Stephanie Kelton on what a deficit actually is

Stephanie Kelton, Professor of Economics and Public Policy at the State University of New York at Stony Brook and Bloomberg Contributing Columnist, breaks down what the deficit actually is and why debt isn't simply a "tax on the poor".
----------------------------------------------------------
To see a full summary of this event, follow this link:
www.gendereconomy.org/build-b...
Did you like this video?
Visit our website to see more: www.gendereconomy.org/
And follow us on Twitter: / gendereconomy and
LinkedIn: / gendereconomy
Sign up for our monthly newsletter for regular updates on news, insights and events: eepurl.com/c2TmLr

[@balazsfoldes4700]

Except what tends to happen in practice is that poor people can't pay lobbyists and form special interest groups to incentivize the government to spend those deficit dollars with them. And the people who can pay for those thing can pay more lobbysts to get more government dollars, pay lawyers and accountants to create special tax sheltered loopholes to put their money in, etc. So the poor have less political influence than the rich, therefore they can get less government funds, they have access to fewer means to avoid taxes, and they can't really have money tied down in bonds and assets to collect interest. This is why America's wealth distribution turned from a curve to a cliff. Most people are at the inlet valve of the taxation suction pump, and the chosen few are around the mouth of the hose where the money is spewing out, because they either arranged for the hose to be there or got a tip, and they're ready to collect the water.

[@ddhqj2023]

Not so fast. The Liberal government has spent those deficit dollars on the poor. $10 a day child care so they can now go out and work (and earn pay that is taxed), school lunches, free dental care for low income families and seniors, increased Child Benefits, investments in businesses so that more jobs happen.....you can't ignore all of that because it has actually happened.

[@kkroeger5868]

👍

[@oldreprobate2748]

Suggested reading the Lewis Powell Memo, and search What is behind Trickle-down Economics on the internet.

[@johnthornton7763]

Any questons why our currency has been destroyed?

[@alvinleong173]

MMT seems to be moving ahead

[@AS-hv2ux]

Voltaire in 1729 “PAPER MONEY EVENTUALLY RETURNS TO ITS INTRINSIC VALUE - ZERO”

[@richardhoner7842]

She appears to be making a career out of pushing ideas that most economists think are wrong.

[@timhowell6929]

I totally agree. Just mindless Drivel.

[@erickborling1302]

THINK HARDER grasshopper. Put every fed chair on the witness stand and they will give Kelton/MMT an unopposed victory. Doubt it? When America needs to finance anything, there is really no obstacle, and the republicans know this but they pretend you're right so they can again manufacture poverty.

[@ddhqj2023]

Maybe the point is, that like everything else in the world, as time passes, new understandings begin to take shape. Especially as we can look back and see the results of decisions made in the past. Like remember when Japans economy blew up years ago? Well because they are a country that prints it's own currency, they decided to just run with the deficit ball and they still have a country that is doing well despite having a very high deficit. The reason Greece ran into trouble a few years back was that they don't have their own currency. They are tied to the Euro and didn't have the option of printing money that Japan, the USA, Canada and others have.

[@richardhoner7842]

@@ddhqj2023 I don't there is any country that has had its government spend and tax the nation into greater prosperity. Can deficit spending keep a country afloat? Sure. Just like I can pay my bills by increasing my credit card debt. IMHO "printing" currency doesn't increase national wealth.

[@prebenpetersen5982]

Waaaaauw, the economic genius Kelton. She has to pay the whole deficit herself

[@paulginsberg6942]

An apologist who should not be taken seriously.

[@donaldflett1504]

Very good discussion.

[@TheRantingRooster]

But the "intrest" is never created so the debt can never be repaid.

[@jaykay5142]

As long as any new dollars created are equally distributed to each citizen i think it could work. The issue seems to be when the government both creates money AND decides how it's spent. That virtually guarantees corruption at the highest level

[@erickborling1302]

But that is how it always is. America offers vastly more public welfare to the rich, and your comment assumes this is "the state of nature."

[@ddhqj2023]

Who else is going to decide how the money the government has, is spent? You? Only you? In fact, often the people do 'help' government decide by virtue of our calls and emails to our MP's. When I communicate to my MP that I can't get a job because who will look after my two kids while I work, and then he/she tells the feds this is a problem in their community and then the feds decide that they need to start a new program for $10 a day child care......or when every student you've heard of complains that they can't afford to live AND pay back their student loans and then the feds start providing INTEREST FREE student loans......to a degree that is the people helping government decide how to spend the money they create. Unless that government is a Conservative government who have a history of voting NO on those sorts of programs that aid the people. Like last year, Poilievre voted NO nine times out of 12 on affordable housing bills! www.reddit.com/r/canadahousing/comments/16cmutl/no_current_mp_has_voted_against_affordable/

[@josephloughrey3434]

Anytime you see the "institute for gender and the economy" you should pretty much get you BS detector turned on.

[@junkjunk2493]

... right

[@Rob-fx2dw]

Yes. More like the institute for stupidity multiplied.

[@miketracy9256]

Borrowing never leads to good outcomes and our insane 34 trillion-dollar spending and borrowing, which is 30 trillion dollars more than we had just 20 years ago, is the real reason for our high inflation. It is not complicate, and anyone who knows simple economics, knows that the law of supply and demand cannot be broken without negative consequences.

[@user-tk9fe5ot6h]

Makes about as much sense as 2+2=7

[@s.d.crockett486]

Nevermind inflation:) and if you are lower income and don’t own bonds- you are still in a very bad position.

[@larryhenry9724]

I think Dr Felton would do herself some good by going back and rereading the writings of Milton Friedman. She is living in a make belive utopia that does not exist. Intellectuals like her will drive us to the next great depression. She also gave away her political leanings with her example of “green” infrastructure spending by government.

[@ssm59]

Due to people being people the Cantillion Effect will always drive the value of the extra dollars to those closest to the place the money is printed. Dr. Kelton's ideas may work if we are on an island with a completely closed economy. As soon as we have to interact with others who are concerned with the value represented by the currency, deficits matter. That is why over production of currency always collapses a society.

[@Anrirua]

She's as thick as a bucket of rocks..MMT is a walled garden false paradigm. A mental virus. Gold is the cure

[@Valicroix]

What she is saying about bonds is only sort of true if only citizens can buy bonds. But that's not true. A lot of bonds are held by foreign countries such as Japan and China. MMT is the Laffer curve of the left and is just as big a load of nonsense. Before you ask, yes I have a degree in economics to go along with the one I have in mathematics.

[@sigi9669]

I'm not an economist. I've merely listened to and read a lot of economists on both sides of the MMT debate. To my limited understanding, there appear to be some massive, and obvious, holes in the theory. In your opinion, is there any legitimate merit here by which an economist might take this seriously? Or is it really just a ploy to have governments give even more money to the social class to which many of these (prominent) economists may well belong themselves?

[@Valicroix]

@@sigi9669 That's a very good question. I think that a country, if it was willing to deal with any resulting inflation, could print up money for a one time investment such as fixing crumbling infrastructure. But MMT as an ongoing economic policy I think is just delusional.

[@paulsaragosa371]

Im hooked on phonics Ohno batman were in a jam yah tada hahaha bad Colby cheese 🧀 and it's not cho cheese okay 🧀 now play with monopoly or your own big wheels outside

[@ArmandoCalderon]

Very well explained.

[@tatsumasa6332]

people misunderstood. MMT isn't a strategy or method, it's just a state of central banking system.

[@Achrononmaster]

Not "just" central banking. Check out _Macroeconomics_ by Mitchell Wray & Watts. You'll find MMT accepts most of post-Keynesian (PK) economics, but with preference for floating rather than fixed exchange rates and recognition the government (in most countries) is the currency monopolist (PK does not recognise this, or if they do --- like John T Harvey --- they are really just closet MMT'ers). MMT also has a Job Guarantee as _essential_ --- the only _humane_ counter-cyclical automatic stabiliser for buffering the labour market, recognizing under capitalism the labour market is an unfair game --- bosses cannot be fired by workers & bosses do not automatically lose income when a worker is fired.

[@balazsfoldes4700]

@@Achrononmaster Just don't tell MMTers the value of bitcoin. It'll make them very, very angry.

[@Rob-fx2dw]

@@Achrononmaster You even got that wrong. It is an unbelievable rubbish theory that ignores historical facts such as pretending taxes put value into money when they did nothing to put any value into money in all of the countries where inflation ruined the money despite taxes. Even their own governments dumped their own official currency for payment in favour of some other. . Of course every time you have been confronted with this fact you and other MMt economists can't answer and run away with their tails between their legs. inflation ruined the money despite taxes. Of course every time you have been confronted with this fact you and other MMt economists can't answer and run away with their tails between their legs.

[@LukeDickerson1993]

1:51 "a gov deficit simply means that the gov is spending more dollars into the economy than it is subtracting away, mainly by taxing". The austrian rebuttle is that the money the gov spends in the economy is spent on goods and services, produced by gov workers jobs. The good and services are whats valueable, not the fiat money. The larger the percent of society working for the gov there is, the less goods and services will be produced by the people, for the people, and the more will be produced for the governments programs. Im not an anarchist and i agree some programs are neccessary, companies should be regulated, ect. But for programs to be approved they should pass an approval to raise taxes, instead of lying to the people about what real taxes are by combining them with inflation caused by a debt all governments around the world, will never be able to pay off, even in peacetime. The interest rate on bonds vastly underperforms the rate of growth of the money supply, and will perform worse than hard assets.

[@oldreprobate2748]

Agreed, and would suggest that there not be a privileged class who pays little to none back into the overall general welfare. Many of tjem receive tax returns in the over the million dollar range. The economic theory in practice over the past 54 years is Milton Friedmans trickle-down economics, which is flawed in that it relies on the ethics of those who gain the most financially to redistribute the nation's wealth. Hasn't worked out that way in the least, it has only served to consolidate the nation's wealth to the top, where it's retained by some one to three thousand individuals out of our 330 million population. Recommend reading as to why the trickle-down theory was adopted by and put into practice by Ronald Reagan is available on the internet, search for the Lewis Powell Memo. Then search for what's behind Citizens United. And perhaps Congressional insider trading. I think you'll see the connections that have led up to March 2024. The application of commonsense needs be, moving forward.

[@sdnalyam]

Majority of Western governments have very poor money skills. Only Switzerland and especially Singapore have been prudent with taxpayers money.

[@erickborling1302]

Our biggest debt is to the earth. To whom do we owe our lives and hopes?

[@gregnix]

Ever see a general in an unemployment line? We always have money for war and none for the poor.

[@Achrononmaster]

What means "Amen brother" but also means "that's the depressing truth" rather than "that's the Holy truth"? Whatever that word is, I hereby send it to you in spirit.

[@thadtheman3751]

You know who else you won't see in an unemployment line. Stephanie Kelton. Why? Because most of money is probably in something like Apple stocks which would survive a crash. If her theories work out. Great! if they do not, she will move to Italy, cash in some of her stocks and live in some nice villa. I don't trust people who don't have skin in the game.

[@clarestucki5151]

It ain't that tough folks, the deficit is simply the excess of annual gov't spending over the amount of taxes collected in a given year. Whether it constitutes more accumulated debt depends on how it is financed. If the excess i financed by borrowing from private investors or foreign govt's, it definitely adds to the nat'l debt, and will someday have to be repaid or defaulted. If however it is financed by "borrowing from the Fed Res Bank" (meaning by having the Fed create new money out of thin air, it is NOT a debt, and will never have to be repaid. In that instance it (meaning the creation of new money out of thin air) is simply a tax levied on the national savings, and because mostly only the rich have meaningful amounts of savings, it is a 'progressive' tax.

[@farawayquill3896]

My family is not wealthy what so ever, yet we still have some money put away in savings, so what’s stopping the progressive inflation tax from not hitting me ?

[@clarestucki5151]

@@farawayquill3896 Absolutely nothing is stopping that. You'll definitely be "hit", along with everybody else who has savings.

[@balazsfoldes4700]

@@farawayquill3896 Assets stored savings or asset based savings will flourish. There's a reason why the housing market exploded since the 70s. The government is pumping money into the economy to spur economic growth, and people are trying to store the excess in whatever they can. Housing, gold, oil, NFTs, whatever. The reason why the USD won't inflate into a pile of dog poop is that it's used to settle international trade, so the demand isn't just national, it's worldwide, so it takes more printing to double the money supply (especially since almost all the USD money supply is digital, and a lot of it is created by private banks worldwide via the Eurodollar system)

[@Leningrad_Underground]

Isn't the federal reserve bank a non govermental private institution ? Therefore a private investor. While the Board of Governors is an independent government agency, the Federal Reserve Banks are set up like private corporations. Member banks hold stock in the Federal Reserve Banks and earn dividends.

[@josephloughrey3434]

The tax is the inflation deficit spending creates. It makes the governments debt worthless over time. It makes you poorer than you were. Check your check book for what you paid 2 years ago for groceries and then look at this year. That is reality.

[@imthinking9760]

She falsely asserts that a central planner can decide better than individuals what is best for the individual, that people who don't own inflation protected assets will receive a benefit from inflated currencies, and that governments are extremely inefficient at using and distributing money. Any government money that is created from government increasing the money supply doesn't create more goods and services, it only reallocates the money to different sources. Interest paid out from the gov't reduces the amount from their budget they can spend on tangible services and increases the amount paid to holders of gov't debt. Overzealous spending by gov't has always ended up sinking a civilization

[@hyperrealhank]

typical right wing / libertarian trash talking point

[@Cybertron824]

​@@hyperrealhank At least offer a rebuttal.

[@Anrirua]

This one is some onion. MaGic Money Tree Monkeybrain Maths Troll

[@jimmuncy5636]

We all need to listen and learn from Dr. Kelton; she can teach us how to vastly improve how our economy works. Everyone will benefit from the new understanding of macroeconomics. The real problem is that those people who learned from the old economics textbooks believe in a faulty paradigm. We need a paradigm shift in macroeconomics to include Modern Monetary Theory (MMT). I recommend Dr. Kelton's "The Deficit Myth." Even I can understand and appreciate it.

[@gregorious123]

Steve keen also recommend her book. I will give it a read as she explains things well.

[@clarestucki5151]

Jim Muncy It's not true that "everyone will benefit" from the price inflation that inevitably follows currency inflation. People who have savings will lose, but people who have debt will gain. But the most serious adverse effect will be the potential loss of the current (very beneficial for Americans) status of the U.S. dollar as the world's "reserve currency".

[@jiadizhang4107]

Except all the rich people’s savings are in the form of assets instead of actual savings in the bank.

[@clarestucki5151]

@@jiadizhang4107 That makes no sense. Isn't savings an asset? Isn't cash an asset? Aren't ALL forms of savings assets?

[@jiadizhang4107]

@@clarestucki5151 assets generate income. How does your saving generates income when CPI is literally 2%-4% every month? The rich borrow money to buy assets, and the inflation wipes out their debt while raising their asset prices. Are you still confused?

[@anthmancuso6429]

It is not possible to issue debt without increasing interest rates. That hurts everyone.

[@professorbland]

MMT is best used to understand a floating exchange rate currency, not as a prescription to cure society's ills. It concentrates power in the hands of the government for good or ill.

[@timhowell6929]

Power in give and not people is a really bad idea if you’re one of the people. History bears that out clearly.

[@PuntedKitten]

This has aged like milk.

[@paulsaragosa371]

Chill y will y cartoons classic movie 🎬 🎞 🎥 🎦 📽 go to the store and buys some penny candy 🍬 butter scotch candy 🍬 😋 mmmmm good 👍

[@adamrafal6587]

MMT leads to lower interest rates, which leads to more people pusing money into riskier assets, like stocks, which ultimately leads to a greater concentration of wealth for society's rich. This also creates asset bubbles. All of this sounds pretty bad, but what other choice do we have? Remember, the September 2019 repo crisis=QE to infininty!

[@tatsumasa6332]

MMT isn't a strategy or method, it's just a state of central banking system.

[@mini_worx]

I don't think you understand what MMT actually is.

[@Theorychad99]

QE isint mmt

[@Achrononmaster]

Low interest rates do not cause the asset bubbles Adam. Bank credit extension is how investors get the money to invest. No one ordinarily purchases a house without getting a bank mortgage, unless they are super rich and that is an almost entirely de-coupled market from residential housing that Blackstone et al are hoovering up. They hoover up real estate with bank credit. Investors cannot create money, banks can. But home owners wanting to play this game then seek riskier mortgages, that's the ponzi element driving the asset bubbles. It is not MMT informed, and is not from governemtn deficits or low interest rates, it is from weakening conditions on collateral demanded fro bank credit. Banks do not even really look at the interest rate. They always use a margin, so whatever the base rate s, they add a small mark-up, and then continue lending like the interest rate was not there. That is pro-inflationary if the base rate rises. (The interest rate _is_ the _price of money,_ (the "own rate") so hiking it up directly hikes inflation, to the exact percent. There are other sources of inflation pressure too, but the interest rate is the only direct acting one.) MMT econs have always understood this. MMT has _always_ suggested euthanising the rentiers and F.I.R.E. sector (finance, insurance, real estate). The problem is, all these nations facing asset bubbles and busts, are using an MMT system, but do not _know_the system, so they get policy backwards, by loosening bank collateral requirements and tightening fiat injection, and hiking rates. They have get it all backwards. They should tighten bank credit, and use a Job Guarantee to anchor the price level at a decent living wage. MMT is the car, say. Governments are driving it backwards, no wonder they keep running off cliffs.

[@thomastaylor9586]

MMT is a way for governments to debase the money supply, and to pay back borrowing with debased dollars, and stiffing the rich investor chumps

[@richardhoner7842]

Actually the ones that are those on fixed incomes and those that can’t take advantage of the system. The rich are mostly unaffected since they have the resources to respond.

[@jiadizhang4107]

This is BS. How do you know inflation is under control when consumer prices should naturally be falling instead of staying static or rising. If consumer pricesshould be falling because of competition and increased productivity, but they stayed static because of all your printed money, the increase still an inflation tax, not to mention CPI has failed to record the real rate of consumer price increase.

[@Rob-fx2dw]

Yes - that is the question everyone should be asking. Why aren't prices falling when they should have been given the increased elffciencies that have gone through virtually every part of industry and even government. The reality is governmment is measuring CPI which is not a very wide range of prices then applying a type of exclusion if there are prices that are considered to be spikes. From this they are assuming there is no inflation even though the cost of capital equipment has risen dramatically as have housing costs and energy costs. .

[@jiadizhang4107]

@@Rob-fx2dw I am afraid inflation is practically unmeasurable, if inflation is defined by the increase of prices caused by the increase in money supply. You can’t measure it because there are so many sectors in the economy and the consumer prices will all fluctuate differently both in sectors. What’s worse is that you have no idea what proportion of the price fluctuations are caused by money supply, and the impact of money supply will even differ in physics are. Thus CPI could be valid for some consumers while extremely unrepresentative for consumers who consume more in other sectors of the economy.

[@Rob-fx2dw]

@@jiadizhang4107 It is hard to measure inflation but a valid way to get a more reliable picture than we have today would be to measure energy prices since energy prices are a common factor in all prices across the economy from food to machinery, transport and building costs.

[@pebblepod30]

Hang on: Name one MMT founder that says Inflation & Deflation are not an issue, even if economic history doesn't fit the mainstream understanding (yes, inc Kelton), and even if polticans and Fed have a Soverign Fiat Currency, but dont have an MMT perspective. That esp includes the great inflation events. Adolf Hitler used an MMT understanding of money, to great & successful effect (even if in an evil direction). I recently saw a Bloomberg article on this. Stephanie Kelton also ansered this in another video on inflation if u do a simple search. Vulnerable Industry bottlenecks have been exposed and supply takes a hit, so then "X amount of ppl with Y dollars chasing a scarcer supply of a neccessity". If the Conventional economic view was correct, consider this: (1) Lumber prices came back down. (2) Enormous amounts of money are newly created when Banks Make a Loan. What about all this extra currency (since credit is used exactly the same as currency) ? See Prof Richard Werner on Bank Credit Creation in his 2014 paper & empirical study on this. Most discussion if this assumes a lot, without any empirical study. (3) If MMT was false, then Adolf Hitler would have created hyperinflation. Instead Weimar Republic did before it, totally in line with MMT model & explaination of inflation. (4) MMT model (as far as i know) does appear to be the best explain when inflation does & doesn't happen. Prof Richard Werner (not MMT guy, but Private Bank Credit Creation) also did good work showing how interest rates follow inflation, rather than control it, but i haven't looked into it yet

[@pebblepod30]

@@jiadizhang4107 You've never met Rob, have you? He is famous on any MMT relates channel. Look on Deficit Owls and look at a long diacussion with him and the Channel makers. Yet he won't even have a video debate despite portraying himself as an expert & he believes everyone else is a fool & is constantly in a rage and makes no effort to understand another point of view; only to convert and angrily demand he be listened to & agreed with; and insults others if they don't. Go see for yourself. First time i met him i thought i had a long conversation and thought he knew a lot, and i have tried being patient too. It's possible to have a conversation with any other view, impossible when someone makes those kinds of choices, and feels inherently superior, entitled and always living in & projecting anger.

[@6brman224]

Word soup. Lies, damn lies and statistics.

[@Rob-fx2dw]

More misrepresentation by Kelton - Savings in a bank are Not non interest bearing deposits - They are interest bearing deposits. Government bonds may be interest bearing but the interest is paid by those in the economy. Besides that the most wealth do not buy government bonds because as one of the wealthest investors in the U.S. over the past 60 years, Warren Buffett, pointed out they are a bad investment over time and a sure way to losing money. High-grade bonds, he said, can increase the risk of an investment portfolio as inflation eats away at the return.

[@erickborling1302]

I am seriously offended that the MMT crowd disappeared in 2020. We are betrayed by those who actually nailed the teachings of Jesus.

[@ddhqj2023]

I'm not sure exactly what you mean but I'd be interested in hearing what you've got to say.

[@anthmancuso6429]

These women are wrong.

[@johntaylor2447]

This woman is full of shiz