On the Sunday afternoon of March 27th, 2022, at roughly 2:30 pm, Sam Levey, who is a PhD student of Economics & Public Administration at the University of Missouri–Kansas City and who, in addition, has several other fascinating interests like he once was a physics major, he is able to play saxophone, and he aspires to eventually become a university professor/lecturer, presented his Theodore Talk lecture titled National Debt: Why You’ve Got It All Backwards (An Introduction to Modern Monetary Theory) to about 40-45 Mensa members and friends via Zoom. This lecture was a very fascinating discussion about changing how we think with something as big as $30 trillion of national (US) debt. Here Sam Levey, who also is founder of Deficit Owls which is an online Modern Monetary Theory (MMT) advocacy group, tried to make a lot of quick sense on a difficult subject while driving down the middle of the road of our ability to understand it.
First, we need to understand that MMT is a heterodox branch of macroeconomics having many influences from other people and their own philosophical ways of thinking about money. A few early views about money are almost common-sensical. We know that debt relationships and units of accounting pre-date writing. During that time perhaps was the barter system which some think evolved into money as a medium of exchange. So, then, how did markets originate? Some think it was through gift giving and/or by council of elders. Other monetary theories have come along since then: Chartalism (‘taxes drive money’) and Functional Finance (FF) are among all of those where money seems to be a creature of the state. Money is just a recording device, or a record of our debt relationships.
However, we need to realize that treasury bonds are just a form of government debt. Money is now the debt relationship, or an intangible social relationship. Government is the central authority of money and taxation, and it has control of the system. In MMT, the government spends first, then borrows and taxes. Spending creates money, and bond sales and tax payments destroy money. Of course, there will be impacts such as inflation and unemployment. [Editor’s note: See discussion of Job Guarantee and the labor standard for more information on how currency is anchored to the value of labor.] But MMT policy analysis briefly states that: ‘anything that’s technically feasible is financially affordable’. So, surely, we still need to consider the availability of our technical resources such as workers, tools, raw materials, and know-how. Also, monetary sovereignty is what allows a government to create its own currency.
In conclusion, we will always be better off discussing the various policy frameworks rather than talking about assumptions which assume their own conclusions/outcomes. Economists have reached this belief because we do not have any good models to predict what monetary instruments like interest rates will do and how operations will behave. Sam Levey wrapped his talk up by answering a good number of interesting audience questions. Also, he provided a short list of ways to get further information about MMT. He suggested a few books authored by leading economists, including a textbook, videos, and academic articles.
