Thread by @MMTpodcast

“A core [MMT] insight is that money in ‘modern States’ — meaning, as Keynes wrote, for the ‘past four thousand years at least’ – is defined by government. Money is created (mostly) by public spending and bank loans.“ James K. Galbraith

bostonglobe.com/opinion/2019/0…

“Money is not something “out there” that the government must borrow from the public in order to function. It is created as government functions; only afterward, those who take payment may then trade the cash for a bond.”

“MMT is about the way the world actually works. It explains why big deficits do not drive up interest rates or ‘crowd out’ private investment, and why big governments in big countries don’t go bankrupt.”

“Contrary to mainstream wisdom, there is no ‘threshold’ beyond which public debts produce financial disaster.

For example, Japan has a debt-to-GDP ratio of 236 percent (in 2017), with a large share held by the central bank. The yen has not collapsed. ”

“During the Global Financial Crisis, the US Federal Reserve Bank ‘monetized’ both the public and even more (in trillions!) the private debt [QE]. The dollar did not collapse. Why not? MMT explains: Countries with effective tax systems can support the value of their money.”

“[Larry] Summers objects that since government today pays interest on bank reserves, deficits are not cost-free. But MMT points out that government pays interest (as well as for everything else) by the electronic version of writing a check. This actually doesn’t cost anything”

”Again, money is created when you deposit the [government] check. You can’t do this, but governments can. I once said this at the Council on Foreign Relations in front of former Treasury secretary Robert Rubin. He did not dissent.”

“What, then, is the threat [posed by MMT]?

If the mainstream’s weaknesses +the truths of MMT were admitted... Control over the paradigm, over training of future economists, over the minds of the young, might begin to slip away. Hell, it’s already happening.“
James K. Galbraith