Uncovering the Reality Behind Stephanie Kelton's 'The Deficit Myth'

A Amarender Reddy: The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy is a 2020 book by Stephanie Kelton, a professor of public policy and economics at Stony Brook University and a former advisor to Bernie Sanders. It is an interesting read. The book is a popular introduction to modern monetary theory (MMT), a heterodox approach to economics that challenges the conventional wisdom about public finance, deficits, and debt. The book aims to debunk six myths that have shaped the public debate and policy making on these issues, such as the myth that the federal government should budget like a household, that deficits will burden the next generation, that deficits crowd out private investment and undermine growth, that deficits cause inflation, that entitlements are unsustainable, and that taxes fund government spending. Kelton argues that these myths are based on a misunderstanding of how money works in a modern economy where the government issues its own currency.

Kelton explains that MMT offers a different perspective on money, taxes, and deficits, based on the following insights: that the government can never run out of money or go bankrupt, because it can always...

India on May 05, 2023

Philip Luzzatto: Si le sujet de la "dette" vous intéresse, il y a une dizaine d'années, est paru, en langue anglaise, un livre intitulé "5.000 years of debt ".... les crises économiques se suivent, les conséquences sont souvent les mêmes, bref, c'est pas la joie !

France on Sep 16, 2022

PIERPIER: I miti che vuole confutare l'autrice, economista che insegna alla Università del Missouri, con questo libro sono elencati nella introduzione. Il primo mito è che la gestione del budget del governo sia simile a quella di un cittadino. Il secondo è che il deficit sia sintomo di eccesso di spesa. Il terzo mito è che il deficit sia un peso per le future generazioni. Il quarto mito è che il deficit spiazza gli investimenti privati e mina la crescita di lungo termine. Il quinto mito è che il deficit rende gli Stati Uniti dipendenti dagli stranieri. Infine, il sesto mito è che i diritti (spese del welfare) ci stiano portando verso una crisi fiscale di lungo termine.
Relativamente al primo mito, cioè che il budget del governo sia simile a quello dei cittadino, per prima cosa bisogna evidenziare che la sostanziale differenza sta nel fatto che la Federal Riserve ha la piena autorità di emettere dollari. E' poi da respingere la idea che siano le tasse che creino la domanda per moneta del governo ( differenza tra chi emette moneta e chi la usa). Le tasse, in realtà, sono un mezzo per cui il governo altera la distribuzione della ricchezza e dei redditi. Prima che qualcuno paghi le...

Italy on Jun 07, 2021

Werner Titz: -
In einem Diktum der Premierministerin Thatcher hieß es 1983:
*Es gibt kein 'öffentliches Geld*, es gibt nur das Geld das die Staatsbürger selbst verdienen. Wenn der Staat mehr Geld ausgeben will, muss er es sich ausborgen oder die Steuern erhöhen.
Diese Aussage - *There is only taxpayer money* - ist ebenso knapp und apodiktisch wie der Sager:
*There is no Society, just Individuals*.

Eine Dekade vor diesem Ausspruch wurde von President Nixon die Goldbindung des Dollars aufgehoben. Der Dollar wurde zu einem frei floatenden Fiat-Geld. Das Bretton-Woods-System war zu Ende.
Die Welt, die Wirtschaft und die Finanzwirtschaft haben sich seither grundsätzlich geändert. Aber die meisten Staatsbudgets folgen immer noch der Logik von Lady Thatcher.

Immer noch wird von den meisten Regierungen der Staat wie ein privater Haushalt gesehen der das Geld erst verdienen muss, etwa durch Steuereinnahmen, bevor er es ausgibt. Mit dem TINA-Wort *There is no alternative* wird auch die Beschränktheit der Staatsmittel immer begründet, unter anderem durch Kanzlerin Merkel mit ihrem schon sprichwörtlichen Hinweis auf die besonders sparsame 'schwäbische Hausfrau', die...

Germany on Nov 20, 2020

Gordon Bruce Smith: How does the US Federal Government raise the money it spends to run its programs, conduct its wars and pay out unemployment benefits? It taxes and borrows, right? No, says this author, that's not how it really works. Since the Federal Government issues its own "fiat" currency -- "prints" it, as it's usually put -- it can never run out of money, so it really doesn't need to either tax or borrow. It can just spend. For a variety of reasons including the fact that that's the way it's "always been done", it taxes and borrows anyway, except when there's a crisis. That's when it really cranks up the virtual printing presses and simply spends without benefit of bothering to pretend to raise the money. That's what much of the spending to bring the Great Recession to an end by the Obama administration (and the very tail end of the Bush administration) was all about -- pumping trillions of dollars into the banking system with emergency transfusions that were nothing more than electronic transactions at the Federal Reserve of NY. "Quantitative easing", which pumped further trillions into the economy over a period of several years up until 2013, had the same idea. The Federal Reserve did not...

United States on Sep 12, 2020

J. Edgar Mihelic, MA, MA, MBAJ. Edgar Mihelic, MA, MA, MBA: Back after the 2008 crisis, I had lost my job and was sitting around unemployed and I started to get interested in economics for the first time in my life. The reason was that for all my life to that point the broader economy had not really broken down during my lifetime. I had long considered myself a Marxist from the experience of being a worker at the point of the spear in the service economy. In food service you see the menu price and you know your price and there’s a huge discrepancy between the two.

I had a sense that in the shadow of that crisis that we were bounded by only being to push at the edge of the status quo. The bailouts, both TARP and ARRA were real money that had to be paid back, so the democratic-led government in 2010 and through pressure from their political opponents, started to roll back the funding that was on offer through the state. “Austerity” was the name of the game and big debts were scary and more important than the mass of Americans who were still without jobs in the economy that had been showing “green shoots” every quarter for 18 months.

I was unemployed and reading as much as I could about economics and especially the...

United States on Jul 26, 2020

MAC: First of all, I'd like to associate myself with all the 5 star reviews below which all in their way explain the book and its concepts very well.

The book is based on what passes for American fiscal policy but also ANY country that is a sovereign issuer of its own currency (like here in the UK) could do what Stephanie Kelton and other pro-Modern Monetary Theorists (MMT) advocate in this book. EU countries whose currency is issued by the European Central Bank cannot carry out MMT.

I have learnt about MMT chiefly through Richard Murphy's blog (highly recommended) but I also bumped into Warren Mosler and his book 'The Seven Deadly Innocent Frauds of Economic Policy' earlier and this to me opened up the subject, as did looking at Economist Bill Mitchell's blog although Mitchell is not convinced of the role of taxation.

I choose to go with Kelton, Murphy et al on the latter - tax is fundamental to MMT because the cash injection can cause inflation: tax however is the cooling agent - the other half of the coin - what you put in at one end has to be taken out at the other, otherwise like a bucket over filling with water, money will overflow and inflation will happen....

United Kingdom on Jul 08, 2020