Thread by @ahokasjaj

Some remarks on @StephanieKelton great book "The Deficit Myth".

1) It is a fabulous popularization of #MMT (neo-chartalism).
2) The division between Currency-User and Currency-Issuer is explained in a very clear manner - will be THE eye-opener for many.

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3) Key principle (of #MMT) is to redefine "balanced" in economic policy and move the focus from balancing government spending and taxes to "balancing" full employment and price stability.
4) Changing NAIRU oriented policies to Job Guarantee is the main tool.

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5) Ditching the NAIRU (or any natural unemployment rate) concept is very important also theoretically. #MMT claims that there is not straightforward relation between unemployment and inflation, the latter being much more complex phenomenon than mainstream view assumes.

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6) The Job Guarantee (#JG) or targeting unemployment is actually the empirical means to find out how much there is slack in the economy and how far we are from full employment situation. The JG is in the core of MMT theoretically and politically.

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7) The dichotomy Currency-Issuer vs. Currency-User is a powerful tool in analyzing government debt and recent sovereign debt crises (i.a. Greece). Problems of the eurozone could have been (and were) easily anticipated using this division as a basis for pre-examination.

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8) The recent discussion on government debt sustainability (Blanchard et al.) focused on the (in)equality of GDP growth (g) and interest rate on government debt (r) is not that interesting as the latter is always a policy choice for a Currency-Issuer.

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9) The fear of government deficits crowding out private investment (by eating virtuous savings) is handled with double-entry accounting (Godley style) and by portraying the actual market of US government bonds to debunk the loanable funds theory. Fear no more.

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10) Furthermore, if interest rate is policy variable for Currency-Issuer, why would deficits lead automatically to higher rates thus cutting back private investment? @StephanieKelton argues convincingly that deficits are good for investment in many ways.

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11) The most important question is of course, how to become a Currency-Issuer. Kelton argues that "monetary sovereignty" is a spectrum and there are many ways to achieve favorable position. Issuing floating currency and having your debt denominated in that is not enough.

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12) US is special case among the Currency-Issuers operating with world's leading reserve currency . But many countries with strong economic structures and own currency are not far away. Developing countries usually struggle to become Currency-Issuers.

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13) When you look at government spending, taxes, deficits and debt through #MMT lens, you are making yourself room to acknowledge more serious deficits.
14) The main purpose of the book is to get people interested in this kind of lens.

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15) To sum up: @StephanieKelton has published a great primer to #MMT nicely connected to contemporary policy discussions. The book clearly shows what MMT is all about: recognizing the powers of Currency-Issuer. Forget "monetization of deficits" - that is not #MMT.

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16) #MMT suggest using Currency-Issuer's ALREADY existing powers to achieve full-employment with price stability. It is done NOT by giving politicians unlimited spending powers but with automatic stabilizers like the #JobGuarantee.

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