(people chattering)
- It's in a sense risky to try
to change the entire narrative.
When I show up for an
appearance, it's like walking
into the lion's den.
But because I've done it
so many times,
I get a good response.
It depends a little bit
how much time they give me.
If they give me 45 minutes,
it's a little tougher.
If they give me an
hour and a half,
I can almost
convince the whole crowd.
With two hours,
everybody's pretty comfortable
with the ideas.
So much of the public
discourse, it's like we're going
through life with one
eye shut and one eye open
and we're only
getting half the picture.
And then somebody like me comes
in and says, "Well, let's make
sure we see the full picture."
For as long back as
I can remember
there's been this drumbeat
of a narrative.
When politicians talk
about spending more money
on healthcare for all,
inequality, housing,
or our climate crisis,
the first question they're
usually confronted with is,
how in the world could
we possibly spend more?
We're already trillions
in the hole.
And people point to the
size of the national debt.
- We must begin to make some
payments on our enormous
national debt if we are to avoid
passing on to our children an
impossible burden of debt.
(audience clapping)
- New worries today over
the exploding federal debt.
- [Newscaster] Already the
national debt is at record high.
- We wanna lift this crushing
burden of debt off of our
children and grandchildren.
- The national debt is
exactly the opposite of what
the orthodox story tells us.
(upbeat music)
- An unconventional economic
theory is gaining some traction.
Modern Monetary Theory, MMT.
- [Host] And one of
its leading proponents
is Professor Stephanie Kelton.
- [Host 2] One of the
most influential
and indeed controversial
economists in America today.
- In conventional wisdom,
surpluses are good,
deficits are bad.
- Deficit spending should not
be a feature of our budget.
(audience clapping)
- They think of the federal
government like a household.
Government deficits are
completely different.
- We must bring
those deficits down.
If we don't, we will leave
an unconscionable burden
of national debt
for our children.
(audience clapping)
- The government debt is
not a burden on anyone.
- We're borrowing trillions
of dollars from China.
- Does the government
have to borrow dollars?
No, of course not.
The federal government is
where the money comes from.
- When a fringe economic
theory goes mainstream,
you better pay attention.
- Six presidents have
come before you to warn
of the damage deficits
pose to our nation.
- We owe it to our children
and grandchildren to act now.
- To make sure we aren't buried
under a mountain of debt.
(audience clapping)
- It is very difficult
to reverse a paradigm.
- We will address
the catastrophic
crisis of climate change.
- How do we pay for
climate mitigation?
- How are we gonna pay for it?
- You're asking the
wrong question.
Finding the money
is the easy part.
- They don't find the
money they create it.
- The true story of money is not
the story that I've been told.
(upbeat music)
(plastic crinkling)
- That's beautiful.
(Twitter notification beeping)
I love stuff like this because
how can you have more fun
on Twitter to be honest?
I would like to work
on my book project
and I know that my publisher
would like me working
on my book project and
spending less time on Twitter,
but I think I have to engage
in these battle of ideas.
(Twitter notification beeping)
People don't make
the connection that the
national debt is nothing
but all these safe assets.
It's just our savings.
You could take the national
debt clock that scares everyone
and just rename it the
US dollar savings clock.
And I think everybody
would have a very different
kind of reaction.
And so I think 95%
of the problems
that we have getting better
policy is probably down
to the words we use to describe
what's actually happening.
(upbeat music)
- Thanks everyone for coming.
Tonight we have with us,
Stephanie Kelton.
She is a professor
at Stony Brook
She's also an economic advisor
to the Bernie Sanders campaign.
You've probably heard
in the news
about Modern Monetary Theory.
- Modern Monetary Theory.
- Modern Monetary Theory.
- You have this Modern Monetary
- What do you think of that idea
Because it's being bruited
as a way to spend more money
on infrastructure on
the Green New Deal.
- What is MMT about
and why has it
suddenly sort of exploded?
MMT starts with
the understanding
that the federal government
is the issuer of the currency.
- Every dollar that exists was
created by the US government.
- We issue the US dollar.
The federal government
can issue more dollars
at any time it likes.
People like Alan Greenspan
or Ben Bernanke have said the
same things we | re saying.
- There's nothing to prevent
the federal government
from creating as much
money as it wants
and paying it to somebody.
- We simply use the
computer to mark up the size
of the account that
they have with the Fed.
- We won't run out of money.
- [Kelton] But usually
the narrative
goes something like this.
- A national debt of
$11 trillion dollars
At what point
do we run outta money?
- Well, we're outta money now.
You know, we're operating
in deep deficits.
- We're broke. America's broke.
- The federal government
is broke!
- We're bankrupting our country.
- We have no savings account.
Congress has spent all the money
- What MMT is trying to say is,
of course, the US
has its own currency.
Of course it can't
run out of money.
Of course it can't end up broke.
- In her talk, Professor Kelton
will cast a different light
on the ongoing fueds
over the budget deficit,
arguing that Democrats
and Republicans are both
missing the bigger picture
when it comes to
paying for our future.
(audience clapping)
- Thank you. Thank you very much
What can we afford?
If we have all of these
ambitious things
that we as a nation
might like to do,
the really important debate
is do we have the resources
to do it?
Because the US
government is never going
to run out of the US dollar.
- Hi everyone. Thank you
so much for joining us.
- Congress holds the
power of the purse.
They don't need to
come to the rest of us
to get dollars in order to
be able to spend dollars.
They're the source
of the US currrency.
Yeah, in a real sense,
it is as simple as that,
but you have to be able
to trace through all
of the implications
of that observation
and that's where the
story gets much richer.
- Today, I nominate
Jared Bernstein. An old
friend who's been with me a
long time, a brilliant thinker.
- [Presenter] White
House economic advisor,
Jared Bernstein joins us
now from the White House.
- Thanks so much.
The US government can't go
barnkrupt because we can
print our own money.
- It obviously begs the question
why exactly are we borrowing
in a currency that
we print ourselves?
I'm waiting for someone
to stand up and say,
"Why do we borrow our own
currency in the first place?"
- [Director] Like you said, they
print the dollar, so why
does the government even borrow?
- Well, um, the uh,
- So the, I mean, again,
some of this stuff gets,
Some of the language
and concepts are just confusing.
I mean, the government
definitely prints money. And it
definitely lends that money.
which is why, um, the government
definitely prints money
and then it lends that money
by uh, by selling bonds.
Uh, is that what they do?
They, they um
They yeah they, they um,
They sell bonds.
Yeah, they sell bonds, right?
Since they sell bonds
and people buy the bonds
and lend them the money.
Yeah, so a lot of times,
at least to my ear with MMT,
the language
and the concepts can be kind
of unnecessarily confusing,
but there is no question that
the government prints money
and then it uses that
money to um,
uh...
So, um...
let | s see, uh...
Yeah, they print money and
they use that money to...
Um.
They sell bonds, they borrow.
Um.
Yeah, I guess I | m just,
I can't really talk.
I don't get it.
I don't know what
they're talking about like
'cause it's like, the government
clearly prints money.
It does it all the time
and it clearly borrows
otherwise we wouldn't
be having this debt
and deficit conversation.
So I don't think there's
anything confusing there.
- We were always asking
ourselves the question,
do conventional
economists understand
what we're speaking of, but
yet not talking about it?
Or is it that they
actually don't understand?
- I believe some of the
things that are preventing us
from taking bolder action
are really just myths
and misunderstandings about
how our monetary system works.
(upbeat music)
- It's an honor to be here
in the presence of future
Senators and Congresspeople.
I grew up in the Middle East.
This is what the map
looks like in the summer
when they show the
weather forecast.
Within my lifetime, the Middle
East will be uninhabitable
within the summer months,
which means hundreds of millions
of climate refugees will be
moving across the planet.
A Green New Deal was
proposed as an ambitious set
of policies to improve
everyday Americans | wellbeing
and prosperity
while we transform
and decarbonize the economy.
The planet is on fire.
Millions of people want to
work and can't find work,
and yet we're told,
"There's nothing we can do.
It's too expensive.
We can't afford this.
We're broke. The government
doesn't have money.
We have to borrow from China."
- Democrats unveiling their
radical, extreme
Green New Deal today to address
catastrophic climate change.
- [Newscaster 2] The Green
New Deal has
an estimated price tag
of $7 trillion.
- Where's the money coming from?
- It's gonna mean big time taxes
- It is unrealistic.
- How do you pay for it?
- I can't 'cause there's
no way to pay for it.
- MMT goes, "Hang on, hold up."
The question that
we should all be asking
of a currency issuing
government, is not
how are we gonna pay for it?
We should replace
that question with
how are we going to resource it?
Not the financial resources,
but the real resources.
- How did we pay for
World w*r II?
World w*r II came right
after the Great Depression.
- This was a time of desperation
Uncle Sam didn't take
his hat off and go around
to the population in the depths
of the Depression asking people
to chip in just a little bit.
This is when the economist,
John Maynard Keynes wrote
that little book and he called
it "How to Pay for the w*r".
And just judging by
the title of the book
you would think, oh,
it's gonna tell me
where the government
got all the money
to pay for World w*r II.
And it turns out it has
nothing to do with that.
It wasn't about
how to pay for the w*r,
where to get the money,
it was about
how are we gonna spend all
of this money to win the w*r
without causing inflation?
That's what the whole
book is about.
- So where did the
money come from?
The federal government
has the authority
to spend money into existence.
The federal government is the
only issuer of the currency.
- Since w*r production
began, we've had more money
than there were things
to spend it on.
- The w*r started and
we start spending money
into existence like crazy
to build for the w*r effort.
- The government was
gonna spend a lot
of money, hire a lot of people.
- By the end of the w*r,
they tell me
that we Americans will have
billions of dollars saved up.
- [Fadhel] So if you
wanted, you'll be going out
on a shopping spree and
bidding up car prices
and home prices, you'll
be causing inflation.
- And the government was
like, "Wait a minute.
I don't want you trying
to spend a lot of money
at the same time."
- [Fadhel] Step two.
The government started
selling freedom bonds
or w*r bonds.
- [Kelton] The w*r bonds weren't
about financing the
government spending.
They understood really well
the purpose of the w*r bonds.
- [Narrator] There are things we
as individuals can do right now.
First, continue to save
our money.
To buy and hold all the
w*r bonds we can afford.
- Do me a favor.
Delay your consumption.
Wait until after we win the w*r.
- [Narrator] Buy only
what we really need.
And pay no more
than ceiling prices.
- Economists understood,
the government can't
run outta money.
They were focused like a
laser on finding the resources
and releasing resources
from other uses
so that we could build the
tanks and the fighter planes.
(plane engines roaring)
- The city of Detroit was
completely transformed.
Detroit didn't produce any
new cars between '42 and '45.
To solve climate change, we need
to move probably
around 10% of GDP
or the nation's production,
to decarbonize transportation,
energy, agriculture, housing.
- We've done this before.
- We had to move 50% of
the nation's production
to fight the w*r.
We did it.
- So the experts tell us that
we have less than a decade
if we're gonna avert the worst
impacts of climate change.
The clock is ticking.
Do we have the resources to
do what needs to be done?
Finding the money
is the easy part.
That's the simplest part
of this whole conversation.
Where will the money come from?
What matters is whether
any proposed new spending
carries heightened
inflation risk.
What doesn't matter is
whether it adds to the deficit
or whether it increases
the size of the debt.
(upbeat music)
- Well, the hottest debate
in the economics world
right now is over MMor Modern Monetary Theory.
Many economists have pushed back
on some of MMT's core ideas,
including Larry Summers
formerly Treasury Secretary and
an advisor to President Obama.
- I think MMT is today's
version of voodoo economics.
It promises a free lunch.
- [Gundlach] This crackpot
Modern Monetary Theory idea.
- Most Republicans rightly
lampoon this quackery.
- The weird thing about MMis I still can't figure out
what it actually is.
- The last thing we need
is some harebrained theory
that basically says
there's a free lunch.
You don't need to worry about it
- First they ignore you,
then they ridicule you,
then they fight you,
and then you win.
Previous years
we were taking off.
The wind was at our backs.
Now it's more like a hurricane.
Okay. Hi.
It's more interviews
than I can keep up with.
Nice to meet you.
Thanks everybody.
Nice to talk with you.
- Thank you.
- Okay.
And it's a lot of work
because with each new day
there's some people
who encounter the ideas
for the very first time.
- [Journalist] So what
is the role of taxation?
- So in MMT, we don | t
think about taxation
as providing the
government with revenue.
A government that issues its
own currency clearly does
not need to tax me in
order to get the dollar.
They | re the issuer of the dollar
Next one is here? Okay.
- Thank you so much.
- You are so welcome.
- Thank you so much.
- Thank you very much.
- [Journalist] Thank you so much
- Okay, I'm so sorry.
- No problem.
- You | re my third.
Come on in.
There's a lot of confusion
and sometimes opposition to MMT,
which I actually understand
because when I first
came across these ideas,
I was skeptical too.
- [Helfand] So the story
I'm writing
I want to introduce
the concept of MMT,
and also trace the
intellectual origins of it.
- Where do I start?
At the beginning? (laughs)
- Yeah.
- Warren Mosler.
That's where MMT I think
really in a sense is born.
(upbeat music)
(car engine revving)
I was a graduate student
at Cambridge University,
the first time
that I remember hearing
Warren Mosler's name.
It was 1996 and Warren
was getting active
on this listserv,
We called it the PKT,
the Post Keynesian Thought list.
Mat Forstater was there,
and Randy Wray.
- And this guy named Warren
Mosler started posting comments.
- [Kelton] He starts floating
these ideas
and he starts saying things like
- The government doesn't
need your dollars
to be able to spend.
- [Kelton] "It's not the
government that needs
the dollars.
It's the rest of you
that need the dollars."
And everybody's like,
"Wait, what?"
- I did not fully
understand everything
that Warren was
talking about on day one.
It took me quite a while before
it seeped all the way in.
- [Kelton] Warren Mosler
wasn't trained as an economist.
He worked in finance.
He was a bond trader.
So financial markets
and monetary operations
were his bread and butter.
- For me, the story
starts in college.
- One of my students,
Pavlina Tcherneva
- I was looking for
an internship.
I went to work with Warren.
He would come in
and he would say,
- Here you've got these
Congressmen saying they need
to get dollars first by
taxing or by borrowing
in order to spend them.
- That's the only story
I'd ever heard.
- In fact, it's the reverse.
The government, which is
the issuer of the currency,
has to spend first before
it can collect taxes.
- Immediately, it sparks
a lot of debate.
It sounds too easy in a sense.
I remember thinking, "This
has got to be wrong,"
but I couldn't quite
figure out why,
and I couldn't let go of it.
So I told Randy
it can't be right.
- It was all
a little bit puzzling
- And Randy said, "You
should write a paper.
You should write it up
because if he's wrong,
he would wanna know it."
- It's not obvious from just
watching from a distance,
but it's fairly simple
if you think of the
government from the beginning.
(film roll whirs)
(Townspeople voices and sounds)
- In the American colonies,
colonial paper notes
were widely used.
Colonial governments collected
their taxes in these notes.
But where did the notes come
from in the first place?
Americans didn't have
colonial currency.
and they couldn't have
colonial currency,
until that currency was
spent into the economy.
- [Pavlina] The government
didn't collect taxes
before they spent.
- Governments have to
spend first.
How can you tax money
that no one has?
- Then people would pay their
taxes with the paper money.
When the paper money
came back in,
once those notes are
returned to them,
they burn 'em.
They burn all of them.
(dramatic music)
(fire crackling)
I don't know if that's gonna
bother people to find out
that when they pay their taxes,
the government just burns it.
But we'll come back to that.
- All right.
You wanna go work?
Warren always said
he wasn | t proposing
a new way of doing things.
He was just trying to explain
accurately how the monetary
system works today.
The one we have already.
But it all felt really
backwards to me.
So I sat down and I thought
that I was gonna do this more
carefully than Warren had.
I spent most of the year reading
Treasury and Fed manuals, really
digging into the mechanics
of the federal budgeting process
and the clearing of payments
and all the balance sheets,
and just the how it all works.
I started getting on the phone
and talking to people
at Treasury, at Fed.
- Modern Monetary Theory,
even the proponents admit
that it's not
necessarily a theory
as much as it is a
description of reality
of how things appear to work.
The US government is
not like a household.
The government creates the money
You don't have to
ask the question of
where do you get the money.
These are factually
correct statements
so it's very hard to
argue against them.
- Then I started writing,
the title of the paper was
"Do Taxes and Bonds Finance
Government Spending?"
Naturally, I thought
the answer was yes.
That's what I had been
taught to believe.
And I didn't know when
I started this paper
where it was gonna end up.
I just let the story take me
wherever it's gonna take me,
and when I worked out all
of the operational
mechanics,I ended up
at exactly the same place
where Warren ended up.
The government does have
to spend before it can tax.
Going through the mechanics,
although it flips your world
upside down, makes
everything seem more clear.
(rooster crows)
- Hey everybody,
this is Barack Obama.
I've got my chief economist,
Jason Furman here.
- I mean, Modern Monetary
Theory is not something
we teach our students.
It's not something that's
in our textbooks.
I think the biggest issue is
that sometimes
Modern Monetary Theory
seems to play a word game.
where it says, oh, we don't need
to worry about the deficit
for this reason, but actually we
do need to worry about it
for some other reason,
like inflation.
Well, all of those get you
to roughly the same place
in your thinking about
budget deficits.
- No, I mean the difference
is not a trivial one.
It changes everything.
- It changes our view
of the nature of money.
- [Director] What is money
and what gives money value?
- Money is what you use for
transactions and it has value
because we all believe
it has value.
If suddenly we decided
that it didn't have value,
it would not have value.
- Money is this really important
mode of interacting economically
so we don't have to barter.
I don | t, you know, I think if
you drill too far down into some
of these questions, I feel
like you lose the thread.
- Didn't they tell you?
(footsteps)
(dramatic music)
You never touch
the money question.
When Paul Krugman was a
student at MIT, one of his peers
in graduate school was an
economist named Bernard Lietaer.
- Paul Krugman,
told me personally
- And Lietaer wanted
to talk about money.
- [Both] "Didn't they tell you?"
- Never touch the money system.
You can touch everything else.
- There's a theory that says we
should not be looking
too closely at money
or almost even talking
about money too much.
- What is money and where
does money come from?
- We could rip off the
veil of this thing
and openly look at how it works,
but maybe that would lead
us to some dangerous places.
- It's just best to let that be.
- When I wrote the first
book on MMT,
I wrote a letter to Robert
Heilbroner and asked him
if he would write
a blurb for the book.
and he said, "I can't
because the topic is money
and your book is going
to scare the hell out
of everyone, okay?"
And he was right.
- There are two words that
scare the pants off of people.
They are the national debt
and the deficit.
- We don't talk about
finance, banking, debt, money.
These are questions that
will put you on a path
that leads you to Siberia.
- You don't wanna step out
and contradict the entire
underlying principles
of your profession.
It's a very dangerous
kind of lonely place to be.
- You're k*lling
yourself academically
if you touch the money system.
- We coalesced at the University
of Missouri in Kansas City
where Fadhel and Lua
were students of ours,
but for many years
we felt ignored.
This is what Bernard
Lietaer said.
He said they took
all the MMT people,
and they put them in the
equivalent of Siberia
because MMT starts with
the money question,
the question you're
not supposed to raise.
(dramatic music)
(upbeat music)
- [Narrator] The first kind
of business was barter,
but what would you trade
in a hardware store
for a gallon of paint?
Money has evolved
from an age old search
for a satisfactory
medium of exchange.
Money should be
something of value.
Gold and silver emerged
as the most durable,
most satisfactory money.
For greater convenience,
men started eking out gold
and silver coins with
values imprinted on them.
Later, governments took
over the exclusive
function of coining money.
- (laughs) Everything is
wrong with that story.
- If you look at any
economics textbook
it's almost exactly
always the same story.
- The barter story fits into
the mainstream ideology.
They want to start with the
market, the private market
with no government, and then
much later in their story, the
government comes along.
- To use some of that
money like the rest of us.
- The problem with that story,
number one, when was
there ever this barter market?
- Money has existed for
thousands of years
before markets were developed.
And rather than gold for most
of time people have used clay,
or sticks or shells or paper.
Things that don't have
apparent intrinsic value.
Why?
(wind and sand blowing)
There are monies that
you will not even see
in physical form.
If we take ancient Egypt, the
Deben never changed hands.
It was simply a virtual record,
and the reason is because
money is not a physical object.
It's a unit of measure.
(film roll whirs)
And it's a record of a
social debt relationship.
The earliest forms of money
that we find are
Mesopotamian clay tablets.
- [Randy] It appears that
in the very beginning,
the authorities would
impose taxes
in kind, say two goats
or maybe one cow.
- [Pavlina] You could think
of money much the way we think
of centimeters, inches, pounds.
- [Randy] The development
of a money unit of account
is conceptually
a bit more difficult.
Because you can use
it to value things
that have apparently
nothing in common.
A bushel of wheat versus a goat.
- [Pavlina] Ancient Mesopotamia
had complex social organization
structure, production systems,
and like every society, they
had to keep track of things.
The clay tablets were
accounting records.
They were like little ledgers.
- [Randy] In fact, these are
the earliest records of writing.
So writing wasn't
invented by poets,
it was invented by accountants.
- [Pavlina] To solve
the problem of producing
and distributing real resources
like bread, labor,
livestock, beer.
- Money is not itself
a real resource.
Money is a tool invented
by political authorities
to organize and mobilize
real resources.
I was not originally
interested in economics,
but many of the issues
that I was concerned about,
poverty, unemployment,
environmental sustainability,
came down to economics.
But I didn't know
the terminology,
so I couldn't argue against it.
Joan Robinson famously
remarked, "We study economics
so as not to be
fooled by economists.
I, early on, a young
assistant professor
and still trying to
grasp the ideas myself,
I would observe Warren
explaining these issues
and see how people reacted,
the questions
that they would ask.
For example, if government
can create the money,
then why do we
have to pay taxes?
(piano music)
- Let's say a colonial
government wants
to hire people to build roads.
They have a new colonial
currency and they offer people
so much a day to come
work building roads.
- But the people looked
at their currency
and they say, "Why
would we work hard
in order to get your money?
What would we do with that?"
- In fairly short order, they
were like, "Oh wait, taxes."
- [Mat] They impose a
tax that is only payable
in the colonial currency.
- We only take this
special thing.
We only take this money thing.
- [Mat] Now everyone
has to obtain that money
to pay their tax
or go to jail.
- Suddenly they had a
demand for the currency.
What do you get?
Folks who need the thing
that the sovereign is
demanding in payment.
The government did
not need the money.
What the government wanted
and what they needed
for their purposes was for
the people to need the money.
(ax chopping trees)
- [Mat] Now the
authority can go out
and purchase the goods or
labor it wants, when it wants.
- The tax is that motor,
that engine of transferring
those resources.
Money is really the vehicle.
(engine starts cranking)
- [Lua] It is the
taxation system
that gets the whole monetary
system going to begin with.
(city noises, honking)
(dramatic music)
(clock ticking)
- The federal deficit
is on track
to exceed $1 trillion next year.
The deficit is the difference
between the amount the
government takes in
often through taxes,
and what it spends.
- [Lua] If you total each
of these yearly deficits
over the history
of the United States,
we call that the national debt.
- Our nation's out
of control debt.
- The debt is the biggest threat
to our economy.
- Those debts get
passed on to our kids.
- I refuse to leave our children
with a debt that
they cannot repay.
- We have piled deficit upon
deficit, mortgaging our future
and our children's future.
- We are mortgaging our future.
We're mortgaging
our children's future.
- I need more coffee.
Nice to meet you.
- Nice to meet you too.
- Absolutely.
- [Deborah] So I'm
at the New York Times
and I'm working on a
piece about budget deficits.
Do you mind if I record you?
- No.
- [Deborah] All right.
There we go.
- If someone said, what's
the strength of MMT?
It's monetary operations.
No question about it.
It's how it all actually works.
People will sometimes say
MMT is the school of thought
that says deficits don't matter.
Obviously that's wrong.
Deficits do matter.
They can be too big,
they can be too small.
So if the government is
running a budget deficit,
it just means they're
spending more
into the economy than
they're taking out, right?
That's all the deficit is.
(upbeat music)
It's like we're going
through life
with one eye shut
and one eye open.
Well, let's make sure
we see the full picture.
(upbeat music)
- [Host] Please join me in
welcoming Dr. Stephanie Kelton
to the stage.
(audience clapping)
- First, what is the deficit?
People naturally think,
"Wait, government deficit bad.
This is a negative thing.
Let's stop this right now."
And I say, "Hang on,
let's open the other eye."
So I want us to suppose that
I'm the federal government.
If I'm government and I
spend a hundred dollars
into the economy...
The government spends a hundred
into the economy,
taxes 90 back out.
We record on the
government's ledger
a budget deficit of 10.
Minus 10, government deficit.
But we forget that on the
other side of the ledger.
Guess what?
When they spend a hundred in
and they only tax 90 out,
somebody gets left with 10,
that's your surplus.
Their deficit is your surplus.
Oh, right, you got your surplus
from the government's deficit
and all of a sudden
they start realizing
that they've been missing
part of the story.
That's when I show the sector
balance graph to audiences.
It's the most important
chart in the world.
Government deficits are
almost always seen
in a negative light, nothing
but a sea of worrying red ink.
That's not how I look at it.
Here's what I see.
I see what's happening
on the other side
of the government's ledger.
On the other side
of the government's deficit
is a non-government surplus.
Their minus 10 is matched
by a plus 10 on
somebody else's balance sheet.
So my red ink is your black ink.
That graph is really the
one that when I show it
to audiences,
it changes everything.
So when you see
a headline like this one.
"Trillion Dollar Deficits Could
Be The New Normal."
This is meant to
shock and frighten,
but take a breath
and read it this way.
Watch the word deficit.
Don't you feel better?
Don't you feel better?
Trillion dollar surpluses
to the private sector
could be the new normal.
Oh, all right. I'm down.
- We were trying to figure out
how to communicate these ideas
and Warren came up
with the suggestion
that our department
create our own currency.
So welcome everyone,
back to principles
of macroeconomics.
Around 2000, we decided
to organize our
community service program
through a monetary system.
We decided to impose a tax
of 20 Buckaroos
per student per semester,
or you don't get your grades.
And that was enough
to enforce it.
Here's the Buckaroo
because we here
at UMKC are the kangaroos
or the Roos, right?
There were so many things
that you could
explain through this.
For example, it was impossible,
from the very beginning,
for the UMKC
Economics Department
to run a surplus.
Suppose that you perform 10
hours of community service.
Okay, 10 Buckaroos.
Now the economics department
is running a deficit
of 10 and the student
population has a surplus of 10.
I can collect 10 Buckaroos back
at the end of the semester,
but I cannot collect back 11.
How can you collect more
in taxes than you've spent
into the economy?
It's impossible.
So if you all the students
want to save any Buckaroos
for a future semester or
in case you would get sick,
if the currency issuer
does not run a deficit,
then people cannot
save in that currency.
So the normal situation
for a currency issuer is
to be in deficit.
(upbeat music)
- Tonight I come before
you to announce
that the federal deficit
will be simply zero.
(audience clapping)
Now we are on course
for budget surpluses
for the next 25 years.
(audience clapping)
- During the late nineties
and early 2000s, most economists
to them, this looked like
a Goldilocks economy.
- We ran a
surplus for four years
and I was Comptroller
General then, ok.
We paid down
debt two of those four years.
My name's Dave Walker.
I think I may have the record
for the most testimonies
in Congress by an individual.
I've got about 350.
- [Multiple] (voices)
- [Chair] I recognize
David Walker
the former head of the
Government Accounting Office.
- After nearly 30
years of deficits,
the combination of hard choices
and remarkable economic growth
has led to a budget surplus.
- A lot of people missed what
was going on at the time.
- You know, we had a surplus
when Bill Clinton was president.
- That means extra money.
- Extra money.
- The government sector
is in red in this graph,
and except for the Clinton
years, it is always
in deficit below the line.
Private sector is blue.
It's almost always
in surplus except
for the decade after 1996.
- It was the private sector
that was spending
more than its income.
We were running the deficits.
- The sectoral balances approach
means every time
you say the government
should run a surplus,
you are saying
that everybody else should
collectively run a deficit.
- This is an accounting identity
The total spending has
to equal the total income
because every dollar
spent is received
by somebody as income.
It doesn't end up on
Mars or something yet.
So it has to be here somewhere.
- No. Never seen it before.
Never heard of it.
You know, doesn't
make sense to me.
- Nobody could possibly
disagree because just a fact.
- I'm in the Accounting
Hall of Fame
and it isn't common knowledge.
- If the government
runs a budget surplus,
it will be reducing our income.
- Go and look at
the United States.
How often have we put the
government's budget in surplus?
Seven times in
our nation's history.
We did it from 1817 to 1821.
What happened?
Had a depression
that started in 1819.
We did it again.
Depression, depression,
not recession, depression.
The last time we did it was
under President Bill Clinton.
Randy could see
the writing on the wall.
- [Randy] We knew
the private sector
was vastly over-indebted.
By 1998,
we were predicting
a big crash would come.
- What happened?
The economy went
into recession in 2001,
and we ended up with the great
recession just a handful
of years later.
- Because it's actually
not possible
for the government sector to
be saving, running a surplus
and the private sector
to be saving,
that is running a surplus.
This is not possible
for the United States.
- If you're not thinking
about it, you can
be led into mistakes.
- The idea that when the
government ran a surplus,
that that was negative
for the private sector,
uh, I don't get it.
- If you put the
budget in surplus
it means you're drawing down
the non-government surplus.
That's what it means.
- [Lua] It doesn't mean the
government is looking around
and successfully finding more
dollar bills out in the world
so that it has a bigger pile
of dollars that it can spend.
- Because money, it's
not something we dig out
from the ground, we create it.
It's an accounting device.
And money always has two sides.
- Most people think
in medieval Europe,
that kings collected gold
coins in tax payment.
In reality, most of the spending
and taxing was
done in tally sticks.
Tally sticks were hazelwood,
and first they would
put score marks on it.
Then they would
split the stick in two.
Into stock and stub.
The king would purchase a wagon
by issuing half of a tally stick
You will take the stick
if you can use
that to pay your taxes.
And the treasury would
keep the stub or debt half.
So when tax time came,
the kings would send
out the tax collectors.
They would match
the stock and stub
to make sure nobody
had counterfeited.
Once you had
delivered back your half
of the tally stick,
your taxes were paid.
So although most of the
revenue was in the form
of tally sticks,
there's no reason
to collect them and save 'em.
Once the stock and
stub were matched,
they were always burned.
(upbeat dramatic music)
- And still today,
when the government
receives tax dollars,
they are destroyed.
- That's the nature of IOUs.
When they come back to the
issuer, they're just destroyed.
(upbeat music)
- [Lua] Imagine a
group of people living
in an organized community.
They decide everyone
should contribute weekly chores
like gardening,
cooking, or cleaning.
So doing your chores
is like paying your taxes.
The Community Center,
like a government,
could record when each
person finished their chores.
Or the Center could
pay chore credits.
Say each adult needs to
turn in 10 chore credits a week
to meet their obligation.
Some might choose to earn
more credits than they need.
So they could use the
credits to pay other members
for special things they
produce, like baskets.
Those members can
then pay their own tax
with the chore credits.
The value of the chore currency
is determined by what you
have to do to get it.
For example, one chore
credit for one hour of labor.
The chore credit would be an
I.O.U. of the Community Center
It says I owe you
a reduction in your
chore obligation account.
The currency is simultaneously
a credit and debt relationship
based on a two sided
accounting ledger.
The Center tallies a liability
when they create their I.O.U.
the chore credit, and it
circulates around the community.
whenever the I.O.U. | s come back
from any member to be
redeemed for tax payment,
the credit debt relationship
is complete.
The numbers on the balance sheet
go back down,
and the credits and debits
disappear.
Government spending
operates exactly the same way.
Currency is the government's IOU
The US dollar is a US tax credit
Money always has two sides
and so the currency itself
is the government's debt.
That green piece of paper,
we call it the dollar bill,
that is a debt of our Fed.
- [Randy] Nobody can
hold a financial asset
unless somebody
has issued a debt.
- I don't think so, no.
- [Randy] That's just
plain wrong
Anyone can look at
the Fed's balance sheet
and reserves are
on the liability side.
- [Pavlina] Currency notes
are a liability.
What is the Fed liable for?
- [Lua] They're liable
for redeeming the government | s
outstanding tax credits.
- [Randy] Once these come
back to the government,
they're not assets
to the government.
- [Kelton] It's not that the
government gets something
when you pay taxes.
It's just that you have fewer
credits on your account.
- [Randy] The government
is no longer in debt
when it receives back its I.O.U.
so it burns it.
- [Director] So federal
reserves and cash, are those
recorded as a liability
on the Fed's balance sheet?
- Yes. They're again accounting.
- It's accounted for by the Fed,
but it's not an asset
or a liability, okay?
- Money is always a
two-sided relationship.
- It's a medium. It's a medium.
- And so that's what most people
are probably not understanding.
They're thinking of physical
notes changing hands.
- I'm talking about the
currency notes, okay?
A means of exchange.
- [Pavlina] Which I think goes
back to the myth of barter.
- [Narrator] Gold and
silver emerged
as the most satisfactory
medium of exchange.
- The media of exchange
is relatively unimportant.
Money has always been
the debt of the issuer.
The only thing that has
changed is the technology used
to store and transfer records
of the debts and the credits.
- [Narrator] For greater
convenience, men started
eking out gold and silver coins
with values imprinted on them.
- The oldest coins never
had a value stamped on them
and the issuer would
often change the value.
Just announce a
new value for the coins.
They were worth whatever the
emperor said they were worth
in payment of taxes.
So even the gold coin was a
debt of the king that issued it
because there is no such
thing as money without debt.
- [Chair Yarmuth] The hearing
will come to order.
- I will emphasize that debt is
on an unsustainable course
in CBO's projections.
- Mr. Hall, what are the
consequences of high debt?
- The most important is
that if people start asking
for a premium
to lend the government money
to run the government, interest
rates could be much higher
than we project at the moment.
- When the government runs
a budget deficit,
it pushes interest rates up.
That's because the government's
trying to borrow more money
and interest rates
are like the price.
And whenever people
want more of something,
the price of it goes up.
There's a big debate as to
how much interest rates go up,
but that's definitely
the direction they go.
- How can he he say that?
How can he say it knowing
what we have been
doing for decades?
- As our debt has risen
in recent years, interest
rates have fallen
to historic lows.
- The national debt
goes like this,
and the interest rate
the whole entire time,
decade after decade.
- What is the reason for that?
Well, I don't know.
What is shocking though is
that even expert economists
can't really explain it either.
Here is the former chief
of the IMF basically
admitting as much.
- Interest rates on bonds
have come down steadily
since the mid eighties.
It's a very long trend.
And we have no explanation.
- Yeah, economists really
have no f*cking idea.
- Why did we have near
zero interest rates?
Why does Japan have near zero
interest rates for 25 years?
It's because the central
bank sets the interest rate.
It's wherever the central bank
wants it to be.
It's not set by the market.
- [Kelton] What they're
talking about is
something called the
loanable funds model.
There's this finite
supply of savings.
- So when the
government is borrowing,
it's borrowing part of that
pool of private savings.
That means there's
less private savings
for other things.
- When the government
spends money on something
some business or private
person has less money to spend.
- It is exactly the opposite.
- The reality is,
it is the budget deficit
that increases the
private sector's saving,
dollar for dollar.
- Deficits don't shrink
the supply of savings.
It's augmenting, It's adding
to private saving, you see?
It's exactly the opposite
of what the orthodox
story tells us.
- We owe the Chinese
massive amounts of money.
- We're borrowing trillions
of dollars from China.
- Like America's in so much debt
at this point, I'm waiting
for China to pull up
and just tow one
of the states away.
Just gonna be like,
"Yeah, you didn | t pay.
We're repoing this, man."
- No, the US government is not
borrowing dollars from China.
- Okay, all right.
So let's start with trade.
China holds all this US
government debt, right?
And people get
anxious about that.
- It could impoverish future
generations because they would
need to pay back monies to
the foreigners we borrowed from.
- So why does China have
all of these US Treasuries?
Where did they get them?
They bought them. Using what?
US dollars.
Where did they get the dollars?
- It's 'cause we buy
stuff from China.
We buy more from China
than China buys from us.
- They end up with US dollars.
So when Donald Trump
talks about trade,
how does he think about trade?
- When was the last time anybody
saw us beating let's say China?
China's k*lling us.
- When he says China's
k*lling us.
- And if you look at China.
- And Japan is k*lling us,
- You look at Japan.
- And Mexico's k*lling us.
- And if you look at Mexico,
they're k*lling us.
Every country we lose money with
- The dollars are going out
to the rest of the world.
What is he missing?
So when I was watching the
debates with my son who was nine
at the time, and there is
Donald Trump and he's saying...
- They send their cars
over by the millions.
- Japan is sending us all
these cars and what do we get?
And my son turns to me
and he goes, "The cars?"
And I said,
"That's right, Bradley."
The cars, right?
This is the piece he's missing.
There's stuff that's coming in.
- If you look at what your
real wealth is as a nation,
you can consider your real
wealth your pile of stuff.
Your imports add to your
pile of stuff that you have
and your exports lower it.
Our policy makers have
this completely backwards.
- Why did China end up
with so many dollars?
cause they sent us so much stuff
So they end up with effectively
a checking account at the Fed.
- Then usually the Central
Bank of China will ask the Fed,
"We would like to have some
government bonds instead
of reserves because we would
like to earn some interest."
It's like a checking account
and a savings account.
- Debit their checking
account at the Fed
and credit their
securities account.
We've borrowed from China.
- China doesn't create
any US dollars.
Every dollar that China
got came from the US.
And all that happens when
they buy a bond, it's not
that they're lending
to the government
so Uncle Sam can
spend in America,
it | s that we | re allowing them
to transfer funds from
their checking account
to savings account and they
get to earn some interest.
- That's all it means
to borrow from China.
(upbeat music)
- We can't keep borrowing
and borrowing.
- We are borrowing from
the American future.
- We should not even
use the term borrowing.
- We refer to the government
selling Treasuries as borrowing.
But here's what's
really happening.
The government says, "Okay,
whenever I run a deficit,
I "borrow".
I did $10 worth
of deficit spending
so I have to sell
this $10 Treasury.
Who wants it?"
And sure enough, there's
someone in the economy
that's holding $10 in cash,
it was put there by
the government's deficit.
So the reason we don't
wanna call it "borrowing" is
because the government is
first putting the money in
and then taking the money
back out and replacing it
with a bond.
So the $10 comes out and
a $10 bond replaces it.
That's just interest
bearing currency.
That's part of
someone's financial wealth,
part of their savings.
- [Morganthau] The bonds you
buy, they're an obligation
of the government in the
same way as a dollar bill
in your pocket, but with
special privileges.
- [Narrator] You can name
someone in the family
to own it with you, which means
that you both own the bond
like a joint savings account.
- But we call that borrowing
and we label the bonds,
the national debt.
And that's where everything
starts to go haywire.
- [Narrator] What's
the national debt?
It's a monster.
School House Rock
- [Newscaster] Reporting
from the debt clock
in New York City,
- You know we're already 14 and
a half trillion dollars in debt.
- The national debt
is now $15 trillion.
- I want you to take
your attenttion
to these debt clocks
that are here.
- When I began this campaign,
it said it was 15 trillion.
- Our debt just crossed
the $20 trillion mark
and it ain't stopping.
- Now we're gonna have
21 trillion in debt.
We don't have any money.
- We're now at 27 trillion.
- We're about
$28 trillion in debt.
- 2024, $45 trillion.
- Wow.
So what I would
like this afternoon
to be is essentially a
form of group therapy
because we need it, okay?
The national debt is nothing
more than a historical record
of all of the times the US
government spent more dollars
than it took out, and those
dollars got transformed
into US Treasuries
Whether bonds or cash,
they're both our assets.
(audience clapping)
- Under my proposal,
the national debt will
be completely eliminated
by the year 2012.
- We're saying let's get back to
a path of paying the debt off.
a debt-free nation
for your children.
- The US government
debt that we're leaving
to our grandchildren is
their financial wealth.
- That's absolutely correct.
It turns out that all that debt
on that debt clock, it's
also private sector wealth.
So that debt clock may
as well just say
private sector wealth.
- Now that you know what
the national debt is,
You can look at that debt clock
and watch the name.
It becomes the
US dollar savings clock.
So now we don't have
to get so anxious
because it doesn't have
the word debt any longer.
Now we know it's just
recording all of the dollars
that are currently being
held as somebody's savings.
So now don't you feel better?
If you can get people
to that understanding,
this thing is not a
monster, it's not a cancer,
it's not a threat to
future generations,
it's not immoral.
It's just our savings.
Then you start getting people
focused on the things
that matter.
We're still gonna have
disagreements about the best way
to use the deficit,
but at least we would be
having the right debate.
What can we afford?
The question isn't, will
it increase the deficit?
The question is, will it
increase inflationary pressures?
At that point, I'm gonna
take a deep breath, huge sigh
of relief and I'm gonna go
spend some time with my kids
because I'll know
we finally did it.
(dramatic music)
(car engine rumbling)
All right, good boy, let's go.
(dog panting)
That's how he sleeps.
I don't know if it's the breed
or if this is just a
particularly weird dog.
Whoa baby.
- [Host] Thank you so
much Professor Kelton
for joining us here today.
I wanna ask,
why is it that we're
letting everybody, you know,
continue with this
misunderstanding
of how things work?
- You know, who's
gonna align with you,
if you step out first?
You're gonna be a target.
Those ideas are
gonna be a target.
But MMT it | s always
been a group of us
that sacrificed a lot to make
the professional decision
to say things that
are so different from
what everyone else is saying.
Knowing that you're gonna
be not just challenged
but ridiculed along the way,
you gotta have some thick skin
to get through it.
But if you're convinced
that the work that
you're doing is important
and that the ideas will
hold up to scrutiny,
then you just keep
pushing forward.
- I wanna talk about
Modern Monetary Theory,
which basically states
that countries can
finance their operations
by continuously printing money
without really the
fear of inflation.
- We can print as much money
as we want and we can spend
as much money as we want,
and there are no consequences.
That's crazy.
- That's not what we say.
We would say,
sure, Congress can always
authorize the spending,
but if they authorize too
much, you'll get inflation.
It's at the center.
It's inflation is the constraint
We're not removing the limits.
- [Randy] The true constraints
on government spending are the
resources that are available.
- [Lua] Our people, our land,
water and agriculture, our
factories, our infrastructure
and transportation, education
and technology, our healthcare.
All of us recognizing
that we don't want
punishing inflation.
We don't want inflation
to get outta control.
And the MMT position is
that the best defense against
inflation is a good offense.
It's to think about
it ahead of time.
It's to consider
before you allow a vote.
If you wanna do $2 trillion
of infrastructure investment,
what are the real resources
that we're going to need?
Where are you
gonna get the contractors
and the architects,
the engineers,
the steel, the concrete,
the machines?
Show me that you have
access to the real resources
or are you gonna have
to compete for those?
And that tells me that you're
gonna be bidding up prices.
If they say,
if you do this trillion dollars
without raising taxes,
inflation will go to 3.5%.
Then you go, "Whoa, okay.
I need some offsets
before we vote on this."
You do it before the vote.
And that's why it's so important
to have a careful evaluation.
And economists can do this.
- [Lua] You have to analyze
where the economy is
at the moment.
If we're in a
recession with lots
of unemployed people
and resources, and factories,
the government
can spend a lot more,
no matter the size of the debt.
Whereas if we're in a boom
when the economy is already
close to full capacity,
the government needs to
be much more careful about
how much and what they spend on.
- [Randy] Some kinds of
spending will be inherently
more inflationary than
other kinds of spending.
- [Lua] But private
banks also create money
that can add to inflation too.
- Banks create bank money.
They create it every
time they make a loan.
- [Lua] But this isn't
in the textbooks either.
- [Mat] This mainstream
textbook reads,
"A primary job of banks is
to take in deposits from
people who want to save and use
these deposits to make
loans to people who
want to borrow."
- No, it's not correct.
Banks don't lend
other people's money.
- If they operated that way,
we wouldn't get
global financial crises.
We would not get speculative
bubbles in housing.
- I would have my students rip
that chapter out of the book
and then I would teach
them how banking works.
If you walk into a
bank and you sit down
with a loan officer, the loan
officer doesn't look to see
if they have money
available to lend to you.
They look at you. They
look at your employment
and your income,
and if a bank thinks you're
a good credit-worthy customer
and I can make money by
granting this loan to you,
then the loan officer
acquires the loan.
That is, they put
it on the asset side
of their balance sheet and they
say, "This is now my asset.
$50,000 loan to Mr. X."
And Mr. X on the other hand
has his own balance sheet
and he's just taken out a loan.
So he's added a liability
to the liability side
of his balance sheet.
$50,000 has been added in debt.
And they put $50,000 in
the customer's bank account.
They simply change the numbers
in Mr. X's bank account.
That's on the liability side
of the bank's balance sheet.
Balance sheets have to balance,
so both of their balance
sheets are in balance.
Where do the banks get the
money that they loan out?
They get it from their
chartered authority
to issue deposits.
That's where it comes from.
Got the money from the keyboard.
- Your checking account
deposit is your bank's I.O.U.
That is their liability or debt.
And when you repay the loan,
just like the I.O.U.s,
the money disappears.
Because they have this ability
to create money, banks
need to be regulated.
They can make good loans
and they can make bad loans.
In the lead up to the crisis,
Wall Street financed all
of these fraudulent mortgages,
trillions of dollars
of bad loans that went bad.
- We start 2009 in
the midst of a crisis
unlike any we have
seen in our lifetime.
Many businesses cannot
borrow or make payroll.
Many families cannot pay
their bills or their mortgage.
Many workers are watching
their life savings disappear.
- In the 2000s,
I was a lawyer at
a really big law firm.
I'm on Wall Street.
The task that I got was
to explain how did
this financial crisis
that we've been
plunged into happen?
Millions of people
lost their jobs.
It was horrible.
The deficit and debt
automatically go up
as people are thrown
into unemployment.
- This past weekend,
the federal debt passed
the $12 trillion mark.
- At the beginning
of 2010, in the midst
of this terrible deep
recession, Obama's team pivoted
to the deficit.
- We will not be adding
more to the national debt.
Because in these hard times,
we have to do what families
across America are doing.
Save where we can so that
we can afford what we need.
- And I think it's a fair bet
that the United States
will default.
- If foreign lenders lose
confidence in our ability to
put our government's financial
house in order,
we could experience a dramatic
increase in interest rates.
- That's what he was hearing.
- You know, Greece was
borrowing at relatively low
rates until it wasn't.
[All] A debt crisis.
A ruinous debt crisis.
- Fiscal policy turned negative.
- We're trying to cut the
deficit by $4 trillion dollars
over the next decade.
- This freeze will require
painful cuts.
- [Lua] This was a time
when bank money was
rapidly disappearing.
Because households were trying
to pay back unsustainable
private debts.
And banks weren't
making many new loans,
as jobs, income,
and prices were down.
Spending was in
a downward spiral.
- Good afternoon. My name
is Reverend Delman Coates.
I'm the senior pastor of
Mount Ennon Baptist Church
in Clinton, Maryland.
Prince George's County, where
I pastor leads the state
of Maryland in foreclosures.
I would have these sessions here
at the church and we'd have
thousands of people here.
- At the height of the
Great Recession,
800,000 Americans were
losing their jobs each month.
Our factories weren't operating
anywhere near their
full capacity.
Machines were lying idle.
We had a housing bubble burst
so we had all these
contractors and engineers
and architects and electricians.
All these people are outta work.
We have lots of people who
know how to build stuff.
The US easily could
have spent $2 trillion
into the US economy,
repairing, modernizing America | s
third world infrastructure,
with no new taxes,
because we had all
the slack in the economy
to absorb that spending,
without the risk of inflation.
- We have work to do
in society, work to address
our greatest existential threat
right now, which is
climate change.
The federal government has
the power of the public purse
to put every American
who desires a dignified job
to work.
- [Lua] But people
were the most worried
about the national debt
at precisely the time
when the federal government
could have spent more than
at any time since
the Great Depression.
- That was a disastrous
missed opportunity
to employ those
resources to benefit the country
That was a tragic mistake.
But Stephanie Kelton
was not speaking to
Obama at this stage of history.
(Twitter notification beeping)
- You know, I have a computer
screen, I have a phone,
I have an iPad,
and I have a laptop.
So without being on Twitter,
I can be aware of Twitter.
(Twitter notifications beeping)
- For several years
after the financial crisis,
the MMT people had a lot
of small victories,
but they didn't really
have a major breakthrough.
- You know, we were
writing and publishing
and we were largely ignored.
We wanted to have a voice
in the policy debates.
And the way to do that is not
to write a journal article
that goes under review and two
years later gets published,
that doesn't get you
kind of in the debate.
You had to thrust your
way in somehow.
I remember going to Randy
and saying, "I'd like to start
a blog, will you contribute?"
And he said, "What's a blog?"
- The blogosphere, that's
where I came across it.
- [Randy] And it was fun.
- Hey, what's that new
group over there that | s
saying something different?
We were making
some pretty big calls,
and what people
call finance Twitter
they paid attention first.
(Twitter notification beeps)
- Wall Street seems
very receptive,
more so than the
economics profession.
- They just wanna
get their bets right.
That made people pay
a little bit of attention.
And then they
started laughing at us.
- Modern Monetary Theory,
kinda like a kid coming up
with a modern dietary
theory that says it's okay
to eat cookies for every meal.
- And we sort of celebrated
because we said, "Okay, well,
we left the first stage.
We're not ignored anymore.
Now we're to the, 'then
they ridicule you stage.'"
So that was actually
moving on up.
That felt kind of good.
- No, you know,
this is the thing.
It's a matter of
emphasis and rhetoric.
You can look
at the pronouncements
of people like Stephanie Kelton
saying "Look,
we keep repeating
that real resource constraints
are what really matter."
The modern monetary
theorists do say
there's ultimately
scarcity of resources.
But too often they treat the
world as if the norm is one
of generally unemployed
resources and plenty of 'em.
But I must say in
the last 20 years
of course, since 2008,
there've been more times
when we haven't been
constrained than when we have.
But the question is, all right,
what do they think we should do
to actually control
inflation when it's upon us?
- Breaking news on the economy.
At any moment now,
the Federal Reserve is expected
to raise interest rates
for the sixth time this year.
- The Fed's goal to tamp down
inflation which is now
at a 40 year high.
- [Newscaster] Americans
are paying more
for gas, food,
clothing, and cars.
- In the US, Congress has
given the Fed a dual mandate.
We want full employment,
we want low inflation.
Go get 'em, tiger.
We say to the Fed,
"It's your job."
They have one tool.
One tool.
The overnight interest rate.
Find the magic interest rate
that puts the whole
US economy in balance.
- The Fed cannot tax,
the Fed cannot spend.
The Fed can only
set interest rates.
Interest rate
policy's a very blunt tool.
- I mean, you have to understand
what the driver
of the inflation is.
- [Lua] When you have a water
leak flooding your basement,
you better identify the
correct source of the leak
if you wanna solve the problem.
Is the inflation coming
from an increase in demand?
Or a decrease in the supply
of goods and real resources?
- [Fadhel] Perhaps from a global
that disrupted factories,
workers going to work,
supply chains and shipping.
Perhaps its severe flooding
that cut food production
in a country by 90%.
Or is it OPEC
or an oil embargo increasing
the cost of energy?
- [Narrator] In 1973, the price
of oil jumped four times
higher than before.
- [Lua] So what policies
can address inflation
by targeting where
it's coming from?
If it's coming from a
shortage in the energy sector.
- [Fadhel] We can reduce
our consumption of oil
with policies to conserve,
drive less, fly less, no fees
for public transit, work from
home, shorter work weeks.
And we can also increase
the capacity of that sector
to relieve some of the
pressure and bottlenecks.
- [Kelton] You can
actually spend money
and reduce
inflationary pressures
- Money that builds new
capacity, building mass transit
and converting to a hundred
percent renewable energy.
So healthcare,
education, housing,
and energy and transportation.
The Green New Deal includes
those areas specifically not
because it's the favorite
shopping list
of the progressive movement.
Well, because these are
the sources of inflation.
We | re gonna include them
in the Green New Deal
because that's how you increase
availability, reduce cost.
- [Lua] Or are corporations
taking advantage
of a natural disaster, w*r,
or pandemic,
to mark up prices much higher
than the cost of production?
In World w*r II, they didn't
just leave it to the market or
the Federal Reserve's one tool
of raising interest rates,
to manage inflation
and allocate scarce resources.
That would never have worked
to prevent real shortages
or rising prices.
- Don't grab for
more than your share.
- [Lua] But what if we want to
increase government spending
and the economy is
already at full capacity?
- Then the resources have
to be freed up or created.
How do you do that?
- [Lua] We can first look at
where are we wasting resources?
- You know, I think
of Medicare for All
as a huge opportunity
in this respect.
We have the biggest, most
expensive healthcare system
in the entire world,
roughly 18% of US GDP.
If we were to transition
to a leaner, more efficient
form of healthcare delivery,
it's gonna save us
a lot of resources.
You know,
eliminating the middleman.
- If you want to fight inflation
you need to release resources.
- [Kelton] Defense, the
military industrial complex,
and we have this behemoth
of a finance sector.
- [Mosler] We got like
over 20 million people
tied up in this stuff
that could be doing
something else.
They could have
cured cancer, built out
all the green infrastructure.
- And remember, private
banks create money
that adds to spending
pressure as well.
Banks have a special
banking license
that allows them to issue credit
and that license was given to
them by the federal government
for a specific public purpose.
But over time, we forgot
about the public purpose
and we just let them loose.
Government spending
on bricks and mortar
to build hospitals is
not more inflationary
than private spending on bricks
and mortar to build casinos.
If we're really at full capacity
we have to prioritize
how do we use
the physical capacity?
Like we did during World w*r II.
And that means reregulating
the kinds and quality
of loans that banks create.
Do we really need 20
more casinos this year?
Maybe we should have 20
more hospitals instead.
- [Lua] But the ultimate
inflationary pressure in front
of us is climate change itself.
So we will need to very
carefully manage our real
resources, while we
decarbonize the economy
if we wanna keep prices
stable in the future.
(clock ticking)
(somber music)
MMT doesn't solve
all our problems.
Being able to create money
doesn't solve all our problems.
But finding the money is often
the least important challenge.
The real challenge
revolves around
how we can organize our
collective resources
to allow humanity and the rest
of the living world to thrive,
within planetary boundaries.
If we have a vision for
a better future, money is
not the scarce resource
we need to go out and find
before we can start building it.
Money is the organizing
tool we can use
to mobilize our people
and real resources to make
that vision a reality.
So what role does the
government play in the economy?
- [Randy] The textbooks tell you
that money originates
in private markets.
- And then later, much later
in history, governments came in.
- [Narrator] Later, governments
took over the exclusive
function of coining money.
- [Randy] But when you actually
look at the historical record.
- What comes first is law
and a decision to organize the
social provisioning process
through this
mechanism called money.
- Only later did markets develop
and markets could really only
develop after you had money.
- Now why does it matter
that we tell the right story?
- [Lua] Because this
story is the basis
of free market ideology.
- The state is not some force
that steps into
market relationships
that disrupts the
market mechanism.
Markets don't spring
up on their own.
- [Lua] They need laws enforcing
and protecting private
property in order to operate.
- [Randy] There has never
been a market economy
with no government.
- But we have been
tricked into believing
that the government shouldn't
have anything to do with it.
- Economics originally was
called moral philosophy.
The reason why
economics tries to claim
that it is a science
studying natural laws is
because they want to pretend
that they're not
making moral judgements.
- These are the
laws of the economy
and they produce these
outcomes, inequality,
and we make people believe
that that's just nature.
Then people will just accept
there's nothing you
can do about it.
- If money is natural, who has
the money is natural as well.
- The economy is extremely
complex, but it's important
to understand that it's
a human creation, guided
by rules and laws.
We can change
those rules and laws.
(cutlery clinking)
- Bernie called two weeks
before Christmas, 2014.
- It was definitely a pivotal
moment when Bernie Sanders
contacted Stephanie
Kelton to offer her the job as
chief economist of the
Senate Budget Committee.
I think the first
question he asked me was,
"What would you
do if you were me?"
And so I just immediately
said, "Second Bill of Rights."
- A second bill of rights.
The right to a useful
and remunerative job.
The right of every
family to a decent home.
The right to adequate
medical care.
- Saying that people have
rights to a job, rights
to housing, rights to healthcare
It's very powerful language.
- We must take up the unfinished
business of the New Deal
and carry it to completion.
And two weeks later, I
had an apartment in DC.
- [Newscaster] Bernie
Sanders last night on Fox
laying out his policy proposals.
But how much would those
plans actually cost?
- [Newscaster] All the
presidential candidates
want to spend much more
of your money.
- You know, whose
money are we spending?
And the simple
answer is: your money.
The government is not some
entity that has its own money.
The government only has money
because people pay taxes.
- He's just absolutely wrong.
- Government spends
by creating money,
and when it taxes,
it destroys money.
- Really making absolutely clear
that the government does
not need your money to act.
(upbeat music)
- [Host] Our next
speaker is Stephanie Kelton.
- We believe the government
has no money of its own.
That's what Margaret
Thatcher told us.
- There is no such
thing as public money.
- [Both] There is
only taxpayer money.
- She told us.
The only way government
can fund programs is
if it can "find the money".
So naturally you have
to go where the money is
and that means tax the rich.
Without them, we can't
afford to feed a hungry kid,
care for our planet,
meet the imminent threat
of climate change.
None of these things can
be accomplished unless
and until we get your money.
You people are nice,
you're lovely,
but the truth is,
we don't need you.
We don't need you.
- We don't need the
rich people's money.
We need to tax the rich people
because they're too rich.
- We don't want an oligarchy.
We don't want a world where
a smaller and smaller number
of people have a larger
and larger concentration
of the wealth and income.
It screws up the
functioning of our economy
and it screws up the
functioning of our democracy.
- But how much should we tax?
- It's not that they're not
paying their fair share.
It's that they're taking more
than their fair share, much
more than their fair share.
- So you have to decide,
what is too rich?
What threatens democracy?
And you remove that and
then you leave the rest.
And it's not because Uncle
Sam needs the money, okay?
You don't stop when
you get enough revenue.
If we get revenue from them,
we're gonna burn it anyway.
(upbeat music)
[Protesters chanting] Our air
- [Speaker] We are
the generation
that will lead
international action.
- [Protesters] Now!
- [Speaker] We demand
a Green New Deal.
(Protesters chanting)
[Protesters] When I say save
you say Earth. Save. Earth.
- Change is coming
whether they like it or not.
(Protesters chanting)
- And then this debate blew up.
And MMT got fired at from
all angles by everybody.
- Bill Gates recently
took exception
with MMT, calling it crazy talk.
- That's garbage.
- Trash, garbage.
- [Gundlach] This theory
is complete nonsense.
I don't even think it's a theory
- Free money for everyone.
- We already know
it doesn't work.
- And so we | re in the
"fight you stage".
- They defy the laws
of arithmetic.
- A bunch of malarkey.
- So do I think we're gonna win?
I won't say no, but it's
gonna be a hell of a fight.
(upbeat music)
(protesters chanting)
- We should not be
servants of money.
Money is fundamentally
a public utility.
- The true story of money
makes it a political
decision, a political choice.
- We have to shift from
their money to our money.
Money belongs to us.
It's the people's money.
Our money.
- Our power.
- Our money.
- Our power.
- In a democratic
society, we get to
decide what the priorities are
for the national
provisioning of resources.
- In Dr. King's words, "We
deserve an economic bill
of rights." Good jobs
promoting the public good,
restoring our neighborhoods
and our ecosystems.
- What do we want?
- [All] Jobs.
- When do we want 'em?
- MMT economists come in
and show you what kind
of a world is possible.
- What can we do to improve
our educational system?
What can we do to improve
our healthcare system?
- Money is a tool and we
need to figure out how
to deploy that tool.
- [Kelton] I just want
to empower people
to fight back against all
of the kinds of things
that stand in our way
of building a better future,
building a better world.
And many of the reasons that
we've been told we can't build
what we would like to build
are not legitimate obstacles.
- One of the biggest
obstacles is this idea
that the government simply
can't find the money.
Once we drive a stake through
the heart of this myth,
then we open up the
possibilities for public policy
that can deliver
the public good.
- There's a famous quote of
Keynes, I'll have to paraphrase.
He says,
when I find new evidence
I change my mind.
What do you do?
(upbeat music)
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Finding the Money (2023)
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