Thread by @allenf32

people seemed to think the inline thread was "good" or something 🤷‍♀️

so here’s another attempt to improve understanding and shift our broken thinking about what "money" is.

THREAD

https://twitter.com/StephanieKelton/status/1321180774675238912

there is some splendid semantic chicanery going on here because there are three distinct, specific meanings of "deficit" under one general meaning.

first, Kelton invokes the connotations of the third specific meaning, "a deficiency or failing" ...

https://twitter.com/StephanieKelton/status/1321180777858695174

... then she gives an example using the - completely different - second specific meaning ...

https://twitter.com/StephanieKelton/status/1321180778995265536

... while ignoring that the only definition anybody ever means in the context she is actually talking about is the completely different again first specific meaning: "an excess of expenditure or liabilities over income or assets in a given period."

this might seem petty but it is key to her entire charade. her argument is entirely verbal but almost every key word or concept is misused. as a result, the logic seems sound and slick, and yet it is entirely unmoored from reality.

it describes nothing.

Kelton's view of "the economy" seems to be that it is a game that is played between economic actors, which one "wins" by earning more money than one spends and loses by spending more than one earns.

https://twitter.com/StephanieKelton/status/1321180781155393537

this is a seductive view, but a false one.

money is not an end, but a means. money represents past economic activity performed and deemed valuable, but not yet redeemed for equivalent perceived value.

this may have arisen because of a lack of spatially coincident ...

... opportunities for consumptive exchange. consumption goods directly exchanged are fundamentally expressions of the time and energy used to create them - or that *would need to be used* by the purchaser, given differing skill sets and specializations.

money facilitates the matching of time and energy over space.

however, time and energy can also be put towards the creation not of consumption goods, but goods that allow for the creation of consumption goods with less time and less energy ("capital").

but valuing capital is inescapably more complex than valuing consumption goods, because it takes time to create capital. this creates two problems: i) you can't know what will change over this time and hence how the consumption preferences of the transactors will change too.

and ii) the transactors may want to, or need to, consume before this time period is up.

both problems make it exceptionally unlikely that economic actors will be willing to contribute the time and energy necessary to create all but the simplest capital.

they would effectively be lending time and energy on credit of entirely uncertain terms.

money solves this.

the *far, far more important* use of money is to facilitate the matching of time and energy over time.

money is universal credit and, as such, it allows us to exchange present, knowable time and energy for future, unknowable time and energy.

which is to say it allows for the creation of capital. which is to say it allows for civilization.

once again, money is a means, not an end. to think of it as a "score" and accumulating money as "winning" is highly suspect.

creating value for others is the end, either directly through trading consumption goods or services or indirectly through creating productive capital.

with this in mind, back to Kelton. there are three serious problems with this next stage in her exposition.

1) if money represents past economic work performed and deemed valuable - fundamentally, time and energy - ...

https://twitter.com/StephanieKelton/status/1321180782392737792

... then the idea that government can will money into existence implies it can will time and energy into existence.

money may be the "score" but the game that gives rise to the score is the creation of capital. can the government will capital into existence?

well, no ...

but anyway,

2) the metaphor itself is incoherent:

scorekeepers "add or subtract scores" based on what happens *in the game*!

the stadium doesn't "award points" - the teams *earn points* based on the rules and the stadium's scorekeeper reflects this reality.

the incoherence of the metaphor perfectly captures Kelton's broader misunderstanding.

the score in baseball captures what has actually happened in the game. if you unilaterally change the score, you are just lying about reality.

if a baseball game is 1-0, you don't make it better by saying it's actually 16-14.

what matters is the game itself.

what matters in economic exchange is the reality of the creation and accumulation of productive capital, not the lies you tell about it.

3) this incoherence is jarring for another reason still: if the "scorekeeper" decided to meddle with the score for political reasons, people would know and could just ignore it.

it's easy to accurately score a baseball game you are watching if you know the rules.

but the situation with money is quite different: its function for an individual economic actor is precisely to reduce the unknowable complexity of aggregate economic behavior across space and time down to the knowable and actionable.

you can't "watch the economy" and deduce the correct money the way you can watch a game of baseball and deduce the correct score.

hence, the lies have an impact.

back to problem 1), no, of course government cannot will capital into existence.

that is not what is happening when it creates money. what is happening is that it is extending itself credit on the unwilling and unknowing behalf of everybody else.

no work has been done that anybody is willing to redeem, and yet a token to redeem it is now circulating.

and nobody can identify this token in order to reject it, hence everybody is forced to act as if this work has, in fact, been done; as if more can be consumed than has, in fact, been produced.

you can think of this in cryptographic terms, as I did below.

Bob does not know his message of value transfer is from Alice and only Alice; it is not from anybody. government has executed a man-in-the-middle attack on the structure of economic exchange.

medium.com/@allenfarringt…

the attack takes time and energy from those who had preferred to direct it towards the future and directs it instead towards the present.

this discourages long-termism, and hence capital accumulation.

people are tricked into consuming when they would otherwise produce.

in other words, no matter how noble the cause (and, to be fair, you can come up with some pretty noble causes, as Kelton does shortly) there will be consequences.

BUT HEY NEVER MIND!

Kelton:

it's nice she now admits what "deficit" really means, but note she strongly implies without saying outright the conflation of the score with the game.

https://twitter.com/StephanieKelton/status/1321180783860764675

notice she also adopts a lingo around "adding" and "subtracting" that avoids distinguishing between the government spending money it has and creating new money.

both are "adding", we are told.

this may be the most densely and deliberately confusing bit of all. it requires unpacking.

the first statement needs to be translated to be made sense of. what she means is, "when he spends more than he earns" ...

https://twitter.com/StephanieKelton/status/1321180786373103616

... which is not "meaningless" at all - the difference ("deficit" 😲) needs to be made up either by borrowing or by creating new money.

debt must be paid back, so creates real costs, while we have covered the perils of creating money at length.

there is also the tasty obfuscation of whether "the government" is just "the scorekeeper" (the entity that politically re-assigns money on top of the results of the "game") or what is usually called in English, "the government".

because the government clearly has costs and is also clearly the same entity that will be making the money creation decisions under Kelton's regime, and so we might reasonably suspect might have political motivations for how it goes about doing so ...

BUT HEY NEVER MIND!

of course, the gravest oversight is the implicit assumption that there is only one set of "points" out there, and that people using other "points systems" won't realize our points are not very good at facilitating the exchange of time and energy, and start to value them less.

you could very easily end up in a particularly nasty spiral in which the ability to facilitate exchange across time with our points is so impaired that certain complex capital goods simply aren't created within our economy and need to be imported ...

... but those who do create them don't value our "points", for the same reasons we can't create this capital, so we need to create more points to afford it, which exacerbates the original problem.

it's a hole we can't lie our way out of.

BUT HEY NEVER MIND!

having thoroughly confused her audience to the effect that there will be no consequences of any of this, she feels comfortable getting fully political with all the things she would buy having secretly extended herself credit on everybody else's behalf:

https://twitter.com/StephanieKelton/status/1321180787706908673

I mean, why not a bajillion points while we are at it? what are you, UNCARING?!?

also, notice the slipup in applying the dimensions of both dollars and points to one number. it's not that important, but it's amusing.

https://twitter.com/StephanieKelton/status/1321180789174882305

highly insensitive in the year John Conway died, but whatever.

https://twitter.com/StephanieKelton/status/1321180790659665920

it tells you the government either extended itself $3.1tn of credit on your unwilling behalf or actually borrowed this money but will almost certainly be unable to repay the principal and so will wait until later to extend the credit.

https://twitter.com/StephanieKelton/status/1321180792123498500

aaaaaaaaaand, there it is.

there is absolutely no reason to believe this will be true given Kelton is fundamentally committed to abusing the premises on which it otherwise might.

https://twitter.com/StephanieKelton/status/1321180793641832448

again, the central conflation. it's not that there is not enough wealth or goods or capital; it's that there is not enough money.

the problem isn't the game, the problem is the score!

https://twitter.com/StephanieKelton/status/1321180795038556170

and notice it's pretty sneaky to say that people can disagree about what it is "worthwhile" government spend if one has first admitted that it doesn't need to have that money in the first place but can feel free to extend itself that credit on everybody else's behalf.

sure, it's possible people can disagree about this, but Kelton's entire enterprise here is to *make sure* they do not understand what it is they are disagreeing about.

also, the idea that we are "not close to inflation" is laughable.

compared to 10 years ago, try buying a stream of cash flows, or a house, or, y'know, the basic cost of living ...

chapwoodindex.com

and remember, kids, the score is not the game 😊

https://twitter.com/StephanieKelton/status/1321180796431093760