Bottom line, most people in our society, including our elected officials, talk about the economy in terms that are flat out wrong.
Hence, this blog
This idea that we should describe the economy as it actually works, rather than how we believe it should work, is called Modern Monetary Theory.
For the record, I hate that name. I hate that name because, for many people, it implies two things:
- This is new (as in modern)
- This is “just” a theory, rather than an operational description
Neither of those is true.
With this blog, I’m working to help make it so anyone can understand.
The list of articles (and future articles) is:
- The Basics of How Modern Economies Work (start here)
- What is money?
- How did money come into existence?
- How does the US Federal government pay for goods and services?
- What does it mean when elected officials say “We can’t afford it”?
- Who figured Modern Money out? How? When?
- What does “the free market” mean? Free from what?
- Why the 70% tax rate would be good for the economy
- Why Job Training alone doesn’t reduce unemployment
- Government deficit spending creates private sector surpluses
- Will we need to LOWER TAXES to pay for single-payer healthcare?
- Warren Mosler Interviewed about Modern Monetary Theory
- Is Economic Rent (Adam Smith) and Fictitious Capital (Karl Marx) the Same Thing?
- Cowboy Economist Tells Us How to Recognize a Socialist
- Cowboy Economist Tells Us How the Private Sector Finances Its Deficits
- Cowboy Economist Tells Us How the Government Finances Its Deficits
- Understanding How Modern Money Works, Requires Knowing Some Reserve Accounting
- The Wealth of a Nation is Not Measured in Money, but in Productive Output
- How the US Treasury creates money
How Did a Non-Economist Get So Interested in Macroeconomics?
The short answer is once you see how Modern Money works, what Modern Monetary Theory describes, you can’t unsee it. Then you find yourself wishing you could help others see it too.
I fell into this rabbit hole after hearing bits and pieces over the course of two years, then watching a video on YouTube during which I had a Eureka moment.
The stuff I had heard over time was:
- The US is monetarily sovereign, which means the US Treasury is the monopoly issuer of US dollars.
- It is not possible for the US to default on its national debt. There are two reasons for this:
- The US national debt is denominated in US dollars.
- The US Treasury creates US dollars as needed, and as such can never be forced to default.
- Some nations and territories are in debt trouble because their debt is denominated in a currency which they do not control. Greece and Italy must pay Euros. Venezuela and Puerto Rico must pay US dollars.
The video in question is at the bottom of the blog
It’s an hour and 21 minutes long, but if you want to understand how modern economies work, it helps to understand why money was created in the first place about 6.000 years ago, and how it worked.
As he described this in the video, all the bits, and pieces I had heard suddenly snapped together into a cohesive framework. I came to understand that:
- Money today works just like it did when it was first invented about 6,000 years ago.
- What we call The National Debt isn’t even debt. Seriously.
It seems one of the reasons we describe it wrong is we use incorrect vocabulary in describing it. I mean, if it’s not debt, why do we call it debt? And isn’t that misleading? Spoiler: It is.
While it may be a boring academic subject, when the economy is managed wrong because it’s understood wrong, people suffer needlessly.
To understand this better, please read…