The Question I Wanted to Ask


I recently attended a panel discussion called by Bernie Sanders—and moderated by Stephanie Kelton—to discuss the crisis in Greece. The panelists were Joseph Stiglitz, Jacob Kirkegaard (of the Peterson Institute) and James Galbraith (who, it had been disclosed just a few days earlier, was part of a secret committee in Greece which evaluated how, and at what cost, an actual Greek exit from the Euro could be managed.)

Jacob Kirkegaard was game in acknowledging that he’d been invited to lend “diversity” to the discussion—and then proceeded, without even wearing a uniform, to give a highly credible impersonation of a six foot nine inch SS storm-trooper. Joseph Stiglitz was a charming rambler who punctuated each point he made with a bright smile—the more painful the point, the brighter the smile. James Galbraith punctuated his points with the very first word of each sentence, which came out as a kind of uncontrolled squawk quickly followed by an incisive and original intelligence that I found truly mesmerizing. (I’d never before seen or heard any of these people.)

Watching Stephanie Kelton guide the conversation, sitting next to Bernie Sanders as she was, it was clear the delicate challenge she faces in poking at the edges of the precepts of the status quo without pushing things into the scary and marginalized territory of counter-intuitive reality. Her most pointed question to the panelists was whether they believed the U.S. potentially had a debt problem similar to Greece’s. There was, she commented, a lot of discussion to that effect there in the Hart Senate Office Building where the panel had convened. Jacob Kirkegaard assured the audience there was very little probability of that, basically because the U.S. had such a strong economy it could always pay off its debts. Joseph Stiglitz concurred, noting helpfully that the U.S. could currently borrow dollars at a negative interest rate. James Galbraith, in effect, only answered with his body language which said: “I’m not even going to treat that as a serious question”—a neat trick which allowed him to maintain his integrity without wading into the weeds of modern fiat money. The room managed to stay on an even keel—though no hints were sown that might assist Bernie and Stephanie, down the road, to explain how all of Bernie’s new federal programs can be paid for.

As time ran out, Stephanie took a question from the audience—a young man who, as it happened, was sitting next to me. I can’t remember the question he asked—nor did I really listen to the answers the panelists were giving—because I’d started thinking hard about the question I wanted to ask, assuming the opportunity presented itself, and I was having a difficult time formulating the exact words, the precise phrase, without which, I knew from experience, I’d just bungle out something incomprehensible. It’s been a special challenge all my life—asking the precisely articulate and hopefully intelligent question that I could feel was up there under my hat, but that I couldn’t quite find the handles to. Fortunately, I was saved because Stephanie only took the one question. And it wasn’t until the following morning that I realized what I wanted to ask was this:

“Does it strike anyone as odd that the discussion today has been only about money? Is it important at all what the real resources are that Greeks have within their own borders? Is it rational for Greece to borrow money in order to buy things the Greek people already own by right—their own labor, their own agriculture, for example? Or is it the case that Greece is so lacking in her own resources that she has to buy most everything her citizens consume from other countries? And, if that’s true, isn’t at least part of the solution for Greece to intentionally and systematically become more self-sufficient? Isn’t it possible, in fact, that if every nation strived intentionally to become more self-sufficient in food and energy—go “off-grid” so-to-speak—that a great chunk of the anthropogenic CO2 (which is threatening our very survival) would be eliminated? Or is the globalization of capital a more important goal than the well-being of seven billion people?”


19 responses to “The Question I Wanted to Ask

  1. financial matters

    I think Ingham makes an interesting point in ‘The Nature of Money’.

    ‘Money generated by Argentine capitalism has customarily sought to become dollars and to find itself safely deposited in New York and London.’

    It seems to be important to establish a reliable ‘money of account’ in a domestic space for the currency to have value that can be trusted by all segments of the population. If this is established it can help contain capital flows and keep them off the dangerous foreign dole.

    As MMT points out this value comes from being able to reliably tax the population. It’s how the state convinces the private players that the money has value and can stay at home.

  2. J.D., excellent question and one that is thoroughly addressed in a book by the title of ‘When Corporations Rule the World’ by David Korten. If you haven’t read this book, you should.

  3. James Cooley

    Of course the globalization of capital is a more important goal than the well being of 7.3 + billion human inhabitants of this obscure rock at the edge of one of millions of galaxies, at least if you are a mainstream economist, Jamie Galbraith possibly excepted. I do hope Stephanie Kelton will find a way to steer Bernie Sanders, at least, into the scary and marginalized territory of counter-intuitive reality. Someone has got to lead the way, and Bernie Sanders is ideally situated to seize the bully pulpit and make the marginalized mainstream. If he were to make his first act as President an order to the Treasury to strike 1000 trillion dollar platinum coins, the howls would by cacophonous, but when the dust settled and the potentially debt free government found itself with virtually unlimited funds to fund it’s public purposes, there would be an irreversible shift in public perception and the result would be cathartic.

  4. I too have been wondering how Bernie Sanders is going to explain MMT to the masses. I assume that he is getting an education from Stephanie Kelton and that some day in the next year or so MMT will make its debut on a debate or television interview.

    Would that the film clip of Alan Greenspan educating Paul Ryan, “There is nothing to prevent the government from creating as much money as it wants.”, referring to Social Security checks, as long as the economy is producing the goods and services seniors want and need, which would prevent inflation, could be shown in a debate. It could be shown in an interview with proper planning.

  5. Mr. Alt, thank you so much for such an on target question.

    National security starts with local security. The foundation of all local security rests on the tripod of access to potable (fresh) water, safe food, and sustainable energy.

    Dale, thank you. I had not seen the video.

    Roswell, thank you for the Greenspan url.

  6. For crying out load. It’s all about the sectoral balances! I’ll write it again,

    It’s all about the sectoral balances!

    Because once you understand we can’t all run surpluses simultaneously, and that govt deficit = non-govt surplus, or conversely govt-surplus means non-govt deficit. Once you explain that, then, and only then, might you have a chance at exploding the myth that we’re out of money. I guarantee you very few people understand that. Almost everything thinks that a govt surplus is only positive, when in reality it’s usually not.

    Most people assume it’s good to earn more than you spend in any given year. But for the non-govt as a whole to do that, it *requires* a govt deficit. Govt deficits are necessary for stable economies, since the non-govt needs to, on average, maintain a net-positive position. Once that’s understood, then you might get people to understand that we’re not out of money, how government deficits add to non-govt net savings, etc. How can you get around that?

  7. The sectoral balances comes from the obvious idea that in order for you to earn a dollar, someone else must spend a dollar. +1 (earn a dolloar) – 1 (spend a dollar) = 0

    The monetary zero-sum nature of an economic transaction leads to all sorts of obvious conclusions. Immediately, it’s obvious that austerity can’t be expansionary, cutting govt spending cuts prvt sector income. Or that the top 0.01% taking such a gigantic share of national income necessarily means there’s less income for the rest of us. It also makes the boom-bust nature of credit driven expansions obvious (if the prvt sector is net-negative during the boom, and then suddenly turns net-positive once they realize they’re over-extended, a la 2008, then you get a crash, unless you have a pro-active govt deficit to balance out the prvt sector net-positive position).

    This idea is the heart of Wray’s classic paper showing that every time the US govt engaged in aggressive deficit reduction, it resulted in recessions or depressions. The private sector simply can’t maintain a net-negative position for very long. Is there a more important economic idea?

  8. ” is the globalization of capital a more important goal than the well-being of seven billion people?”

    To whom? To the Powers That Be that currently run the world, the globalization of capital is by far more important. But iIf there should be a shift in world power, where the 99% take back their power & their governments from the 1%, that priority ranking would be turned upside down.

  9. Arliss Bunny

    JD –

    It’s a great question and one which I would have LOVED to have heard Dr. Galbraith answer since he was involved so directly with Yanis in the group which was seeking to deal this the immediate post-euro crisis Greece would/will endure if forced into a chaotic Grexit.

    I have been reporting on the Greek crisis, for Netroots Radio, since January so I have been following all of the machinations as closely as is possible from the outside. Certainly the most pressing needs repeatedly mentioned both by Tspiras and Varoufakis are food and medicine. Greece has a limited agricultural base both in variety and in quantity and has long been reliant on its neighbors. Additionally, “big pharma” is not a part of the Greek economy now or in the reasonable future. The biggest problem for Greece is not that it is not self-sufficient, the biggest problem* is that it has a massive trade imbalance because it exports very little. Tourism is not an export. [*Actually, I should say that the biggest problem is that the oligarchs of Greece are not now and have not ever paid taxes. In an economy which is not sovereign that is an unmitigated disaster and that the IMF and Eurogroup purposefully prevent Greece from imposing taxes on financial elites is Euro-corruption of the very worst kind.]

    • financial matters

      Good points. I would add that paying taxes would also be important if they were sovereign so as to give value to the drachma. They don’t have to be excessively regressive such as a 20% VAT though.

      Taxes now can be seen as giving value to the Euro. The EZ is trying to enforce this but doesn’t have the social or political contract. But these contracts don’t seem to be easily established by the Greek government either. Without them the bailouts are band-aids rather than cures.

    • Arliss, explain to me why tourism is not an “export”. From my perspective, the net result of exporting isn’t that something leaves a country, but rather that something comes INTO the country from outside—namely a foreign currency. The exporter can then use that foreign currency to buy things from other countries (import.) If a tourist from USA spends her US dollars to vacation in Greece, are those dollars not then available for Greece to buy pharmacy products from USA? Perhaps I’m missing something in your point…?

    • Arliss: A Euro or a Dollar earned from tourists is the same as a Euro or Dollar earned from exporting goods. Of course it would be nice if Greece exported more, but what matters is the net in or outflow. Recently it has been roughly equal, which makes exiting less disruptive. Of course, J. D.’s question is THE question. Joe Firestone offers good answers too.

      Contrary to bizarre disinformation, some from usually sane people or sources, Greece has and would have no real problem feeding itself, with a healthy Mediterranean diet. At least if you believe the Greek farmers, the UN FAO, the Economist’s Food Security index. But what do they know?

      Tsipras snatched defeat out of the jaws of victory – he wasn’t faced with a forced, chaotic Grexit – but the negotiated, smooth one offered by Schauble. As Galbraith notes elsewhere, people are fooled into focusing on Germany but not the French Rasputins & Draghi. And why would even a forced chaotic exit be so much worse?

      financial matters: Yes, that is a very good point. MMT / Keynes etc isn’t about free-wheeling spending, but doing ordinary things a bit better, the right way. Argentina’s elite at all times has had much more than enough dollars to pay off all of Argentina’s dollar debts. But they are beyond the reach of the government. I think Ingham says that Argentina’s problem was that it never made a national settlement between the state and the capitalist class, one that would have provided for domestic investment and growth.

  10. Joe Firestone

    Hi JD,

    Wish I’d known you were there. I was sitting about two rows behind you and a little to the right. The “young man” next to you was Ed Harrison, whose blog is creditwritedowns, and who is also the producer of the excellent Boombust program at, easily the best economics show on cable television, in my view.

    I didn’t catch Ed’s question either because I was behind him and couldn’t quite hear them carefully. It would have been helpful if Stephanie had repeated his questions, especially since they’re very hard to hear also on the video. You can understand the gist however based on the answers given by Jacob, Jamie, and Joe.

    Other than the panelists, E, you and I, some other pretty well-known people were in the room. Matt Stoller who works for Senator Sanders was there, and so was Bruce Bartlett, a Washington fixture who usually presents at Jamie’s Economists for Peace and Security Conferences and who is very well known in Republican circles. A while ago I did a series on something Bruce had written. I don’t know if Dean Baker was there. He had tweeted it before him, and I looked for him but didn’t see him.

    I’m writing something on the Conference too. It’s a very long piece and I’m trying to cover the session pretty comprehensively. I think the point of your post is a good one and think I noticed both Joe Stieglitz and Jamie giving some attention to Greece’s ability to gain foreign exchange through trade and tourism. At one point, Joe Stieglitz pointed to Greece’s current account surplus before its latest crisis, which was generated from tourism, in addition to exports of products.

    Jamie also remarked to me afterwards in response to a one on one question that he thought Greece could be self-sufficient in food if people could be brought back to work, through abandoning austerity policies. Pharmaceuticals have to be imported, but if Stieglitz is correct, the foreign exchange to import them would be there if the Eurocrats would get off Greece’s back.

    Anyway, I consider the session to have been very worthwhile since it highlighted the big issues surrounding the conflict and made clear just how authoritarian, anti-democratic, neoliberal, and Petersonian the position of the defenders of the troika is.
    Thanks for the post!

    • Joe, sorry I missed you. Too bad everyone wasn’t wearing name tags!

    • «Greece could be self-sufficient in food if people could be brought back to work, through abandoning austerity policies. Pharmaceuticals have to be imported, but if Stieglitz is correct, the foreign exchange to import them would be there if the Eurocrats would get off Greece’s back.»

      There is no doubt that Greece could largely work with a policy of autarky, but the question is the level of GDP that would be needed to make it work.

      In 2007-2009 Greece had net imports (and also government deficit) of 15-20% of GDP and in 2013-2014 it had a substantial trade (and also government) balance, but with a lower GDP, the same GDP it had in 2000-2001 when the trade balance (and also government deficit) was “near” balance.

      If that had been regarded as good enough by greek voters they should not have elected SYRIZA. The platform on which SYRIZA was elected was “end to austerity”, that is in practice means “more net imports”. Because greek voters really enjoyed being able to consume 20-25% more than they produce thanks to big net imports, and want that back.

      The past 15-20 years show that there the elasticity of greek net imports to GDP is not far from 1, probably around 0.8, therefore how much money should be donated every year to the greek government matters a lot:

      «the discussion today has been only about money? Is it important at all what the real resources are that Greeks have within their own borders?»

      The discussion on Greece is all about money because the discussion is about “making Germany pay”, that is about making the german government give net (hard currency) transfers to the greek government to pay for higher imports to boost the living standards of greek voters.

      Because the real resources of the greek economy cannot produce enough hard currency earning exports to fund the level of imports and thus GDP that greek voters want to have, as Y Varoufakis wrote:

      «idle productive resources in Greece cannot produce much for which there is increasing demand»

      So the discussion centers on how much money (hard currency) should the german government donate to the greek government so that greek GDP can go back to the level of 2007-2009 when greek voters could afford imports of 15-20% of GDP.

  11. Steven Greenberg

    Maybe this is a good place to interject the question I would like to ask.

    How does MMT account for the Mark-to-Market method of valuing just about everything? An example of what I am talking about is that when there is one trade of a stock on the stock market, everybody who owns any shares of that company assumes that their individual shares are suddenly worth that price.

    Their behavior on how they spend or save their money is quite tightly correlated to how much they think they have. Mark-to-market is as fictitious as they come (although there aren’t necessarily any better measures), so here is a perfect example of “money” being created exogenously from all the sectors that MMT enumerates.

    • Steven, I’m no economist and wouldn’t dare to speak for #MMT, but Wall Street and the elites have understood for a long time that the U.S. can’t default on any debt denominated in dollars. That’s how they got Obama and both parties to let them use the FDIC to “socialize” the risk of their derivatives onto the taxpayers, “5 U.S. Banks Each Have More Than 40 Trillion Dollars In Exposure To Derivatives.”

      To put $200 trillion in perspective, annual U.S. GDP’s around $17 trillion. Social Security’s Trust Fund’s around $2.3 trillion. They say we only blew about $6 trillion on the Middle East occupations.

      IMHO, Pavlina Tcherneva’s four-page pdf is an excellent introduction into the “political economy” of #MMT.

      “And the third question should be “Should the government spend willy-nilly on whatever it pleases since it doesn’t face involuntary default?” and the answer to that question is most definitely NO. Not all deficits are created equal: some create more inequality and more rentier income, as it seems to be the case in the current crisis. Others can cause inflation. Yet others can directly create jobs, public investments, and productive capacity without generating inflationary pressures. In sovereign currency nations, a truly responsible government spending is one that is measured not by the debt-(or deficit)-to GDP ratios, but by the real impact of that spending on the economy–job creation, poverty alleviation, stable prices, income distribution, social goods provisioning are all good measures for assessing how responsible government policy has been.”

      Instead of letting the Wall Street elites play with “house money,” we could bring back the full holiday on both sides of the payroll tax (FICA) and follow Warren Mosler’s vision for health care.

      “Long term vision subject to revised details:

      Everyone gets a ‘medical debit card’ with perhaps $5000 in it to be used for qualifying medical expenses (including dental) for the year.
      Expenses beyond that are covered by catastrophic insurance.
      At the end of the year, the debit card holder gets a check for the unused balance on the card, up to $4,000, with the $1,000 to be spent on preventative measures not refundable.
      The next year, the cards are renewed for an additional $5,000.”

      Democrats are understandably afraid that Republicans would take any change in the payroll tax as an excuse to cut Social Security. If we could get over to that huddle, maybe we could make progress on “functional finance.”

      • financial matters

        I think that Pavlina’s points are correct but maybe could be a bit more nuanced to fit with ‘political and social economy’

        She states :

        ‘First, “Will the U.S. government run out of money while it maintains its deficit position?” The answer to the first question is ‘no’—’

        which we know is correct but begs the question as to why then do I need to pay taxes?

        We also know that taxes are what gives money its value so I think that is what needs to be nuanced into putting MMT into more of a social and political perspective.

        I think we want to get away from the idea that taxes directly fund spending but that taxes are necessary to provide a useful public purse and reflect a productive use of labor.

        I think it would also be useful to take labor firmly out of being considered a commodity which I think would imply a subsistence level basic income below what a job guarantee would be.