Rotten Title, Great Summary of My Talks on MMT

By Stephanie Kelton

As much as I dislike the title of this article from Advisor Perspectives, the essay itself is a good overview of the talks I’ve been giving at national, regional and chapter meetings of the Financial Planning Association (FPA) over the past year-and-a-half. I wasn’t aware that Veras was working on a piece and didn’t see it until it was published (or I would have implored him to change the title!). I wanted to share the piece but only after this word of caution: I would not and did not say, “deficits don’t matter,” as you’ll discover if you read the entire piece. This is a touchy subject for MMTers, who’ve been (wrongly!) accused of taking the position that “deficits don’t matter.” Randy Wray made the MMT position crystal clear years ago, and I told Dan Jamieson the same thing when he interviewed me for a similar piece in Investment News:

InvestmentNews: Are MMT theorists saying deficits don’t matter?

Ms. Kelton: Deficits do matter, but not in the way people think.

So with that flashing neon disclaimer in place, here’s Veras’ article from Advisor Perspectives.

11 responses to “Rotten Title, Great Summary of My Talks on MMT

  1. The household budget analogy will be a hard myth to break. Human nature to think in terms of personal finances and assume the federal government functions the same way. It’s also human nature for special interests which benefit from this faulty thinking to perpetuate the household budget analogy..

  2. Does wealth inequality matter even more than federal deficits?

  3. JohnfrmCleveland

    In Veres’ defense, you won’t get any readers without a grabby title.

    The article itself is terrific.

    • Stephanie Kelton

      Totally sympathetic to that (as an Editor myself!). Just need to be on record because goodness knows, someone will straw man MMT as the “deficits don’t matter branch of economics” and link to that piece. Left unchecked, these things tend to snowball.

  4. This was a very easy and concise article. I also liked the links you provided. My favorite was Mr. Delong’s “In MMT world.” Or as I like to call it the World.
    I do have a question it maybe very basic but I can’t seem to find a good answer. Anyone on this site is welcome to chime in.
    When explaining MMT to people the Loanable Funds model comes up because everyone seemed to learn about banking by watching “It’s A Wonderful Life.” But if loanable funds were true then a bank would have to subtract from my savings account to loan the money to someone else. Also, if loanable funds were true and if I had a treasury account money would be subtracted from my account for the government to use.
    I guess what I’m trying to say is: Money can’t be in two places at once. It can’t be an asset to me AND to someone else. Would this be accurate?
    I get it, but I’m looking for a way to communicate that loanable funds is not how it works.

    • Stephanie Kelton



      • A+!
        Where’s my Nobel? Oh, I forgot. I have to believe in loanable funds to win one of those (Zing!)
        Money can’t be in two places at once. I also have….
        The government doesn’t tax you so it can spend, it spends so it can tax you.
        Or, If a dollar falls in the forest and no one is around to spend it does it cause inflation?
        Go ahead and make T-shirts & bumper stickers but I want a cut of the beer cozys. 🙂

    • Mark Robertson

      Arby, you are correct.

      Money is not physical. As Randy Wray says, a “dollar” is simply a unit of account.

      And since money is not physcal, there is no “cost” for government spending. Moreover, banks create (non-physical) loan money (i.e. credit) out of thin air.

      Indeed, if you think this matter through, you will see that “fractional reserve banking” is a myth.

  5. When encountering the ‘are you saying deficits don’t matter’ line, my sugged response is:

    Deficits do matter, or rather the nett amount of currency the government issues matters, and we can easily limit that according to the median wage inflation in the economy. Politicians would have to answer serious questions if wage inflation was too high. So no danger of becoming Zimbabwe etc. The limitations on policy for a fiat currency nation should be real – as reflected in employment and wages – not arbitrary budget limits for political points..

  6. Mark Robertson

    Yes, deficits matter. Indeed the US government has a deficit crisis: the deficit is far too LOW. This is one reason why the real economy remains locked in a depression (as opposed to the financial economy, which is roaring).

    Anyway, as Stephanie says, the US government’s deficit is the public’s surplus, and the US government’s surplus is the public’s deficit.

    Speaking of deficit reduction, on 1 Nov 2013, food stamps will be cut for 47 million Americans. This will not only hurt Americans at the food table; it will hurt grocers, dollar stores, and gas stations that rely on low-income shoppers. It will dent revenues for the nearly 250,000 supermarkets around the country that accept SNAP payments, affecting everyone from farmers to store workers to truck drivers. It will also hurt doctors, since families that get food stamps are less likely to skip doctor’s visits.

    All of this means less jobs and higher prices nationwide. Just what a depressed economy needs, right?

    California will lose $457 million in SNAP funding.

    All because of the mania to further reduce the deficit.

    The corporate media speaks of the “cost” of SNAP. In reality, food stamps “cost” the US government nothing, since the US government has infinite money. “Cost” is one of those terms that applies to currency users, not to currency issuers.

    Big banks like JPMorgan make money by administering the EBT cards for the SNAP program. Why aren’t the criminal banksters squawking? Where are those creeps when we need them?

  7. This was a very good article; but you’re right about the title. We’ve been trying to dispel the “deficits don’t matter” thing for years now.

    At one point in the piece it sounded like you were advocating automatic fiscal policy devices to take decisions out of the hands of politicians. Isn’t this anti-democratic, and doesn’t Bill Mitchell argue very persuasively against rules for fiscal policy?