Elon Musk Discovers the "Magic" of Modern Money

Yesterday, U.S. Senator Ted Cruz (R-TX) shared a clip from a podcast interview he recorded with Elon Musk. Cruz called it “an absolute bombshell.” The clip went viral because Musk claimed that his band of merry infiltrators (DOGE) had discovered something truly revelatory: the federal government has “magic money computers”. Fourteen of them, to be exact.

These “magic money computers”, as Musk calls them, “can just make money out of thin air.” Daddy DOGE seemed genuinely gobsmacked. “It just issues payments.” “They just send money out of nothing.”

Hold onto your hats and clutch your pearls, because Musk and his team have just exposed a huge scandal.

Not

I’ve lost track of the number of people who tagged and/or messaged me to say something like, “Holy cow! Elon just let the cat out of the bag!” I guess they missed it when I shared this clip of Musk saying basically the same thing last month. He was talking about the federal government’s finances, and he blurted out:

You’ve got a situation where the checks never bounce. They’ve got an infinite money printer.

So even before stumbling onto these fourteen “magic money computers”, Musk had already publicly declared: (1) that the federal government can’t run out of money; (2) that it can write really big checks and they won’t bounce; and (3) that money can be conjured into existence at will. (At this point, you should be asking yourself why he keeps saying that “America is going bankrupt” and Social Security is “the biggest Ponzi scheme of all time” when he admits that the checks never bounce because you’ve got an infinite money printer.)

If you tell the average person that the federal government has an “infinite money printer,” they’ll probably envision something like this.

And this kind of machinery is used to create some of the money the government issues, but the vast majority is created electronically, using nothing more than a computer keyboard. There’s nothing “magic” about it, although the government’s computers are special in the sense that they’re plugged into a network that allows them to make payments by “sending money out of nothing”.

I guess Elon missed the MEMO from various central bankers—Alan Greenspan, Ben Bernanke, Jerome Powell, Neel Kashkari, Mario Draghi—all of whom have acknowledged that this is how modern money works. I guess he also missed thousands of articles, books, chapters, working papers, etc. that MMT scholars (alone or in collaboration with others) have written or recorded over many decades.

The point is, there’s no “bombshell” in what Musk told Senator Cruz.

As Mosler likes to say, “the government spends by changing numbers (up) in bank accounts.” The money doesn’t “come from” anywhere. It materializes out of nothing, just like the points that are awarded by the scorekeeper in a football match.¹ Bloomberg’s Joe Weisenthal has interviewed most (if not all) of the leading MMT scholars over the years, so he immediately saw the humor in Musk’s “revelation.”

Nothing New Under the Sun

No one who read Warren Mosler’s Soft Currency Economics almost thirty years ago would be the least bit surprised to learn that present-day governments “spend money out of nothing.” And if you’ve read Randy Wray’s Understanding Modern Money, Michael Hudson’s Temples of Enterprise, or David Graeber’s Debt: The First 5,000 Years, then you know that governments have created “money out of nothing” from the very beginning.

You might even say that the ancient Mesopotamians invented blockchain technology some 4,000 years ago. Instead of a network of computers, these ancient societies used clay tablets to securely record transactions that were transparent, immutable, and resistant to tampering. You find the same kind of early blockchain technology throughout the Middle Ages, when English kings issued hazelwood tally sticks as a form of tamper-resistant currency with its own embedded record-keeping technology.

In fact, Mesopotamian clay tablets were so ubiquitous that scientists are still discovering them today. Just last week, The Guardian ran this terrific article about an impeccable new discovery.

Notice the word “spreadsheets.” This is exactly how MMT teaches us to think about the monetary system—as a complex system of intertwined balance sheets, designed to keep track of who owns what and who owes what to whom. Over the millennia, we have upgraded money’s operating system. We have changed the technologies that are used to issue and keep track of government spending, but the essence of money has not changed. It is no more “magic” today than it was 4,000 years ago. From The Guardian:

The red tape of government bureaucracy spans more than 4,000 years, according to new finds from the cradle of the world’s civilisations, Mesopotamia.

Hundreds of administrative tablets – the earliest physical evidence of the first empire in recorded history – have been discovered by archaeologists from the British Museum and Iraq. These texts detail the minutiae of government and reveal a complex bureaucracy – the red tape of an ancient civilisation….

“These are the spreadsheets of empire, the very first material evidence of the very first empire in the world…”

Money was invented for the purpose of moving real resources into the public domain. From the very beginning, it was conjured into existence to build armies, temples, palaces, navigable waterways, granaries, roadways, bridges and more. Whether they used “imprints on Mesopotamian clay tablets, notches on sticks, writing in chalk on slate or, later, fountain pen on parchment paper, stamped and milled coins, inked paper notes, [or] today’s electronic entries store on computer hard drives,” powerful collectives have issued payments out of nothing to maintain the functioning of their societies and further their broader ambitions.

The DOGE “bombshell” is tantamount to a team of archeologists declaring, "I found 14 magic money tablets that send money out of nothing." Nothing new under the sun.

1. When I say “nothing” I’m using the term loosely (the way Musk intends). MMT scholars have explained from the beginning that money is a creature of the state, and that requires understanding the legal and political underpinnings of money as a unit of account.