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The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy Paperback – March 9, 2021

4.5 4.5 out of 5 stars 3,960 ratings

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A New York Times Bestseller



The leading thinker and most visible public advocate of modern monetary theory -- the freshest and most important idea about economics in decades -- delivers a radically different, bold, new understanding for how to build a just and prosperous society.





Stephanie Kelton's brilliant exploration of modern monetary theory (MMT) dramatically changes our understanding of how we can best deal with crucial issues ranging from poverty and inequality to creating jobs, expanding health care coverage, climate change, and building resilient infrastructure. Any ambitious proposal, however, inevitably runs into the buzz saw of how to find the money to pay for it, rooted in myths about deficits that are hobbling us as a country.




Kelton busts through the myths that prevent us from taking action: that the federal government should budget like a household, that deficits will harm the next generation, crowd out private investment, and undermine long-term growth, and that entitlements are propelling us toward a grave fiscal crisis.




MMT, as Kelton shows, shifts the terrain from narrow budgetary questions to one of broader economic and social benefits. With its important new ways of understanding money, taxes, and the critical role of deficit spending, MMT redefines how to responsibly use our resources so that we can maximize our potential as a society. MMT gives us the power to imagine a new politics and a new economy and move from a narrative of scarcity to one of opportunity.
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Editorial Reviews

Review

"Kelton writes clearly and directly, and does well to keep the lay reader in mind throughout. This comprehensive, lucid explanation of a much-buzzed about economic theory will resonate with progressives."―Publishers Weekly

"Stephanie Kelton is among the most prominent of the dozen or so economists associated with MMT. Her new book
The Deficit Myth is intended to bring MMT to a broader audience. In addition to an impassioned call for a bigger, more active public sector, The Deficit Myth contains a number of distinct economic arguments."
The American Prospect

"Clear and vigorously written book."―
Foreign Affairs

"She has succeeded in instigating a round of heretical questioning, essential for a post-Covid-19 world, where the pantheon of economic gods will have to be reconfigured."―
The Guardian

"Kelton and her colleagues have brought a great many non-economists into the economic conversation in a way that no other contemporary branch of heterodox economics has been able to....[Sh]e's dead right about a central political fact of our times: A large, active public sector is more needed today than ever, and unfounded fears of public debt are a big reason we haven't gotten it. Which means her eloquent, accessible book is performing an important public service."―
The American Prospect

“This book is a timely and welcome addition to the economics literature.”―
Governance

"Kelton certainly offers food for thought at a time when governments are spending eye-watering sums to mitigate damage from the coronavirus pandemic."
Spear's Magazine

“Kelton’s wonderful tome is digestible for most, even if one needs to comb through it a few times to get to grips with the terminology and utter shock about the state of economic discussion in the media.”―
Redaction Politics

"The big thing she gets right is in the way she structures her book around our current beliefs. In addressing our current understanding of how the world works - interpretations she identifies as myths - Kelton leads us step-by-step towards a new understanding of how federal spending works."―
Inside Higher Education

"Stephanie Kelton convincingly overturns the conventional wisdom that federal budget deficits are somehow bad for the nation. ...Kelton argues that our government's inability to provide for citizens isn't due to a lack for money; instead, our leaders lack political will."―
Farhad Manjoo, The New York Times

"
The Deficit Myth is simply the most important book I've ever read. Stephanie Kelton carefully articulates a message that obliterates economic orthodoxy about public finance, which assumes that taxes precede spending and deficits are bad. Kelton's work is on a par with the genius of DaVinci and Copernicus, heretics who proved that Earth revolves around the sun."―David Cay Johnston, recipient of the Pulitzer Prize, an Investigative Reporters and Editors Inc. Medal, and the George Polk Award

"A remarkable book both in content and timing. A 'must-read' that is sure to influence many aspects of policymaking going forward."
Mohamed El-Erian, chief economic advisor, Allianz

"In a world of epic, overlapping crises, Stephanie Kelton is an indispensable source of moral clarity. Whether you're all in for MMT, or merely MMT-curious, the truths that she teaches about money, debt, and deficits give us the tools we desperately need to build a safe future for all. Read it--then put it to use."―
Naomi Klein, author of On Fire: The Burning Case for a Green New Deal

"Kelton's game-changing book on the myths around government deficits is both theoretically rigorous and empirically entertaining. It reminds us that money is not limited, only our imagination of what to do with it. After you read it you will never think of the public purse as a household economy again. Read it!"
Mariana Mazzucato, author of The Value of Everything: Making and Taking in the Global Economy

"
The Deficit Myth is a triumph. It is absorbing, compelling, and--most important of all--empowering. Embracing a well-researched framework that focuses on how real-world economies actually operate, she lays out a realistic path to true economic prosperity. It is an approach that focuses on Main Street and not Wall Street and will permit us to not only revitalize the struggling middle class, but address critical social problems like chronic unemployment, poverty, health care, and climate change. We of course face many binding constraints on our ability to act, but Kelton argues that the intentional underemployment of our own resources that results from the pervasive influence of deficit myths should not be one. We have needed this book for a very long time. Everyone should read it, and then reread it, before it is too late to change course."
John T. Harvey, professor of economics, Texas Christian University

"Kelton's mission in this powerful book is to free us from defunct orthodox thinking about fiscal deficits rooted in the bygone era of the gold standard. Her theoretical canvas is modern monetary theory. At its core MMT offers a simple proposition: In a fiat currency world, the finances of we the people ain't the same as a summing up of our individual budget constraints, because we the people can't go broke, only deficit-spend our collective self into inflationary excesses. In the prevailing era of too-low inflation, the macro policy implication should be obvious: We the people presently have far more fiscal space than the deficit scold, pay-for crowd preaches. Kelton is a gifted writer and teacher and I confidently predict that
The Deficit Myth, brilliantly written and argued, will become the defining book on what MMT is--and what it is not."―Paul Allen McCulley, retired managing director and chief economist, PIMCO, and senior fellow, Cornell University Law School

"Clear! Compelling! Eye-opening and persuasive,
The Deficit Myth is an adventure in the world of budgets, jobs, trade, banking and--above all--of money. With the great force of common sense, Stephanie Kelton and the MMT team have broken through the closed circles of so-called sound finance, a stale orthodoxy that has weakened and impoverished us all. This book shows how they did it, and it blazes a path forward, toward a better world built on better ideas."―James K. Galbraith, The University of Texas at Austin

"A robust, well-reasoned, and highly readable walk through many common misunderstandings. A 'must-read' for anyone who wants to understand how government financing really works, and how it interplays with economic policy."
Frank Newman, former deputy secretary of the Treasury

About the Author

Stephanie Kelton, professor of economics and public policy at the State University of New York at Stony Brook and Bloomberg contributing columnist, has been called a "prophetic economist" and a "rock star" of progressive economics. She is the founder and of the top-rated economic blog New Economic Perspectives, and a member of the TopWonks network of the nation's best thinkers. In 2016, Politico recognized her as one of the fifty people across the country most influencing the political debate.

 

Kelton was chief economist on the U.S. Senate Budget Committee (minority staff) and an advisor to Bernie Sanders's 2016 and 2020 presidential campaigns. Kelton is a regular commentator on national radio and television and speaks across the world at large gatherings of people interested in global finance, political economy and public policy. She has superb connections in all areas of print and broadcast national media. Her op-eds have appeared in
The New York Times, The Washington Post, The Los Angeles Times and Bloomberg.

 

Product details

  • Publisher ‏ : ‎ PublicAffairs; Reprint edition (March 9, 2021)
  • Language ‏ : ‎ English
  • Paperback ‏ : ‎ 352 pages
  • ISBN-10 ‏ : ‎ 1541736192
  • ISBN-13 ‏ : ‎ 978-1541736191
  • Item Weight ‏ : ‎ 2.31 pounds
  • Dimensions ‏ : ‎ 5.5 x 1.25 x 8.25 inches
  • Customer Reviews:
    4.5 4.5 out of 5 stars 3,960 ratings

About the author

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Stephanie Kelton
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Stephanie Kelton is Professor of Economics and Public Policy at Stony Brook University. She was formerly Chief Economist on the U.S. Senate Budget Committee (Democratic staff). In addition to her many academic publications, she has been a contributor at Bloomberg Opinion and has written for the New York Times, The Los Angeles Times, U.S. News & World Reports, CNN, and others.

Customer reviews

4.5 out of 5 stars
3,960 global ratings

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Customers say

Customers find the book readable and refreshing. They describe it as an important treatise on modern monetary theory, a great primer for deeper economic and monetary conversations. The book provides an enlightening introduction to the basic thinking behind MMT with some simple examples. Readers appreciate the potential for health care, education, employment, and sustainability. They find the book fascinating and exciting.

AI-generated from the text of customer reviews

128 customers mention "Readability"120 positive8 negative

Customers find the book readable and refreshing. They appreciate that the author does a great job building their understanding of the subject and providing explicit details. The book is written in a simple, clear language that debunks myths. While the first few chapters are strong, the book quickly becomes repetitive.

"...It is, to me, also inherently commonsensical as we are not constrained by the amount of a shiny rock in the vaults of the Federal Reserve in New..." Read more

"...The ideas in this book are not difficult, but they do seem to go against much of what both professional economists and non-economists believe to be..." Read more

"...Fundamentals The concept is simple, and the above definition of MMT contains the answer—money issuers do not have the same constraints as money..." Read more

"...This is a beautifully written book that has the potential to bring correct understanding of government finances to millions who have no background..." Read more

113 customers mention "Encyclopedia content"103 positive10 negative

Customers find the book an important treatise on modern monetary theory. They say it's a great primer for deeper economic and monetary conversations. The book provides good information about what taxes are for, why we pay them, and how fiat currency works. It also provides a fantastic overview of the model gov finances and fiscal policy. Readers mention that there are real constraints on spending and the author proposes more spending on health care, the environment, education, community services, and others.

"...And for that reason, it is an especially important and necessary book." Read more

"...basic truth that Professor Kelton demonstrates is that the national debt is not a burden...." Read more

"...about the federal deficit should read this important treatise on Modern Monetary Theory...." Read more

"...'s book is a magnificent accomplishment in that it is readable by the non-economist, and makes the truth clear...." Read more

60 customers mention "Educational value"56 positive4 negative

Customers find the book enlightening and a good introduction to MMT. It provides a high-level overview of the basic thinking behind it with simple examples. The author takes a complicated subject and describes it in terms that can be understood by anyone. They say monetary theory opens a vast landscape of opportunity for improving the lives of everyone.

"...And for that reason, it is an especially important and necessary book." Read more

"MMT is a great idea, this book was so interesting. But the problem with MMT us greedy people. ( my opinion)." Read more

"...She explains things quite simply – and brilliantly too. The world always moves forward. Our way of viewing everything changes for the better...." Read more

"...The ideas in this book sound plausible, and the aims that the author wants to support I agree with politically, however I did not follow the..." Read more

14 customers mention "Health care"14 positive0 negative

Customers find the health care plan in the book to be beneficial. They say it opens up many possibilities for health, education, employment, and sustainability. The book explains how the government can solve large-scale societal issues like unemployment, social issues, and climate change. It also reduces lives wasted and opportunities lost.

"...The reduction in lives wasted and opportunities lost, in addition to the increased productivity of the economy, would be enormous...." Read more

"...where everyone works, there is no poverty, there is free quality healthcare for all, no college debt, no pollution, world class infrastructure and..." Read more

"...For now, this is an excellent introduction that clarifies the issue and hopefully helps to spread the word among non-economists that deficits are..." Read more

"...It is a book which makes clear that meeting the challenges of climate change and building a better future, depends on how we manage our real..." Read more

9 customers mention "Eye opening"9 positive0 negative

Customers find the book fascinating and important. They describe it as exciting, truthful, and entertaining.

"...We don't have to do this and keep them impoverished. A fascinating, important book...." Read more

"...Incentives – her Mosler business card story is entertaining, but she never states that the federal government will levy a similar requirement on..." Read more

"...This book was truly eye opening, and I gained a much deeper understanding of how our economy really works." Read more

"A real eye opener. It’s changed my perspective on what money really is and how it is actually used by the federal government." Read more

7 customers mention "Infrastructure"7 positive0 negative

Customers find the book helpful for infrastructure. They mention world-class infrastructure, no pollution, and worthwhile projects like hospitals, dams, and other worthwhile projects. The book provides a convincing path forward and an optimal framework to build upon. It is clearly written and well-sourced.

"...built many college campuses, hospitals, dams and other worthwhile infrastructure projects...." Read more

"...quality healthcare for all, no college debt, no pollution, world class infrastructure and in general a higher standard of living for all...." Read more

"...(ie: healthcare for all, massive infrastructure projects, large scale renewable energy investment, shelter & food..." Read more

"...international trade, social security, climate change, health care, infrastructure, and unemployment...." Read more

7 customers mention "Repetition rate"0 positive7 negative

Customers find the book repetitive and plodding. They mention it's too political for their taste.

"...Although the first few chapters started off strong, the book quickly becomes repetitive, is disingenuously naive and reads like a corny Dem-..." Read more

"...Yes, it is very repetitive. Like it repeats itself...." Read more

"...My only negative comment is that the book contains a lot of repetition...." Read more

"...Kelton wrote well and the book was a easy read; however, it was a bit repetitive...." Read more

A Very Necessary Book
5 out of 5 stars
A Very Necessary Book
Back after the 2008 crisis, I had lost my job and was sitting around unemployed and I started to get interested in economics for the first time in my life. The reason was that for all my life to that point the broader economy had not really broken down during my lifetime. I had long considered myself a Marxist from the experience of being a worker at the point of the spear in the service economy. In food service you see the menu price and you know your price and there’s a huge discrepancy between the two.I had a sense that in the shadow of that crisis that we were bounded by only being to push at the edge of the status quo. The bailouts, both TARP and ARRA were real money that had to be paid back, so the democratic-led government in 2010 and through pressure from their political opponents, started to roll back the funding that was on offer through the state. “Austerity” was the name of the game and big debts were scary and more important than the mass of Americans who were still without jobs in the economy that had been showing “green shoots” every quarter for 18 months.I was unemployed and reading as much as I could about economics and especially the crisis. There were scores of books written by commentators and economists trying to get their hands around just what happened and why it happened. But it was not the first crisis. I eventually found myself making my way through Keynes and Minsky – with some understanding but not 100% of it. Keynes had some integrals I just skipped over and hoped that he was explaining all of them in the text. It was during this time that I came up with what I thought was a fairly novel idea that the household metaphor that politicians used was completely wrong. The government lives forever, I said, and it creates money. A worker is constrained in the money they have and the only way to get more is to work more even if the can temporarily increase their spending by borrowing they eventually have to pay it off (or pass down the debt once they die). I created an imaginary currency called “EdgarBucks” and knew my biggest problem was making sure that people accepted these “EdgarBucks”.My insight about the fallacy inherent in the household fallacy was not novel it seems. While politicians and many economists talked about spending money being the constraint, there was a then little-known school of thought who had fleshed out the idea that money is not the constraint in the economy, but real resources are that constraint. You cannot run out of money if you are a currency issuer, but you can run out of factories. It brings to mind Keynes looking at idle workers and idle factories and realizing that you can have suboptimal equilibria where resources are underutilized. But what this little-known school of thought had done was flesh out that idea, and it has a name – Modern Monetary Theory (MMT).The basics of MMT are that the real constraints are the real economy and in the book Professor Kelton works through the implications of the idea that money is more a record keeping device than some sort of fetishized commodity through simple, easy to understand metaphors. What is dangerous through the world as described through MMT is inflation and not debt, and the way to pull that back is to increase taxation. Also embedded in the structure is a call for a Job Guarantee to make sure that people have and can spend money. I personally am not for a Job Guarantee but lean more towards a Basic Income, but that is outside the realm of this review but I think within the realm of possible debates, so MMT is not strictly dogmatic.I was receptive to the ideas of MMT because I was not a slave to the old orthodoxy and especially because I thought that the old orthodoxy was in a large part to blame for not preventing and not really being able to predict the crisis of 2008, I was ready to throw it all out and find an explanation for how capitalism worked and if possible how it could be made better for people if we were going to keep putting off the eventual worker’s revolution. MMT was, and still is centered on a couple of institutions like UMKC and Bard College in the US and has a couple of figureheads like Professor Kelton but also Warren Mosler and Scott Fullwiler. Despite this, MMT punches above its weight in policy discussion because it has many passionate adherents in both the blogosphere and on Twitter. It is, to me, also inherently commonsensical as we are not constrained by the amount of a shiny rock in the vaults of the Federal Reserve in New York or in Fort Knox.I was sitting, unemployed though the summer of 2011, smart and a hard worker and ready to be put to use so I could get money to pay my rent but no one was answering my applications. It was confounding and scary and just a total failure of policy because there were tens of thousands of people like me who wanted to work. But I was reading. The biggest problem for me when I was learning more about different economic schools in terms of learning about MMT was that there was no centralized place to start learning about it. People would talk about it in blog comments and you would ask where to go for more details and they would send you a link to a pdf or a self-published book on amazon and that did not inspire a lot of confidence. If someone was asking where to start to learn about Marxism you could point them to many different publishers who had put out versions of the Manifesto but this was like if the only resource available was Marxists dot org. What “The Deficit Myth” does is not just synthesize the ideas of MMT in a simple and easy to read format, but it also formalizes the school as something to be taken seriously by readers of levels. And for that reason, it is an especially important and necessary book.
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Top reviews from the United States

  • Reviewed in the United States on July 26, 2020
    Back after the 2008 crisis, I had lost my job and was sitting around unemployed and I started to get interested in economics for the first time in my life. The reason was that for all my life to that point the broader economy had not really broken down during my lifetime. I had long considered myself a Marxist from the experience of being a worker at the point of the spear in the service economy. In food service you see the menu price and you know your price and there’s a huge discrepancy between the two.

    I had a sense that in the shadow of that crisis that we were bounded by only being to push at the edge of the status quo. The bailouts, both TARP and ARRA were real money that had to be paid back, so the democratic-led government in 2010 and through pressure from their political opponents, started to roll back the funding that was on offer through the state. “Austerity” was the name of the game and big debts were scary and more important than the mass of Americans who were still without jobs in the economy that had been showing “green shoots” every quarter for 18 months.

    I was unemployed and reading as much as I could about economics and especially the crisis. There were scores of books written by commentators and economists trying to get their hands around just what happened and why it happened. But it was not the first crisis. I eventually found myself making my way through Keynes and Minsky – with some understanding but not 100% of it. Keynes had some integrals I just skipped over and hoped that he was explaining all of them in the text. It was during this time that I came up with what I thought was a fairly novel idea that the household metaphor that politicians used was completely wrong. The government lives forever, I said, and it creates money. A worker is constrained in the money they have and the only way to get more is to work more even if the can temporarily increase their spending by borrowing they eventually have to pay it off (or pass down the debt once they die). I created an imaginary currency called “EdgarBucks” and knew my biggest problem was making sure that people accepted these “EdgarBucks”.

    My insight about the fallacy inherent in the household fallacy was not novel it seems. While politicians and many economists talked about spending money being the constraint, there was a then little-known school of thought who had fleshed out the idea that money is not the constraint in the economy, but real resources are that constraint. You cannot run out of money if you are a currency issuer, but you can run out of factories. It brings to mind Keynes looking at idle workers and idle factories and realizing that you can have suboptimal equilibria where resources are underutilized. But what this little-known school of thought had done was flesh out that idea, and it has a name – Modern Monetary Theory (MMT).

    The basics of MMT are that the real constraints are the real economy and in the book Professor Kelton works through the implications of the idea that money is more a record keeping device than some sort of fetishized commodity through simple, easy to understand metaphors. What is dangerous through the world as described through MMT is inflation and not debt, and the way to pull that back is to increase taxation. Also embedded in the structure is a call for a Job Guarantee to make sure that people have and can spend money. I personally am not for a Job Guarantee but lean more towards a Basic Income, but that is outside the realm of this review but I think within the realm of possible debates, so MMT is not strictly dogmatic.

    I was receptive to the ideas of MMT because I was not a slave to the old orthodoxy and especially because I thought that the old orthodoxy was in a large part to blame for not preventing and not really being able to predict the crisis of 2008, I was ready to throw it all out and find an explanation for how capitalism worked and if possible how it could be made better for people if we were going to keep putting off the eventual worker’s revolution. MMT was, and still is centered on a couple of institutions like UMKC and Bard College in the US and has a couple of figureheads like Professor Kelton but also Warren Mosler and Scott Fullwiler. Despite this, MMT punches above its weight in policy discussion because it has many passionate adherents in both the blogosphere and on Twitter. It is, to me, also inherently commonsensical as we are not constrained by the amount of a shiny rock in the vaults of the Federal Reserve in New York or in Fort Knox.

    I was sitting, unemployed though the summer of 2011, smart and a hard worker and ready to be put to use so I could get money to pay my rent but no one was answering my applications. It was confounding and scary and just a total failure of policy because there were tens of thousands of people like me who wanted to work. But I was reading. The biggest problem for me when I was learning more about different economic schools in terms of learning about MMT was that there was no centralized place to start learning about it. People would talk about it in blog comments and you would ask where to go for more details and they would send you a link to a pdf or a self-published book on amazon and that did not inspire a lot of confidence. If someone was asking where to start to learn about Marxism you could point them to many different publishers who had put out versions of the Manifesto but this was like if the only resource available was Marxists dot org. What “The Deficit Myth” does is not just synthesize the ideas of MMT in a simple and easy to read format, but it also formalizes the school as something to be taken seriously by readers of levels. And for that reason, it is an especially important and necessary book.
    Customer image
    5.0 out of 5 stars A Very Necessary Book
    Reviewed in the United States on July 26, 2020
    Back after the 2008 crisis, I had lost my job and was sitting around unemployed and I started to get interested in economics for the first time in my life. The reason was that for all my life to that point the broader economy had not really broken down during my lifetime. I had long considered myself a Marxist from the experience of being a worker at the point of the spear in the service economy. In food service you see the menu price and you know your price and there’s a huge discrepancy between the two.

    I had a sense that in the shadow of that crisis that we were bounded by only being to push at the edge of the status quo. The bailouts, both TARP and ARRA were real money that had to be paid back, so the democratic-led government in 2010 and through pressure from their political opponents, started to roll back the funding that was on offer through the state. “Austerity” was the name of the game and big debts were scary and more important than the mass of Americans who were still without jobs in the economy that had been showing “green shoots” every quarter for 18 months.

    I was unemployed and reading as much as I could about economics and especially the crisis. There were scores of books written by commentators and economists trying to get their hands around just what happened and why it happened. But it was not the first crisis. I eventually found myself making my way through Keynes and Minsky – with some understanding but not 100% of it. Keynes had some integrals I just skipped over and hoped that he was explaining all of them in the text. It was during this time that I came up with what I thought was a fairly novel idea that the household metaphor that politicians used was completely wrong. The government lives forever, I said, and it creates money. A worker is constrained in the money they have and the only way to get more is to work more even if the can temporarily increase their spending by borrowing they eventually have to pay it off (or pass down the debt once they die). I created an imaginary currency called “EdgarBucks” and knew my biggest problem was making sure that people accepted these “EdgarBucks”.

    My insight about the fallacy inherent in the household fallacy was not novel it seems. While politicians and many economists talked about spending money being the constraint, there was a then little-known school of thought who had fleshed out the idea that money is not the constraint in the economy, but real resources are that constraint. You cannot run out of money if you are a currency issuer, but you can run out of factories. It brings to mind Keynes looking at idle workers and idle factories and realizing that you can have suboptimal equilibria where resources are underutilized. But what this little-known school of thought had done was flesh out that idea, and it has a name – Modern Monetary Theory (MMT).

    The basics of MMT are that the real constraints are the real economy and in the book Professor Kelton works through the implications of the idea that money is more a record keeping device than some sort of fetishized commodity through simple, easy to understand metaphors. What is dangerous through the world as described through MMT is inflation and not debt, and the way to pull that back is to increase taxation. Also embedded in the structure is a call for a Job Guarantee to make sure that people have and can spend money. I personally am not for a Job Guarantee but lean more towards a Basic Income, but that is outside the realm of this review but I think within the realm of possible debates, so MMT is not strictly dogmatic.

    I was receptive to the ideas of MMT because I was not a slave to the old orthodoxy and especially because I thought that the old orthodoxy was in a large part to blame for not preventing and not really being able to predict the crisis of 2008, I was ready to throw it all out and find an explanation for how capitalism worked and if possible how it could be made better for people if we were going to keep putting off the eventual worker’s revolution. MMT was, and still is centered on a couple of institutions like UMKC and Bard College in the US and has a couple of figureheads like Professor Kelton but also Warren Mosler and Scott Fullwiler. Despite this, MMT punches above its weight in policy discussion because it has many passionate adherents in both the blogosphere and on Twitter. It is, to me, also inherently commonsensical as we are not constrained by the amount of a shiny rock in the vaults of the Federal Reserve in New York or in Fort Knox.

    I was sitting, unemployed though the summer of 2011, smart and a hard worker and ready to be put to use so I could get money to pay my rent but no one was answering my applications. It was confounding and scary and just a total failure of policy because there were tens of thousands of people like me who wanted to work. But I was reading. The biggest problem for me when I was learning more about different economic schools in terms of learning about MMT was that there was no centralized place to start learning about it. People would talk about it in blog comments and you would ask where to go for more details and they would send you a link to a pdf or a self-published book on amazon and that did not inspire a lot of confidence. If someone was asking where to start to learn about Marxism you could point them to many different publishers who had put out versions of the Manifesto but this was like if the only resource available was Marxists dot org. What “The Deficit Myth” does is not just synthesize the ideas of MMT in a simple and easy to read format, but it also formalizes the school as something to be taken seriously by readers of levels. And for that reason, it is an especially important and necessary book.
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  • Reviewed in the United States on June 21, 2020
    Professor Kelton’s important book shows, in a very accessible manner, some basic economic truths which have been buried in an edifice of economic theory, supported by appeals to apparently common-sense but inappropriate analogies. These truths are the core propositions of what is know as Modern Monetary Theory.

    The central truth that she demonstrates, is that government spending (in a country which issues its own currency) is not limited by its ability to tax or to borrow, as it is for an individual, or a household. The analogy of the Government needing to balance its books, just like any family, is deeply ingrained in political and common discourse. Anybody unconvinced of the lack of limits on government simply needs to look at the response to the Covid-19 crisis in the United States. If it had been suggested before the crisis that the Government could just mail out checks to the whole population, we would have been told that it was impossible and unaffordable. Clearly it was not impossible. It just required Congress to authorize it. There was no debate about how it would be financed, because there was no need.

    As a corollary to the proposition that government spending is not limited by its ability to tax or borrow, Professor Kelton argues that a deficit is not, in itself, evidence of overspending. As a professional economist, I can already hear the cries of many colleagues that this is magical thinking that implies that the government can spend whatever it wants in violation of its intertemporal budget constraint. This is not what is being suggested. The issue is whether the total of desired government spending and desired private spending exceed the productive resources of the economy. If they do exceed this limit, particularly in a relatively closed economy such as the United States, inflation will be the result. There is however, no direct relationship between inflation and the government deficit. Thus, she is not arguing that the Government can spend without limit, merely that the limit is defined by the capacity of the economy, and attempts to go beyond that limit will result in inflation.

    The next basic truth that Professor Kelton demonstrates is that the national debt is not a burden. It does not have to be repaid, as it is the counterpart to the net acquisition of financial assets by the private sector. Without a public deficit and a public debt, the private sector cannot collectively hold financial assets. Attempts to actively reduce the public debt through budget surpluses forces the private sector to reduce its assets or increase its borrowing, and eventually result in crises of private sector indebtedness.

    One of the central arguments of the book is that a political discourse which focuses on avoiding deficits kills debate on policies to address the real deficits: the good jobs deficit, the education deficit, the health deficit, the infrastructure deficit, and the climate deficit. Policies are disqualified as unaffordable or politically impossible, before they can be seriously examined. Fear of deficits and debt has been used as a means to argue against reforms which address the real deficits in society.

    Professor Kelton presents a coherent case that these real deficits can be addressed by public policy, and that “finance” is not the problem. Perhaps the most important proposal is the idea of an Employment Guarantee, whereby the Government guarantees a public service job (delivering useful services or building infrastructure for example), to all those who cannot find jobs in the private sector. If implemented this would mean that the private sector would be contracting not from a demotivated reserve army of unemployed with poor skills, but from a pool of employed workers. The reduction in lives wasted and opportunities lost, in addition to the increased productivity of the economy, would be enormous. Many details would need to worked out to ensure good management and governance of such a scheme, but it should not be dismissed as financially impossible.

    The ideas in this book are not difficult, but they do seem to go against much of what both professional economists and non-economists believe to be common-sense. In the words of Keynes, in his preface to the General Theory of Employment Interest and Money, “The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.” The irony is that many of the new ideas in this book are rooted in precisely the new ideas that Keynes was advocating. These ideas have been lost and urgently need to be recovered. For this reason, Professor Kelton’s book is so important and valuable.
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  • Robin Chase
    5.0 out of 5 stars The government can never run out of money.
    Reviewed in Canada on October 9, 2021
    This book opened my eyes to the concept of MMT, and how governments that issue their own currency have unlimited spending power. From what I understand, the only real constraints are the resources that are available, both natural and human and inflation, which can send prices skyrocketing if we spend too much money. Apart from that, the government simply gets the money it needs to fund programs by typing in a number on a computer keyboard. It doesn't even need to print money.

    The main idea in the book is that there is a large difference between household budgets and government budgets, where the government has the power to issue its own fiat currency. In the first instance, people can go bankrupt if they don't spend their money carefully and budget properly. In the second case, no such thing can occur, since the government, unlike people that are currency users, is the currency issuer. The government can't go bankrupt. Not only that, taxes are simply a way for the government to take back some money so that people have the incentive to work to get paid. Taxes don't pay for anything, and it is the government simply creating money out of thin air that pays for programs.

    In Canada, we once had a Prime Minister that cut $77 billion from the federal debt. At the time, I thought that was great, because it brought out finances under control. After reading this book, however, I'm starting to see that it was simply an austerity measure and that, since the government is the currency issuer, we can fund any program we want as long as we have the resources to do it. Having money is not the issue. Having real resources to put our policies into place is the real constraint.

    This book changed my views about economics, the deficit and the debt. I think we should rev-up our economy to the point where everyone that wants a job can get one. This book should be mandatory reading for finance ministers around the world. I would gladly send one to the finance minister in Canada if it made that person change their views.

    Great book. Five stars all the way.
  • schneemann
    5.0 out of 5 stars How Fiat money works
    Reviewed in Germany on November 16, 2024
    A must read for anybody who is remotely interested in macroeconomics and investing, and wants to learn how Fiat money works. Now I don't need to "worry" anymore about gold standard etc.
    The book is very well written and eye-opening in many ways. If you always wanted to really have comprehensive and easily understandable descriptions of how fiat money works, then this is your book.
    Criticism: the author's ideas go a little too far in my opinion, and she doesn't critically deal with real human nature. If gocernment really was to provide jobs to all unemployed, there would be large industries anticipating government money injection and this would distort these industries, hugely decreasing efficiency and leading to many bull*hit jobs. There are economies in the world already that are just waiting and anticipating how the government wants to spend money, and then the industries will sell their work "slice by slice", always anticipating follow-up investment by the government. So all in all, the author assumes humans are honest and hardworking, and this is simply not the case. We all need pressure and competition to perform, and that's the only way economies can prosper and money can retain value. If everybody knew that the government will always feed us and provide jobs with good pay, the game would be rigged. I recommend reading George Soros' concept of relexivity about how results change as a function of how participants anticipate results.
    However, the book is still great!! It explains how fiat money works inlcuding its operating parameters and limitations, and opens the discussion about how we can fully utilize its powers.
    In my opinion, fiat money is the best money we ever had, it will continue to depreciate over time, and the value of stocks will continue to appreciate significantly in the long term.
  • Kindle Customer
    5.0 out of 5 stars great book
    Reviewed in India on July 27, 2024
    Very interesting perspective and makes one think that of how prevalent mainstream economics taught in colleges might need to change to incorporate MMT in a larger manner
  • Marcus
    1.0 out of 5 stars 'A better economy' with inflation at its core
    Reviewed in the Netherlands on July 7, 2022
    According to MMT, the sky is green
  • Amazon Customer
    5.0 out of 5 stars Injectant la monnaie seulement là où il y a des ressources disponibles
    Reviewed in France on April 4, 2021
    Il faut pouvoir créer de la monnaie, mais seulement en l'injectant là où il y a des ressources disponibles ,
    et en contrôler l'usage. Inonder l'économie en général est inefficace voire néfaste.