Economic Update: Government Deficits; Why They Happen, Who Benefits From Them, and MMT
Richard Wolff mentions the printing of money occasionally, but he never squares that with the government supposedly needing to tax and/or borrow first before it can spend.
He spends the last two minutes talking about MMT, but not as a theory of fiat money; instead as a novel monetary policy proposed by “progressive-minded economists.”
Somewhere in there he also repeats the common fallacy that what banks lend is other people’s savings. They don’t. The money they lend is created out of thin air, and the “money multiplier” is a myth.
I’m just a technerd who’s never taken an economics course, and I grind my teeth every time this expert botches these fundamentals. Why Michael Hudson and Radhika Desai never push back on him when they do talks together is a mystery to me.
That’s not quite how it works. The privatised government debt is in the form of treasury bills, notes and bonds that mature at different time periods: bills being short periods (weeks). Notes being up to ~10 years. Bonds being 20 or 30 years. The government pays interest on those bills, notes and bonds. So a portion of the yearly Federal budget is money to those investors.
The government has to pay those bond holders for decades. Treasury did buy back some bonds last June but it wasn’t really a large enough amount to effect the debt.
I understand that, it was just an abstracted simplifed example to acknowledge that MMT highlights that you don’t need to raise taxes for the government to “pay” for stuff.
Ah I see.
Yes under MMT, taxes don’t pay for government spending.
I think MMT is a great way to argue that government shouldn’t justify austerity measures because of public debt.
Unfortunately the privatization of that debt under an international capitalist treasury bond market system has fucked that up to a great extent.