Author Archives: J.D. Alt

By J.D. ALT

The theme and illustrations of this essay are from the new book “Paying Ourselves to Save the Planet.”

It might seem, as we observe the U.S. government “instantly” generating $2 trillion new dollars for direct payments and grants to people and businesses, that the coronavirus pandemic has shed a new light on the authenticity (and necessity) of modern money theory (MMT). But that light, if it is being shed at all, is illuminating instead the dramatic limitations of the “standard money theory” we insist on applying to the exigencies of an unfolding modern society (including, but not limited to, how to deal with pandemics).

By J.D. ALT

It’s ironic that, at this moment, when the truthfulness and utility of modern money theory (MMT) is being publicly realized—(and even potentially implemented!)—that its singular vulnerability must emerge as a real concern: hyper-inflation.

The most recent thing I’ve written—Paying Ourselves to Save the Planet­­—addresses the issue of hyper-inflation as follows:

By J.D. ALT

The last two and a half months I’ve been at work on a new book. As it evolved, I found I was approaching MMT from a new direction—one which made an explanation of MMT much less counter-intuitive and, perhaps, less controversial. The approach is relatively simple and straight-forward: follow what I began calling “standard money theory” step by step until one reaches a perspective that has, almost seamlessly, become “modern money theory.”

By J.D. ALT

With the essential collapse of the U.N. Framework Convention on Climate Change in Madrid (“Climate meeting goals go unmet” Washington Post, 12-16-19) we now approach the first day of 2020 with much less to celebrate, much more to fear, and much more to accomplish. Here’s a little parable for the coming New Decade: Continue reading →

Inflation & Consumption

By J.D. ALT

Let’s quickly recap: I outlined, in PART 3, an argument that modern society has evolved in ways that necessitates a dramatic increase in public enterprise—yet, at the same time, we’ve doubled down on an old-world narrative about “money” that makes it mathematically impossible to meet that need. In PARTS 1 & 2 we reconfirmed a “modern money” perspective by simply observing the actual operations of the Federal Reserve—and reconfirmed, as well, how this new perspective holds out the opportunity to actually confront, through the efforts of public enterprise, the new challenges modern society faces.

It was my intention, at this point, to focus on the unfolding reality that climate change will soon prove to be the most dramatic challenge modern society is facing—and will be the challenge that necessitates, by far, the greatest need for goods and services produced by public enterprise. More to the point, climate change will generate the greatest need—by far—for implementing and managing a “modern money” perspective in America’s economy. While I still intend to pursue this argument, comments addressed to PART 3 have led me to change sequence: I realize now it will be ineffective (and perhaps futile) to discuss the extraordinary level of public spending that climate-change will necessitate without, first, attempting to address two related issues: (1) the stridently insistent warnings about “inflation,” and (2) the conundrum of the necessity for increased “consumption.”

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An Explanation of the Federal Reserve Money system and what it means for the potential accomplishments of American Democracy

By J.D. ALT

The big surprise of our tour of the Federal Reserve system (please see PARTS 1 & 2) is that the FED (America’s central bank)—as it is presently authorized to operate—can create “money,” as necessary, to support not only the undertakings of private enterprise, but the undertakings of public enterprise as well. Please recall that public enterprise produces needed goods and services which private enterprise cannot produce at a profit or, to make its profit, must set prices higher than what most citizens can afford to pay. To accomplish what private enterprise cannot, therefore, the U.S. Treasury, as directed by Congress, pays U.S. citizens and businesses directly to produce the goods and services of public enterprise.

The fact that the Federal Reserve system is able to create the “money” required for this spending is a surprise because we, the American voters, have always been led to believe that public enterprise is “financed” by a different method: namely, some combination of taxing private profits/income and borrowing from the investment capital of private enterprise. What we discovered, instead, is that, yes, taxes do fund some portion of the Treasury’s spending—but the remainder of the funding is derived from operations that have nothing to do with “borrowing” in any meaningful sense of the term.

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An Explanation of the Federal Reserve Money system and what it means for the potential accomplishments of American Democracy

By J.D. ALT

Let’s begin by restating what I think was the main insight of PART 1: The overarching purpose of the Federal Reserve Act was to enable “money” to be created, as necessary, to support the scale of commerce that American Enterprise decides to undertake and accomplish. If the labor, materials, energy, technology, and ingenuity exist to do something—and it is desirable that it should be done—it is illogical to say it can’t be done because there isn’t enough “money” in the system to pay for the doing of it.

The only questions to be asked, then, are two: (1) Who will create the “money” when it’s needed, and (2) Who will decide when the creation of additional “money” is justified?

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An Explanation of the Federal Reserve Money system and what it means for the potential accomplishments of American Democracy

By J.D. ALT

“Reserves”—that esoteric term in money-talk that postures to explain everything but explains nothing at all—have been much in the news of late. The Wall Street Journal even tried, recently, to explain what they are! They didn’t do such a great job. That’s unfortunate because, properly explained and understood, Reserves hold a big key to the political befuddlement—especially acute in the present election cycle—about what we can “afford” to accomplish as a collective society. This includes “paying for” real solutions to the five, money-intensive, life-defining dilemmas America now confronts: (1) climate change (2) healthcare (3) student debt (4) early child-hood care and development (5) affordable housing. It is therefore well worth the effort, I think, to attempt an explanation of “Reserves” that might actually be grasped by the collective consciousness of our political dialog.

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By J.D. ALT

Elizabeth Warren has succeeded, I think, in framing an argument as close as anyone is going to get (in the present election cycle) to the progressive position of MMT. Warren acknowledges that she’s proposing goals and undertakings that will “cost” a lot of money. She further acknowledges that everyone asks: “How are you going to pay for it?” And she gives a very specific and simple answer: an “ultra-millionaire tax”—which she details as “two-cents on every dollar of income over $50 million.” She then goes on to list what those “two-cents” will accomplish: The cancellation of college debt; free two-year college education; universal pre-school day-care…etc.

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By J.D. ALT

There’s a lot of handwringing now about how central banks have no ammunition to fight a recession. The fact that this is apparently true—and, perhaps, uniquely true in modern history—is all the more reason to explore MMT’s premise that central banks are not just instruments of private commerce, but are, as well, instruments of collective, democratic will. The bankers are in a box of their own making, but that box, in fact, is inside another box which, as MMT makes clear, has lots of ammunition not only to fight a recession, but to pursue the betterment of American society whether an economic downturn unfolds or not.

Let’s consider the central bankers’ basic dilemma: If private enterprise begins to slow, they would love to issue more money to get it back up to speed. But inside their box the only way to do that is by encouraging private enterprise to borrow more money. Private enterprise, in turn, decides to borrow more based on production and spending decisions tied to the making of potential profits. The only lever the central bank has to affect these profit calculations is the manipulation of interest rates—lowering rates to make the profitability of enterprise more feasible (hence, encouraging more borrowing and more money creation) or raising rates to do the opposite. So, if interest rates are already close to zero, the central bankers are out of ammunition if private enterprise, on a large scale, decides to slow down operations and lay-off workers.

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