Former Deputy Secretary of the U.S. Treasury Department Endorses Modern Monetary Theory (MMT)

By Stephanie Kelton

Three months ago, Frank Newman sent me a book entitled Freedom From National Debt.  I finally got around to reading it — all 89 pages.  It’s a little book, packed with evidence that America is being held back by incorrect assumptions and misguided fears about the national debt and government finance in general. Here’s the takeaway:

America has convinced itself that it can no longer afford many of the productive things that it has done so well over its history. Infrastructure repair, jobs programs, military modernization, tax reduction…have all been stifled because of this fear.

Like the proponents of MMT, Mr. Newman is frustrated by the pervasiveness of these falsehoods and their devastating effects on our social and economic well-being.  He sees what we see, the potential for a vastly more prosperous, more stable, and more secure America that is being kept out of reach through the adoption of economic policies that were designed for a country whose currency was still tied to gold.

He draws many of the same “unconventional conclusions” reached by proponents of MMT:

  • Saving cannot generate productive business Investment; it’s the other way around: Investment generates Saving.
  • Deficits do not reduce national Saving or Investment
  • Issuance of Treasury securities (deficit financing) cannot “use up” equivalent amounts of funds intended for private-sector use.

He recognizes that this runs counter to the conventional wisdom, but he insists that these truths simply follow from an accurate portrayal of “how the system actually works.”  And he should know.  He served as Deputy Secretary of the U.S. Treasury. Prior to that, he was Vice Chairman of the Board and CFO of BankAmerica Corporation, and Executive Vice President and CFO of Wells Fargo Bank.

So when Mr. Newman writes, “This author recommends Mr. Mosler’s book, as well as various writings by academic proponents of ‘Modern Monetary Theory’,” it really means something.



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