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When I first started to read about MMT through articles then your book, I really wanted to go back to my university and sue for my graduate tuition for my macro courses. Everything I thought I knew (and had been told was gospel) was wrong.

So, keep doing what you are doing!!

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I believe that the feckless Democrats had the opportunity to dispense with the debt ceiling altogether during the lame duck period after the 2022 elections. But they did nothing. It's my opinion that they would rather have the issue than the solution. It's a cudgel with which they will be able to pound on the Republicans during the next election cycle. To the Dems, that's more important than actually solving the problem.

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My dear, you are out of your mind. “Their Red Ink is Our Black Ink.” “ Our debt” Are you in a “ debt” cult selling paradise to the willing. Your debt or the direct printing of cash will absolutely kill our currency. I know, it’s all an investment. Your “ gospel “ is insane.

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I would suggest that if we and every other country banished inflation to the dust bin of history with the policy of a 50% Discount/Rebate at retail sale and the rest of the new paradigm's policy program that we could create treasuries or simply distribute the money needed to fund the government and truly free the individual and it wouldn't make any significant difference. Inflation is the biggest bugaboo in the economy and the money system. Resolve that problem and all of the orthodoxies and problems of the current paradigm attending it become egg on the face of those who failed to analyze on the paradigmatic level. So with Ptolemy, so with the paradigm of Debt Only and its accumulated problems.

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This is probably one of your best articles I've gotten to read. As mentioned, old habits die hard but this is a habit that must be broken no matter how long it takes. Sadly, we as Americans have aided in the deficit myth ourselves along with economists and politicians, believing that our nation will go broke that taxes pay for everything. I used to think this myself. I used to cheer Democrats who lowered the deficit and got angry at Republicans for adding to it. I was an economics major and yes I'm human enough to admit that I wish that MMT was taught to me then. The Deficit Myth has been a game changer for me and has changed my outlook on how our monetary system should work. Its long overdue that we need to stop looking at government debt as a household budget and look at is the non-government surplus.

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Is there any way to release this article?

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When I opened up my browser this morning and saw Tankersley’s article, I groaned. "I have to write yet another post (for our MMT Google Group) about the New York Times not getting the federal 'deficit' right." I left the article open in my browser, putting off the inevitable. Fortunately Stephanie Kelton has saved me from this chore!

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Jan 23, 2023·edited Jan 23, 2023

When the government sells bonds in return for money, the government takes spendable money out of the system and replaces it with money that cannot be spent into the economy. So there is a difference between money and bonds. As long as MMT people like yourself try to sell the fiction that there is no difference between money and bonds, you will fail to gain credibility. You do know why the government sold bonds in WW II, don't you?

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I wonder what MMT says about Triffin's dilemma (first posited in the early '60's), which says that a country that has the global reserve currency (i.e. the USA) MUST supply enough currency abroad to sustain global economic growth. This came to a head in the early '70's when Nixon ended settlement of trade imbalances in gold, since too much gold was leaving the country, as Triffin would have predicted. Since then, the same thing has been happening in dollars, also as Triffin predicted. The global economy depends on a growing supply of dollars via structural U.S. trade deficits. Isn't a corollary of Triffin's dilemma that structural U.S. government deficits are also necessary, insofar as trade deficits are financed by U.S. government debt. Without sufficient debt issuance from domestic government spending deficits--and interest payments to induce countries to hold that debt--how will enough bonds exist to enable a rising level of global trade in dollars?

If all of the above is close to correct, it would mean that US government debt is actually necessary to keep the global economy growing. It's not about US fiscal irresponsibility at all, but for the math of a system that extends beyond our borders. US government debt can thus be seen as the necessary lubricant of the global economic system. The fact that much of this debt adds to demand for imports (e.g income from transfer payments, e.g. Social Security) just helps the global economy all the more (possibly hurting domestic workers, however, who lose jobs abroad). This is not about which entity creates the debt instruments (Fed or Treasury) but that there MUST be a spending deficit by the government having reserve currency status (USA).

And who benefits from these structural trade deficits? Well, those who invest in production abroad and seek dollar returns. And who is hurt? US workers who lose jobs to foreign competition, also as Triffin predicted. If this logic is correct, U.S. fiscal deficits are needed to enable global wealth holders (e.g. Wall Street) to get a dollar return on their foreign investments from sales to U.S. consumers. If the U.S. government started balancing its budget what would happen to the global economy according to MMT?

One alternative to this system is the one proposed by Keynes--the reserve currency should be a basket of currencies. This might require all countries to move toward import-export balance. It might help U.S. workers, and disadvantage U.S. capital. What would MMT say about this alternative, and how would it work?

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Inflation was the predictable result of the Fed's massive M2 expansion. I predicted it to you nearly three years ago. If Uncle Sam could just write checks, pay off all bond holders, and end weekly Treasury auctions, why don't they do it? I'm thinking Beijing & Tokyo might object since the dollars they would receive would be functionally worthless. MMT and its variants have been tried from time to time for centuries. The end result is always the same and it is not positive.

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Ooh rah Stephanie Kelton! Keep up the good fight for all the right reasons. I’m grateful to you.

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I am all in with MMT and have been for years. I don't see why T-securities sales should be credited to the TGA in the first place. It seems to me that the TGA is merely an accounting of dollars spent by the treasury and dollars destroyed by the Treasury through taxing and its various other methods, not a federal checking account as the Federal Reserve and others say it is. T-securities do not seem to destroy previously created dollars, they just temporarily drain reserves. So why are they credited to the TGA and not to separate securities accounts? Not crediting T-securities sales to the TGA would, of course, cause the TGA to go negative, but who cares? It is not a checking account after all.

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The first argument to be won is the consolidated government. Mainstream theory is about treating the Treasury as *separate and distinct* from the Federal Reserve and requiring the Treasury to operate in Fed dollars by selling Treasury liabilities in exchange for them.

To mainstream the Fed is outside the government sector. It is outside the Treasury's 'currency area'.

Mainstream want a floating exchange rate between Treasury and the Fed (government and the central bank in the round) and a fixed exchange rate with the rest of the world. MMT sees the internal exchange rates between institutions as fixed, with the float pushed out to the borders of the currency area.

This battle is about whether the country operates with the Treasury's money, or some nebulous 'international money' that the Treasury has to obtain.

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Stephanie, Outstanding effin' post! It's amazing how you can in fewer than 1500 words surgically skewer the conventional wisdom on money mechanics. I know how much time and effort it takes to bang out one's thoughts on a keyboard, and I, for one, appreciate it.

And yes, Peter Coy's column had a whiff of patronizing condescension: "In case you're wondering, I'm familiar with MMT. I just think it's bullshit." I exchange emails with Peter from time to time. He's a smart guy with a sharp sense of humor. I called him out on that column because he's better than that.

In addition to you, Stephanie, another one of my heroes is Randy Wray. His new book, "Making Money Work For Us," is simply brilliant...and brilliantly simple. In his entertaining Chapter 6 Randy discusses the need for creating new "memes" that might help people to more easily understand the (often counter-intuitive) insights of MMT. So here's one. Suppose federal positive "net spending" is like gaining weight. About 2/3's of Americans are either overweight or obese (no body shaming intended). How is this possible? I taught English in the People's Republic of China in 1983-84, during which the Chinese economic juggernaut was in its infancy. I didn't see many overweight Chinese. In fact, the greeting, "Ni hen Pang!" (you're very fat) was meant as a compliment. The speaker was acknowledging the fact that this person appeared to be doing very well (or maybe they were just being polite). Back in those days it was hard to get "pang" on a diet of rice and pickled bai cai (white cabbage).

So many Americans are over their ideal weight because America produces an abundance of food (some might say "empty calories"). Americans may gain weight, but no one is suggesting that we pass a law forcing overweight folks to "pay back" their calories! The American agricultural industry is perfectly capable of supplying the extra calories that appear to make people happy. The gov't doesn't want those calories back in order to feed other people. If it ever tried to do so, we'd have a second American Revolution on our hands.

So here's the point. Just as too much positive "net spending" by the federal gov't can create economic problems (namely, runaway inflation), too much weight gain can create health problems. So it's advisable to monitor both "net spending" and weight gain. Now this is important: the amount of weight gain that Kareem Abdul Jabbar can accommodate is surely far greater than what, say, Danny Devito can ever hope to take on. Think of Kareem as the United States and Devito as, oh I don't know, Peru.

Dear reader, if you think this analogy has merit and--more important--if you think you can "flesh it out" more clearly (pun intended), please reply to this comment.

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I agree with the article. As to the self-imposed requirement for the Treasury to sell securities in an amount equal to the yearly fiscal "deficit," is this contained in a specific statute? Back in the 1800s when there was an occasional deficit, did the government sell securities?

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