Modern Monetary Theory: The Deficit Myth

For years, many countries have adhered to the belief that state coffers are empty and money is scarce. Continuous austerity measures are deemed unavoidable to avoid burdening future generations with unbearable debt and to prevent state bankruptcy.

But what if these fears are unfounded and we have fallen for a modern economic myth? Advocates of Modern Monetary Theory, an established school of economic thought, argue precisely this. They claim that a state can never go bankrupt because it can print as much money as it needs. MMT, as an analytical lens and descriptive framework, asserts that taxes are not meant to finance government spending but to regulate the economy.

Developed by economists like William Mitchell and Stephanie Kelton, MMT gained significant recognition when Kelton's book "The Deficit Myth" became a bestseller, and she advised Bernie Sanders during his 2020 presidential campaign. Despite its growing popularity, MMT faces significant criticism. Both conservative and left-leaning economists warn of possible inflation and the underestimation of the risks of state debt.

Literature:
Kelton, Stephanie. The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy. PublicAffairs, 2020.

[hoon_sol]

In fact, not only governments have the power to do this, regular banks do the exact same thing whenever they give out loans; they don't take that money from any account anywhere, they write it up as they give out the loan, and if the loan is repaid the money is essentially destroyed.

The risks of both banks and governments doing this are very real, though, as we've seen how it causes large-scale collapses time and again both through modern history as well as in ancient times (where the government-controlled mints would debase the currency by making coins with less precious metal than there was supposed to be in the coins).

[Orange_Sunshine]

Love the variety of topics covered on the channel, cant wait for future videos and btw your fashion style looks great :D

[ZakStandridge]

Cheers, mate. I appreciate this under-valued channel of extremely enlightening literary discourse. Indeed, it makes me look at my modest savings and wonder what could be done with some wiser investing - particularly in mutual funds. Perhaps we have more power via 'pocketbook' than 'the man' would have us believe.

[pkeslerp]

Thank you for your fascinating and in depth analysis! I love your videos! Blessings, hugs, and unconditional love to you !

[Theorychad]

1Dime has some great videos on the subject. Have you seen em?

[ankit]

U r an example of beauty with brains.
John Keats said:- Beauty is truth and truth is beauty.
Feels like to listen to you day n night.

[dannyaglugub]

I will give mmt due credit... They funneled the inflation into assets without mass seepage far longer than I thought possible

[WhatsPastisPrologue]

MMT is junk economics.
Money printing to pay for social programs is always absolutely fine, up until the point that it's not.
Determining exactly the point at which people start to lose confidence in an inflated currency has so far proved to be impossible.
Usually by the time central banks realise that money printing has gone too far you are already at the point of inflation or hyperinflation.
How far you can push monetary policy turns on the elusive quality of “confidence” market confidence, public confidence, institutional confidence.
As for the question of economic sovereignty, this is a phrase that sounds good until you actually stop and think about it.
The 50 states of the American union rightly trade state sovereignty in order to achieve a more efficient wider US economy.
Under MMT each state, county, city, town, or village should strive for its own currency, central bank and interest rate under the guise of ''economic sovereignty"; that would be an incredibly inefficient system.
It is not that sovereignty doesn’t have any value, it's just that there are other and often more important considerations.

[mikecaetano]

Book recommendation: The Great Transformation by Karl Polanyi from 1944. Polanyi examines the transformation from Feudalism to Capitalism and the creation of what he calls Market Society and how aspects of those changes fed into the rise of Fascism in the 1930's.

[ndenman]

Book recommendation: Theory of Money and Credit - Mises

[sparkyfromel]

The counter argument is that as the government must reign in its deficit it crush the economy
modern monetary policy is great until it has to be paid for, like all debt

[xspartanx]

would you read Human Action by Ludwig Von Mises?

[lorenzlfk]

Everyone faces a need for liquidity of time, creativity, and labor for the things we need to live, such as food and shelter. The problem of liquidity is universal and therefore a philosophic problem. Incidentally, economics realized itself to be nothing more than non-normative ethics.

[KM]

This is not true that big countries like US can print money without negative consequences. Printing money in 1920s resultet in great depression 1930s (great depression was great also because 1930-33 amount of money was dropping, so there was two bad moves), printing in 1960s resultet in crisis in 1970s and printing since 1995 resultet in crisises in 2001, 2008 and probably in some next few years from now. Printing money destroyed also Roman Empire in late antiquity, so MMT is very old.

[Santiago-hvhh]

Reality says otherwise. Money is but an image of the current estate of economy, or at last it was when the gold and gold equivalence were used. It worled it was healthy. Now everything is falling apart since Richard Nixon took the dollar out of it, and with people thinking printing money would take the world out of poverty like printing diplomas would make us all wiser. Just like magic.

[fanstream]

You don't need to get an advanced degree in Economics --- you already know as much or more than many professors --- but maybe you can get an online masters degree just to provide the credentials some companies require ...although these days many companies are focused on bringing bright people like you, who have the ability to teach or share their knowledge, as you're doing here on your YouTube channel.
Or maybe you can grow this channel and become a YouTube star :) or entrepreneur

[dangin]

Money is a commodity. It cannot be considered as just a 'unit of account' or a 'medium of exchange'. In other words, money is not there to 'mobilise resources' in socially desirable ways, it exists because it has intrinsic value.