The Millennials’ Money Pt. 1

By J.D. Alt

The ebook Diagrams & Dollars has been a top-seller on Amazon (in the category “macroeconomics”) for over a year now. There have been many requests for a paper-back version. In deciding to undertake that mission, I started to expand the original long essay into something that would be more book-like in length—and before I knew it, the effort morphed into something else: a different “frame” for the whole argument. The new “frame” evolved as I was reading Millennial Momentum by Morley Winograd and Michael D. Hais, which views U.S. history from the perspective of a repetitive cycle of four archetypal generations. Every eighty years or so, this cycle repeats, beginning with a “civic” generation—and each of these “fourth turnings” (as they are referred to in the book) is accompanied by dramatic, traumatic, social upheaval. When the upheaval is finally resolved, the “civic” generation is firmly in control, and things settle down, but with a dramatically changed social structure. The “civic” generation that is now leading us into the next “fourth turning” are the Millennials—the children of the baby-boomers—and they now, specifically, are the target audience for the book.

Before I complete—or even decide to publish—the book, I’d be grateful for feedback and responses to some key sections of it. With that in mind, this is the first of several posts presenting these key sections for comment by the NEP readers.



Those who have known them as parents or teachers will likely tell you that today’s Millennial generation—the children of the baby-boomers—are unique: they are unique in their romantic relationships, their fealty to and sense of personal communities, their pursuit of entertainment and fun, their work-ethic and entrepreneurial interests, their sense of fairness and justice. Generational historians tell us that Millennials are the leading edge of a “fourth turning”—a repetitive cycle of generational archetypes which, every eighty years or so, sets society off in a new direction. I’d like to add to these observations with the proposition that what is most unique about today’s Millennials—and what will make their role in the current “fourth turning” uniquely historical—is the fact that they are positioned to be the first generation in human history to explicitly understand, and effectively utilize, democratically issued sovereign “fiat money”.

The essential reality and potential power of modern fiat money—which has yet to be fully realized and managed by any modern society—can be summarized in the following statement:

While it remains true that the number of dollars any individual can spend is ultimately limited to what he or she can “earn”, the number of dollars individuals can spend collectively—as a sovereign nation—is (with one cautionary caveat) unlimited.

The purpose of this small book is to introduce the topic of this “modern money” to the Millennials themselves—to make them aware that the above statement is very much a possibility and, furthermore, to help them see that it is very much in their interest to grasp hold of and nurture that possibility. This is not a message their parental generations are inclined to send, chiefly because boomers and the interim gen-Xers (let’s lump them together as “BGX”) are entrapped—conservatives and liberals alike—in an ideological “money box” from which they cannot, or will not, allow themselves to logically escape. To understand this entrapment, a short bit of history will be helpful.

In August 1971 President Richard Nixon took the United States—and thus the rest of the world—off the monetary “gold standard” which had prevailed, in one form or another, for much of modern history. The gold standard, in general, was the way nations had sought to protect the value of money by requiring printed dollars to be convertible, on demand, to a specific amount of gold. In theory, this guaranteed conversion to gold limited the amount of money that could be created, thus protecting, it was believed, against governments diluting monetary value by simply “printing” dollars when they were needed.

Nixon took his unprecedented action primarily in response to French President Charles de Gaulle’s decision to demand that the United States convert the U.S. dollars held in France into the promised gold. Other nations began to follow suit, and it suddenly became apparent that the U.S. did not have enough gold to make good on its obligation. Nixon’s solution, at the time, was considered to be temporary—the gold standard (which everyone still believed was an essential tool of monetary value) would be reinstated as soon as the nations of the world could agree to a new set of rules. This new agreement, however, never materialized, and the U.S. (along with everyone else) found itself operating with a pure, sovereign “fiat” currency—that is to say, money that is issued by “declaration” of the sovereign power and which is not “convertible on demand” to anything other than itself.

The surprise—although it was never publicly or consciously noted—was that neither did the sky collapse nor did the dreaded hyper-dilution of monetary value (inflation) come to pass. Even though U.S. dollars could no longer be converted to gold, they still retained their “value”; (we’ll find out why a little later.) Nor did the generation that was just coming into power—the baby-boomers—take any notice of what had happened. All the monetary procedures that had been put in place to protect against the government issuing more dollars than it had gold to redeem were left untouched. Everyone proceeded to think and behave exactly as they had before 1971. That is to say, they behaved as if the quantity of dollars available in the world was somehow a limited “resource” for which everyone—including the sovereign government itself—had to compete to have a share of.

As it turned out, this perspective was reinforced by the fact that the boomers were an archetypal “idealist” generation, driven by the need to force “reality” to conform to a rigid ideology—and a central component of their particular ideology is the idea of “competition”. If “money” isn’t a scarce resource, why would we have to compete for it? And if we don’t have to compete for money, the ideology of competition itself—everyone getting a “fair shake” on the playing field but being personally and solely responsible, nevertheless, for their own success and well-being—that ideology would be undermined. Hence, the idea that “money is scarce” and must be competed for was, and continues to be, maintained and reinforced on all fronts by the BGX generations.

As I’m about to demonstrate, however, there’s another way to look at money—not at a different kind of money, but at the same money we’ve had for the past 44 years, since Richard Nixon inadvertently reconfigured the world without anyone realizing it. In this new way of understanding money, certain things do NOT change at all, namely that for individuals money is, in fact, a scarce resource that must be earned and carefully managed. This is because individuals—and families, and businesses, and state and local governments as well—are the USERS of money and not the CREATORS of it. The CREATOR of money, as we just noted, is the sovereign state—and where the sovereign state is a functioning democracy, it follows, logically, that the USERS of the money are, collectively (but not individually) the creators of it. The distinction is subtle but, as I intend to illustrate, it is overwhelmingly important.

What I believe and hope is that, being the first “civic” (cooperatively oriented) generation to come to power in the first modern era of pure “fiat money”, the Millennials will also be the first to grasp its astonishing “cooperative” possibilities. While the “idealist” BGX generations have been less interested in desired outcomes than on insisting that those outcomes be achieved in accordance with their ideological “rules”, the “civic” Millennials view the world as a pragmatic problem to be solved by whatever method works best. They are focused on understanding and achieving the desired outcomes themselves—and, as it turns out, this is exactly what modern fiat money is ideally suited to accommodate.

I fervently wish for Millennials to get the message, because if they do succeed in grasping and carrying it forward they will, as a result, stand a fighting chance of resolving the monumental dilemmas we (their loving parental generations) have bequeathed for them to grapple with.

What follows has three more parts: Part 2 is an essay, Diagrams & Dollars, which lays out in an easily visualized fashion the basic realities of how a modern, sovereign fiat money system works. This essay was first posted on the UMKC economics blog, New Economic Perspectives, in early 2014, and was subsequently published as a small Kindle ebook on The version included here has been adapted from the original.

Part 3—Rules and Values—explores why the ideological driven generation of the boomers cannot “compute” the realities of modern fiat-money (as described in the diagrams)—and why they cling so rigidly to a set of monetary regulations that, in many ways, defy logic. As the Millennials, coming to power, attempt to untangle and modify the illogical monetary “rules” of the past 80 years, they can expect a forceful and likely strident, push-back from the waning BGXers. In anticipation of this contentious resistance, it will be useful to have a basic understanding of what, in fact, is motivating it. To help deflect the push-back, Part 2 will also explore why the end of monetary scarcity for collective society does NOT mean the end of the benefits of competition, nor does it mean the creation of a welfare state, or the demise of merit-based rewards, creative entrepreneurship, self-actualization and personal achievement. If anything, modern fiat money builds on these American values in ways the BGXers could never imagine.

Part 4—The Opportunity of a Millennium—is a sampling of how cooperative democracy and modern fiat money can enable the Millennials to actually solve some of the most intractable dilemmas they have been given to live with. I’ll explore five examples (which, I predict, we’ll find are interestingly interconnected):

  • Building a Free Lifetime Education System
  • Mitigating Climate Change
  • Creating “work” in a Hyper-Automated Economy
  • Building a Housing Infrastructure that leaves nobody in the cold
  • Reversing the Desertification of Planet Earth

Some explanation is required as to why this book is being written by an architect and not an economist. The best answer I have is that this, really, is more of an “architectural” issue than an economics one. Here’s a brief explanation of what I mean: When I was teaching architectural design at UNCG many years ago, my favorite design problem for first year students was the reconfiguration of a small cafeteria in the Student Union. The cafeteria was infamous for daily collisions between people carrying trays full of food and people trying to get trays to put their food on. Before I’d let the students begin redesigning, however, I asked them to spend some time observing and taking notes about what was going on in the cafeteria. Their first assignment was then to draw a set of diagrams that illustrated and explained what they’d observed, and another set of diagrams illustrating how they proposed to alter the situation for the better. Only after those diagrams were presented to the class and discussed, were the students allowed to begin designing their actual reconfiguration. That is essentially the process I’ve gone through with the structure of the U.S. monetary system: As an architect, I’ve observed it as best I can, and what I’m doing now, with this book, is using a set of diagrams to illustrate and explain first what’s happening and, second, how we might want to more rationally and effectively manage what’s happening—assuming, that is, our goal is to prevent the continuation of collisions between people with trays full of stuff and other people with empty trays seeking to fill them up.

From this point on I will be talking directly to the Millennials. Boomers or Gen-Xers are welcome to listen in, but please keep in mind Bob Dylan’s immortal lyrics:

“Your old road is
Rapidly agin’
Please get out of the new one
If you can’t lend your hand
For the times they are a-changin’.”

21 responses to “The Millennials’ Money Pt. 1

  1. Justin Santopietro

    JD, as a millennial myself I have to say this post was fantastic. I can’t wait to read the whole book. This sentence you wrote perhaps says it all: “the “idealist” BGX generations have been less interested in desired outcomes than on insisting that those outcomes be achieved in accordance with their ideological “rules”, the “civic” Millennials view the world as a pragmatic problem to be solved by whatever method works best.”

    The first part of that statement nails it. In my view, most of what drives/explains policymaking in the last several decades is this Baby Boomer obsession with moral hazard, that everything must have a downside, and the system needs to be built to prevent people from taking advantage of it. Of course, this moral hazard is always directed downwards at the poor and powerless, never to the wealthy and powerful whose decisions actually have systemic consequences. I hope that your prediction for us millennials comes true- namely that we are more pragmatic and utilitarian than our predecessors. Nothing less than the future of our planet depends on it!

  2. So glad so many on this website “get” the situation facing us millenials.
    All my life, like everyone I know, college was the golden ticket, so I went, took my many loans and have been working since in a low paid job that didn’t really require a degree, and while always looking so are millions of others in my spot. The gov is corrupt and bought off, the private sector has made us feel like your job is under daily threat for a few years before being shipped out. Wages stay low, we have no faith to put in anything.

    Both “left” and right ideas out there are stale. This is why I love MMT/Post Keynes thought. Besides the economic sense it makes, it may be the best thing for our society. Heal all these deep wounds we have and give us and our children and grandchildren an actual future and something to believe in.
    Like it was said on fight club…we have no great war, no great depression. We may have the latter now, but we have no source of unity or goals to work for!

  3. I didn’t notice much reference to history of any kind before 1971. I trust you will eventually deal with, among other things, the history of the Federal Reserve, its successes and failures and why it tolerates failed the capitalist enterprises that are now too big to fail or jail.

  4. J.D. – this is a great move. I fully agree with the premise and that it will be this generation that will bring the changes needed. To use a Jewish reference, we’re the David’s bloodying our hands in the battle over old ideas; our sons & daughters are the Solomon’s who will build the prosperous and peaceful nation. Millenials don’t carry the baggage of the cold war, communism, etc. etc.

    We’re all wrestling with how do we communicate abstract money concepts to regular people in a way they intuitively “get it”, to unseat and replace the neoliberal framing. I think your work is making wonderful strides in this direction.

    The social metaphor needs to become the primary for sure.

    One concept I think that can be helpful to overcome the stubborn “run government like a business” is the bank analogy. Governments aren’t like households, they’re like banks. Banks are granted the power to supply new money for profit-seeking people/businesses to deploy resources and build assets. They work for anything that can pay back that money with interest.

    But societies have always desired and benefited from other things that are in their collective interests (security, commerce, education) that don’t generate near term cash flow. So we collectively grant to our government the ability to also issue new money for all these other purposes.

    So governments shouldn’t be thought of like a business that balances a budget, but as a bank that issues money for public purpose. Perhaps you might find this useful as you weave your message. Keep up the great work!

  5. The Positive Money people in the U.K. claim that around 97% of all new money is created by private banks yet the MMT people say the Governments of countries with their own sovereign currency have a monopoly on creating money. Could you please clarify these seemingly contradictory claims.

    • Everybody issues money all the time, because money is debt. Some people’s money is more widely accepted than others.

      Commercial banks are licensed by the state to operate in the way that they do and are pegged to the central bank, which makes their liabilities widely acceptable. They are nothing more than regulated outsourcers. The state still controls what they can and can’t do and they are finished as banks if the state withdraws their licence to operate.

      Monopolies work in lots of ways.

    • To do so would require understanding the difference between “horizontal money” (bank money) and vertical money (sovereign money). Horizontal money, created by bank loans, is zero sum. Let’s say a bank creates a loan, essentially out of thin air, for a million dollars. At first, this seems outrageous, but a deeper look shows that money that is now spent into the economy is extinguished when the loan is paid off. Thus there is no increase in the amount of money in the economy after the loan is paid back.

      Sovereign money, on the other hand, is not zero sum. When Congress creates the budget and spends it into the economy via computer keystroke, it is there forever (or until it is taxed back out of the economy). This is a good thing as more money is needed because of population growth. Now where that money is spent, and to whose pockets it goes into, is a worthy topic of debate. As pointed out here, one of the best uses of this new money is to out it into a underutilized or wasted resource, the people who are out of work. And we all know how much work needs to be done on our crumbling infrastructure.

  6. financial matters

    Excellent as usual.

    But may I suggest that Syriza is demonstrating that if pushed hard enough even the BGX may be able to understand this. 🙂 Syriza is led by a 40 year old. And one confident enough to have a strong ‘cabinet’.

  7. Derryl Hermanutz

    Peter, You have identified the fatal difference between the commercial bank-issued credit/debt money that the world actually uses, and the government-issued fiat money that MMT envisions. Fiat money is printed (or electronically created) by governments and spent (or given) into the economy: like Ben Franklin’s colonial scrip, and Abraham Lincoln’s United States Notes (greenbacks). Fiat money is issued and spent to fund government operations and public purposes, and to provide the private sector economy with a supply of money to use. There is no repayment or interest obligation attached to the fiat money supply. Fiat money is debt-free, interest-free, government-issued money. A money-issuing government does not need to tax its people, or sell bonds to money-issuing banks, to get spending money. Clearly, the money-hungry, tax-grabbing, debt-shackled governments in today’s world have not been issuing and spending their own debt-free fiat money. Governments are using bank-issued credit/debt money. Commercial banks, not governments, are exercising monetary sovereignty via their virtual monopoly on money issuance. The creation, issuance, and allocation of money is the macroeconomic command and control system that determines who and what will be funded (corporate monopolists or public purposes). To get from the bankster-driven privatization of the ownership of this planet (global neofeudalism), to a democratically governed future, requires monetary “reform”. Which is why Positive Money and others are advocating monetary reform, to “change” real world bank-debt money systems into the government-issued fiat money systems that MMT imagines (for reasons of their own MMTers claim — contrary to reality — that we ALREADY live in a fiat money world; whereas monetary reformers acknowledge the need to “change” the money system to fiat). The 97% commercial bank-issued (credit/debt money issued as repayable loans of bank deposits), 3% central bank-issued (currency: cash money), breakdown of the components of a modern currency system’s money supply, is “common knowledge” that the Bank of England confirmed in its recent pdf and video, Money Creation in the Modern Economy. ALL money (except government-minted coins) is issued by banks that “lend” money into existence, so all of the money supply is owed as “debt” to the money-issuing banks of the world. Monetary reformers identify the world’s bank-debt money system as the root cause of the world’s bankster-imposed debt-bedraggled calamities. And monetary reformers identify government issuance of their own debt-free “positive money” into the equation as the solution. But who can unseat the banksters who rule the world via their monopoly on the issuance and allocation of money?

    • Recheck your BoE 97% stat. That is the portion of broad money that is bank deposits vs. cash. That is the present form of money, not the source of its creation. Positive Money always misread this stat.

      If the government pays out in new cash for goods & services, the people holding that new cash might go give it to a bank in exchange for bank credit which is more convenient in the modern world. The commercial bank then gives the cash back to the central bank in exchange for central bank credit (reserves) which again, are more convenient. Wow, just converted government-created broad money into commercial bank credit, counted in the 97% category.

      Anyway probably not the place to go deep on PM, so I’ll just say, looking forward to the book JD!

  8. J.D.,

    The purpose of this small book is to introduce the topic of this “modern money” to the Millennials themselves—to make them aware that the above statement is very much a possibility and, furthermore, to help them see that it is very much in their interest to grasp hold of and nurture that possibility.

    Don’t use language diminishing your own book. Leaves a negative flavor after the reader moves on. I’ll work further through the passage this evening.

  9. What a great idea! To look to the future is the way to go and I’m pleased that the millennials will be the focus.

    In my own lifetime, my mother grew up during The Great Depression and her family lived in abject poverty. She was unable to complete her education beyond Grade 8. Her jobs were heavy on labour and the pay was low. Her children (2) had the opportunity to complete their education beyond high school without going into debt and could become professionals if they so desired. Jobs were plentiful in the 1950s and 1960s when they graduated. The next generation became the technology generation and their education was more focussed but produced extremely well-paying jobs. That would have been the baby boomer generation that you describe as ideologically driven. [Lloyd Blankfein was in his 50s when he found the means to become a millionaire using subprime. That was the same baby boomer ideology (only more fraudulent), I suppose.]

    After the Great Financial Crisis, came the millenials of the next generation who found themselves unable to get an education without going into extreme debt and not being able to find jobs for which they were trained: professional jobs became scarce as many lower paying jobs became available. I do hope the millenials can become the civic-minded and cooperative generation that changes the world into one that is more friendly to man AND nature. They are already learning how to live within their means.

  10. J.D.,

    May I email you something? If you would like to contact me rather than publish your address you can use [email protected], and from there I will use my private address.

  11. A couple of points.

    Firstly, it’s no coincidence that J.D is able to communicate MMT ideas so well his training as an architect both at university and in practice taught him to think synergistically. Not an easy attribute to achieve.

    Secondly, I’m not so much convinced that the Boomer Generation are much different than other generations in their willingness to latch onto “utopian” ideologies. One thing I do think human beings are poor at recognizing is the way Nature has encouraged cooperation amongst living creatures and especially human beings. So, for example, we take so much for granted that we don’t recognize language as a cooperative tool, we don’t recognize the social networks we readily form from good attachment processes to Social Prosthetic Networks (See and we especially don’t see money as a social relationship that enables us to contract obligations with each other to produce the goods and services we all need. This sample list I’ve itemized, to coin a word, might be called “cooperationizers.” Indeed as Geoffrey Ingham has written in his book “The Nature of Money” perhaps the most important form of “cooperationizer” created in our hunter-gatherer days was the moral community which Ingham tells us ontologically preceded the NeoConservatives sacred “market” which manifestly fails to incorporate political equality with its accompanying democratic process for conflict resolution.

  12. I hope that you do publish this book. More people need to understand that the federal government can fund the economy up to the point of full employment without fear of inflation. Federal debt is, in fact, how the private sector gets more money.

    However, I think that people also need to understand one other very important point, i.e. the debilitating and indeed the parasitic nature of the financial sector. I would guess that most millennials do not understand the degree that private debt has expanded since the early 80s. The financial sector is now receiving about 40% of corporate profits. People now take on major debts for college, to buy a house or car, and if they get sick they can be wiped out. Most of the money now going to finance once went to working class wages and people could avoid major debt. Millennials have always lived in this debt society and probably don’t think much about it.

    This is a huge problem because that money going to finance no longer goes to pay for higher wages and productivity improvements. Instead asset prices increase and the plutocrats get ever richer. When our laws and regulations make it easier to make money from money than from productive labor we are in an unsustainable situation. Making money from money (finance) adds nothing to the economy but rather sucks wealth from productive activities that already exist. Without major changes this will continue until the 99% is reduced to the status of the serfs of old, but instead of being tied to the land, they will be tied to their credit card statements. But that will be debt peonage.

    It is vital that the laws and regulations regarding financial activities are reformed to reduce the ability of finance to suck out the blood of the real economy.

    • financial matters

      Very good points. It looks like J.D. is planning on dealing with these in the education and housing areas. The ‘work’ area could also include the provision of free basic medical and legal services.

  13. Strauss–Howe theory of repetitive cycles of four archetypal generations is patent nonsense. There is nothing in evolution that would produce these “oscillations”, neighter is there in technological progress, which is linear.

    Strauss–Howe originally wondered why post-ww2 generation seemed to differ from pre-ww2 generation in attitudes toward entitlements and came up with their four generations theory, while we know that what had happened was that budged deficits of ww2 generated enormous quantities of private wealth and a new sense of affordability.

    Real scholars don’t take their pop-sociology seriously. Sorry to say but if I take a book in my hand that contains nonsense theories that undermines credibility of the rest of the book.

  14. MMT is a powerful concept and it is actionable. This “fourth turnings” idea is conjecture without strong evidence and it provides no plan of action. To mix the two is to diminish the very important concept of MMT by association. I would advise against it.

  15. Must agree with Hepion and Ron. Do not undermine your very worthy effort. It is enough to point out that we stumbled and fumbled our way into a fiat monetary system without realizing what had happened. With the scholarly research of the past 25 years to guide them, as well as popularized articles such as yours, the millennials are in a unique position to make use of a fiat system unhindered by existing, mostly neoliberal economic prescriptions.

    Best of luck to you. I look forward to your book.

  16. Hi J.D.,

    that looks very promising to me! There was a German economist named Karl Föhl who published something like the General Theory in 1937 (in German) and his book excludes lots of flow diagrams, too. I find it very intuitive, and it might be worthwile to study this. By the way: Föhl also concludes that monetary financing by the government can decrease unemployment. He is more explicit about it than Keynes ever was.


  17. It would be good if you could figure out some way to talk to millennials that did not alienate older generations. Yes a major share of the responsibility for solving the big problems of today will fall on their shoulders, but it will not help them to be cast adrift with the notion that they alone have the “generational character” adequate to the task. They will need to build alliances with older people, not sneer at and blame us for leaving them a world with problems.

    I don’t recognize your characterization of my generation (boomer) as ideologically wedded to rules. My generation was all about breaking rules and not accepting authorities. Of course, we weren’t all rule breakers, and like every generation before us (and like the millennials themselves) much of our struggle was with one another, not only with our parents’ timidity and conformity. It was my peers, not my parents or my friends’ parents, who cat-called and egged me for being a long-haired male.

    The impulse to conform is present in every generation. I see no reason to characterize my generation as especially obsessed with rules or to be any less pragmatic about results than any other generation. The great rule-breaking we undertook may throw the sheepish passivity and complacency of the “affluent society” into stark relief. But it was the rule-breaking of the few that defined who we were as a generation, not the complacency of the many. No, we didn’t solve every problem, but I am proud of what we accomplished. It is not our fault that power and money reacted and pushed back and found ways to undo our “excesses of democracy”. Calling us names may get you a positive reaction among the young, but it will not help them understand or solve the problems of the world.