The horizon is not so far as we can see, but as far as we can imagine

The difference between money and the productive economy

James Galbraith has a good interview with Ezra Klein on the deficit being meaningless, which you should read. A good chunk of the interview is Modern Monetary Theory, though not all.

Let’s put it more simply: the government can print money. IF you owe your debts in your own currency, and that currency is a fiat currency, then you cannot run out of money. You can have some inflation issues, you can have some problems with misallocation of resources, you can
have some issues with currency rates and so forth, but you can’t run out of money.

The key to doing this, to using the printing power, is to use it in ways which either don’t lead to massive increases in exports, or which lead to reducing dependence on exports. Likewise you need to always remember that while money as such matters less than people think, actual real productive capacity matters much more. If you’re building aircraft carriers, those people and other resources cannot be used to build other things. If you’re building yachts and $50,000/night hotel rooms, those people and resources cannot be used for other things.

Money is how you allocate resources, how an economy decides what to do. If price signals are distorted, and they are right now, you wind up spending a lot of resources on things which are not productive-which do not build up the real productive capacity of the economy, instead of the largely useless, and indeed destructive financial sector, which, at its current state of development, has gone from being a symbiote to a parasite on the economy.


Small Traders are Guppies for the Sharks (aka: banks)


Cramming Down Social Security is not a partiticularly “politically difficult decision”


  1. BDBlue

    For people who might be interested in learning more about MMT, here’s the link to the presentations (audio and ppts) made at the Fiscal Sustainability Teach-In Counter-Conference on April 28 at GWU –

    Mandos had earlier provided excellent notes, which Ian linked to, but these are the complete presentations.

  2. anonymous

    The most important thing that Galbraith said is that the “problems” that Klein was bringing up were fake and then said we should be putting effort into working on the real problems.

    It says that we should be focusing on real problems and not fake ones. We have serious problems. Unemployment is at 10 percent. If we got busy and worked out things for the unemployed to do, we’d be much better off. And we can certainly afford it. We have an impending energy crisis and a climate crisis. We could spend a generation fixing those problems in a way that would rebuild our country, too.

    Somehow, I don’t think this or any of Galbraith’s reasoning about economic thinking will get through to Klein, who will just repeat what his “worries” are to the next person he interviews. People at wapo have been repeating these “worries” for decades.

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