What Is MMT And How It Works w/Stephanie Kelton

Stephanie Kelton explains Modern Monetary Theory and how it works.

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ABOUT THE JIMMY DORE SHOW:
The Jimmy Dore Show is a hilarious and irreverent take on news, politics and culture featuring Jimmy Dore, a professional stand up comedian, author and podcaster. With over 5 million downloads on iTunes, the show is also broadcast on KPFK stations throughout the country. It is part of the Young Turks Network-- the largest online news show in the world.

Photo Credit: "Wasting Money", © 2012 Tax Credits, Flickr | CC-BY

[pocoapoco]

Seriously, Jimmy this has to be one of your most important interviews. The bulk of the 99% really needs to have a firm understanding of this. It also makes great armament for a bullshit detector.

[peterrios]

Jimmy's back!!. Welcome back old friend. The best Progressive on the internet, hands down.

[jessewood]

Holy crap, this was useful & informative as hell.

[rippingtons]

Come back from a well earned vacation and you jump right back into what you do best. Good to have to have back Jimmy, you are awesome.

[Maxedaddy]

I almost cried when i saw Jimmy talk about the difference between a home budget and our government budget. It was a watershed moment.

[SomethingImpromptu]

I like Yanis Varoufakis' very concise explanation for why austerity doesn't work: all private expenditures + all public expenditures in a nation = that nation's TOTAL INCOME. In other words, every dollar someone spends is a dollar someone else earns. So if private expenditures are low because of a crash in the business cycle (or for any other reason) and the government panics and cuts spending (public expenditures fall too), then total incomes drop even more dramatically, which creates a vicious cycle as the deepening depression discourages investment and spending further (i.e. private spending drops even more).

It's just vitally important to understand that the macroeconomy is NOT like your personal microeconomy. In your life, there is a total independence between inflows and outflows-- if you spend less, that has no effect on your income-- you just end up with more money left than you would have. If you spend less (reduce outflows/expenditure) on the scale of a government/nation, that *reduces* your income, so austerity logic doesn't make sense.

[Drew_]

Amazing to have you back. Missed you so much!

[DN_]

You are gobbling up the subs. 400k+ Good job, Jimmy.

[efortune]

quotes I found esp relevant:

2:28 “Keynesians tend to be associated I think more with big government spending. But you could be a Keynesian and also be in favor of tax cuts but you would want to see tax cuts that are skewed to the people who you could put more money in their pockets and they’ll go out and spend. And a tax cut would be a just fine thing to do if you were putting more money in the hands of the pockets of the people who are the real job creators. And in our economy the real job creators are the American consumers because that’s where most of the demand comes from. I said it, it’s you, it’s me, it’s regular old people who make less than a million dollars a year and spend virtually everything they get.

3:35 “I think we’ve come to believe over time that Republicans are always the party that favors tax cuts and Democrats are always the party that favors government spending and MMT (Modern Monetary Theory) kinda comes in and says actually both would work provided that you’re spending on things that would materially boost economic activity, they’re not boodogle projects, you’re doing good types of spending into the economy, providing things that people actually value and that will lead to some job creation. And if you want to do some tax cuts as well that’s ok too. But make sure that tax cuts go where they’ll do the most good in the economy and that means to the people who will turn around and spend virtually everything and not turn around and pad their 401ks, buy more real estate, buy more shares of stock and the like.

5:00 Federal Reserve creating its own money. Not the same as a household
5:20 SK:…because the federal government isn’t like a household…the federal government is where the money comes from. And everybody deep down in their core they know this. Everyone knows that Congress has the power of the purse. We use the term ‘the power of the purse’. And somehow we just don’t connect the dots and don’t come to fully appreciate what that means, which is that they can never run out of money
7:30 “We say somehow this is going to be a problem. No, the government doesn’t even have to do that. It’s borrowing its own currency back and it can set the terms at which it borrows. In other words, we have our own central bank. So we could have the Federal Reserve say ‘We’re not going to let the government borrow at rates in excess of 2% ever.’ We did that historically. We had something in the 1950s and 1940s called the Treasury Fed Accord. And we just instructed the Central Bank to serve the people. …”

8:14 JD: “So a lot of people think that oh my god, we have this $21 trillion deficit and that we have to pay that back with our taxes. But that’s not really true right?”
SK: “No it’s not true at all.
… “I’m (the govt) providing both the money that you’re using to pay your taxes and the money you use to buy bonds from me.”
10:33 Alan Greenspan on Social Security. Never run out of money. Asked a question by Paul Ryan
10:45 JD:“Paul Ryan is trying to get him (Alan Greenspan) to admit that Social Security is a bad idea and that we should have private savings for Social Security instead of this public idea. He’s trying to get Greenspan to admit that yes, Social Security could run out of money… but he doesn’t actually go along with Paul Ryan.
(“I wouldn’t say that the pay as you go benefits are insecure in the sense that there’s nothing to prevent the federal government from creating as much money as it wants and paying it to somebody.” ~Alan Greenspan)
So Greenspan says no, there’s really no danger of pay as you go, meaning social security right? That’s what he means. There’s no danger of it running out of money because the United States government can print as much money as it wants and then give it to anybody it wants. He just said that. Which kind of blows Paul Ryan out of the room right?

12:45 SK: He (Alan Greenspan) knows it’s not a theory. He was a chairman of the Federal Reserve. The guy knows where the money comes from right? So he knows it’s a reality and not only that this guy follows Ayn Rand. This guy is a true believer, libertarian, this is a guy who would very much like that not to be the case in a sense. That there were real hard constraints on government’s ability to do more for the economy. And so in a way it drives him crazy that this is the case. But he’s under oath and to his credit he gives and honest answer.

14:55 “The first thing he does is take the affordability question off the table. He (Alan Greenspan) says there’s absolutely nothing to prevent the Federal Government from caring for every future retiree, the disabled, dependents, as promised, in full, on time, for the rest of eternity. Nothing to stop us from doing that. So we completely put that aside.
Then he goes on to make what is the really important point, the point that I wish we were debating instead of what we always end up debating. The real important point he’s raising is this. Greenspan knows …”
~Stephanie Kelton

18:00 SK: You know when Hamilton first said we’re gonna buy up some state debts and we’re going to have a national debt. There was no national debt before Hamilton did that. So there was a small national debt. And of course over time $500 billion becomes a trillion and all the hair is on fire and everybody is saying this is the worst thing in the world. It’s unsustainable. And then a little bit of time passes and then it’s $2.5 trillion, then it’s $5 trillion, $7 trillion. Everybody’s hair on fire. Then Obama comes in and we go from $7 tr to $11 tr, now $15 tr to $20, to $21. And everybody all along continues to say ‘The End is near. This is unsustainable.’ And nothing happens. Inflation stays right around the Fed’s 2% target. Interest rates go wherever the Fed tells them where to go. What are we upset about?

~Stephanie Kelton


19:40 “Look at Japan. Japan is the perfect example of a debt to gdp ratio of about 240%. Their debt is near a quadrillion (yen). And they got no inflation, and interest rates below 1% and life goes on.”




28:40 SK: We keep thinking the government needs our money to do xyz. The government doesn’t need our money. We need their money. The taxes imposed by them on us. So we’ve got to earn these things somehow in order to pay our taxes. And it’s because they very kindly, normally put more of these things into the economy than they take out that we’re able to walk around with some extra. We’re able to hold to some of these and accumulate them and hold them as part of our savings. So if the government just decided no more of that behavior, we’re just running surpluses from now on. They would just be sucking the orange paper out faster than they put it in, and our balances would all start dwindling down.

[jamesconnolly]

It's interesting how people have difficulty with MMT. Wall Street has been practicing MMT for years: QE, bailouts, zero interest discount window, etc etc... while getting tax cuts. MMT is not a foreign concept, it's an ongoing policy. The question is where you apply MMT, which goes on everyday: Wall Street or Main Street.

[jimi]

Welcome back Jimmy. So happy to see Stephanie on your show. I'm so enthralled you are learning MMT and our operational reality ❤

[David_Bower]

Jimmy returns. My life is whole again.

[prschuster]

Thanks for relaying this in everyday language, so I know what they're talking about.

[kevinschmidt]

MMT takes away any excuse for imposing austerity on the people. The oligarchy is pissed!

[Hez]

My mind was being blown, proceeded by the statement "that's gonna blow a lot of peoples minds, right?"

[PunchTWB]

Jimmy Dore: True Champion of the Progressive Movement. You have my respect, Sir.

[sonnysoprano]

Welcome back Jimmy..
Watching from Singapore

[MykolasGilbert]

"Labor is the source from which human wants are mainly supplied... capital is the fruit of labor, and could never have existed if labor had not first existed" Abraham Lincoln....

[dustingleason]

I’m glad to see your finally having Stephanie on your show.

[whm_w]

Everyone says Jimmy is toxic. When he’s back, he brings up MMT. I don’t know if any other news or podcast on YouTube talks about this. Toxic? Nope.