Stephanie Kelton ekonomia on batez galdezka

Stephanie Kelton Wants You to Ask: ‘What Does a Good Economy Look Like?

Charlotte Cowles


It’s rare for a fiscal policy wonk to attain political celebrity status, but economist Stephanie Kelton, a professor at Stony Brook University in New York, is one of the hottest names in Washington right now. Though her ideas were considered radical just a few years ago (Paul Krugman flatly rejected the premise of her research in a 2011 New York Times column), several of the policies she helped popularize, such as nationwide student debt cancellation and a federal jobs guarantee, have become hallmarks of emerging progressive ideology, championed by politicians like Democratic House nominee Alexandria Ocasio-Cortez, Senator Kirsten Gillibrand, and Senator Bernie Sanders. (Kelton served as Sanders’ chief economic adviser during his 2016 presidential run.)

At 48, Kelton is a fast, earnest speaker eager to explain her ideas to anyone who asks. She packs conference halls (even a sports arena, in one case), appears regularly on MSNBC, cultivates a robust Twitter presence, and even lists her cellphone number on her website for journalists on a deadline—although lately, she’s been fielding just as many calls from political candidates seeking her counsel. “I’ve spent the whole summer on Skype with an awful lot of people running for office,” she says brightly. “They’re reaching out because they want to get the economics right, which is so heartening.”

Getting the economics right is, of course, how Kelton’s star rose in the first place. Kelton is one of the leading proponents of Modern Monetary Theory, or MMT, named for its focus on governments’ ability to manage the value of their currency. More specifically, she argues that countries like the U.S., which control their own currencies, don’t function like a traditional family or business budgets where income (taxes) should equal output (spending). Instead, the government has the power to print the money it needs for sweeping, economy-boosting projects, and resulting budget deficits would not be the bogeyman people believe them to be. And what about the threat of runaway inflation, the most common critique of increased government spending? According to Kelton, it would be avoided if the country had a more stable, sustainable economic system.

We spoke with Kelton about her latest work, her role in the upcoming election cycle, and her vision of a balanced economy.

A lot of policymakers and economists formerly considered your ideas to be very radical—what changed their minds?

A few things. One is that, at a certain point, being right matters. Another was getting our ideas out there. When we started using social media, people started to pay more attention to us. In 2009, during the Great Recession, I launched the New Economic Perspectives blog because we wanted a voice in the debates happening at the time. A lot of economists, politicians, journalists, and pundits were saying the U.S. was going to end up like Greece because the recession caused a sharp increase in budget deficits and that was going to drive up inflation. And we were saying, ‘That’s incorrect. Here’s how it really works.’ People started to take us and our work more seriously because we kept getting big things right that others were getting wrong. We also predicted the failure of austerity measures in Europe. Having a good track record with real-world events made people listen.

It’s not really your job to explain economic theory to the public. But how can other people—say, politicians—explain the concepts of MMT to voters who many not necessarily even want to listen?

You’re right, it’s not necessarily my job to persuade average people. But I feel like it’s my responsibility, because when policymakers make decisions that are grounded in a bad understanding of the way government budgets operate, it affects us all. For politicians, the challenge is really on them. Some of them ask me for specific advice on how to talk about debt and deficits, and my first answer is, ‘Don’t.’ The broad public reaction to those words tends to be negative, so my first rule of thumb is don’t bring it up. Do no harm. If somebody poses a question to you, and they inevitably will—‘Oh, what about the debt?’—then you’ve got to find ways to deal with it. I don’t think there’s a cookie-cutter response.

When you get that question, how do you respond?

I say, ‘Look, the purpose of the government’s budget ought to be to balance broad conditions in our economy.’ We are so obsessed with balancing the federal budget, but that’s not the right policy goal; the right policy goal is to achieve a good economy. So, what does a good economy look like? It’s not imbalanced like the economy we have today. It’s not an economy where the concentration of wealth is rivaling where we were in the 1920s, where the top tenth of the top 1 percent owns the same share of wealth as the bottom 90 percent combined. It’s not an economy where the median worker hasn’t seen a wage increase in real terms for more than a generation.

It all comes down to this: What kind of a world do we want to create for ourselves? We could eliminate poverty. We could manage our impact on the climate. And if we use the government’s budget to achieve those goals and there’s no inflation problem, who cares if the deficit is 4.5 or 2.1 percent of gross domestic product? That number is irrelevant.

A lot of people get nervous about the concept of government intervening with the economy. How do you package these ideas and make them palatable to people who fear “big government”?

MMT has always made a point of doing two things: First and foremost, we’re just describing the way things operate. ‘This is how the federal budget works. This is what deficits really do. This is what the national debt really is.’ It’s a descriptive exercise.

Politically, we also happen to be progressive. So, we take our understanding of how the monetary system operates and argue in favor of a progressive agenda. But you could just as easily take our understanding of how things work and argue in favor of small government. Our belief is that the federal government has more space to expand the size of its balance sheet, or to increase spending, or to cut taxes, whatever your politics prefer.

Another way to explain it is we’re currently living beneath our means. Right now, people believe that budget deficits reflect living beyond your means. But the evidence of that would be an inflation problem, which we don’t have. If you’ve got the space to either cut taxes or raise spending without causing inflation, and doing so would boost economic activity, why wouldn’t you do that? If you have people who want to work, and you don’t employ them, then you’re wasting their energy, talent, and willingness to participate. Whether you’re a Republican or a Democrat, you should be opposed to economic inefficiency and lost output.

Speaking of living beyond your means, how do you establish the limits to government spending if deficits aren’t an issue? And who makes sure those limits are observed?

Sometimes people will say, ‘Well, according to MMT, there are no limits.’ No. Just because you can produce more doesn’t mean you should. There are sustainability conditions, both environmental and economic, that provide limits. Every economy has its own maximum speed. The labor force is only so big. There are only so many people who can and will work. Your capital is only so much. As for enforcing those limits: That’s the job of the Congressional Budget Office. Their job is function as the scorekeeper, or the watchdog, and provide helpful feedback whenever Congress proposes a spending bill, at least in theory.

The idea of a federal jobs guarantee program has been picking up steam lately and legislation is in the works. Can you describe what that bill would look like?

I can’t tell you what the bill will look like, exactly. But I can tell you in general terms what a federal job guarantee should have. It needs to be universal and permanent. That means it’s not something we introduce in certain regions when the economy is weak, but then eliminate after the economy recovers. It means Americans always have a right to a job if they wish to have one, period.

The bill I am currently working on proposes that public service employment would offer benefits, including health care and retirement. It may also include child care. It would be federally funded, but ideally, those jobs would be bubbling up from the communities where the unemployment exists, so that local people can say, ‘Here’s what this community needs.’ Then those communities would work with their local and state governments to design the projects that those jobs would support, and the Department of Labor would provide oversight at the highest level.

The Republican Party is taking credit for current economic growth and lower unemployment rates and claiming that it’s a product of the new tax cuts and trade policies. How would you describe the current state of the economy?

We’re currently into something like the hundredth month of an economic recovery that began back in June of 2009. What’s marked this recovery is how uneven it has been, and not just since Donald Trump got elected. Those in tech industries, coastal regions, and areas that were already well off have recovered a lot. But there are still millions of people in communities across the country who feel like the recovery didn’t happen for them. I’m concerned about those people, who continue to live in a precarious financial state, paycheck to paycheck. I’m also concerned about financial deregulation. We’re chipping away at the safeguards that were put in place and unleashing big finance to begin engaging in the same risk-taking that drove the last crisis. That worries me a lot.

Does it ever feel difficult to balance the chaos of the political climate with your academic work?

I’m really not cognizant of the politics when I’m doing the academic work. We try to make it more of a neutral exercise, a series of “what-ifs.” You’re looking for the right answers, not the answers that will best position the party that you happen to hope will win.

Are there any candidates whom you’re particularly excited about right now?

I was on the phone with Alexandria Ocasio-Cortez back in February, way before anyone was paying much attention to her, and there was something about her that struck me. She had a real interest in the student debt report that we had written, and I found her curiosity inspiring. Not a lot of people are open to different ways of talking and thinking about economic questions, but she certainly was.

Iruzkinak (5)

  • joseba

    Warren B. Mosler‏ @wbmosler
    Good coverage with quotes from Professor Stephanie Kelton!
    2018 ira. 6

    Nancy Pelosi Promises That Democrats Will Handcuff the Democratic Agenda If They Retake the House
    David Dayen


    In the first outline of the legislative agenda House Democrats would pursue if they take the majority in November, Minority Leader Nancy Pelosi has made the public a big promise, vowing to handcuff her party’s progressive ambitions, including in the event that a Democratic president succeeds Donald Trump, by resurrecting the “pay-go” rule that mandates all new spending is offset with budget cuts or tax increases.
    Pelosi’s planned legislative package for the beginning of a potential House takeover would include establishing ethics and lobbying reforms, lowering the costs of health insurance premiums and prescription drugs, and spending $1 trillion for infrastructure investment. The latter two would cost money, and under pay-go it would all have to be offset. (Amerikar trilioi bat = Europar bilioi bat.)
    A new vanguard of economists in Washington, including former Bernie Sanders staffer Stephanie Kelton, has argued that under modern monetary theory, public spending is only constrained when the economy is running at full capacity and inflation starts to rise — which is not remotely the case today. Public deficits, she points out, are just another way of talking about private surpluses. She has warned of the dangers of balanced budgets that take money from the hands of ordinary people, and has made some headway inside Washington. Kelton has been involved in strategy sessions with Senate Democratic Leader Chuck Schumer, D-N.Y., and remains close to Sanders, who would chair the Budget Committee if Democrats take the Senate. But Pelosi has been unmoved.
    In a statement, Kelton said that “pay-go is a self-imposed, economically illiterate approach to budgeting.” Republicans, she said, know this, which is why “they have unabashedly used their power to expand deficits and, hence, deliver windfall gains for big corporations and the already well-to-do.”
    She continued, “Instead of vowing budget chastity, Democrats should be articulating an agenda that excites voters so that they can unleash the full power of the public purse on their behalf.”

  • joseba

    LEFT OUT: Stephanie Kelton on MMT and debunking budget deficit myths
    Stephanie Kelton is a leading American economist and a Professor of Public Policy and Economics at Stony Brook University. Kelton was Chief Economist on the U.S. Senate Budget Committee and Economic Advisor to the Bernie 2016 presidential campaign. She’s most known for being a pioneer of Modern Monetary Theory (MMT). 
    In this episode, Professor Kelton debunks budget deficit and government spending myths and explains how understanding how our monetary system works is crucial to making the political and economic case for important programs like universal health care, free public higher education, infrastructure investment, and more.
    We also explore some current economic issues, including how we might be able to cancel all public and private student debt in the U.S., and lastly the role and challenges of women in economics.

  • joseba

    S. Kelton eta defizita

    Ben Walsh-en Stephanie Kelton Wants You to Rethink the Deficit

    Stephanie Kelton, an economics professor at Stony Brook University on Long Island in New York, has a radical new way for thinking about the economy: Governments that print and borrow their own currency can’t go bankrupt, she says, and the current U.S. budget deficit is, if anything, too small.
    That kind of thinking is part of a school of economic thought known as modern monetary theory, or MMT, which Kelton has helped develop. But she also wants to tell me a story from 2012, years before she became better known as an advisor to Sen. Bernie Sanders’ (D., Vt.) presidential campaign.
    At that time, Kelton was invited to an all-male breakfast club of the Kansas City rich and powerful. Despite her left-leaning views—and being the only woman—she won the room over.
    How she did it is a testimony to her rhetorical and intellectual skills and to just how much her thinking confounds a political graph that is defined solely by tax and spending axes.
    Kelton, 48, explained to the room in Kansas City that the government budget is not like a household budget because the government prints its own money. But the problem is that Washington always wants to know how to pay for new programs.
    That’s a problem for you, she says she told her listeners, because the conventional wisdom in the capital is that money “grows on rich people” and you pay for nice things by taking it from them.
    “Don’t look at me,” she instructed her audience to tell lawmakers. “That’s where the money comes from. And you point at the Treasury. You point at Congress.” And she won the room over.
    Insisting that government spending comes from taxes, she says, puts the rich at the center of American policy-making in an unhealthy way. And the very rich, Kelton’s experience shows, are pleased to hear that you don’t have to tax to spend.
    Here’s what else she had to say.
    Barron’s: Let’s start from the top. The way the federal government works is it takes in money from taxes, and then it spends it. Right?
    Stephanie Kelton: Well, that’s the usual belief. How it really works is that there’s a constant overlap of things happening. That when Congress sits down, in an ideal scenario, the House and the Senate would come up with budgets. And in all likelihood, they won’t match exactly. And so there will be reconciliation. The budget will either pass or not. It gets signed by the president or not. Congress is writing down numbers and saying, “This is our intention, to spend in these amounts.” And the budget authorization is given that allows the heads of these agencies to go out and start hiring, engaging in contracts. It’s the authorization from Congress that provides the funding. That triggers the spending.
    The conventional wisdom about deficits is that we should always be worried about them. When do you worry about deficits?
    I worry not just about the magnitude, but about the purpose. We could add $1.5 trillion1 to the deficit over 10 years, as we just did with tax cuts that go disproportionately to people in the top-income distribution, and we could have done, for instance, student debt cancellation at virtually the same price tag. We could have done massive infrastructure investment, or R&D investment.
    You can have the same budgetary outcome, but very different economic outcomes, in terms of the potential to boost long-term growth and productivity, impacts on the distribution of income, and so forth. Every economy has its own internal speed limit. You can only absorb so much additional spending at any point in time, given the slack that the economy has at that moment. So can the deficit be too big? Of course! But can it be too small? Yes. And that’s something you rarely hear people say. Or complain about it.
    It seems like people forget that balance sheets have two sides.
    Government debt is just the money the government spent into the economy and didn’t tax back. That’s all the national debt is. It’s a historical record of all of the times that they made a net deposit, spent more than they taxed out, and the bonds are the difference between those. One of the greatest cons ever perpetrated on the American people is this notion that the national debt belongs to us, that we are responsible in our individual capacity for a share of it.
    The national debt clock that counts up exactly how much is owed by every man, woman and child in America!
    When I worked on the Hill, one of my favorite exercises was to find elected officials, staffers, and ask them if you had a magic wand, and you could wave it, and eliminate the national debt tomorrow, would you do it? Of course. Who wouldn’t do that? Yes, I mean, the quickest “yes” you ever got in your life.
    OK, what if I gave you a different wand, and I told you, you can wave the magic wand, and you can eradicate the world of U.S. Treasuries. There won’t be Treasury notes anymore. They’ll just all be gone. How many members of Congress, would do that?
    They looked at me with a total blank stare.
    Why do you think that people generally, and politicians in particular, are stuck on this notion of the government spending being like a household or an individual?
    In some ways, it’s rhetorically convenient. No politician wants to stand, I think, in a town hall meeting and try to explain the intricacies of government finance to constituents. So it’s a convenient narrative to just reinforce the conventional wisdom, the norms of understanding. And I think it also provides political cover.
    You advised Sen. Bernie Sanders, and you’re a major proponent of a jobs guarantee, support Medicare for all, free college tuition, and on—all things the left wants. Do you think that modern monetary theory has an inherent set of politics?
    No. When we started undertaking the research for this body of scholarship that’s now dubbed MMT, it was an exercise in trying to understand the monetary system, the way things work. We just wanted to get a better understanding of how the economy works, how fiscal and monetary operations work. At least 90% of MMT is descriptive in nature. But if you believe that the economy chronically operates under its full potential, then it makes sense to look for policy recommendations to make things more efficient, to maximize potential output. And MMT’s not the only school of thought that does that. You see that with classical supply-siders as well. They think the way to squeeze out the last bit of potential is largely through tax cuts and deregulation.
    What about Greece, Portugal, Spain, Italy, Argentina, and their debt crises? They exist. Why don’t those things worry you?
    Well, the debt crises in those countries are worrying to me. But it’s not a lesson for America. You know, back in 2010, at the height of the European debt crisis, I can remember standing in my kitchen with the TV on, and turning on the news, cooking dinner, and seeing the opening to the nightly news. And it goes, dah, dah, dah, the debt crisis in America. And I go, what debt crisis in America? But that is really what the narrative started to become: This is a warning for America. We need to get our fiscal house in order.
    What’s different? Look, Italy in 1995 had a debt-to-GDP ratio of around 120%. Spain in 1995 had a debt ratio of 62%. Greek debt-to-GDP over 100% before joining the euro. These countries were borrowing and spending in a currency that they created. Who remembers the debt crisis in Europe in ’95? There was no debt crisis in ’95, because Italy could always meet every obligation that came due, on time, in full, because it was paying in lira. Where and how else is the lira going to come from but the Italian government?
    Do you think openness to MMT and view of deficits and government debt is generational? Do old people just not get it?
    I think so. For a certain demographic, the ’70s are still kind of a fresh memory, and you know, waiting in long lines to put gas in the car, high inflation. And so that’s a live memory for some demographic. But young people—I mean, Obama’s slogan was “Yes we can.” And then all hell breaks loose, and he’s on TV right after the inauguration saying, we ran out of money, so no, we can’t. And then you get Hillary Clinton’s message, which was pretty much, “Yes, we can a little bit.” And millennials see their future, they see climate change, and they take it seriously. They see the cost of college education. They see problems with health care. They can’t get out of the home and start a life. They’re open to a big, ambitious agenda. The threats are real for them.

  • joseba

    Stephanie Kelton-i egindako elkarrizketa, 2012an

    Transcript: Stephanie Kelton Interview
    LE SHOW, OCTOBER 28, 2012
    Listen to the podcast here.
    Interview recorded Thursday, October 25, 2012.
    HARRY SHEARER:  This is Le Show, and we are frightfully close to Election Day, and I think some of us are heaving a sigh of relief, if not utter, utter, utter joy, that this will soon be over one way or the other. And one of the sources of joy is that we will no longer have to hear the bipartisan consensus about the economy, our state of finances, being yelled from every rooftop.
    I’ve been reading and seeing video seminars on the Internet, which we have these days, from a source of somewhat differing perspective on what we’ve been led to call the fiscal cliff and all the rest of it – the danger of the deficit, the crime we’re committing upon our grandchildren – so I’ve invited one of those folks who’s been writing and appearing on these video seminars in to be my guest today on Le Show. Sitting in – are you in Kansas City?
    STEPHANIE KELTON:  I am, yes.
    HARRY SHEARER:  Dr. Stephanie Kelton, who is an Associate Professor at University of Missouri Kansas City and a Research Associate at the Levy (“lee-vie”)? Levy (“levee”)?
    STEPHANIE KELTON:  Levy (“lee-vie”).
    HARRY SHEARER:  Levy Institute in New York City. And welcome, first of all.
    STEPHANIE KELTON:  Thank you so much for having me.
    HARRY SHEARER:  My pleasure. The university and the institute seem to be the loci of this group of economists and people who study the economy who have a – I’m tempted to say a radically different understanding, than what we’re given by the Washington-New York consensus. Is that right?
    STEPHANIE KELTON:  Well, there certainly are a large number of us that are affiliated with one or both of those institutions. There are people, you know, all over the place, and as the understanding about how things work grows, we continue to pick up numbers, and so we’ve got people not just all over the U.S. in academic institutions, but also outside the U.S.
    But interestingly what we have is really a growing number of people who are subscribing to what we’re doing, paying attention to what we’re doing, inviting us to come and speak to their groups, and they come from the finance industry, and so that’s been kind of a surprise. But I guess in some ways, you know, a lot of these folks have training and background in accounting, and so a lot of what we do emphasizes through the other side of the ledger, and every time someone talks about the government’s deficit, you forget that when the government spends more than it collects from you, that somebody else ends up with the difference, and that’s the other side of the ledger. So these finance and accounting types seem pretty intrigued by this.
    HARRY SHEARER:  So let’s start at the beginning. What’s money?
    STEPHANIE KELTON:  Well, money is a relationship that exists between two parties, and it signifies a party who is the debtor and a party who’s the creditor. So money is a balance sheet relationship where you’ve always got both sides of the balance sheet at work. You know, somebody’s asset is somebody else’s liability. Somebody’s IOU is somebody else’s balance sheet asset.
    So money isn’t this thing. We tend to think of money as a thing, something that you can pick up, something that exists in physical form, and there’s only, you know, so much of it. Or if there isn’t only so much of it, most people think there should be a limit. And really, in the modern era, money is something that we create with keystrokes. We use computers. When you walk into a bank and you sit down with the loan officer and you say, “I’ve got this plan for a small business I’d like to start,” or “I’d like to expand my business,” or “I want to buy a car or a computer or pay for school” or whatever it is – the loan officer doesn’t get up from the desk and say, “Just a second. Let me go and find out if we have any money we’re lending out today.”
    HARRY SHEARER:  (laughs)
    STEPHANIE KELTON:  That doesn’t happen. Right? The loan officer doesn’t look in the vault to find out if they can make the loan. They look at you, and they look at your work history and how much you make, how long you’ve been there, what kind of debt you have. You know, they look at your balance sheet, not their balance sheet. And if they think they can make money by extending credit to you, then they simply use the computer. They credit your bank account. You get money and they get this asset called a loan.
    HARRY SHEARER:  Or in the last decade they didn’t even look at you.
    STEPHANIE KELTON:  They didn’t even look, right.
    HARRY SHEARER:  Yeah. So did – your point of view is that this changed when the United States and ultimately a lot of other countries went off the gold standard and money ceased to be a representation of something payable ultimately by the provision of certain – you could always go and demand certain precious metals for your piece of paper?
    STEPHANIE KELTON:  Right. Right. Exactly. So before 1971 the monetary system that we had in the U.S. looked very different from the one that we have today. It was based on a system of fixed exchange rates. It was a global monetary system where you had 44 countries participating. This is something that was an outgrowth after the end of World War II. It was called the Bretton Woods system because it was designed and put into place, conceived at a place called Bretton Woods, New Hampshire. And so 44 countries got together and decided to fix the value of their currency, so the Mexico peso would be convertible into so many U.S. dollars, and the French franc into so many U.S. dollars, and the German mark into so many U.S. dollars, and then through the dollar those currencies would be convertible into gold. So a fixed price, you know, $35 an ounce. So you convert your deutschmarks into dollars and then your dollars into gold.
    And when you have a system like that in place, of course you have to be careful about how much you allow your money supply to expand, because you’re promising to convert the dollar on demand into this very finite resource called gold.
    Well, after 1971, President Nixon took the U.S. off of the Bretton Woods system. We don’t have this old archaic gold standard convertibility currency system anymore. We have what’s sometimes referred to as just a pure fiat money system. It’s – our money isn’t backed by anything physical. It’s not convertible on demand into any other country’s currency or into any hard asset or anything like that. We quite literally can have an infinite supply of U.S. dollars. Okay? There is no inherent limit to the amount of currency that can be created in the modern era.
    And this isn’t, you know, a crazy idea that I dreamt up. This is something that Alan Greenspan has been really candid about. And he’s said it over and over again. You can find the videos, read the testimony. He says quite plainly that there is no limit to the government’s capacity to create the currency.
    And that’s why all of these, you know, these debates that you hear about, all this hand wringing over the size of the national debt, and what if we can’t pay it back, and the rating agencies, and what if the U.S. defaults on its debt, and all this, and Greenspan comes out and he says, “This is ridiculous. The debt is denominated in the U.S. dollar. The U.S. dollar comes from the U.S. government. We always have the ability to pay the debt, always.”
    HARRY SHEARER:  We hear the United States government, especially during the election campaign, being compared to two different entities – to a household and to Greece. Might you explain why the U.S. economy does or doesn’t resemble a household in America and/or Greece?
    STEPHANIE KELTON:  Sure. I would be very happy to. If I could dispel and disabuse people of these two myths, we would have an entirely different national conversation.
    So, first the household debt analogy. This is a really powerful one. And the finances that most people are familiar with, of course, are their own personal finances. And so I think it resonates with them when they hear people make the argument that the federal government faces the same kinds of constraints that you and I face, that we have to tighten our belts when times get tough, and the federal government should do the same thing. And the person who really I think hammered this home so was Ross Perot with his little charts and his feisty little attitude, you know, telling the American people that we’re on the verge of bankruptcy in this nation and if he ran his business the way the government runs its operations, why, he’d be broke, and all this. So that’s where that really, really comes from. And today, you know, it’s the Peterson – Pete Peterson and his ilk that are pushing this.
    So ask yourself, what is the difference? Why is it that a household has to live within its means? Why is it that a household can only borrow so much before it runs into possibly a situation where a bill comes due and the household can’t pay? Why is it that businesses sometimes go bankrupt? Why is it that state governments or, you know, Orange County – why is it that some of these folks can actually go bankrupt?
    The fundamental difference between a household, a business, a state or a local government and the U.S. federal government is that the U.S. federal government is the issuer of the currency, and everybody else that I mentioned is merely the user of the currency. We all have to go out and get the dollar in order to spend the dollar. We either have to earn it, we have to borrow it, we make investments, we may have interest income – whatever, but we have to come up with the currency from some source.
    The U.S. government in contrast is the source of the currency, right? The U.S. dollar comes from the U.S. government. Congress has given itself a monopoly over the issuance of the U.S. dollar. If you and I try to do it, we go to jail. It’s called counterfeiting, right? But the U.S. government has the monopoly right to create the currency. And as the issuer of the currency, it can, as Alan Greenspan has said, as Ben Bernanke has said, it can never run out, it can never go broke, and it can never be forced to miss a payment.
    Greece, you asked about Greece.
    HARRY SHEARER:   Mhmm.
    STEPHANIE KELTON:  So this is a very interesting, a very interesting example. Because what you have in Europe is, you know, this collection of countries that decided at various points in time – not everybody adopted the euro at the same time – but they all decided to give up their individual sovereign currencies. Eleven of them did this in 1999 and then gradually six more countries joined, so today there are seventeen. But all of these countries used to have a currency that came from them. The lira –
    HARRY SHEARER:  The franc, the lira –
    STEPHANIE KELTON:  Right! Right. Right. And today they have this currency that they can’t issue. And in order to spend they have to go out and get the currency from somebody else. And so you look at Italy, that today has a debt-to-GDP ratio that is almost exactly where it was 15 years ago, only 15 years ago you didn’t have a debt crisis and today you do. What’s the difference? How come they could always pay before? Same debt load. And the difference is because they had promised to pay lira, and the lira came from the Italian government.
    Same for Greece. High debt is not something entirely new to Greece, but it was always sustainable before because the debt was denominated in the drachma, and they could always come up with the currency when they needed to make a payment.
    HARRY SHEARER:  Just incidentally, who does issue the euro?
    STEPHANIE KELTON:  That would be the European Central Bank. They have the monopoly over the issue of the currency, and that’s why, you know, time and time again when we’ve seen governments get into trouble where they’re reaching the point where their debt levels are unsustainable and there’s the possibility that they actually might miss payments, the only place the currency can really come from, the only entity that can deal with the solvency crisis, is the ECB. So the ECB steps in, provides the funds, and, you know, this thing can go on. As long as the ECB is willing to do that, the euro can survive, but there’s just really no other, no other alternative under a system like that, because these countries are borrowing in a currency that doesn’t come from them.
    Financial markets realize that they’re lending to currency users and not currency issuers, which is exactly why the financial markets have so much power. It’s why they’re able to bully these countries in a way that they can’t bully the U.S., they can’t bully Japan, they can’t bully the U.K.
    Look at Japan’s debt-to-GDP. It’s twice ours. It’s 200% debt relative to the size of their economy. Ours is about 100% debt to GDP. Where are Japan’s interest rates? Right where ours are. Zero short-term and about 1% long-term. Why? Why is Japan’s debt twice as big as ours and their interest rates are at zero, U.K. same thing, U.S. same thing, and in Europe interest rates are all over the place – 6%, 6½ , 5, 7? It’s because financial markets recognize that they’re lending to currency users, that there’s a real possibility of default, and in order to compensate them for the risk they’re taking in lending to these currency users, they want a premium. And so they’re able to extract that higher interest rate by virtue of the fact that, you know, you might default, so you’ve got to compensate.
    HARRY SHEARER:  Those are so-called bond vigilantes that we keep hearing about.
    HARRY SHEARER:  Let’s get back to us. The corollary of what you’re saying would be the question, does the United States have to either tax or borrow to get money to spend? The federal government?
    STEPHANIE KELTON:  No. It doesn’t need to finance itself by raising taxes or collecting money through the sale of bonds, which is what we call borrowing. No. That is not that purpose of either of those operations. The currency comes from the government. So, could the government write checks on its account at the Federal Reserve and just allow the balance in that account take an overdraft? Right? So allow the balance in its account at the Fed to go negative, deeper negative, deeper negative? And the answer is yes, it could. Currently there are laws in place that prevent the federal government, that prevent the Treasury, from running its account at the Fed into the negative. But who came up with that rule? Congress, of course. So, there is no financial constraint. The U.S. government is not revenue constrained in the way that private business is or in the way that we’re constrained.
    HARRY SHEARER:  Well if that’s true, why are they taxing us?
    STEPHANIE KELTON:  Well, taxes play an important and historically very interesting role. You know, if you look at the history, one of the examples that we often use is we talk a little bit about the colonization of Africa by the British. You say, “You know, the British sail over and they have a look around and they say, ‘You all have some really terrific res–’” I’m paraphrasing.
    HARRY SHEARER:  Yeah! (laughs) You’re putting it mildly, too.
    STEPHANIE KELTON:  “You all have some really –” (laughs) “You all have some really great resources here. How’s about we make a deal and you sell us some of this great stuff and we’d be happy to pay you for it, and here are some British pounds.” And the Africans, you know, look at the currency and they say, “Well, it’s lovely, but no thanks, cheerio, and safe trip home.” And the British said, “Well, no, actually, we really, really want the resources, so here’s what we’re going to do. We’ll start imposing taxes – it could be a head tax, it could be a village tax – but we’re going to impose a tax liability on you, the tax liability is payable only in the British currency, and the penalty for not paying the tax is –” And then, you know, use your imagination. The penalty was pretty stiff. So all of a sudden these African people who had no interest in working to get the British currency suddenly became very willing to work and provide resources in order to get the currency. And the reason is that the currency had no value to them until the tax was imposed and the liability was imposed on them. In other words, until they were forced into debt. And the only way –
    HARRY SHEARER:  You’re saying that taxes create the demand for the currency?
    STEPHANIE KELTON:  Historically you can find this. You can find this in the literature. Historians are very good on this, anthropologists are very good, numismatists are very good, and economists are really terrible at this –
    HARRY SHEARER:  (laughs)
    STEPHANIE KELTON:  – because they’re lazy scholars by and large. And so, yes, the literature, the work is out there, and historically you can find this.
    And look, if you had asked the German people – and they did ask the German people – hey, poll after poll, do you want the euro? Would you like to give up the deutschmark? And the Germans said “Absolutely no. We are not signing onto this. We like the deutschmark. We’ve been through a lot with our currency here. This thing is stable. We’re keeping it. We don’t want to take any risks.” And the German government said, “Wait a minute. We’re going to go ahead and introduce the euro. From this point forward, all payments by government will be made in this new currency, and all payments to government will be collected in this new currency.”
    And it’s that decision by the government about how it’s going to make its payments and what it’s going to accept in payment to itself that drives the currency, that ends up making that currency the currency that circulates within the national borders.
    HARRY SHEARER:  So they didn’t have to confiscate lira and francs, they just were not payable as debts to the government.
    STEPHANIE KELTON:  Exactly. And they quickly stopped circulating as widely accepted.
    HARRY SHEARER:  Okay. The other half of the question. Why does the United States government borrow?
    STEPHANIE KELTON:  Well, it’s a relic of an old monetary system, and one that was designed to ensure that you didn’t have too much of the currency created when you had a convertible currency. So, you know, currency was convertible into gold. So at this point the answer with the new monetary system, the one we have today, the answer is that when the government sells bonds, it’s a way for the government to hit and maintain positive interest rates. This gets a little bit complicated, but if you think about the government running deficits, that is, spending more money than it collects from us in the form of taxes – well, what that does is it leaves the private sector, and in particular the private banking system, with a bunch of extra money that economists refer to as reserves. So if banks are sitting on lots of reserves because the government is –
    HARRY SHEARER:  Let me, let me – sorry, let me –
    HARRY SHEARER:  – slow down to –
    STEPHANIE KELTON:  Go ahead.
    HARRY SHEARER:  – for a show business person’s understanding of this –
    STEPHANIE KELTON:  Okay. (laughs)
    HARRY SHEARER:  This is the surplus in the private sector you were referring at the beginning to as the offset on the other side of the ledger sheet from the government deficit.
    STEPHANIE KELTON:  That’s right. So if the government buys a $100 billion aircraft carrier – it’s harder to do just a single purchase, but I’ll try to do this – a $100 billion aircraft carrier, and it collects in only $90 billion in taxes, well, the person who put the $100 billion into their checking account, that bank has $100 billion in what we call reserves. And now let’s say the customer at that bank pays the $90 billion tax liability, 90 comes out, but there’s still an extra $10 billion in the banking system and in the private sector. And if you’re not doing anything to get rid of those extra reserves… Bank reserves circulate between banks, and so what happens is banks are required in the U.S. to hold reserves. That is, they keep checking accounts at one of the twelve Federal Reserve banks, and they hold reserves against a fraction of what their customers keep on deposit with them.
    HARRY SHEARER:  This is so-called fractional reserve banking?
    STEPHANIE KELTON:  Fractional reserve banking. And sometimes the banks have more reserves than they want to hold and sometimes banks don’t have as many as they’re legally required to hold. And so you have this market out there called the federal funds market. And the banks with too many can get together with the banks with too few and they make a loan, and the price that you pay for those reserves is the federal funds rate. And a lot of people will have heard that, you know, when they talk about the Federal Reserve changing interest rates or something, you hear about the fed funds rate.
    Well, if the government is putting more in than it’s taking out by spending more than it’s collecting in taxes, then the banks are accumulating reserves. And if this is happening on a wide scale, right? All the banks are accumulating more reserves, then everybody wants to be a lender and nobody wants to be a borrower. And so the price goes to zero. And so your overnight interest rate, the federal funds rate, quickly falls to zero.
    Today it’s a policy decision to keep it at zero, but that’s not how things normally work. Normally the government wants the interest rate above zero, and so what they’ve done historically, for decades now, is they sell bonds. They say, “Well, the interest rate is zero, because you all have all of these reserves and you’re trying to get rid of them because they don’t pay you any interest. Let’s sell you some bonds, and then you hold U.S. government bonds that pay you interest and I’ll take those reserves from you.” And so it allows – the bond sale is a way for the government to maintain positive interest rates. This is the short answer to a kind of complicated question.
    HARRY SHEARER:   Mhmm, mhmm. Well, it leads to the question of, which we hear constantly talked about in the political context of who’s buying U.S. debt, U.S. federal government debt, and we’re depending on the Chinese and we’re putting our grandchildren in hock. Let’s examine both halves of that one. Are the Chinese the main holders of U.S. Treasury debt at this point in time.
    STEPHANIE KELTON:  No. Not by a long shot. No. They hold about a trillion dollars out of the total roughly $16 trillion, so, no, it’s not a trivial amount, but it’s also –
    HARRY SHEARER:  Well, I got that on me.
    STEPHANIE KELTON:  (laughs) Yeah. It’s not a trivial amount, but it’s also not – it’s also not something we should be wringing our hands over the way we do today.
    Look, China has U.S. dollars because China has a strategy for domestic growth that relies heavily on China’s desire to produce things and ship them to other people to enjoy. So as long as this is part of their strategy and they want to grow their industries by making things and shipping them to foreigners, they’re going to end up with the currency of foreign countries. And in the case of the U.S., when the Chinese send us more goods and services than we send them, they end up with U.S. dollars. Which is fine. So, we get the stuff and they get the credit to their bank accounts. Now, what they do is they say, “Well, we have all these U.S. dollars in our bank account, but they don’t pay us any interest. So, why don’t we flip these out of our checking account into our savings account, which is basically what the U.S. Treasury is to them. It’s like having a savings account instead of a checking account.
    HARRY SHEARER:  So they get interest paid on the bonds.
    STEPHANIE KELTON:  They get interest, and because the U.S. government is only promising to pay to U.S. dollars, and because it’s the issuer of the U.S. dollar and it can never run out, it can always pay the interest, it can always pay back the principal, and when they do, we put the money back into China’s checking account, and then what does China do? Do they say, “Oh, good, we have lots of dollars. Now we can go buy more goods and services from the U.S.”? No, they say, “Put it back in our savings account,” right? “We want the Treasury.” So they just keep flipping it back and forth from checking into saving, all the while they’re toiling away the day in conditions none of us would want to be working in, producing things, cheap things, sending them to us to enjoy. And what do they get in return? They get more credits to their checking account that they flip into their savings account. And we act like they’re winning and we’re losing. And we send convoys of, you know, high-level government officials over there to tell them to stop allowing us to abuse them this way.
    HARRY SHEARER:  (laughs) The other half of that. What’s happening to our grandchildren? Who’s doing what to our grandchildren?
    STEPHANIE KELTON:  Well, we’re not doing them any favors at the moment, that’s for sure. Cutting education, laying off teachers, letting our infrastructure fall into disrepair to the tune of, you know, $2.2 trillion, and a D rating overall. I mean, we’re not leaving them a whole lot to be proud of., in energy and environment and any number of things, and a, you know, retirement system, Social Security, the cuts that they – the programs that may not be there for them when they need them and so forth. So we make all of these choices and the excuse is always, “Well, we’d love to do better but we can’t afford it.” Because we don’t understand our own monetary system. We think the dollar comes from China.
    HARRY SHEARER:  Made right on the same assembly line as iPad. I left one question hanging from the previous question. Who does own most U.S. Treasury debt then, if not China?
    STEPHANIE KELTON:  Oh, well, it’s on the books of financial institutions, banks, pensions, corporations. I mean, these are good, safe, default-risk-free –
    HARRY SHEARER:  Mainly American?
    STEPHANIE KELTON:   Mainly American, sure. Sure.
    HARRY SHEARER:  So if I were listening casually to you – I’m trying to pay more attention – but if I were a casual listener, I would say, “Well, she’s just sort of fronting for a policy of just spend it all and, you know, raise taxes.” I mean, is this just an ideological water carrier for the Democrats?
    STEPHANIE KELTON:  Well, no, because they frustrate me more than anybody does.
    HARRY SHEARER:  Well, welcome to the club!
    STEPHANIE KELTON:  I mean, you know, who wants to strike the Grand Bargain? Who said “go big”? Who said “four trillion”? No, most of this kind of talk is actually coming from the Democrats. It’s not a free lunch. There are lots of things that we don’t do today to recover the economy to where we should recover it, and you’re just sitting here looking at still very close to 8% unemployment, and we’ve chased so many people out of the labor force that the real numbers are much higher than that. And every single day we’re leaving around $10 billion on the table in lost output, lost income, because of all of the unemployment.
    And you know all the social problems that go alongside that – a housing market that we haven’t addressed the problems there, and so on and so forth. So there are real costs, and there are lots of things that we forgo every day because we don’t do what we should be doing.
    But this is not – what I’ve been saying shouldn’t be interpreted to mean, because you can spend and you can create the currency in an infinite way, that you should go out and spend to infinity. That’s not it at all. What I’m saying is that when you have about 23 million Americans who want to work and they want full-time work and they’re unable to find it, when you have things that need to be done, useful things that need to be done – like, I mentioned the $2.2 trillion in infrastructure investment that needs to be made, and you have folks who want to work, and you have useful things that need to be done, and you have the financial wherewithal to make that happen, it’s not financially responsible.
    We hear a lot about fiscal responsibility.
    STEPHANIE KELTON:  What could be more fiscally irresponsible than being the monopoly issuer of the currency and keeping it so short that people can’t get the currency when they want to work in exchange for the dollars so that they can buy things. And so you put people to work, you pay people to work, people go out and spend, businesses have customers, businesses hire – this is not really rocket science.
    I’m sort of dumbfounded every day I go through life at the complexity that apparently people – people can’t figure out the simplicity of this. You know? You run your economy at full employment. If there’s unemployment, it’s an indication that the deficit is too small. If you get inflation, it can be an indication that you’re spending too much. That is, if the inflation is the result of, as they say, too much money chasing too few goods. But if your economy is starting to heat up and you begin to see inflationary pressures that are coming because there’s too much demand and you don’t have the supply capacity, you can’t produce enough goods and services, then you have to slow that demand down, and you do that either by cutting spending or by raising taxes.
    Right now we have this national conversation taking place about, you know, the debt and the deficit and the Chinese and the burdens and the rating agencies and all this kind of crazy talk that we need to start cutting now, raising taxes and cutting spending, and we’ve got 23 million people without work. You know, this isn’t – you’re supposed to do the opposite in this situation.
    HARRY SHEARER:  Okay, you did mention the “I” word, which I’m sure some people have been screaming at their radios for some time now. So let’s tackle it head on. If the government doesn’t need to tax and it doesn’t need to borrow in order to spend and it spends willy-nilly, people will say hyperinflation, wheelbarrows full of paper money just to buy a loaf of bread, the familiar images in our heads of the Weimar, which certainly still scares the Germans if nobody else. Inflation is a constraint. You’ve acknowledged that. How great a constraint is it?
    STEPHANIE KELTON:  Well, it would be a significant constraint if we didn’t have the excess capacity and the millions and millions of unemployed workers. So you expect price pressures when your markets get tight, when you’re running your factories very near their capacity, when the labor market gets so tight that, you know, you have basically a job opening for every job seeker. Then you know you’re really close to full employment.
    You know, you don’t get hyperinflation by running your economy at full employment. Let’s not forget that under the Clinton years, the so-called Clinton boom, we had full employment in this country. We had as close as what I am comfortable referring to as full employment where we actually had one job vacancy for every job seeker. And that was the first time in 35 years that we’d achieved those kinds of numbers. Our inflation rate was so low, nobody even talked about inflation. Inflation was not even on the radar screen. We had high rates of growth of GDP, our unemployment rate officially was 3.7%. We had high growth, low unemployment, and modest inflation. So we did this before and we did it in the not-so-distant past.
    All I’m saying is that the way we’re running the economy right now, this is not fiscally responsible. This is dysfunctional finance. We’re getting everything wrong. We’ve got all kinds of room to run here and we can safely crank up aggregate demand. We can safely cut taxes on those that we think will be most likely to go out and spend, and that spending leads to the sales that then lead to job creation, and we can safely increase government spending on programs like infrastructure, education and the kinds of things that we believe generate real economic growth and prosperity and leave our children and grandchildren better off than they would be otherwise.
    HARRY SHEARER:  Your colleague Warren Mosler, I believe, says that the decision whether to cut taxes or to increase spending, or the balance between those, remains a political decision, that this understanding of economics does not dictate one or the other or the particular formula for the combination – is that correct?
    STEPHANIE KELTON:  Sure. Absolutely. I mean, look, I sometimes use the phrase, “Cash registers don’t discriminate.” You know, when you go to the grocery store, somebody might say to you, “Paper or plastic?,” but nobody will ever say to you “Private or public?” And so whether the additional spending comes because we had a payroll tax holiday and millions of Americans have more take-home pay and more money to eat or pay down debt or to go out and buy something new, or whether it comes from, you know, direct government spending, cash registers don’t discriminate. So, yes, it is very much a political decision.
    HARRY SHEARER:  I want to double back to the question of the bond vigilantes for a moment, just to nail something down. This very day I heard a member of the Conservative government – well, the coalition government, actually, it was a Liberal Democrat I think, official in the British government, asked about the fact that the IMF had said, “You know, Britain may need to think about sort of putting the brakes on its austerity program if it wants to enjoy actual growth in the economy.” He said, “We’re not going to backtrack on our policy because our policy” – which is basically sort of an austerity light as compared to what Greece and Italy and Spain and Ireland have been through – “our policy has kept interest rates down, has increased confidence in the market, which has resulted in lower interest rates.” “Confidence in the market” – is that code for bond vigilantes looking for the next, you know, fish in the water that may be emitting blood?
    STEPHANIE KELTON:  Yeah, I guess so. I love the taking of credit for something that – you know, interest rates are going to be low as long as the Bank of England says interest rates are going to be low. This is not a reflection of the success of the austerity program or the placating of the bond markets or anything else, it’s simply a reflection of the fact that if the central bank establishes a low interest rate and then pledges to keep rates low, as the Fed had done here, that market participants are going to anticipate low interest rates across some period of time out in the term structure, and so you’re going to have low interest rates. I mean, when you set the interest rate, you’re going to have whatever interest rate you decide upon.
    HARRY SHEARER:  Well, then, you mean the Fed decided that interest rates should be 17% in the late 1970s?
    STEPHANIE KELTON:  Absolutely! That was Paul Volcker’s doing. Yes, absolutely. This is the first – this was something that was known as the great monetarist experiment. And of course the greatest monetarist who ever lived was Milton Friedman. This is the old Chicago School of Economics.
    You know, in the Seventies the U.S. was experiencing that ugly thing called stagflation where we had a period of time where we simultaneously had high unemployment and high inflation. And Paul Volcker, who was the chairman of the Fed before Alan Greenspan, decided he was really going to tackle inflation. And being a good monetarist, he decided that the way to bring down the inflation rate is to try to reduce the rate of growth of the money supply, because they have this idea that if your money supply grows at 6%, you’re going to have 6% inflation, and if you can bring your money supply growth rate down to 2½, 3%, your inflation rate will come down proportionately.
    So what Volcker did was attempt, for the first time really, to control the rate of growth of these monetary aggregates. And I’m not going to get into all this because it gets a little bit too technical with M1s and M2s and M3s and all that, but he tried to control how much banks were actually lending, these different measures of the U.S. money supply, and when he decided to target the money supply, he let go the interest rate. And you can do both.
    And so, yes, U.S. interest rates went very high. The prime rate, which is the interest rate that banks are supposed to be charging their best corporate customers, went to 21% under Volcker. But that was absolutely a policy decision.
    HARRY SHEARER:  What – you mentioned the name earlier, and I want to get back to it. Why is there a bipartisan consensus that’s pretty much written in concrete these days, that the deficit is a bad thing, that the national debt is going to crush our grandchildren, that we can’t afford these things that you talked about before that might be desirable for the state of the economy and for the employment of Americans who want to work, this consensus that we are debt constrained and tax constrained – revenue constrained – and you mentioned the name Peter G. Peterson, so –
    HARRY SHEARER:  – would you fill us in on that a little bit?
    STEPHANIE KELTON:  Well, here’s someone who has made a financial commitment to establishing a narrative in the American psyche and hammering it and hammering and hammering, and recognizing that it would take time, it would take, you know, financial commitment, but that this message if drilled in hard enough and long enough could infect every political party, on both sides. And it absolutely has done that. I watched the first debate between Obama and Romney, and somebody said, you know, “Who do you think won?” And I said, “Pete Peterson.”
    HARRY SHEARER:  (laughs)
    STEPHANIE KELTON:  It’s obvious. You know, I’m reading just today in – Reuters put something out about the CEOs of more than 80 big U.S. corporations, and these corporations include the likes of Goldman Sachs and Boeing and JPMorgan, and these guys have all gotten together and they’re pressuring Congress to reduce the federal deficit. And what do they want? They want tax cuts, of course, and spending cuts. And what do you think is on the receiving end of the spending cuts? Of course it’s entitlements, right? So these CEOs from more than 80 of these big U.S. corporations got together and wrote a letter in the Wall Street Journal website. It was supposed to go up today in fact. And they’re emphasizing the fiscal cliff and the need to bring down the deficit. Now they want, they’re concerned about, you know, how big the deficit is, and I read that the statement itself was organized by a campaign called Fix the Debt. And this campaign’s been urging Washington to, you know, put aside their partisan differences and let’s all get the U.S. back on a sustainable fiscal path and all that stuff. And Pete Peterson is connected to this group. And so he seems to be in everything and behind everything.
    HARRY SHEARER:  Hmm. The economy that you talk about, in terms of – well, you’ve talked about two things. One, the understanding of how money works, and then B, the resultant political decisions that could be made that could affect the economy. The second would seem to be an economy that grows at a fairly healthy rate and that would be – call me a dreamer – good for everybody. Why would those corporate CEOs not want an economy with a lot more people working and able to consume and driving economic growth to a much higher rate than the anemic rate it is at now?
    STEPHANIE KELTON:  Well, I don’t – I think they should, right? They should want 23 million more Americans with more money to spend. You would anticipate that that would be in their financial interest and that they would recognize that.
    The only thing I can really think is that the national dialogue is so set with the haves and the have nots and the makers and the takers and the 1% and the 99%, and so when anybody in the middle class or anyone who’s poor or any part of the 99% says, “We don’t want you to cut this program because it helps us,” or “We want more investment in education” or whatever it is, the politicians, you know, they pat their pockets and they say, “We’d love to help you but there’s no way to pay for it.” And so the 99% point at the 1%, and they say, “They have all the money. Go get the money from them.” And the 1%, having the power and influence that they have, successfully push back against that. And so you have these two sides pitted against one another as if, you know, in order to pay for something, you have to rob Peter and pay Paul. And what the 1% should really do, I think, is to point at the Congress and say, “Don’t look at me. They have all the money.” You know? I mean, turn the attention where they really could effectively say, “Hey, don’t come to me and say you’re going to raise my taxes. I’m not causing any inflation. You don’t need to raise taxes unless you’re trying to cool something down.”
    So at least right now, you know, if you want those programs, this is who you need to go talk to. Go talk to your politician, because these guys can vote and appropriate and the funding will be there.
    HARRY SHEARER:  I’m getting the idea that what one of the things you folks are doing, aside from trying to redirect our attention towards the actual way that the monetary system works in the post-1971 era, is – if this is not the purpose, this seems to be the effect – is to take the moralizing out of it. We’ve been taught, by what we’ve been hearing in the so-called national debate, that there’s something immoral about having a high debt. There’s something immoral about having these deficits. There’s something that is against the way people should – again, from the household analogy, obviously – but there’s a morality factor here that I think moves Americans who don’t even, wouldn’t know the Federal Reserve if they walked into the front door of it.
    STEPHANIE KELTON:  Yeah, I – for whatever reason, I just started thinking about Murdoch. And, you know, it’s obviously not God’s will that the federal government be in deficit. There is a moralizing – we’re – it’s a de facto sign that you’re behaving imprudently, right? If there’s a negative number on the ledger, we’ve done something wrong. We’ve gone wrong somewhere. And what we’re trying so hard to do is to get people to recognize that if they spend 10 and only take away 9 from us, that we got the extra 10, you know? That their deficit is our surplus, that their redding is our blacking. And it’s a very hard thing to flip that switch and get people to spin the way that they view, you know, the government’s deficit and the debt and so forth, and it’s a very powerful narrative, as you said, playing into morals and fear, and the fear of China, and the fear of the rating agen– there’s, both of those things are extremely difficult to get people to overcome. Both the moral aspect and the fear.
    HARRY SHEARER:  What would happen if Ron Paul got his way and the United States went back on the gold standard?
    STEPHANIE KELTON:  Well, we had eight depressions on the gold standard and zero off of the gold standard. It is a system that constrains you in a way. You have a flexible system today that provides you with policy space that you simply do not have when you’re on a fixed exchange rate system, a gold standard system, when you’re adopting a currency that you don’t control like the euro – those types of monetary systems, the gold standard and the rest, they place constraints on you that limit your fiscal space. And the reason it’s important is because when you have an economic downturn, and you inevitably will – every single market economy on the planet has cycles. We have booms and we have busts, every one, independent of the type of monetary system you have. So when that bust inevitably comes, you just won’t be able to respond effectively. Which is exactly why countries went off the gold standard every time they went to war and every time there was a serious economic downturn. They all go off gold. Every time. In other words, it works until it doesn’t work.
    HARRY SHEARER:  Got it.
    STEPHANIE KELTON:  That’s what I would say about gold.
    HARRY SHEARER:  So there is a series of seminars or lectures on the Internet right now at Columbia University that you and Warren Mosler and R–
    STEPHANIE KELTON:  Randy Wray.
    HARRY SHEARER:  Randy Wray –
    STEPHANIE KELTON:  Mhmm. Mhmm.
    HARRY SHEARER:  – have participated in so far. Does this indicate that an Ivy League school’s economic department has endorsed what you guys are saying?
    STEPHANIE KELTON:  Well, no.
    HARRY SHEARER:  (laughs)
    STEPHANIE KELTON:  What it does indicate is that the law school – and because so much of what we do has legal, you know, underpinnings and implications for government policy and law – the law students got behind this and they organized this. And it’s a year-long seminar. They’re doing four or five this semester and four or five next semester, free and open to the public and all that. But it’s just a really heroic effort that was put together by a young law student at Columbia who discovered our work a few years ago and began following it and then began obsessing about it in some way and then when – you know, as if it’s not enough work to be a student at Columbia Law School, he decided he would raise funds and organize a year-long seminar series about these ideas. But he is getting people to moderate the sessions, people who are in the Journalism Department who are prize-winning journalists, and people from the History Department, and so forth. So it’s really given us an opportunity to interact with some scholars in different fields and collaborate and so forth.
    Now, Joe Stiglitz is there at Columbia University in the Economics Department, and you know, this is Nobel Prize-winning economist, former head of the World Bank. This is a very, very smart man who has moved closer and closer over the years to the position that I’ve been espousing, you know, for the last hour or so. And you can just see it. You know, he’s really starting to connect the dots. And so is Paul Krugman. And so is Martin Wolf, who writes for the Financial Times. And so are people at The Economist. And so are people at the Washington Post and the Wall Street Journal. All of these news outlets and magazines and so forth have run stories that develop the ideas that I’ve been putting forward here with you today, and this is exactly what we need. We need more people saying these things and a more diverse, you know, group of individuals from different walks of life and different – you know, media, press, academics and so forth. And eventually I think people will start to recognize that this is – we’re just describing the way things work, and we really do have the capacity to improve conditions without harming people, that this debt and deficit bogey is doing real harm.
    HARRY SHEARER:  You are the editor, I believe, of New Economic Perspectives, a web blog, yes?
    HARRY SHEARER:  And one of the people who’s written for that, or who writes for it fairly frequently, has been a guest on this program, Bill Black, so if any listeners who were intrigued by Bill Black or what’s been talked about here today want more, neweconomicperspectives – dot com, is that correct?
    HARRY SHEARER:  Dot org. New Economic Perspectives, would be the place to go.
    Dr. Stephanie Kelton, thank you so much for being with me today. You’ve made it clear enough that I can understand it, and that’s a big deal. But thank you very much, and continued good luck to you.
    STEPHANIE KELTON:  It’s been an honor and a pleasure. Thank you so much.
    HARRY SHEARER:  Thank you.
    Ladies and gentlemen, that interview was recorded on [Thursday] with Stephanie Kelton.  She tweeted me shortly thereafter to say, “It occurred to me that I talked the upside of the Clinton economic situation but didn’t say it was built on the back of private debt, left people to conclude that budget surpluses drove it.” So, that’s from Stephanie Kelton.
    Speaking of which, the URL for New Economic Perspectives and for the video seminars being put on by Columbia Law School are on the website at Also, because we mentioned the Peter Peterson Foundation, their URL is on our website along with a story in the Los Angeles Dog Trainer— the Los Angeles Times, pardon me. They’re publishing daily now about the Peter Peterson Foundation. All of that is on the website at
    Thanks to David Greene here at KCRW and the gang at KCUR in Kansas City for helping with the engineering of today’s broadcast. Welcome aboard to our newest affiliate, WFBK, somewhere in North Carolina.
    This concludes this week’s edition of Le Show. The program returns next week at this same time over these same stations, over NPR Worldwide throughout Europe, USEN-440 cable system in Japan, around the world through the facilities of the American Forces Network, up and down the East Coast of North America via the shortwave giant WB– I can’t even remember the name of the station! [WBCQ The Planet 7.415 MHz shortwave] – on the Mighty 104 in Berlin, available for your smartphone through, available as a free podcast at It’ll be just like me remembering what I’m supposed to say if you could agree to join with me then. Would you? All right, thank you very much, uh huh.
    Thanks as always to Pam Halstead. This broadcast is on Twitter. Join the almost 75,000 followers @theharryshearer. If you’re in Santa Monica this afternoon at 4:00, your last chance to see the remarkable Cabaret of Souls at The Broad Stage. You will be glad you did. Le Show comes to you from Century of Progress Productions and originates through the facilities of KCRW Santa Monica, a community recognized around the world as The Home of the Homeless.

Utzi erantzuna

Zure e-posta helbidea ez da argitaratuko. Beharrezko eremuak * markatuta daude