I’m noticing that the news of Bernie Sanders hiring Dr. Kelton as his economic advisor made a very short and barely-noticed splash in the media, which strikes me as somewhat extraordinary, considering how the knowledge she brings to the table is somewhat revolutionary. It’s not new–bankers and the finance world know it very well–but it’s something that has been systematically lied about by economists and the mainstream business press for decades. And, well, it’s fairly obvious why that is. No one would tolerate the misery they inflict if they were aware of the operational realities of the money system.
So, here’s a small collection of articles that do a good job of explaining why that is:
Nice and basic:
Budget Deficits and Net Private Saving
This one answers some of the controversy over MMT:
Private Savings is Federal Deficit
And heck, why not. The exhaustive collection:
Warren Mosler’s Mandatory Readings page
And of course, my own collection: MMT Links
I’ve seen a lot of articles admitting that yes, federal spending is private income, but what about “crowding out private investment???”
This is a fairly blatant attempt to protect the notion that private credit is somehow money. Yes, you can get money from a bank and build a house. That is a net good, a net increase in wealth–until the bank wants it’s money back! What then? The bank didn’t give you enough money to pay the interest on it’s loan. Where does that come from? Another bank, that you then have to pay even more to? One can easily see how exponentially-growing privately-generated debt increasingly leads to debt crises.
The only money source that doesn’t want it all back is the government.
Money–government debt–is a service to the economy. That’s it’s only function, and government can issue it without restraint. There is no need to have unemployment of either people or resources. As long as both are available, just add money and stir. There is no “burden on the future.” How can there be? People working with resources are creating more wealth that will still exist in the future! How can this be a burden?
The only constraint on spending is resources. Do we have enough lumber to build the houses? Do we have enough carpenters? Do they have the time? When you think about it–if the answer to the above is yes, then it doesn’t matter if you get money from the government to pay for it; that only means that you don’t have to take on debt to add real assets to GDP. So the real complaint from the “crowding out” crowd is that government debt crowds out their unearned income from interest. It’s like fleas objecting to being “crowded out” of their share of your dog’s blood.
What if we’re at full employment (a dream, alas)? More government spending will then not increase anything, because no one is available to do the work anyway. One wonders how government could spend more if the economy is maxed out? They can buy more goods, which could, in theory, cause inflation–but then those goods are in turn used in the real economy anyway. We don’t lose them.
In reality, it’s never more spending that causes it, but credit bubbles, speculation, and resource collapses caused by disasters and outside forces, which is a topic for another article. In a productive economy, as long as everyone has income increasing at the rate of other prices, it doesn’t matter to them.
So the only people really bothered by inflation are those whose only income depends on the price of money, and have a vested interest in you believing that inflation is some kind of public catastrophe. Deflation makes their money worth more, so they much prefer a lousy economy with high unemployment. MMT has excellent ideas on managing the relationship between resource utilization and money supply, and it doesn’t entail any insane NAIRU (natural anti-inflation rate of unemployment) ideas. Which brings us back to Bernie Sanders and Dr. Kelton. The cure for this malaise is now within reach of Congress. Will they defy their banker constituency and let us get back to work?