times and contracts in good times, without interference from Capitol Hill. She prescribes a guaranteed federal job. Anyone who wants a job could work for the government at a livable wage, with benefits. This allows them to keep looking for other work while gainfully employed, a huge advantage. It lets the government build out infrastructure, community works, hospitals – anything that needs people power. And it keeps everyone employed. Because one of the more idiotic aspects of they way things run now is the NEED for unemployed people. The Fed maintains there is a natural level of unemployment which varies with inflation. In order to maintain proper inflation, the Fed wants to see a certain percentage unemployed. So America has never had real full employment, because it thinks that is bad. Some Americans need to suffer if the country is to prosper, is their modus operandum. Kelton says an “automatic stabilizer” of a guaranteed federal job will do far more for the economy and keep it going right, producing at full capacity. I was surprised she didn’t go farther and discuss a universal basic income, which has not only shown to stimulate business and lower poverty, but is also profitable to the government because all the entitlement programs would go away, with all of their applications, interviews, investigations, denials, prosecutions, appeals and bureaucracies. Maybe next book. The USA will stay mired in the doom and gloom of the current recession only because its leaders want to, not because it has to. There should be some advantage to being an American, and not have to suffer to the same extent as countries that don’t have powerful currencies. Expanding the budget deficit costs nothing and grows the economy positively. For all the decades of crying that deficits hamstring our children, no one is suffering from the record of deficits of World War II or Vietnam or the Reagan ballooning. The truth is federal deficits are not only good, they are important tools, and yet, we fight to avoid them. I can’t imagine a more exquisitely timed book. Just when the coronavirus pandemic has destroyed much of the economy, as unemployment soars, millions are behind on rent or mortgages, the government is fumbling around with squirts of help here and there, and mostly for giant corporations (again). Now is clearly the time for MMT to shine. A universal basic income will clearly not only not hurt the economy, it will demonstrably rev it up. A guaranteed federal job would do the same for working age Americans. Not using this no-cost advantage is criminal. The Deficit Myth is about the most hopeful book you can read right now. The more people who understand this, the sooner America can regain its world-beating stature. David Wineberg

  2. 5 out of 5

    Peter Tillman

    I feel comfortable rating this book "of no possible interest" (to me) based on economist John Cochrane's review at the WSJ, aptly titled "Years of Magical Thinking": https://johnhcochrane.blogspot.com/20... To clarify: I haven't read the book, and don't plan to. But Cochrane's review makes interesting reading. He wasn't impressed. And he is a professional economist, albeit a right-wing one. Like many of you, I'd vaguely heard of Modern Monetary Theory (aka Magical MT), but payed little attention I feel comfortable rating this book "of no possible interest" (to me) based on economist John Cochrane's review at the WSJ, aptly titled "Years of Magical Thinking": https://johnhcochrane.blogspot.com/20... To clarify: I haven't read the book, and don't plan to. But Cochrane's review makes interesting reading. He wasn't impressed. And he is a professional economist, albeit a right-wing one. Like many of you, I'd vaguely heard of Modern Monetary Theory (aka Magical MT), but payed little attention to yet another economist's pipe dream. It turns out to be worse than I thought: "Its central proposition states that the U.S. federal government can and should freely print money to finance a massive spending agenda, with no concern about debt and deficits." Whee! Sadly, the lack of analytical rigor in Prof. Kelton's book is, well, remarkable. "In a book about money, the inflation of the 1970s and its defeat are astonishingly absent. ... If spending can be financed by printing money, “why not eliminate taxes altogether?” Kelton "criticizes Sens. Bernie Sanders and Elizabeth Warren for claiming that they need to raise taxes to pay for spending programs. But then why raise taxes? Taxes exist to decapitate the wealthy, not to fund spending or transfers: “We should tax billionaires to rebalance the distribution of wealth and income and to protect the health of our democracy.” Hmm. "What about all the countries that have suffered inflation, devaluation and debt crises even though they print their own currencies? To Ms. Kelton, developing nations suffer a “deficit” of “monetary sovereignty” because they “rely on imports to meet vital social needs,” which requires foreign currency. ... The problem is that “the rest of the world refuses to accept the currencies of developing countries in payment for crucial imports.” Imagine that! Anyway, per reviewer Cochrane, the book devolves into an "immense list of left-wing spending policies ... If you could only feel her singular empathy for the downtrodden, if you could, as she does, view the federal budget as a “moral document,” if you could just close your eyes and need it to be true as much as she does, your “Copernican moment” will arrive. Logic and evidence will no longer trouble you." Heh. FAIL.

  3. 5 out of 5

    Roy Lotz

    Deficits can be used for good or evil. Robert Skidelsky, in his enormous biography of Keynes, remarks that economics today occupies the same position as theology did in the Middle Ages—as a complex a priori logic that can be used to reach any number of contradictory conclusions. The more I read in the subject, the more I agree with him. To be taken seriously in politics means being able to use this logic. And yet, despite the seemingly scientific nature of this language, we seem hardly better Deficits can be used for good or evil. Robert Skidelsky, in his enormous biography of Keynes, remarks that economics today occupies the same position as theology did in the Middle Ages—as a complex a priori logic that can be used to reach any number of contradictory conclusions. The more I read in the subject, the more I agree with him. To be taken seriously in politics means being able to use this logic. And yet, despite the seemingly scientific nature of this language, we seem hardly better able to pinpoint the nature of economic reality than the scholastics were able to count the angels. I am exaggerating, of course. But I am a little distressed to find that, according to Stephanie Kelton, most economists and politicians—who already disagree with one another—are still fundamentally wrong about money, taxes, fiscal policy, and government debt. Here is another perspective to add to the mix: Modern Monetary Theory, or MMT. Kelton begins the book by taking a page right out of David Graeber’s history of debt. Money was not invented, as so often supposed, to solve the problems of a barter economy. Instead, money and taxes go hand in hand. The argument goes like this: If you introduce a currency into a fully functioning credit economy (where people just keep track of what is owed to one another), then there is little reason why people would adopt it. But if you institute a tax payable only in this currency, and threaten punishment for non-payment, then suddenly everyone must find a way to acquire the new currency, and this means doing some work for the state. In other words, governments introduced taxes, not to collect money (which it was producing anyway) but to compel work. And Kelton argues that this is still true today: that governments do not depend on taxes. She uses the example of a scorekeeper in a board game. The scorekeeper adds and subtracts points for other players, but they are never in need of points for themselves. Points are simply willed into existence whenever needed. Kelton argues that the US government (and other governments with what she calls “monetary sovereignty”) is in essentially the same position with regard to the US dollar. Since we use a fiat currency, any number of dollars can be willed into existence. Thus, the government does not depend on tax revenue, any more than a scorekeeper must subtract points from other players in order to stay afloat. In short, we do not have to worry about the deficit, since government debt is nothing like the debt you or I may owe. Does that mean that the government can just spend infinite money? No, Kelton says: though the deficit is not a problem, inflation may be. Too much government spending may lead to too many dollars chasing too few resources, which can cause prices to rise. Does that mean that taxes are unnecessary? Also no, according to Kelton, since, apart from compelling work, taxes perform at least two important functions. First, they remove money from circulating, thus decreasing inflationary pressure; and second, they reduce inequality, which leads to a healthier society. Yet if the government cannot spend infinitely, and if we still do need to tax, then what are we doing wrong? To answer that, Kelton next turns her attention to unemployment. Kelton notes that unemployment is built into our economy, largely via the policies of the Federal Reserve. The Fed aims for an arbitrary level of unemployment (say, 3%) which it considers the “natural” rate. Going below this natural rate would, it is feared, cause inflation to kick in, since demand would outpace supply. But this “natural” rate is little more than a guess, Kelton argues. Even when unemployment has been very low in recent years, inflation has remained low. Indeed, in this argument Kelton seems to have been prescient, since just in August the Fed decided to change its policy of lifting interest rates once employment hits a certain level, thus paving the way for more sustained employment growth. But Kelton has a fairly dim view of the prospects of using monetary policy to govern the economy. Instead, she thinks that unemployment should be directly eliminated using a Federal Jobs Guarantee. This is the main policy proposal of the book, and Kelton spends a good deal of time selling it. The advantages are compelling. Most obviously, unemployment is bad for people and communities, so it would be highly desirable to get rid of it. And a jobs guarantee would give workers more bargaining power, since the wage floor would rise (the jobs would pay a living wage) and the threat of losing work and health insurance would be eliminated. Still, I admit that I was not convinced. For one, even according to MMT’s own premises, the huge increase in aggregate demand—caused by increased federal spending, eliminating unemployment, and increasing wages across the board—could cause inflation. Kelton does not really address this potential pitfall. On a more practical level, I also have trouble imagining the logistics. Kelton describes a program that can employ anyone, anywhere, in socially meaningful jobs. But there is not necessarily the right amount of meaningful work in any given location, nor do the unemployed necessarily have the skills necessary to do this work (and re-training has its limits). I think that a substantial amount of make-work is inevitable in such a scheme. Furthermore, I can hardly contemplate the enormous bureaucracy that would be needed to administer such a program. It seems there would be just as many people making jobs as people needing jobs made for them. The job guarantee’s major policy rival, universal basic income (UBI), has none of these practical challenges (though of course it could cause inflation, too), since it is merely paid via the IRS. Admittedly, jobs do provide social and psychological benefits that an income does not. But Kelton does not discuss UBI at all, which I thought disappointing. At this point, the reader may be forgiven for wondering what is so new about MMT. After all, Paul Krugman—an orthodox Keynesian economist critical of MMT—has been writing for years about the mistake of thinking of the federal budget like a household budget, and the desirability of federal deficits in times of recession. The difference, so far as I understand it, brings us into dangerously wonky territory. Krugman avers that when we near full employment, a large deficit may require higher interest rates in order to avoid inflation. Kelton counters that our assumptions that low interest rates boost spending, and higher interest rates constrict spending, are actually incorrect. In other words, Krugman thinks that monetary policy can partly compensate for fiscal policy, while Kelton thinks that monetary policy is not particularly useful. I have little to add to this, other than to remark that I can never understand why these disputes—like theology—always take the form of high theoretical debates from first principles. It strikes me that the impact of monetary policy is an empirical question that could be answered with a careful look at the historical record. But what do I know? Well, I have done my best to elucidate this sacred mystery, but I ought to evaluate the book. Like many readers, I found the writing in this book extremely grating. The tone was somewhere between a salesperson and a televangelist—promising instant enlightenment and easy solutions—which immediately put me on edge. In fairness, when Kelton is not selling MMT but explaining it, the book can be quite fascinating. But Kelton’s insistence on treating MMT as blindingly true, and its enemies as either blinkered traditionalists or deceptive politicians, was not charming or effective. And the amount of repetition could even be condescending. By the time I reached the end, I really could not stand to hear another iteration of the central tenets of MMT. I got it the first couple times. Whatever the flaws of the book, and whether or not MMT is an accurate picture of how the economy works, it at least makes you think about how the deficit is treated in public discourse. Anyone who reads the news cannot help but notice that the swelling deficit is only invoked when we have to pay for, say, healthcare or infrastructure; but, somehow, when tax cuts to the wealthy or defense spending are on the table, nobody seems to worry. Even if the deficit presents more of a problem than Kelton believes, it is obvious that, if anything is worth going into debt for, it is programs that benefit the public, rather than bombs or yachts. I hope that followers of Keynes, MMT, Thomas Aquinas, and William of Ockham can at least agree with that.

  4. 4 out of 5

    Milind Hegde

    I found this book annoying to read. The central tenet of modern monetary theory (MMT) is that a monetarily sovereign government, like the United States and maybe a few more, creates currency and so cannot run out of it. In particular, deficits caused by spending in excess of taxation isn't inherently a problem, so long as the spending doesn't cause inflation, which isn't caused by excess currency but by a lack of real, physical resources and production to meet demand. This is definitely an inter I found this book annoying to read. The central tenet of modern monetary theory (MMT) is that a monetarily sovereign government, like the United States and maybe a few more, creates currency and so cannot run out of it. In particular, deficits caused by spending in excess of taxation isn't inherently a problem, so long as the spending doesn't cause inflation, which isn't caused by excess currency but by a lack of real, physical resources and production to meet demand. This is definitely an interesting and very (initially) non-intuitive statement which seems like it would have far-reaching consequences. My annoyance is that the book repeats this exact explanation maybe a hundred times over the course of the book, without (in my view) really developing it further. It feels like the book doesn't have a very high view of my intelligence and feels the need to really, really, really belabor the point. But that's more stylistic. What about the argument itself? Do I believe that the (US) government can spend as it wishes, without even needing to tax the population at all except as an anti-inflationary tool? I can't say that I completely do. Reading the argument feels very much like looking at a mathematical proof you've spent ages on and convincing yourself that actually there's a much simpler approach which totally avoids all the work - why didn't you think of it earlier? In math, it's usually - but not always - that you did and it was wrong. So I was very disappointed to find the book not really address this: why is MMT such a non-standard idea in economics? In fact, the book regularly implies that all the non-MMT economists are a bunch of idiots who can't see what's staring them in the face, which is something I found hard to accept at face-value from a MMT book. Partly because the book feels the need to tell you that the government is the currency-issuer and not the currency-spender every other page, it doesn't get around to elaborating in enough detail about the other things. For example, the book also proposes that the government provide guaranteed employment to all, at a federally set minimum wage (say $15/hour); when people lose a private sector job, they could get absorbed into one of these jobs, thus keeping them off of unemployment. Paying the wages won't be a problem because the government can just create the money. But how would this actually work? Won't it be colossally difficult to match people from all sorts of industries to work which they actually know how to do? If the workers are envisioned to only spend a couple months on the government job before returning to other employment, how will they have time to learn skills on the job? How will they be able to organize into unions to apply pressure for better conditions? Maybe I'm uninformed, but it seems foolish to expect any employer, including the government, to improve worker conditions with no worker pressure. In any case, there are a lot of details that it would have been interesting to see discussed, but we get none of it. In the same way, it would have been interesting if the book explored some of the consequences of the basic thesis. For example, in my view, the argument that the rich should pay taxes because the money is needed to provide welfare services for all is rhetorically much more powerful than saying that the government could provide welfare whenever it decides to, it just hasn't yet, and we should tax the rich just as an anti-inflationary tool and also because we think inequality is bad for other reasons. It might be true; it just doesn't have the rhetorical power, because it weakens the connection between the rich and the poor as being members of the same society who must share the society's resources. Similarly, in my view, saying the government has the awesome power to create money as it wants weakens the notion of the government as an agent of the people. In the old view where taxation is the source of government spending, there is a sense that the people work together to direct their collective energy through their taxes; one way people chip in to the collective endeavor is by paying their taxes. But if the government has the superpower of spending whatever it likes, the balance seems to shift: the government is doing various things, and we the people do not have a materially contributory role. Of course, this isn't strictly true because people can still vote and engage in democracy in other ways; but the rhetorical connection is still weakened compared to the old perspective. Or maybe some other notion can take its place: possibly, make the role of a vote and representation more fundamental than taxation ("representation without taxation!"). Whatever the alternatives may be, they have to be alternative and they have to be new, and so they need to be developed and discussed. It doesn't happen in this book. Talking about these sort of things would have pulled the book slightly away from strict economics and into politics, where the idea that there is a right answer is even more doubtful. But the world doesn't care about those academic boundaries, and I wish the book had taken a broader view, combined with a more optimistic view of the intelligence of its readers. (And I haven't even talked about how the book essentially ignores the question of every country out there which is not monetarily sovereign like the US or needs to have dollars on hand to pay for imports. The book devotes less than five pages to this important aspect, and in those five pages basically says that modern capitalism, World Bank, IMF, etc. have screwed over the poor countries and that sucks. Unclear how MMT will help. It felt a little ridiculous that so little energy was spent on so much of the world, especially since the introduction promised to talk about it, and also ridiculous how shallow the prescription was.) A critique of MMT itself (not of this book, though many of the criticisms still land) by one much more knowledgeable than me is at https://jacobinmag.com/2019/02/modern..., and a primer on MMT at https://www.vox.com/future-perfect/20.... Shorter, and you'll learn most of everything you would from the book.

  5. 5 out of 5

    Mehrsa

    I've been following Stephanie Kelton for some time and I think she's one of the smartest people around. The ideas in here are worth reading for anyone sucked into the deficit myth--the idea that we have to "balance the budget" or that the government's budget works like a household. I really appreciate how Kelton covers not just how the US budget works, but also how people on the Hill engage in "pay for" hackery when they know full well that they can just spend but that they need to show the CBO I've been following Stephanie Kelton for some time and I think she's one of the smartest people around. The ideas in here are worth reading for anyone sucked into the deficit myth--the idea that we have to "balance the budget" or that the government's budget works like a household. I really appreciate how Kelton covers not just how the US budget works, but also how people on the Hill engage in "pay for" hackery when they know full well that they can just spend but that they need to show the CBO that they are balancing the budget. I also appreciate how she covers what MMT means outside of the US--which is where my only beef with MMT comes from. To me, the whole thing relies on dollar supremacy and dollar supremacy relies on empire and weaponry. She talks a bit about that, but there could be a bit more there. Still, the book does the job fully and I hope more people take heed.

  6. 4 out of 5

    Sebastian Gebski

    (a reminder: I'm NOT rating the MMT, but the book about MMT - there's a huge difference between these two) I have a few significant problems with "The Deficit Myth": 1. The rhetorics are purely "American style" - which means: "if you repeat something 100 times, readers will treat it as truth, if you don't, they will forget it". Honestly, it felt like the author treats readers like idiots. 2. The initial 2 (or so) chapters were successful in presenting (in a very approachable way) the basics of fisc (a reminder: I'm NOT rating the MMT, but the book about MMT - there's a huge difference between these two) I have a few significant problems with "The Deficit Myth": 1. The rhetorics are purely "American style" - which means: "if you repeat something 100 times, readers will treat it as truth, if you don't, they will forget it". Honestly, it felt like the author treats readers like idiots. 2. The initial 2 (or so) chapters were successful in presenting (in a very approachable way) the basics of fiscal policies, the role of taxation & why being a currency issuer is a game-changer. This is a big pro. But ... I had the impression that all the remaining chapters were doing nothing but reiterating what was already said earlier. 3. The author has repeated the difference between household budget mgmt & national budget mgmt 1000 times, but once she had to mention the impact of issuing the currency on inflation, she was always flying through the topics & never covering it in-depth ("just look at the unemployment level and things will be OK") - it's naive, it's an oversimplification and again - it feels like she treats readers as complete morons I had expectations that this book will provide a lot of "food for thought". I didn't assume I'd need to agree with everything - that was not the point. But I didn't expect (especially after the initial chapters) that I'll actually find this book lacking valuable content. Disappointment. Not recommended.

  7. 5 out of 5

    Chaitanyaa From Teatime Reading

    As I made my way through The Deficit Myth, I had to stop numerous times, because it felt like my political and ideological underpinnings were being shaken at their cores. The idea that government spending should not be measured and debated in parallel with a family budget made sense to me, but I didn’t understand how. This book explains complex economics and political posturing in digestible terms It is a book that has the potential to transform public opinion, if it is read. So, I tell you today As I made my way through The Deficit Myth, I had to stop numerous times, because it felt like my political and ideological underpinnings were being shaken at their cores. The idea that government spending should not be measured and debated in parallel with a family budget made sense to me, but I didn’t understand how. This book explains complex economics and political posturing in digestible terms It is a book that has the potential to transform public opinion, if it is read. So, I tell you today, go and read The Deficit Myth. It Changes Everything. Please check out the full review on Teatime Reading www.teatimereading.com/blog/2020/4/30...

  8. 4 out of 5

    Zoltan Pogatsa

    This book is probably gonna be the Piketty of 2020! Very easy to read, lots of good examples, simple enough language for any intelligent person to understand. Kelton, Bernie Sanders' economic advisor, proves how all the austerity of the decades of neoliberalism, including the handling of the eurozone crisis, was unnecessary and harmful. The state does not run out of money. Money is not the bottleneck. Deficits do not matter. Output capacity matters. What matters is inflation. And inflation can be This book is probably gonna be the Piketty of 2020! Very easy to read, lots of good examples, simple enough language for any intelligent person to understand. Kelton, Bernie Sanders' economic advisor, proves how all the austerity of the decades of neoliberalism, including the handling of the eurozone crisis, was unnecessary and harmful. The state does not run out of money. Money is not the bottleneck. Deficits do not matter. Output capacity matters. What matters is inflation. And inflation can be controlled, if you tax what you want to curtail. Print and spend on green energy, tax SUVs. A must read! This book is gonna cause a revolution in economics.

  9. 4 out of 5

    Gea

    I'm not an economist, or even someone who is savvy about the topic of deficits. One thing I have learned over the years is that conservative politicians rail about the deficit - but only when the other side (Democrats, Liberals, etc.) hold the reins of government. Do a little research and find out for yourself which side usually runs up the deficit. The author is clearly a proponent of MMT, and she knows the subject well, making this book a must read for an introduction to the topic.

  10. 5 out of 5

    Debbie Notkin

    Stephanie Kelton is an economist, an economics professor, and a proponent of modern monetary theory (MMT). I've been interested in MMT for a while, and I read a chapbook by Warren Mosler, often described as the originator of MMT. Mosler was persuasive, but also dense and confusing, and I reserved judgment. What's MMT? Briefly, it is the belief that governments which issue their own currency ("fiat money") should never worry about debts and deficits, as long as the economy has the real material ( Stephanie Kelton is an economist, an economics professor, and a proponent of modern monetary theory (MMT). I've been interested in MMT for a while, and I read a chapbook by Warren Mosler, often described as the originator of MMT. Mosler was persuasive, but also dense and confusing, and I reserved judgment. What's MMT? Briefly, it is the belief that governments which issue their own currency ("fiat money") should never worry about debts and deficits, as long as the economy has the real material (people, goods, resources) it needs. In the acknowledgments at the end of the book, Kelton thanks her editor, John Mahaney. for cutting out charts, graphs, and jargon, and constantly reminding her of her readers' interests and needs. This review is a love letter to Mahaney, because this is the book I needed. I know I'm not alone. Using plain language, simple analogies, and clear explanations, Kelton makes an absolutely compelling case for MMT, and I can't find fault with her logic. Basically, she walks us through the facts of money, asking one crucial question: If the government creates the money, then we can only pay it back in taxes, because we only got it from the government in the first place. One of her lovely examples is the game of Monopoly: if the bank doesn't distribute money at the beginning of the game, there's no game. (She doesn't go into Monopoly's fascinating history, however.) Kelton is a realist. She goes into the reasons we still need taxes, the reasons why it's important to manage inflation, and the limitations of MMT (doesn't apply to U.S. state and local governments, doesn't apply to countries not in control of their own currency). She patiently and clearly refutes myths, explains wrong-headed thinking, and builds her case. Toward the end of the book, she starts talking about other deficits the U.S. lives with because of our unswerving belief in federal money deficits. I'm intimately familiar with most of her statistics about education, health care, infrastructure, etc., but I find it fascinating to think of them as deficits which could be addressed with a different theory of government money. Don't be put off by negative reviews from conservative economists: this is radical thinking indeed (though not partisan) and it's going to ruffle feathers and frighten horses. I'm thrilled that it made the NYT best-seller list, which I don't think would have happened pre-coronavirus. She mentions the coronavirus briefly in the introduction, but the book was written before the U.S. started handing out multiple trillions of dollars in "stimulus" funds, mostly to the people who need it least. If you are at all interested in rethinking how money works, this is the book for you.

  11. 4 out of 5

    Kumail Akbar

    I was really looking forward to this book after having followed Professor Kelton on twitter, and after seeing the praise for this book there. However, this turned out to be even more disappointing than I could have imagined. When reading a book written by an economist, it is fair to expect the author to bring to their writing the methods usually employed by the same when publishing in journals. It is fair to expect the author to propose a model and cite its assumptions and limitations, to show h I was really looking forward to this book after having followed Professor Kelton on twitter, and after seeing the praise for this book there. However, this turned out to be even more disappointing than I could have imagined. When reading a book written by an economist, it is fair to expect the author to bring to their writing the methods usually employed by the same when publishing in journals. It is fair to expect the author to propose a model and cite its assumptions and limitations, to show how it is a better model than all others by comparing other models, to evaluate all available data, to carry out a historical analysis and to engage with prior models and theory that may be pertinent to what they bring to the table. But apparently that was too much to expect from this book. Let me state up front what I found interesting about the book. Her statements about what MMT is – the ‘correct’ way of looking at spending and deficits by a monetary sovereign are interesting. Her anecdotal example of people preferring to abolish the national debt but not abolish US treasury’s – a statement mostly about framing – is interesting. Her reframing of public deficits as a positive – an injection of capital from the government to the rest of society – is interesting. Her arguments regarding inflation only clocking in when a society’s spending starts to outstrip its capacity are somewhat interesting. Her reasoning that a monetary sovereign can wipe its debt out with a key stroke and citing Japan as an example are definitely worth thinking about. Her assertion that taxation exists to create demand for a currency and has a positive side benefit – siphoning resources away from the wealthy was interesting. Her proposal for a federal job guarantee and ‘automatic’ stabilizers for the economy other than by monetary mechanisms piqued my curiosity, and will do the same for any reader. However, none of these are evaluated in a remotely objective or scientific way. The author sets the stage early for a very slanted approach to this book when she begins with framing MMT as a necessity for her preferred positive outcomes (such as the Green New Deal, etc.). Suggesting these early on should already raise an eyebrow - if the monetary mechanics described are true and paint an accurate picture of reality, you would not need to peddle potential positive uses of the mechanics, the truth itself should suffice. But no the author is setting the stage for people who prefer the positive outcomes to focus away from critically examining her arguments as apparently, this theory alone would guide us to the desirable policy outcomes. The mechanics of MMT as described (and repeated ad nauseum) are as follows – a monetary sovereign cannot run out of a currency it itself prints, that the choice of unemployment is arbitrary and that the Federal Reserve maintains a level of ‘slack’ in the economy and that the only real risk is that of inflation which can occur when a society starts exceeding its productive capacity. True, technically a monetary sovereign cannot run out of a currency it prints. But is there no limit to printing? Nope acknowledges the author. Great, then what is the limit? Just not what Fed has arbitrarily chosen because of its faulty reasoning. That is a valid starting point, but then what is a more accurate limit? We are never given an answer except a vague – 'when the slack (supposedly full employment as defined by the author) is removed'. Meanwhile, no attempt is made to thoroughly examine any relevant historical evidence (such as the Weimar republic – which is dismissed in the last few chapters without adequately demonstrating how an MMT-esque approach would not lead to a Weimar style hyperinflation). Her other arguments also do not seem to be robust nor evaluated critically. A government can in principle ‘wipe out its debt’. But what happens the day after? If society can see a debt being wiped out by a keystroke, especially repeatedly, would it continue to treat that country’s bonds the same way? Would other countries continue to do the same? There may be merit to the argument when considering the case of the United States today, given the status of its currency but can *every monetary sovereign* get away with this? Not really. Markets and societies will respond and recalibrate with different responses to behaviors different from the status quo, an idea that the author never seems to consider. The claim that governments use taxation to create demand for currency, is another such argument. If this is true, then a state without taxes or extremely low taxes should not be able to create demand for its currency. This is never considered; we should simply take the author’s assertion at face value. Her notion of a job guarantee as a magic fix for unemployment and other economic woes is another woefully underexamined thesis. She does not seem to consider a dynamic employer market can price in a government job guarantee, that assumptions such as 'people unemployed for long durations are unemployable whereas if they had alternative employment with a job guarantee they wouldn’t be so' seems laughably static. What are the chances that a dynamic job market starts treating people on a government job guarantee the same way it treats those unemployed for long stretches? No that is simply impossible because it would not fit her neat model. The whole notion of a federal job guarantee comes without any specifics regarding its operations and seems to not consider the possibility of government inventing ‘make work’ nor does it consider historical examples such as those of conscription (oy vey, the Road to Serfdom creeping up!). Both would ‘end chronic unemployment’ on paper but would someone truly want make work or conscription and even if they do what exactly would their net contribution to society be? No examination of this takes place, all we get is an assertion that local governments can invest more in ‘well-paying jobs’ such as care giving, etc. as they know what communities need. Is there any consideration of alternatives to a job guarantee, such as a UBI? No that does not get talked about. How about the opportunity costs of a government employment guarantee, such as the possibility of reduced entrepreneurship and risk taking? In her world view a hotelier, a banker or a coal miner losing their job would somehow fluidly transition into nursing and paramedic care simply because the government guarantees that they could do so, whilst the rest of the economy continues as is because well ... er ... ceteris-peribus, duh. The whole thesis sounds laughably bad once you start picking at it. The rest of the book rambles on about her personal experiences with people in power who can influence or change policy before turning into what sounds like a summary of Stiglitz’ The Price of Inequality, coupled with extra chapters on climate change and a green economy. Are those interesting enough on their own? Maybe, but those are issues that have been talked about at length elsewhere. Does a thorough history of monetary and fiscal policy ever get discussed? Nope, unless you consider cherry picked examples to show where the author’s priors are confirmed in specific instances (Roosevelt’s New Deal, Kennedy’s space plans, etc.), and cases where conditions facing the economy are ignored and her political and intellectual opponents painted as devils with insidious intentions (Reagan, Thatcher, inflation and other economic issues of the 70s, 80s, etc.). The final chapter then seems to come full circle about how MMT does not come with a policy prescription, it is only an interpretation of a mechanism – which makes you wonder what the point of most of the book was. Overall, a severe disappointment. If you want to be well informed on what MMT proposes, there are better articles (and hopefully much better books) out there. Rating: 2

  12. 5 out of 5

    James

    If you’re going to read this book, don’t worry if you come away feeling like Gertrude Stein after she visited Oakland. Although I was disappointed in this book, there were some good points: First, I listened to the Audible audio book, read by Professor Kelton. She has a pleasant reading voice, even at 1.5X. I especially enjoyed when she imitated teenagers and children talking about monetary theory and macroeconomics. Second, it was funny. Maybe not intentionally so, but it was funny. My father used If you’re going to read this book, don’t worry if you come away feeling like Gertrude Stein after she visited Oakland. Although I was disappointed in this book, there were some good points: First, I listened to the Audible audio book, read by Professor Kelton. She has a pleasant reading voice, even at 1.5X. I especially enjoyed when she imitated teenagers and children talking about monetary theory and macroeconomics. Second, it was funny. Maybe not intentionally so, but it was funny. My father used to joke whenever he got a new box of checks in the mail, "I have lots of checks so I must have lots of money!" This book reminded me of my father's jokes. It was also funny when Professor Kelton talked about the time the national budget was accidentally balanced during the Clinton administration, then talked about the Great Recession. I don't think she meant to imply causality, but there you go. And the whole “yellow money/green money” thing is a hoot! "Red fish/Blue fish" redux. Unfortunately, it wasn't all yucks and impersonations. Here's the bottom line: Modern Monetary Theory isn't modern, nor is it monetary, nor is it a theory. More properly, it's "Keynesian Deficit Spending Fiscal Policy Hypothesizing." But I'm lazy, so let's stick to "MMT." Although my education in economics led me to classical liberalism, I recognize that socialism and classical liberalism have in common the desire to lift the poor to the highest level of well-being possible. The problem with socialism and its idiot cousin, communism, is that both rely on the eternal benevolence of others. Socialism relies on the state's wisdom and benevolence, while communism relies on everyone involved becoming angels. (I remember my freshman Poli Sci class when this became obvious to me. I burst out laughing. Even as a callow 18 year old I knew that people weren't angels and were unlikely to become so in a million years, much less over night, after the terror of the proletarian revolution ended). Anyway, MMT says the government can never run out of money as long as it retains the sovereignty to print its own currency. This is true. It's also true that deficit spending, i.e., government expenditures exceeding government revenues (usually taxes), is not necessarily a bad thing. The problem is knowing when to stop. You have to know when to stop or you catch a bad case of inflation. They didn't know when to stop in Weimar Germany. Or in Argentina. Or a few other places around the world. More of a problem is when someone without the intellect or wisdom to understand the limitations of deficit spending gets some political power, he or she is likely to think he or she can pay for any number of colorful new deals with this unlimited supply of funds, and convince armies of even less sophisticated followers that the only reason the government doesn't take care of everyone is because it's run by mean people. The book itself is overly repetitive and falls into the "Underpants Gnomes" trap of knowing what you want, knowing what you'll do, but not having any clear and logical plan in place to get there. (South Park: "Collect underpants", "?", "Profit." That "?" part is pretty important.) Professor Kelton seriously overreaches after the first three chapters; she stops being an economist and becomes a politician -- a Bernie Sanders socialist politician, which is what MMT is designed to support. I won't waste any time on her politics - either you believe that stuff or you don't. I thought this book could’ve benefited from one last, brief chapter, consisting only of the words, “Just kidding.” But no.

  13. 5 out of 5

    Heather

    This is the sort of book that's capable of changing how you see everything about the way our societies work. A very well explained exploration of the myths that surround economics and the ways in which MMT seeks to refute them. I have no formal economics training whatsoever but having a little understanding of MMT under my belt, I found this to be exactly what I needed to read. We should all be listening to MMT economists instead of letting governments consign so many of us to unnecessary povert This is the sort of book that's capable of changing how you see everything about the way our societies work. A very well explained exploration of the myths that surround economics and the ways in which MMT seeks to refute them. I have no formal economics training whatsoever but having a little understanding of MMT under my belt, I found this to be exactly what I needed to read. We should all be listening to MMT economists instead of letting governments consign so many of us to unnecessary poverty time and time again. #fuckThatcher as well.

  14. 5 out of 5

    Gary Beauregard Bottomley

    The world changed hugely after this book was published and made this book somewhat superfluous. The pandemic happened and congress passed ‘The Care Act’ for dealing with the pandemic, and they magically created over one trillion dollars out of thin air. There was no talk about ‘bond fairies’, ‘paygo’, nor did anyone take seriously Republicans’ moaning ‘how are we going to pay for it?’. Nobody cared nor should they. A sovereign state which controls their own currency can create money through fiat The world changed hugely after this book was published and made this book somewhat superfluous. The pandemic happened and congress passed ‘The Care Act’ for dealing with the pandemic, and they magically created over one trillion dollars out of thin air. There was no talk about ‘bond fairies’, ‘paygo’, nor did anyone take seriously Republicans’ moaning ‘how are we going to pay for it?’. Nobody cared nor should they. A sovereign state which controls their own currency can create money through fiat by touching a computer key. As long as resources, time and will exist, money can be created. The only caveat is will inflation ensue. The ‘very serious people’ who never ask how tax cuts for the rich will be paid for, or how do we pay for that war that we don’t need, or the military’s shiny new toys, or who always want to reduce social security and Medicare in a ‘grand bargain’ are playing us for fools. This book is superfluous today. One doesn’t need a grand new theory of economics to realize that the ‘very serious people’ who believe in ‘bond fairies’ really don’t give a shit about us. This book drives home the point that the Wall Street Journal editorial page is wrong about everything and needs to be ignored. The great fault this book makes is that to be right on the facts is not as important as it is to win the political argument and there will always be simpletons like the 45% who support Donald Trump and don't give a damn about the facts nor care about you and will preach their austerity onto others but never austerity for themselves and the masses will be swayed by the argument that the government finance is equivalent to a household budget. Just as all Republicans and Trumpkins think like that, we also had President Obama lead in that false equivalency when he led an effort for a ‘grand bargain’ for no reason and said we were using are credit cards to buy Chinese goods to make them richer.

  15. 5 out of 5

    Gergo

    Important topics discussed but the style is really annoying: -The book seems to argue that everyone is an idiot not understanding how the system works (particularly money creation and public debt). -MMT is the solution to everything, we were just blind not to see it before. Actually the ideas offered here are not new, MMT is just a brand created to help selling them (which is fine with me). I think a better, shorter, more objective write-up on the topic is from Ray Dalio, and it is free to download Important topics discussed but the style is really annoying: -The book seems to argue that everyone is an idiot not understanding how the system works (particularly money creation and public debt). -MMT is the solution to everything, we were just blind not to see it before. Actually the ideas offered here are not new, MMT is just a brand created to help selling them (which is fine with me). I think a better, shorter, more objective write-up on the topic is from Ray Dalio, and it is free to download and read: https://economicprinciples.org/downlo...

  16. 5 out of 5

    Shriram Venkataraman

    Most of soc dems and leftists already know that we can run massive deficits as the US government controls the dollar and we can't go bankrupt. Give it as a present to your liberal friend who is misinformed. If your friend is a right winger, don't worry about it. They are lost cause.

  17. 4 out of 5

    Jack Wilson

    I’ve always been frustrated by the federal budget and why it was such a big deal when we can print money... and how inflation would be effected as a result. This book satisfied my frustration and showed me the endless possibilities Modern Monetary Theory could have on the macroeconomy. The unknowns, and potential issues, with MMT are not discussed in great detail and the writing comes across as a bit persuasive at times.

  18. 5 out of 5

    Odi Shonga

    As a layman to the arcane workings of economics, I’ve often had many questions that I’ve never been quite sure how to ask, never been quite sure how they’d be answered. One of these questions revolved around the difference between ‘natural costs’ and ‘financial costs’. It always seemed to me that they weren’t quite the same thing. The natural currency of the universe is energy. In order to build things, create things, keep people alive, etc, you need to get and spend energy — the whole conservat As a layman to the arcane workings of economics, I’ve often had many questions that I’ve never been quite sure how to ask, never been quite sure how they’d be answered. One of these questions revolved around the difference between ‘natural costs’ and ‘financial costs’. It always seemed to me that they weren’t quite the same thing. The natural currency of the universe is energy. In order to build things, create things, keep people alive, etc, you need to get and spend energy — the whole conservation of energy shebang. In the human world, we use money to get things done. So you’d expect financial costs to track energy costs. But we know they diverge. You can have the exact same action — say, building high-speed rail — in two different nations and, in real monetary terms, the costs will vary. Yet in energy terms, they should be roughly equivalent (assuming for simplicity roughly the same material use, roughly the same terrain, etc). Why, if the energy costs are similar, is it too financially expensive for one nation but perfectly doable for another? This book begins to answer such fundamental questions for me. For countries with monetary sovereignty, the answer is a mixture of ignorance and political will. It’s just a choice. If your country issues its own currency, there is no reason it can’t use that money, whenever necessary, to incentivise certain areas of production. It just needs to keep in mind inflation. Inflation is when there’s more money than productive capacity in the economy. If you have productive capacity to spare (available materials, unemployed people), then you have room to give people more money to encourage them to produce. In reality, inflation indicates the economy’s limit. But politically, it’s used as a boogey word to stop us doing anything useful. A currency-issuer can’t run out of money. But it *can* run out of resources or productive capacity. Money is a tool. Resources matter. We should be focused on what we can do with our resources, not balancing budgets and pretending the government is the same as Steve next door. The government is not the same as Steve, unless Steve has the power to issue a trusted, usable fiat currency. If Steve does, could you get him to give me a call? I just wanna chat. We haven’t caught up in ages.

  19. 4 out of 5

    John Mcjohnnyman

    My initial impression of MMT prior to this book was that it is purely magical thinking. After reading it, my thinking has changed but not necessarily in a supportive way. Throughout the book, Kelton tries to stay grounded in reality by sticking to mantras such as "there's no such thing as a free lunch," but by doing so I think that she's just paying lip service to the antiquated thinking she's critical of. Make no mistake, despite raising some qualifiers to avoid having it sound too magical for My initial impression of MMT prior to this book was that it is purely magical thinking. After reading it, my thinking has changed but not necessarily in a supportive way. Throughout the book, Kelton tries to stay grounded in reality by sticking to mantras such as "there's no such thing as a free lunch," but by doing so I think that she's just paying lip service to the antiquated thinking she's critical of. Make no mistake, despite raising some qualifiers to avoid having it sound too magical for the audience to digest, what she is describing is exactly a free lunch. However, that doesn't necessarily mean it's wrong. MMT has already proven it can work...until it doesn't. The best evidence cited for the US is that the Federal Reserve is already doing this and has been for decades and it is here that she has a solid point. Supporters of the theory, including Kelton, argue that so long as inflation is properly managed there are no other major limitations to be concerned with and that we should just reap the benefits of fully embracing the theory. However, this book like all other MMT supporters I've found overlooks the impact that sustained annual inflation has by instead diverting your attention to how rare hyperinflation is. What the federal reserve target rate of 2% annual inflation means over the course of 20 years is a 50% decline in the purchasing power of your savings. And since the interest rates must remain low to maintain the monetary policy, the incentive for responsible citizens is to invest savings in more risky assets. This is the situation we are now in. So although Kelton is quick to highlight the fact that Americans have no savings when making a point about the need to provide government assistance, she ignores the fact that it is monetary policies like what she's promoting that disincentivize saving in the first place. My impression of MMT now is that it's not magical, but is simply a slowing down of the hyperinflationary process in order to attempt to create a very long-lasting boom. I'm not necessarily against such an idea, but what will be needed is a plan of action for if/when it inevitably fails, how to get it back on track, and what that would all look like. Unfortunately, failure of the plan is not something entertained at any point in this book. My 2-star rating is primarily because the book could easily have been half its length, but it too was inflated.

  20. 5 out of 5

    Stephen Sawyer

    I’m not an economist, but have had a lifelong interest in the subject. For many, many years I have been puzzled by a seeming disconnect between the “conventional wisdom” learned in business school economics classes and my own reading, and the way that economic systems actually work. In particular, nothing seems to be following the rules as laid down by Paul Volker, Milton Friedman and the Chicago School in the years since the financial crisis of ‘08; record levels of fiscal and monetary stimulus I’m not an economist, but have had a lifelong interest in the subject. For many, many years I have been puzzled by a seeming disconnect between the “conventional wisdom” learned in business school economics classes and my own reading, and the way that economic systems actually work. In particular, nothing seems to be following the rules as laid down by Paul Volker, Milton Friedman and the Chicago School in the years since the financial crisis of ‘08; record levels of fiscal and monetary stimulus, record low unemployment, record low interest rates - and economies, globally, unable to get inflation up to the level targeted by central banks. Modern Monetary Theory (MMT) comes along and things start to make sense. If MMT’s ability to describe how economies actually operate is accurate, it has huge implications for monetary and fiscal policy moving forward from this time of tremendous upheaval. The “MMT Lens” allows us to see anew the possibility of more effectively addressing national and global issues of income inequality, climate change, eroding educational systems, displacement of labor, the rise of authoritarianism and the rapidly-changing techno-economic landscape in which we live. This book is brief, to-the-point, very clearly written in plain language and will really change the way you view economics.

  21. 4 out of 5

    Robert Campbell

    Repetitive shallow political rhetoric. Whatever merits or faults Modern Monetary Theory may have, you won't learn about them in this book.

  22. 4 out of 5

    Jeff Kaye

    The Deficit Myth is an important game-changer in the world of economics. My university degree was in this field, but in the days of Milton Friedman and monetarism there was no understanding of the critical themes that Stephanie Kelton teaches. My days trembled at the sound of Margaret Thatcher, comparing the economy to her own house budget: never spend more that you earn. Ms Kelton's teaching is that, for an economy that has control of its own money (such as the US and the UK), this is untrue. Th The Deficit Myth is an important game-changer in the world of economics. My university degree was in this field, but in the days of Milton Friedman and monetarism there was no understanding of the critical themes that Stephanie Kelton teaches. My days trembled at the sound of Margaret Thatcher, comparing the economy to her own house budget: never spend more that you earn. Ms Kelton's teaching is that, for an economy that has control of its own money (such as the US and the UK), this is untrue. The essence is that such an economy can spend its way through troubles and that it simply needs to understand a country's aims and then finance them. The example of Kennedy's mission to get a man on the moon is central, but the crucial point is that unemployment can be eradicated by using money that can be supplied by the Federal government. Deficits are irrelevant; Treasuries held by the Chinese offer no problem as they merely convert 'green' $ into 'yellow' $ (with a little interest thrown in). Of course, this is right. The objections to the theory result in the moves towards practice. First, economic theory used to be known as 'political economics' which represented the way that nations wanted to develop. Even if the theory expounded here is understood by some, will it be by enough and will the 'political' nature of economics allow it to be introduced? This brings a second issue, understood by those, like Richard Murphy and myself, who want to see taxation run better, with the eradication of tax havens and a focus on how tax can improve nations. MMT (Modern Monetary Theory, the centre of the book) could be seen to argue that tax is irrelevant as funding from federal government does not need it. Tax becomes a secondary issue, useful for showing how money is sucked away when needed (e.g. when inflation may be rising - the key constraint on MMT) and also as an aid to the allocation of resources amongst the population. This is a political economics issue of the highest order. The third issue is how to implement the critical methods of running an economy in this way to ensure full employment, better use of resources, keeping inflation low etc when the old system (keeping budgets etc at a macro-level) are no longer relevant. The book offers up a number of suggestions. The fourth issue is how countries without such freedoms can work in such a world (e.g. from those in the EU that have given up their national rights to their own money to nations pegging themselves to the $) and how government areas below federal or national function. For example, Texas does not have control over its money and has to budget like the rest of us. How does it work in an environment where a Federal government might be seen to be taking over states rights? This is an important work. MMT is not new but The Deficit Myth will add an important framework to its future momentum. All three areas are important and difficult to make good.

  23. 5 out of 5

    Eric

    TL;DR The Deficit Myth by Stephanie Kelton explains a revolutionary finance theory in easy to understand terms. It places the focus of government finances back where it belongs…on helping citizens. Highly Recommended. Disclaimer: The publisher provided a free eARC of The Deficit Myth in exchange for an honest review. For the full review and others, visit Primmlife.com. Review: The Deficit Myth How many times have you heard people try to compare the government’s finances to that of a household TL;DR The Deficit Myth by Stephanie Kelton explains a revolutionary finance theory in easy to understand terms. It places the focus of government finances back where it belongs…on helping citizens. Highly Recommended. Disclaimer: The publisher provided a free eARC of The Deficit Myth in exchange for an honest review. For the full review and others, visit Primmlife.com. Review: The Deficit Myth How many times have you heard people try to compare the government’s finances to that of a household? Many of my conservative friends say that money coming in has to equal money going out because that makes sense. It’s how a family budgets. For state and local governments – even for some foreign national governments – this analogy works. But for the U.S. federal government and any national government that issues its own currency, this analogy fails according to advocates of Modern Monetary Theory (MMT). In short, MMT is a theory of government deficit. Proponents of this philosophy tell us that thinking about the federal government’s budget acting like a household budget is wrong. In The Deficit Myth, Stephanie Kelton explains MMT by debunking six common myths about U.S. federal finances. This radical approach to government finances could change the country forever. Whether for better or worse, I’ll leave that for the experts, but The Deficit Myth convinced me that more politicians should give some MMT policies a chance. Stephanie Kelton addresses six myths about federal government spending in The Deficit Myth: • The federal government should budget like a household • Deficits are evidence of overspending • Deficits burden the next generation • Deficits crowd out private investments, undermining long-term growth • Deficits make the U.S. government dependent on foreign governments • Entitlements propel the U.S. toward long-term fiscal crises Dr. Kelton devotes a chapter to each of these myths and explores in detail why each is false. As evidence of her arguments, she uses history, basic accounting, and her experience in government. The first, most basic part of her argument requires understanding the difference between a currency-issuer, like the federal government, and a currency-user, U.S. citizens. You see, unlike you or I, the government can print money out of thin air, or rather by typing out a command on a keyboard at the Federal Reserve. Everyone knows this fact, but economists of most stripes think this MMT fantasy. And to be fair, it really does sound too good to be true. After all, if we can just print money, what stops the government from printing continuously? Dr. Kelton answers that in the book in detail by pointing out how economists have erred in their economic predictions. Just as she starts with myths and goes on to disprove the myths, Kelton describes the ideas of MMT’s critics and then shows the flaws in their arguments. The whole book is written in terms that I, not an economist, could easily understand. The Deficit Myth by Dr. Stephanie Kelton becomes available from Public Affairs Books on June 9th, 2020. 8.5 out of 10!

  24. 4 out of 5

    Justin

    ***I was granted an ARC of this via Netgalley from the publisher.*** We all have been told about the dangers of the USA deficit. If it gets too large then our children will bear the burden and that is a sign that we are spending irresponsibly. One party wants to tax the rich to solve the problem while the other wants to cut funding for social problems. However, in the book, The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy by Stephanie Kelton, seeks to dispel those my ***I was granted an ARC of this via Netgalley from the publisher.*** We all have been told about the dangers of the USA deficit. If it gets too large then our children will bear the burden and that is a sign that we are spending irresponsibly. One party wants to tax the rich to solve the problem while the other wants to cut funding for social problems. However, in the book, The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy by Stephanie Kelton, seeks to dispel those myths and show how the deficit is an asset, not a threat. She does a good job at breaking down the deficit issue into 6 myths, dedicating a chapter to each one, showing why that particular myth was not true. Kelton has this book to be easy to be digested by someone who has no economic background which is the idea because the book's purpose is to get the reader to try to imagine an America where the question is not 'How do we afford this?' but where we prioritize the welfare of our citizens. Rating: 4/5 stars. Would recommend to a friend.

  25. 4 out of 5

    Jeremy Williams

    This book changes everything. While Modern Monetary Theory is not new, in Stephanie Kelton, MMTers have a great champion. She has the academic credentials, she's seen at first hand how the state apparatus actually works, and – most important of all – she is a great communicator (written and verbal). Hopefully this book will help get the message out, with a little help from recovering 'dismal scientists' like myself. Here is an elevator pitch length summary of her arguments: https://youtu.be/d_ud This book changes everything. While Modern Monetary Theory is not new, in Stephanie Kelton, MMTers have a great champion. She has the academic credentials, she's seen at first hand how the state apparatus actually works, and – most important of all – she is a great communicator (written and verbal). Hopefully this book will help get the message out, with a little help from recovering 'dismal scientists' like myself. Here is an elevator pitch length summary of her arguments: https://youtu.be/d_udbs-wuDA

  26. 5 out of 5

    Ethan Lees

    This book will change the way you view government economic policy and make you yell at the news nightly

  27. 4 out of 5

    Will Hoyer

    This book absolutely changed my worldview. It's rare a book can do that. Please read this book!

  28. 4 out of 5

    Keven Wang

    Eye opening. Every person should read this book. It will steer our public discussion around government spending in a positive way.

  29. 5 out of 5

    Kyle Minton

    The American left maintains the constant goal of articulating a better world. This means reshaping the American perspective of what is politically possible, think of the way Bernie Sanders popularized Medicare for All. Given that I've been able to win various people in my life over to the left (or at least to a position sympathetic to left values) with this method I've internalized the goal; I'm constantly on the lookout for policies and projects that can help reimagine the world we live in. Ent The American left maintains the constant goal of articulating a better world. This means reshaping the American perspective of what is politically possible, think of the way Bernie Sanders popularized Medicare for All. Given that I've been able to win various people in my life over to the left (or at least to a position sympathetic to left values) with this method I've internalized the goal; I'm constantly on the lookout for policies and projects that can help reimagine the world we live in. Enter the Deficit Myth by Stephanie Kelton. Kelton's CV is, at its face, conventionally establishment; professor of economics, Chief Economist for US Senate....Bloomberg contributor. Don't let this fool you, Kelton is here to buck convention and destroy public misconception. Using the lens of Mondern Monetary Theory (or MMT), she sets out to dispel what is known as the deficit myth. The deficit myth is a pervasive view that the government deficit means that the government is so indebted that it is effectively out of money and couldn't possibly spend any more. You don't have to be a political scientist to understand the effects the deficit has on our political discourse. It's used to hand-wring about big, life-altering universal programs, it's used to scare voters into thinking society is on the brink of economic collapse if we don't get some fiscal sensibility, it's used to stage massive political battles on the Hill, some of which are so petty they shut the government down for weeks. Which is all to say the deficit myth is a useful idea to total assholes. Kelton's telling features 5 core misconceptions the deficit myth is generally used for, each has a chapter devoted to it; The US government budget operates like a finite household budget We're putting young people on the hook for our national debt government debt crowds out private investment The trade deficit means we owe countries like China Entitlement programs (Medicare, Medicaid, Social Security) are going broke The main reason the deficit myth is bullshit is that America prints its own money. It could essentially pay off any number of debts and pay for any number of programs. If it sounds impossible, you're likely thinking about the negative impacts of inflation, but as Kelton adeptly shows, that's a different argument entirely. We should be assessing our economy's ability to take an influx of cash in certain areas rather than if the money is there (because it always will be). The penultimate chapter "the Deficits that Matter" serves as Kelton's estimation that our economy can absolutely handle large sums of money as long as it's directed to where it counts with programs designed to help reduce the existing deficits that matter (like in education, healthcare, the environment). Whether the programs are "paid for" with tax revenue or whether they're produced via deficit spending doesn't matter so much as getting the money funneled into infrastructure, projects reducing the impacts of climate change, expanded healthcare etc The Deficit Myth helps us develop policy proposals that will improve our communities, it helps us imagine a better world where we don't handcuff ourselves with arbitrary fiscal constraints. In this regard, it is a very useful book. Butttttt.........I remain unconvinced by certain aspects of MMT. The role of taxes - Exploring the politically possible without worry about where the money comes from must be what it's like to oversee the Pentagon budget. Imagine if infrastructure or green energy or education funding bills soared through both houses of congress with the ease that our bloated war budgets do! What would you include in them? These are valuable exercises, but I can't help but feel without the conversation on taxation (MMT suggests that taxes do not in fact fund government spending), you're missing out on, frankly, some of the fun. To MMT, taxation is used to control inflation or to siphon money out of unuseful places (carbon emissions or offshore accounts). These are useful endeavors, but some of the value in the taxes as a payfor logic is that there is an inhent justice in making corporations and businesses (and even citizens) pay their fair share. I also don't feel like we can abandon taxation as a payfor because - as Kelton herself points out - state and local governments use tax revenues. The continuance of using payfor verbiage isn't to continue to suggest money is finite but rather that it is a public good used to pay for services that we all benefit in. Doug Henwood has a large piece criticizing MMT, I don't agree with much of it (I think MMT is helping), but I do agree with his position on taxation: "We have homeless people living on the streets of San Francisco blocks from Twitter and Uber’s headquarters, bridges collapsing, trains derailing, schools falling to bits — the entire structure of private opulence and public squalor, as John Kenneth Galbraith put it long ago, because the public sector is starved for resources. Taxing takes those resources out of private hands and puts them into public ones, with at least the potential for them to be spent on more humane pursuits. Fewer Lamborghinis, more bullet trains. Fewer Hamptons houses, more public housing." Messaging - Along those same lines taxation is still an important part of the puzzle for how we create a people's economy (the subtitle of the Deficit Myth). Kelton acknowledges that the government needs to tax to control inflation, redistribute wealth, and discourage bad behavior. Except only the first of those seems entirely necessary. No one is suggesting we can just print money consequence free. Yet the idea that we're printing money, doling it out, and then taxing some of it back to incinerate it doesn't have the same messaging power as "the money is used to pay for services" (which again, is still true, since it does in fact pay for local government services). It's way easier to talk to people about social security and medicare, two successful government programs who have so far mostly withstood efforts to abolish and privatize, when you suggest that they are in fact paying into it. They are! Whether you believe the money is going to partially fund the program or - as MMT suggests - is being removed from the economy, the truth is you're paying for it. The accounting trick of payfor is just easier to explain to people. Matt Bruenig (who is actually quoted positively in the book) gets at the heart of MMT's messaging problems: "This is a good way to jam up the discourse and confuse people, which can arguably be useful politically, but as a policy matter, it does not add any new insight. It tells you that the correct question is not “how will you pay for this” but rather “how will you offset the inflation that is caused by paying for this with created money since all government spending is created money.” Nonetheless the rephrased question has the same answer as the first one: some combination of taxes and borrowing that will eventually have to be worked out." Jobs program - I despise the idea of a jobs program and think it is one of the most undertheorized projects to come out of the left. The MMT Job Garuntee (JG) answers one of the striking questions of modern poverty; what do we do with the under/unemployed? MMT: "give them a job". Oh your oil rig laid you off because we're not extracting oil anymore? Here's a job. You're a truck driver and your profession was automated? Here's a job. You get a job, you get a job, you get a job! The idea is that, somehow, the government can be flexible enough to provide jobs to areas suffering joblessness. There are tons of problems with this idea; no one can articulate what jobs would be ephemeral and useful enough, how long could the jobs theoretically be kept up, some areas have lots of jobs and just not enough qualified people to work them, jobs are hard and require training, etc etc. Which isn't to say I don't agree with a jobs program, similar to, say, the New Deal, that offers jobs to people who can do them especially in times of high private sector unemployment, but a constant jobs guarantee seems impossible and undesirable. One of the best arguments against it is the population of our unemployed are...not people who would or should be working at all. The better move is to give these people money. This is another from Bruenig's outfit, but the argument seems airtight: https://www.peoplespolicyproject.org/... All in all, MMT is useful in its efforts to destroy the traditional deficit myths that plague our ability to use our policy imaginations. If worked out, I think it could provide some pretty compelling answers to the incalcuably stupid, misguided, and bad faith question "hOw ArE yOu GonnA PaY fOr ThAt". But it still has some limits of its own and might complicate certain aspects of the debate that are better left simplified. I'm glad I can keep it in my back pocket, but will avoid keeping it in my front pocket for now.

  30. 4 out of 5

    Alán M. de León

    One of, if not, the most important economics book released in a long time. No prior economics-training necessary for readability; on the contrary, you're probably better off not having taken any economics courses before reading this book since Kelton reckons directly with many of the myths and untruths embedded in the dominating economics canon and discourse today. Mandatory read for everyone interested in building an economy that unconditionally serves the public interest.

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