Daily Archives: October 30, 2013

By Stephanie Kelton

A few weeks ago, I had a lengthy e-mail exchange with Frank N. Newman, former Deputy Secretary of the U.S. Treasury. Frank’s books (here and here) are so closely aligned with MMT thinking about deficits, debt, monetary operations, etc. that I wanted to get his thoughts on one of the most common criticisms of MMT. MMT recognizes that the currency itself is a simple public monopoly and that the issuer of the currency must spend (or lend) it into existence, before it can be used to pay taxes or buy bonds. The implication? Governments that issue sovereign money are not revenue constrained. Critics have argued that MMT has this all wrong because the system requires the government to have numbers on its balance sheet before it can spend — i.e. the government is not allowed to run an overdraft and is, therefore, constrained by cash on hand. Here’s what Frank Newman thinks of that critique:

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