Thread by @emanueleo73

The #deficit #myth #deficitmyth by @StephanieKelton #MMT modern monetary theory
Myth N. 1: The #state should budget like a #household
#RealityCheck : unlike a household, a #SovereignNation, which owns its national #centralbank, issues the #currency it spends

Myth N. 2: #deficit is evidence of #overspending
#RealityCheck: look to #inflation for evidence of over spending

The purpose of #taxes is not to pay for #government expenditures but to help rebalancing the #wealth distribution #MMT

Myth N. 3: The public #debt is a problem
#REALITY: the national #debt poses no financial burden whatsoever if you can print your #money

Example: the #debt #crisis in #Greece happened because "Greece lost the power to print their #money. If they could print #drachma, they would have other problems, but they would not have a debt #problem". (#WarrenBuffett)

Financial #markets can't push a #SovereignNation like #Japan or the #USA into a #debt #crisis because their #centralbank(s) can override any unwanted move in #interest #rates. They could also retire the entire #debt using nothing more than a #computer #keyboard #Kelton #MMT

For example half of Japanese #public #debt has been paid off by its #centralbank and it could easily go all the way to 100%. It could be done tomorrow, without collecting a #yen from #Taxpayers (@StephanieKelton) #Kelton #deficitmyth #MMT

The #fiscal #surplus sucks #money out of the #economy. Fiscal #deficit does the opposite. #hystory evidence tells us. (Prof. #Thayer, #pittsburg #university)

If we want to make the national #debt disappear, simply let the #centralbank buy up #Government #bonds (Prof #Lonergan @ericlonners). It can be carried out using nothing more than a keyboard at #FED #MMT #economy

Myth N.4 : #Government #deficit crowds out private #investment, making us poorer.
REALITY: Fiscal deficits increase pur #wealth and collective #savings
#MMT @StephanieKelton

From a #MMT perspective, the purpose of issuing #public #debt via #bonds is not to finance #Government expenditures, which have already taken place, but to prevent a large infusion of #reserves from pushing the #overnight #interest #rate below the #FED's target level

The loan able funds #theory is simply wrong. #fiscal deficits, with or without #bond sales, do not mean an inevitable increase in #interest #rates @StephanieKelton #TheDeficitMyth

The #Government of a real #soveraign #Country can issue #bonds to the #market at any #interest #rate its #centralBank chooses to enforce #MMT

A #nation with its #soveraign #monetarypolicy trhough its #centralbank retains the ability to move #rates lower even if the #deficit soars. It is a reality that should be obvious to everyone over the last decade #thedeficitmyth #MMT @StephanieKelton

A #currency issuing #Government doesn't need to borrow its own currency from anyone in order to #spend #MMT #economy

In spite of most #economists say, there's simply no pteordinated #relationship between #fiscal #deficit and #interest #rate. The #government can issue #bond to the public ay any #interest #rate the #centralbank chooses to enforce #MMT #thedefictmyth @StephanieKelton

Country like #italy, along with the other members of the #eurozone, gave up their #soveraign #currencies in order to use the #euro. Since they can't issue the euro, these governments must cover #fiscal #deficits by selling #bonds.

Their #risk increased as they have to repay bondholders in a #currency that they could no longer issue themselves. This could become painfully... @CCFCattaneo @StephanieKelton #MMT

Countries that fix their #exchange #rates sacrifice control of their #interest #rates. From a #MMT perspective, this explains the very high interest rates paid by #Governments with perceived #default #risk in fixed exchange regimes. #thedeficitmyth @StephanieKelton

When an external (i.e. #currency) #devaluation isn't an #option, #countries often pursue internal devaluation as a way to try to "win" at #trade. The #neoliberal term of #art for this #strategy is #structural #reform.

A #structural #reform is a (#neoliberal) polite way of describing an #agenda aimed at driving down #labor #costs (#wages and #pensions) to increase #competitiveness by reducing the #production costs #MMT #thedeficitmyth @StephanieKelton

The #MMT #solution to involuntary #unemployment is to introduce a #job guarantee #scheme that establishes a legal #right to a good job at good #wages with good #benefits @StephanieKelton

One of the most important features of a #job guarantee #program is that it maintains a form of full #employment by immediately rehiring the unemployed into #public #service #work, providing them with #income and re #Training #MMT #way

In this way, the #job guarantee can serve as the core of a response to both #freetrade and #trade #war. With a job guarantee, free trade is no longer a threat to full employment anf trade wars are no longer necessary to prevent #unemployement @StephanieKelton #MMT

Some nations have weakened their #monetar #sovereignty, either by:
1) pegging their exchange #rates (e.g. #Venezuela, #Bermuda, #Niger)
2) abandoning their national #currency (e.g. all nineteen #countries in the #euro zone, #Ecuador, #Panama)
or...

3) borrowing heavily in US #dollars or other foreign #currencies (e.g. #Argentina, #Turkey, #Ukraine, #Brazil).
Doing any of these 3 things compromises a #nation 's #monetar #sovereignty and diminishes it's #policy flexibility
#MMT

Most #developing #economies are at the weaker end of the #sovereignty spectrum. Even those that can issue a #fiat #currency usually can't afford to ignore #fiscal and #trade imbalances. That's because most poorer #developing #nations rely on imports to meet vital social needs

Exporting cheap #labor & #Commodities, while importing expensive high-value items (such as #medicines, #technologies), tends to leave #developing #countries with perpetual #trade #deficits. The problem is that there isn't a permanent appetite for dev. countries' financial assets

That's why developing nations will be forced to borrow #USD and other foreign #currencies they don't control (=#print). They get into real trouble when something compromises their ability to borrow on affordable terms enough #foreign exchange to finance #imports & foreign #debts

The #IMF, #WTO and #WorldBank have no commitment to full #employment around the #world. Instead, they tend to recommend drastic cuts to #Government expenditures (#fiscal #austerity) and tight #monetar policy (higher #interest #rates) to raise the value of their #currency

The #IMF frequently recommend that #developing #countries #peg the value of their #currency to a stronger foreign currency like #USD, #EUR, etc. The actual results from this package are perverse, as these countries have sacrificed their #monetary #Sovereignty @StephanieKelton

When a #Country cannot acquire sufficient #foreign #currency to defend the #target #EXCHANGE #rate, its currency #peg collapses, as the country cannot favorably convert #domestic currency to repay #debt denominated in foreign currency. #hyperinflation can set in, #cost of...

... #imports skyrocket in #price. Then #IMF 's recommended #austerity and tight #monetary #policy crush the #domestic seconomy, driving up #unemployment and #poverty, all in the name of luring in another batch of #neoliberist #investors who will start the whole #cycle over again

One #Country 's #surplus is another #Country' s #trade #deficit, so by definition not everyone can win in that way at once. But it doesn't follow that the deficit country has to bear economic losses if it gets its policy matrix right #MMT. That's why ⬇️

#MYTH N. 5: the #tradedefict means #Country is losing
#REALITY: the #monetary #Sovereignty can supply all the #currency its domestic private sector needs to reach full #employment and it can supply all its own #currency the rest of the #world needs to build up their #reserves

In this way a #Country with its #monetary #Sovereignty can protect their #trade #flows. #currency.
#thedeficitmyth #MMT

The @ilo (International #labour organisation) estimates that (before the #COVID19 #economic #crisis) almost 200 million #people around the #world were involuntarily #unemployed.
#employment should be a #human #right as envisioned by the @UN 's univ. declaration @StephanieKelton

The so called #freetrade agreements fovour wealthy #investors around the #world, while leaving #workers and #environment behind. Furthermore, many of them include #isds mechanisms (investor-state dispute settlement) based on a parallel system of #justice

#MYTH N. 6: #entitlement programs like #social #security and #medicare are financially unsustainable.
#REALITY: as long as a #state has #monetary #sovereignty it can always afford to support this programs. What matters is the #economy 's long-run capacity to produce real #goods

... and #services #people will need. Receiving #entitlement benefits isn't a moral failure or a sign of weakness. Everyone deserves to have #medical care, #assistance if they lose a #job or become old or disabled #MMT @mmt @StephanieKelton

The #MMT shows us why we don't have to put one group against another in some desperate and unnecessary attempt to solve a #financial #crisis. It tells us why the biggest challenges facing these programs have nothing to do with #affordability #thedeficitmyth

A #currency issuing #state is never financially constrained. As long as the payment obligations are denominated in its own unit of account, its #centralbank can always afford to support #entitlement programs

Mr. #Greenspan said "there's nothing to prevent the #Government from creating as much #money as it wants and paying it to #somebody" #helicopterMoney #MMT

When we talk about whether #entitlement are sustainable, we need to think in terms of the #economy 's real productive #capacity. We need to think about how the economy will absorb that #money, not from where that money will come from. The real #challenge is to manage #inflation

The #dependecy #ratio might be a concern not because there won't be enough #money but because we might struggle to make enough of the real #goods and #services that #people will want and need in the future #MMT @StephanieKelton

The big #challenge is making sure that the #economy is producing the right #output mix over the coming decades. The problem isn't a lack of #bytes in some electronic l #spreadsheet. The problem is a lack of #vision, of #strategy. #MMT #thedefictmyth

The real #deficits that matter are:
1) lack of #savings (#people aren't able to save)
2) #healthcare coverage
3) disparities in #education
4) inefficient #infrastructure
5) #climate
6) #democracy: see the #Gini coefficient that measures #income inequality
#thedeficitmyth #MMT

#MMT doesn't take a #RobinHood approach on #tax #policy. To restore a more balanced distribution of #wealth and #income, we need a #labour #law to strengthen #unions, a #licensing law that cut down #oligarchs' use of existing laws to stifle #competition and siphon #money from us

At the end of the day, the #MMT offers a realistic description of how modern fiat #money works. For the #currency issuer, money is no object. It doesn't exist in some scarce physical form, like #gold, that the #Government needs to "find" in order to spend. #thedeficitmyth

The current system relies on #monetary #policy to actively dial #interest rates up and down in an effort to discover the "invisible" #NAIRU that is supposed to keep the #economy on an even keel. #MMT considers #fiscal policy a more potent stabiliser @StephanieKelton

Any #currency issuing #Government has the power to eliminate domestic #unemployment simply by offering to hire the unemployed. The unemployment #insurance is considered the most important automatic stabiliser we have today @StephanieKelton

The #job #guarantee is the #MMT #solution to the real #deficit #problem: the chronic jobs deficit. Why trapping millions in #unemployment as a sacrificial tribute to the so called "natural" #rate of unemployment?
#thedeficitmyth

According to #MMT #prof @StephanieKelton, the #Government needs to carry out a #job #guarantee #scheme, to establish the #right to a living #wage job. This would strength the #labour's bargaining power, reduce racial inequities, decrease #poverty and build stronger #communities

The #MMT teaches us that if a #currency issuer #nation has the real #resources it needs, then the #money can always be made available to accomplish its goals. That is the beauty of the #sovereign #currency, also according to Mr. #Greenspan and Mr. @benbernanke

The #government's spending capacity is infinite, but the #economy's productive capacity isn't. Every economy has its own internal speed limit. Once it reaches its full #employment potential, any additional spending (from gov or domestic private sect or #export) carries #inflation

The #nobel prize winner Mr. James #Tobin said the #deficit could be any size, the #debt could be any size, provided they don't cause #inflation
Our #technology and our material #resources are the only things that can limit our #possibilities (not #money)
#MMT
#people's #economy