The Deficit Myth

Modern Monetary Theory and the Birth of the People's Economy

By: Stephanie Kelton

Narrated by: Stephanie Kelton

Length: 10 hrs and 52 mins

Publisher's Summary

A New York Times best seller

The leading thinker and most visible public advocate of modern monetary theory - the freshest and most important idea about economics in decades - delivers a radically different, bold, new understanding for how to build a just and prosperous society. 

Stephanie Kelton's brilliant exploration of modern monetary theory (MMT) dramatically changes our understanding of how we can best deal with crucial issues ranging from poverty and inequality to creating jobs, expanding health care coverage, climate change, and building resilient infrastructure. Any ambitious proposal, however, inevitably runs into the buzz saw of how to find the money to pay for it, rooted in myths about deficits that are hobbling us as a country.

Kelton busts through the myths that prevent us from taking action: that the federal government should budget like a household, that deficits will harm the next generation, crowd out private investment, and undermine long-term growth, and that entitlements are propelling us toward a grave fiscal crisis.

MMT, as Kelton shows, shifts the terrain from narrow budgetary questions to one of broader economic and social benefits. With its important new ways of understanding money, taxes, and the critical role of deficit spending, MMT redefines how to responsibly use our resources so that we can maximize our potential as a society. MMT gives us the power to imagine a new politics and a new economy and move from a narrative of scarcity to one of opportunity. 

PLEASE NOTE: When you purchase this title, the accompanying PDF will be available in your Audible Library along with the audio. 

©2020 Stephanie Kelton (P)2020 PublicAffairs

Critic Reviews

"Kelton's mission in this powerful book is to free us from defunct orthodox thinking about fiscal deficits rooted in the bygone era of the gold standard. Her theoretical canvas is modern monetary theory. At its core MMT offers a simple proposition: In a fiat currency world, the finances of we the people ain't the same as a summing up of our individual budget constraints, because we the people can't go broke, only deficit-spend our collective self into inflationary excesses. In the prevailing era of too-low inflation, the macro policy implication should be obvious: We the people presently have far more fiscal space than the deficit scold, pay-for crowd preaches. Kelton is a gifted writer and teacher and I confidently predict that The Deficit Myth, brilliantly written and argued, will become the defining book on what MMT is - and what it is not." (Paul Allen McCulley, retired managing director and chief economist, PIMCO, and senior fellow, Cornell University Law School)

"Kelton's game-changing book on the myths around government deficits is both theoretically rigorous and empirically entertaining. It reminds us that money is not limited, only our imagination of what to do with it. After you read it you will never think of the public purse as a household economy again. Read it!" (Mariana Mazzucato, author of The Value of Everything: Making and Taking in the Global Economy)

"A remarkable book both in content and timing. A 'must-read' that is sure to influence many aspects of policymaking going forward." (Mohamed El-Erian, chief economic advisor, Allianz)

Good core idea, ruined by polemics

There is a good core idea here, summed up by the title: For an issuer of a sovereign currency such as the US dollar, the UK pound, the Japanese yen, etc., deficits do not matter. The things that matter are inflation and the availability of real economic resources--goods and services--in the economy.

Unfortunately, this good idea is buried under a blizzard of handwringing left wing claptrap. Removing the claptrap the book would be about 10% as long, unless the author did the hard work of fleshing out her idea with more rigorous analysis.

Vis a vis rigorous analysis: There are almost no statistics in this book. Instead, like a journalistic hack, the author attempts to wrench our emotions with weepy stories about poor, miserable slobs who can't make ends meet. Some of these poor slobs could get jobs in other locations but they refuse to move because of their "roots". Well, there's economics term of art for this; it's called a tradeoff. If you refuse to move to get a job you've made a tradeoff. Good for you, but don't expect sympathy from me. I've moved numerous times to improve my economic situation and I'll move again if I have to. The main point, though, is that the weepy stories should be replaced with statistics supporting, or perhaps refuting, the author's contentions.

There is one policy point on which the author bangs away throughout the book. She believes that the main function of a healthy economy is to produce jobs. No, it is not. The main function of a healthy economy is to produce wealth, in the form of goods and services. That's why Adam Smith called his masterwork "The Wealth of Nations", not the "The Jobs of Nations".

The focus of economic policy should be on making a nation more productive. Then, with more wealth, it is less of a burden on society to support those who are in need.

Looking further ahead, it is likely that at some point in the future nearly all work will be performed by robots and various forms of automation. At that point creating jobs for humans will be patently pointless. Economists would do well to consider how to share the wealth when jobs performed by humans are mostly obsolete.

The author writes like a very bright high school student who has not learned to separate analysis from ranting about her ill-conceived political passions. If I were her high school teacher I'd give her a B+. Given that she's an adult professional economist I give her a D.

Hopefully another author, or this author when she is older and wiser, will present MMT in a policy-neutral way, so that this interesting theory can be discussed without burying it under a pile of infantile leftist gobbledygook.

Terrible ideas

The author basically says we can print money and give it out on ANY social program and the only reason to tax people is to make sure the wealthy do not get to much of it. The author misses out on common sense, she uses examples like a parent that pays in stamps and that the kids then have to pay in stamps and that gives the stamps value. The problem with all her theories are:
1) if people lose confidence in the currency because we are printing it like water and they see that we are only able to pay it back by printing g more currency but by being fiscally conservative, people in the real world have the option to invest in other assets (crypto, gold, silver, or any foreign currency around the world).
2) she doesn’t deal with what happens if their is inflation. She keeps talking about how the government should hire every unemployed worker and spend spend spend, but then what happens when their is inflation? Is the government going to then immediately lay all these people back off, kill the spending programs or give them pay cuts? Every time the government gets involved like this they just keep causing more bubbles in the economy.
3) of we go down this path then, the way democracy works is politicians will never say no to anything to TRH to get re-elected so ANY program will be approved under MMT which will cause for more wasted spending.
4) it is odd that the author thinks it is ok to spend spend spend on certain programs that she likes “social related” but it is not ok to spend like that on things like the military. Personally I think we spend too much on the military but hey, if it is ok to spend spend spend then where is the line?
5) if this Ponzi scheme worked you would think that somewhere in the last 6,000 years on the planet we would have figured it out and been using it. Right now Japan is the closest to testing the limits of MMT as they have been running a Ponzi scheme for about 12 years. At some point a natural disaster or even COVid May push this over the edge.. When and if it does fail, there will be no protecting the downside as the country will have too much debt to tax and pay for, so it will be “watch out below.”

At what point have people just simply lost common sense in their lives and decided to try this socialist stuff? We have seen over 10 countries basically default on their currency over the years from poor policies like this. The US could have printed money after the civil war but had to restart. Japan, Germany etc after the wars, Latin America (yes had a dollar problem), but the point is, just use common sense and everyone will support the policies and when you go off into dumb theories, you end up with dumb consequences..

Great explanation of a fallible ideology

If the average person wants to know more about MMT and Kelton’s ideal economic system then I would highly recommend this book. However, If the average person wants to learn about sound economic policy this book is not for you.

I give Kelton credit: her view on how politicians spin the deficit is insightful, she has good intentions and some valid arguments on why the deficit does not necessarily “matter”, and she explains things in a way that the average person can understand.

My issue is that she states the US government can spend as much as they want with impunity while ignoring economic sense and extremely downplaying all the risks involved. While former fed chair Alan Greenspan also believes we can have a large deficit and keep spending, he knows the fact that eventually the chickens will come home to roost. This book addresses the fact that eventually the deficit will be too high for us to handle, the main point all mainstream economists have with MMT is that we don’t know how high is too high for the national debt and it’s better to practice sound fiscal policy than to test the limits of our national solvency.

Communists!!

I prefer to have more justification and reference in my economics books. There are too many instances where the author treats references as commom knowledge. This book is something closer to Michael Lewis or Peter Zeihan than Freidman or Keynes. Kapital is aggressive, but works are cited. The similarity to communism and socialism is striking to the point it makes me question the authors credentials. I can't imagine that an economics professor would confuse and attempt to redefine the state control of financial operation and labor as anything else. I'm not sure if it's tragic or amusing, but the single superficial reference to the 98 ruble default does seem a bit like hand waving away from complexity driving a sustainable market economy.

Important book but misses some huge points.

Honestly the framing of this book is a little odd. Modern Money Theory is not completely new. MMT is more of less keynesian economics with a jobs guarantees. It is good reminder of some basic economic facts particularly when faced with fallacious arguments regarding how we pay for essential programs like the Green New Deal. I think the more interesting story is why the deficit (or money creation in general) is so consistently and seamlessly framed in falsehoods propaganda and outright misinformation. It's unconscionable to many of us that we squander so much of our potential just to make wealthy people even richer. If we are going to turn this corrupt system around, we need to talk about these things realistically: The deficit is not simply a myth but a deliberate deception. It is a lie propagated by those who profit from it. It is the primary mechanism that keeps our nation impoverished and unequal.

World-changing

Listen to this book. It contains essential information that you need to know NOW!! Well-written and read, 1,000 stars.

A source of real hope for our future!

Public money is the spring of the truly democratic, people's economy, we all want but don't have.
In her book, Stephanie Kelton is methodically knocking down the myths that are keeping us from this better future.
She does an excellent job analyzing these myths, suggesting real alternatives that work.
I read the actual book and listened to the audiobook. The audiobook is especially good because Prof Kelton’s voice conveys the humanity and passion of what she is advocating.
The bottom line, “Unlike a household, the federal government issues the currency it spends”, therefore it can never run out of money. But how it spends this money is what matters and should be the focus of discussion. Not the fiscal balance, but the real economy balance.
This changes everything. We CAN have good things!

Don't agree with the author, but well written

I don't believe mmt is the solution, but the author presents the fundamentals of mmt in a logical and clear way. A great book to read if you want to understand mmt proponents.

A Copernican moment

This book will floor you when it changes your perspective on government budgets. You’ll never ask again, “how are we gonna pay for it?”

Very important

I am about to start listening to the audio version a second time, this time with the hardcopy vetsion in hand and with highlighters and post-its at ready. So here is the bottom line. Vote for Biden now as the way-lesser macroeconomic evil but also vote now and henceforth for whoever can show that they understand what this book is about.