I never took any economics courses; it sounded all math-y to me. 😱 But I wish I had, because I see now that the discipline is more like my own undergraduate major (anthropology)—or ….not quite, because it does more than observe, it predicts and pontificates. It is not “simple math”, no way! and, you don’t actually have to do any calculations in order to tbeorize about it.
Having no idea what I was getting into, I conjured up Stephanie Kelton’s book The Deficit Myth. I did it because she promised to reassure me about the deficit. I mean, just from studying anthro I am already convinced that when a society measures value in terms of something abstract (or ubiquitous and intrinsically valueless, like cowrie shells) instead of something tangible and finite (like gold) then the entire economic system is artificial and precariously dependent on public confidence (or ignorance, or willing complicity.) I don’t understand and never have understood all this doomsaying about “burdening our children with our debt“. So overnight ( literally, just since last night! I find myself afloat on a sea of modern monetary theory (MMT).
Basically ( I think, and I’m writing this to humblysolicit guidance from the money-Rattys) ;it’s that when a sovereign nation creates its own currency by fiat (as US has been doing since 1971) it can never go bankrupt. It can’t run out of money. (It CAN get into hyperinflationary trouble, like Venezuela and Zimbabwe, if it can’t provision its own people; what both of those newly-minted dungpits did was take land away from the farmers and redistribute it to non-farmers, so food was nonexistent and the price of it spiraled outta control.) Taxes do not provide money the govt needs for its spending. Taxes are instead a way of making sure there is demand among the citizenry for the currency. Because Altho the govt could create an infinite amount of it, if it didn’t also remove some from the system, the result again would be hyperinflation. (Taxes are of course also useful as a tool of social policy.)
Also, as long as our foreign debt is expressed, or owed, in our own fiat currency, it could be wiped out instantly if the govt chose to do so. Okay China: here’s $1.1 Trillion, newly printed! We now owe you zilch: go suck a duck-egg! And the govt does not have to tax us to get that money: it can simply command it into being. It doesn’t even really have to print or mint it: this is simply a matter of a few keyboard strokes.
The weak point appears to be: other sovereign nations and their currencies. Don’t they have to believe in the dollar, too? How does all this fit into the idea that the dollar is presently the “reserve currency”? And who decides what the reserve currency is?
Im hoping to read your thoughts, endorsements or refutations about MMT.