One To Watch

By Stephanie Kelton

So far, President Obama has shown little understanding of our domestic monetary system. His pledge to cut the deficit in half by the end of his first term, together with his assertion that the federal government is “out of money”, reveal deep flaws in his understanding of key issues related to the workings of government finance. Unless he masters the basics of double-entry bookkeeping — and fast — the nation’s job numbers will remain grim, social unrest will mount, and every one of his political challengers will adopt the same battle cry in 2012: “President Obama mishandled the economy — Vote for me if you want a better tomorrow.”

Almost none of them will have a better understanding of the issues than our current president, but one candidate will, and his name is Warren Mosler. I ran across this interview yesterday and thought it was worth sharing. He is one to watch.

8 responses to “One To Watch

  1. Pretty interesting. I wonder how he would be treated on Fox News…a bunch of golddites warning about China's impending takeover of our country any second now.Seriously, Rush Limbaugh suggested that China would seize our nuclear weapons to pay off our debt to them. Such ignorance.

  2. I don't think you have any idea what your talking about. Obama may think as he may, but to be a functional political figue he must conform to the social consensus theory. Whether or not your own opinion on macroeconomics is correct, it will make no difference on federal policy, if it is not accepted politically. To be quite honest there is a reason that your view is considered radical, and most egotistical. I think Mosler may be a nice man, but he will only compete for fewest votes ever for a presidential candidate. Note, that in his speaking of the interview you linked, he says that there are two political options, gov't spending and tax cuts, effectively. In this nation the later is always more politically accepted. This blog was quite foolish and juvenile, but I have to admit, if you write again about John Zerzan running for president, I might not be so critical.

  3. Yeah, but if Mosler can get enough coverage to get his point across that would do allot of good for this country.

  4. @ AnonymousI can see why this approach might be interpreted as "radical." After all, it usually takes the work of radical thinkers to dislodge old, antiquated and entrenched myths. However, I'm curious what you mean by "egotistical." Please elaborate.

  5. back-at-yaThis view is some kind of hybridized idea in and of Post-Keynesian theory and Neo-Chartalism. It's clever, it sounds good, but it is very Ameri-centric, because the dollar happens to be the played favorite around the world. If America is the meaning of life for humans, great, but this does not mean that these theories can float anywhere else at any given time. Anything created out of thin air is a fallacy. Forcing the world to believe it from the end of a gun, would only work for so long. The largest military in the world, is the muscle for the largest capitalist network in the world. Why do we get the only money tree? What are exchange rates for? Egotistical, because its not a fair fight to countries that don't play this way or can't play this way. Tell Mosler that people in China actually want something for those T-shirts. Post-Keynesians are just Frustrated Institutionalists and what they forget to remember is that people or nations don't really want money, they want stuff.

  6. There's nothing egotistical about recognizing the true nature of how money capitalism works. Functional finance is not a tool to undermine other economies, but rather a measure to promote full-employment. Any money economy that has sovereignty over its currency and issues debt denominated in its own currency, is free to pursue full employment programs of their own.The US is especially poised to take measures to eliminate unemployment, due to the high level of development in our financial structures and the deep-rooted faith in our ability to make good on our debts. There's nothing egotistical about that.As for your connection between Post-Keynesian monetary theory and American hegemony, you fail to point out how the acceptance of endogenous money & functional finance promotes militarism and ethnocentricsm. The only thing that is implied from an understanding that the US government is not faced with budgetary constraints, is that it is free to purchase what it needs in order to maintain full employment.Furthermore, the statement that "anything created out of thin air is a fallacy" is invalid. Fallacies refer to the logical holes of an argument, not the nature of a material substance. Besides, things are created out of thin air all of the time. Property is created out of thin air. For example, a parcel of land is does not exist as property until an arbitrary line is drawn to create a zone of exclusion and a deed of ownership is generated. Only government can place legitimacy on the deed, thereby creating property. This has been the case since the inception of private property.Finally, people and nations really do care about money, because money is required to permit the exchange of goods. The last time I checked capitalist economies don't operate on a barter economy.You might want to revisit the literature on Post-Keynesian monetary theory, because it seems you've missed the point. Also, you would do well by reading Abba Lerner's treatment on Functional Finance. "The Economics of Control" is a good place to start. I think after reading the Post-Keynesians objectively you'll find that they promote policy oriented towards social justice and equality, not ethnocentrism and imperialism.

  7. Hear my concern between mr green and anon.thanks for all the vibrant thoughtsThis is why political science and economics are not the same subjectThe general public will think they have been swindled. If deficits don't matter like they have been told they do in the past, everyone will be wondering why they have suffered in the past, "Why has the government been lying about the money tree?" Who will spend what to get full employment! I fear in this country, the mega-corporations will say "Oh yeah trust me and all my lobbyists, where gonna put everybody back to work". Yeah right. Don't they call it pushing on a string, we gave banks billions and let them borrow for almost free, and hey!, no loans to anyone, all the while businesses freeze up and people drop off payrolls and out of their houses. What makes you think the Fed or the government does not already know this but is just giving lip service to the public?About ethnocentrism- Say we all could clone humans, or make nukes, but its not cool because of social mores around the world. When we come out and proclaim, that "oh are deficits don't matter but yours do, and I'm gonna spend all I want, gimme your stuff and I'll let you have some of these dollars, along as it does not hurt my inflation, which I can manipulate in different ways that I won't tell you". To me thats kinda like "well because I can make nukes and you can't I'm gonna say you never can"actual people vote, not firms (although it may seem like they do) I don't think that even if you could serve them this PK theory with a side of jam, that they would trust the government to obtain the full employment goal. Twofold of course, some want less government just because, and some feel that it will just be a open hose for corporations to drink from without being accountable for hiring to full employment. If corps. innovate to circumvent labor laws now, their profit seeking nature will eventually find a way to defraud this program.with no enclosure movement, we might have mostly solved the problem of hunger – creating things out of thin air is dangerous to humans sometimesthe US seems to love military spending, more so than anything I can think of right now. And what about Prof. LR Wray, I think he wrote on Military and Penal Keynesianism, if this is what Mosler's seeds bear we are all in big trouble.Absolute Power corrupts absolutely

  8. It is public knowledge to the world that German economist Georg Friedrich Knapp developed the concept of forced labor in service to the state to reduce the cost of government for the rich. Hitler tried it in the concentration camps and 50 years later Warren Mosler has resurrected it.