Introducing reality to your government debt & deficit debates: Modern Monetary Theory (MMT)

[El Prezidente Kaboom]

From the get-go, conservatives are going to be frightened..but all I have to say to that is BLAME YOURSELVES. This is, in fact, your system...your politicians have been in charge of designing it and running it for over 40 years....

Basic principles of MMT:
1. Federal government is not a household. It's a sovereign issuer of its own fiat, floating currency.
2. Federal government spends before it taxes.
3. Taxes do not pay for spending. Taxes manage demand and create demand for our currency.
4. Bonds do not finance deficits. Bond issuance acts as a reserve drain to allow the Fed to manage interest rates. Bond auctions are highly orchestrated...Treasury + Fed are targeting reserves they know are in the system...as a result of deficit spending.
3&4 consolidated: Taxes and bonds are not fiscal financing tools.
5. Bonds are like opening a savings account with the Treasury + Central Bank.
6. Over deficit spending with full employment and full output will result in higher prices, but we currently have just the opposite--massive unemployment & a demand-output gap. And even with full employment and full output, the private economy still needs government deficits to grow....it just needs smaller deficits and less spending.

Now, MMT is not about ideology or making value choices. It's focus is on understanding how the system actually works.
From this reality, conservatives and liberals are welcome to suggesting different policy routes...and there are left-right divisions amongst those who accept MMT. But the federal government is not a household, and MMT holds that anyone who suggests policy from that basis is dead wrong.

The US Congress might be broken..but until revolution or high-water the USG is never broke! The Treasury is open...the economy is operating at 13-14 trillion annually....and we got problems that austerity is not going to fix. For conservatives who afraid of inflation....make the rich pay more in taxes.....your tax cuts are loading up world markets with excess funds to speculate and bid up prices! But for goddsakes don't run a government surplus!

Net government sectoral deficits=net private savings!

The national "debt" clock could just as easily be referred to as the "world dollar savings clock."

A balance budget amendment would be national suicide. The financial system needs annual government "deficit" spending to add net private gains and provide stability to the private financial system.

So here's a link to a post on Naked Capitalism about MMT: <http://www.nakedcapitalism.com/2010/08/guest-post-modern-monetary-theory-%E2%80%94-a-primer-on-the-operational-realities-of-the-monetary-system.html>
MMT: A Primer on the Operational Realities of the Monetary System
by Scott Fullwiler...associate economics professor at Wartburg College

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