Saturday, May 4, 2019

Bernie's Sr. Economic Advisor is a Modern Monetary Theory Fan

I know; this is your shocked face, right?  Not even remotely surprising.  Stephanie Kelton is Senior Economic Advisor to Bernie Sanders' 2020 campaign.  She argues the government can create all the money it wants.

In a Tweet criticizing a comment from Deutsche Bank for saying that there was a limit to debt that could be created.  She said

Deutsche Bank initially said,"the more government debt you have, the less money you have available for government spending on health care, education, and social issues," which sounds pretty reasonable to me.  Dr. Kelton said that only applies if you're on that primitive gold standard (in fine print just above the date/time tag at the bottom).  She's arguing that money is infinite. 
Nope, that's not how it works. That is only true if you treat money as finite and budget as fixed pie.
It's interesting how she defends this.  She specifically picks things that aren't real.  By extension, I think her argument is that interest on the country's debt isn't real.  We just make up money to pay it.  If you owned US debt - Treasury Bonds, or other instrument - would you be happy to think they're just making up your repayment out of thin air? 
  • The carpenter can run out of inches of wood, nails or anything that is used to create real things
  • The stadium can run out of seats, food, and playing surface.  It can't give out points the team didn't score and retain any credibility.
  • The airline can run out of Frequent Flier miles they can redeem: they can run out of seats to put passengers in. 
  • The USA can run out of dollars if we want them to be worth something.  
A commenter to her tweet rushed to defend her, saying that MMT theory recognizes that real resources and real demand are what matter.  Really?  So you're saying any country can borrow any amount it wants and ignore the reality of paying the interest on their debt?  Or just the US? 

This has Venezuela written all over it - where the money isn't worth bending over to pick up out of the gutter.  Venezuela, Zimbabwe, Wiemar Republic...

Good thing America can't run out of zeroes to add to our currency.  Get your wheelbarrows oiled and ready. 

Stephanie Kelton in her day job as Professor of Economics at Stony Brook University.  As the author of the original article quipped, I bet she gives out perfect recommendations for every student who asked - can't run out of those, can she?  Which makes those recommendations worthless, too.


  1. My immediate thought was - A professor can't run out of A's.
    If I were in her class I'd demand my fair share. Let the Dept. Head worry about the schools credibility.

    On a more serious note this is why AOC walks around with an Econ degree and can't open her mouth on the subject without sounding like the village idiot. I ask Academia, "Have you no shame, sir? Have you no shame?"

    1. Academia just cackles while rolling naked on a giant pile of money.

  2. Technically Ms. Kelton is correct. The US Gov CAN create all the dollars they wish. What she apparently does NOT understand is that if we print enough of those dollars their value diminishes to the point where they aren't worth ANYTHING except perhaps as toilet paper ( assuming they don't clog up the sewers). Either she's GROSSLY ignorant, WILLFULLY ignorant or a LIAR. We have many many example just from the past century including Weimar Germany, Zimbabwe and RIGHT EFFING NOW Venezuela where the ruling powers printed money in massive quantities that was fact it's reached the point in Venezuela where the cost to print Bolivars exceeds their value. Either Ms. Kelton was unconscious during EVERY mention of this in history and economics class OR she is a typical commie demonrat.....a LIAR.

  3. Rule .223 comes to mind......HER "mind"

  4. The rich store their wealth in land, stocks, and government bonds. The middle class store their wealth in paper denominated in dollars and more paper. If the dollar is hyperinflated, the middle class is wiped out but the land, factories, and tax collection remain. That's nearly as useful as world war three.

    Can we say that in a perfect government ecosystem, the government parasite feeds from the citizen host forever, and the situation never changes? Just like Orwell described. Except in reality countries break down in 200 years. I speculate that one reason countries crash is because elite children no longer get taught kingsmanship, but instead get taught the gobbledygook the upper class are taught to prevent them from effectively competing with the elite. Like Modern Monetary Theory. The largest financial asset of the federal government is university student debt, most of which won't be collected because the students aren't productive enough to pay it off.

  5. Cute kid. Darn shame about the software.

  6. I agree with Dan: technically she is correct. However, what everyone is arguing about isn't the issue! What we can't run out of is WEALTH. The entire reason we have inflation or deflation is because for (a given level of perceived value) there are too many or too few units of currency exchange to service the amount of WEALTH.

    As WEALTH increases over time (it is created out of thin air by human ingenuity and effort) in civilized countries, the units of available currency to trade it with must increase. That is the nominal level of "printed dollars". Hitting that level is a fine art, and involves the honest assessment of the value of new wealth.

    And it is a mistake to believe that showering people with currency who won't do anything with it to add wealth is going to help the economy. On the other hand, printing money to build infrastructure actually DOES create wealth, so it likely won't have much effect on inflation.

    1. We can run out of wealth. Destroying wealth ans producers thereof is the whole point of most left-wing projects.

    2. Absolutely we can. One of the biggest problems with trying to generate a civilization is that destruction is almost infinitely easier than creation. It takes an enormous population of people who build things to counter the few that turn them to ash and rubble.

  7. How many historical examples does she need, Rome in the fourth century, Weimar Germany, Argentina, Venezuela? The list is endless, the results are always the same.