I read books so you don't have to
Let's get a couple things out of the way: First of all, this is not a book about Modern Monetary Theory (MMT). Eighty five percent of it is middle-class neoliberal grievance-airing, a condescending outline of every hand-wringing, pearl-clutching economic issue that a self-centered economics professor at a SUNY backwater might read in The Atlantic. Note that I agree with these grievances, and have read every.single.book Ms. Kelton references, but that I have yet to read as superficial and self-serving a summary as this one. Note also that her focus is squarely on I-me-mine; issues such as eviction or equality or health care aren't addressed.
Another ten percent of this book is disheartened, scolding disapproval of every person Ms. Kelton attempted to explain MMT to while employed as the Sanders campaign's pet economist in 2016. She spent a good nine months telling congrescritters that water was wet and not a single one of them went for a swim with her, which is a sign... well, we'll get to that.
So maybe five percent of this book is "here's MMT". And that five percent is stupid. Stephanie Kelton is stupid, her arguments are stupid, and MMT is stupid. I don't mean that in the nondenominational "I don't like it" way we tend to use "stupid" these days, I mean it as "designating a mentality which is considered to be informed, deliberate and maladaptive."
I was not aware of any books on MMT prior to this one. Every investment professional or economist I've ever read, however, treats MMT like the fucking plague without really describing it so an actual book would be great. And I call Ms. Kelton and her ideas "stupid" after real consideration: you simply cannot reach her conclusions without a deliberate and practiced immunity to reason. This is obvious after very few pages, I might add, but I finished the whole thing mostly so I could say I did. I suspect it will be rhetorically useful to be able to say I read Kelton, much like it's useful to be able to say I read Piketty, except that Piketty is fundamentally here's all the historical data I could find, here are some trends I noticed, so here are some correlations we can draw.
Deficit Myth never breaches a "checkmate atheists" level of reasoning.
So with all that said, what is Modern Monetary Theory(MMT)? Well, there are tenets, which we can discuss:
1. Any government whose debt is delineated in its own currency can never run out of money.
2. The purpose of taxes is to control inflation.
3. Unlike households, governments can spend money and then collect the funds necessary to cover expenses.
4. Unemployment of any kind is a policy decision and full, meaningful employment can be mandated.
That's it. That's MMT in a nutshell. If you've studied macroeconomics at even an "I read a Vox article once" level, your eyebrows may be creasing right now. A book with "Modern Monetary Theory" in the title could reasonably be expected to examine, investigate, debate, explain and defend these four tenets but this book does not. Well, not at the level an economics book should. Ms. Kelton legit references Sesame Street within the first 20 pages:
And the condescension continues at that level for the rest of the book; those who do not accept MMT are clearly idiots in Ms. Kelton's mind and if her arguments are uncompelling it's because no one has even the child-level intellect necessary to comprehend the brilliance of MMT, not because her arguments are facile. But that's just annoying, it's not rhetorically fatal. The fatality is that she cherry-picks arguments like a person with no object permanence, as if the broader implications of her examples are legitimately beyond her reasoning.
Take tenet (1), for example. Ms. Kelton makes much of the fact that there's nothing stopping any government from printing all the money they need, so long as they don't owe anyone any debt in money they don't control. Nowhere in this book is the word "hyperinflation" used or discussed. "Weimar Germany" is unmentioned. "Great Depression" is never discussed, although Ms. Kelton does quote John Kenneth Galbraith from The Great Crash. Instead she mentions that Greece ran into currency troubles because they were on the Euro, and that Russia defaulted in 1998 not because they didn't have the resources to prop up their spending but because they borrowed too heavily from foreign governments.
Tenet (2) is likewise advocated in a sideways fashion. Taxes exist to control inflation. So how do we control inflation? We disband the Federal Reserve and give it to Congress. How does Congress control inflation? They raise and lower taxes. Instantaneously? How often should we pay taxes in such a way that the economy can be moderated? What kind of taxes are we talking about? Federal? What about state taxes? What about sales taxes? What about investment taxes? She never examines this issue, nor the fact that we're talking about a body that debated Terry Schiavo's feeding tube for a month and debated Benghazi for the lifetime of a giant redwood. Naah these are the guys that are going to moderate inflation through taxation. Handled. Next.
Tenet (3) argues that the government can spend whatever the fuck it wants and then pay for it later. She makes this big song'n'dance about "yellow dollars" and "green dollars" where "yellow dollars" are what everyone else on the planet calls "bonds." Need to pay for full employment? Write the checks, and then sell bonds. Debt service? Never discussed. Fluctuating bond prices? Nowhere in evidence. There's a passage whereby Ms. Kelton fails to convince a congressman that the US could default on all bond debt without impacting any part of the economy because, you see, he's too afraid to challenge the status quo. The amazing thing is, she legit brings up Breton Woods and the Nixon Shock as an example of how everything changed for the better when we kicked the gold standard to the curb, but doesn't address the fact that we did it because we spent too much on the Vietnam War, and doesn't address the fact that doing so caused six years of crippling inflation. She's like a woman talking about how the most prominent feature of a unicorn is its hoofs. Cashflow? Nowhere discussed. Fractional reserve banking? Nope. Multiplier effects? None.
Tenet (4), though, the wonder of full employment, is where some truly breathtaking leaps of faith are made. Ms. Kelton, you see, feels that the solution to unemployment, underemployment, and living standards is for the government to guarantee a living wage job to anyone who wants one. She thinks fifteen an hour ought to do it, because "inflation" is this fuzzy idea that's tied to "taxes" which only exist as the grudgingly necessary counterpart to the practice of writing whatever checks you need, when you need them. What are these jobs? We'll let the local municipalities decide that. This from a woman who brings up redlining as a non sequitur a couple times and legit lashes out at The New Deal for being racially biased. Great Leap Forward? Never mentioned. This is a book in which the word "Soviet" never appears. No - when we talk about mandatory full employment, what we bring up is Argentina in 2003, but not Argentina in 2001, nor Argentina in 2002, nor Argentina in 2005. Argentina didn't enter a crisis because they'd outstripped their resources, and it didn't leave a crisis because they took on a shit-ton of foreign debt. Nope. That's pure MMT, baybee.
And that's kind of where we're at: This shit is pure if-you-build-it-they-will-come Laffer Curve Communism.
That's not an accident, by the way. Ms. Kelton's guru and mentor is Warren Mosler, designer and entrepreneur behind some of the ugliest kit cars ever made (look it up). She was hanging out at his house because of course she was and he told her the story about how he taught economics to his kids by paying them in business cards and they were all wtf dad and then he said lol and if you don't give me ten of my business cards a week I'll kick you out and lo and behold, it doesn't matter how many business cards Warren Mosler has, what matters is that his kids can't find anywhere else to live and foreign exchange and black markets are figments of your fucking imagination. Mosler?
- Excited to share his various economic theories, Warren met economist Arthur Laffer through a tip from Donald Rumsfeld. Arthur suggested Warren to seek out postkeynesian economists L. Randall Wray, Bill Mitchell, and Stephanie Kelton to discuss his ideas. These post-Keynesian economists taught Mosler about chartalism, and in turn Mosler convinced the economists that taxation and borrowing does not finance US federal government spending.
Voodoo economics: not just for Republicans anymore
So. Governments can pay for anything, the economy is a closed system, Soros never broke the Pound, full employment has never been attempted, and the Great Depression never happened while the reason the Great Recession lasted as long as it did is because the Obama administration didn't give enough money away (and probably should have given it directly to the middle class). Budgets need never be balanced, taxes can be raised instantaneously and controlling inflation is as easy and fundamental as adjusting a thermostat.