presented by Dr/Prof. Stephanie Kelton.
A comment by Matt N: “I'm not an economist. This was an incredibly succinct presentation that has put a lot into perspective for me. Thank you Stephanie Kelton
I'm also glad to read that Stephanie Kelton is [was] Bernie Sander's chief economist on the Budget Committee, its clear she understands economics.” …
Dr. Kelton is an MMTer. I like MMT, it makes more sense to me than the “mainstream” or Neo-liberal or Neo-classical theory of economics [3 names for the same theory] does. Neo-liberalism assumes the US is still on the gold standard. [Dr. Steve Keen likes to say that Neo-classical theory assumes the world is still on the barter system and only adds money as an after thought. MMTers also say that Neo-liberalism ignores the banking system when it talks about Gov. debt and deficits.]
Four interesting points she made are:
1] The relationship between the Fed. Res. Bk and the US Treasury is not what most people think in 1 important way. It differs from your personal bank account in this 1 important way. It is, as soon as the Treasury authorizes the sales of US bonds or T-bills the Fed. credits the US account with that amount of dollars. So, in fact, the US Gov. can spend before it gets the loan, i.e. before it sells the bonds. MMT would point out that this makes it much easier to sell the bonds because the money goes into the banking system before it is taken out.
2] The US economy has gone into a recession *every* time since 1974 that the US Gov. deficit has gone below 3.9% of GDP. I think this is because of the chronic balance of payments problem that sucks dollars out of the US economy. This level of deficit is merely replacing those lost dollars.
3] Allen Greenspan testified under oath in reply to a question by Paul Ryan that the US Soc. Sec. system can always pay out any amount of benefits after the Trust Fund is exhausted because the US can create money. See point 1 above. However, he when on to add to his answer that what is necessary to support the elderly is for the economy to be able to provide the goods and services that they need or want to buy with their SS benefits.
4] Dr. Kelton said she has gone to Washington several times and sat down to explain MMT economics to Reps and Senators. She said that it takes a while but finally many of them have their aha moment and get it. But, then in every case they say, “I can't say that” [publicly]. The problem is that gold standard thinking is entrenched into American [and I think] European economic thinking, despite the fact that the US has been off the gold standard since 1971. Politicians can't go against what “everyone” “knows”.