A nations wealth is productive output, not money

A Nations Wealth: Economist Stephanie Kelton giving a lecture

A nations wealth: Summary (as in, not a word for word transcript)

“Mark Twain said sometimes it’s easier to fool people than to convince them they have been fooled”.

This sadly, applies to our discussions of the national debt today.

We talk to each other about how US government deficit is a problem, while most of us don’t understand what the US government deficit is.

Then occasionally, some political leader takes the time to learn about what it means to have a sovereign currency, how the US government is THE currency issuer of US dollars, and now they’re like a fish swimming against the tide, but if they speak openly about what they’ve learned, their constituents and supporters will then they’ve gone nuts.

So they don’t rock the boat. It would be political suicide to do so.

Interestingly, the one political leader to start openly talking about how the US “just prints US dollars, was/is Donald Trump, who at the time was running for President in May of 2016.

“So now, a lot of the bankers said ‘Donald Trump wants to go and start negotiating with creditors’. First of all, you don’t have to think about this, but we print the money”.

Donald Trump, in a phone interview with Maria Bartiromo on Fox on 9 May 2016

I mean these people are crazy. This is the United States government. First of all, you never have to default because you print the money”.

Donald Trump in a phone interview with Chris Cuomo on CNN on 9 May 2016

After Donald Trump gave these interviews, some people went crazy, claiming that what candidate Trump had said was crazy talk.

Except, it wasn’t crazy when Alan Greenspan said it, and it wasn’t crazy when Warren Buffet said it, and it wasn’t crazy when the St. Louis Fed put it in their report.

Alan Greenspan, Warren Buffet, the St. Louis Fed, and (then candidate) Trump were all saying the same thing.

The United States has a sovereign currency, and the federal government of the United States is the monopoly issuer of the US dollar.

The the currency itself is a simple public monopoly.

That the US dollar comes from the US government and can’t come from anywhere else.

If you think about what that means, what the implications of that are, you realize the US government can quite literally NEVER run out of US dollars.

That the US government can not be forced, by markets, into defaulting on obligations in their own money, because the US dollar can only come from the US government.

If anyone else creates US dollars, it’s called counterfeiting and it’s against the law.

The US government has given to itself the exclusive right to create the US dollar.

And the implications of this are broad and significant.

Greece gave up the Drachma, and all of a sudden Greece is borrowing in euros.

They don’t create the euro. This created problems for Greece when it came to make good on obligations denominated in euros.

They could only make payments if they could find enough euros somewhere.

And that meant either raising taxes or finding someone willing to lend euros to them.

Having a sovereign currency, or not, is a fundamental game changer.

Because the US has a sovereign currency whereas Greece does not, the US can never end up like Greece, for the various reasons stated by Greenspan, Buffet, and Trump.

THIS is the debate we should be having.

[She then plays this video of Alan Greenspan answering a question from Paul Ryan].

The answer Greenspan gave was NOT the answer Paul Ryan was expecting.

The question was tied up beautifully, in one sentence, with the phrase “personal retirement account” used four times. Paul Ryan could not have made it more clear what he was hoping Greenspan would say.

Instead, under oath, Alan Greenspan told the truth.

“I wouldn’t say there is anything insecure the way the system is setup today, in that there is nothing to prevent the US government from creating as much money as it wants and paying it to someone”.

How many people have told future retirees that their retirement benefits are secure? Nobody.

I’m guessing everyone has told you that your benefits are in jeapordy.

That the system is going broke, that it’s probably not going to be around for you, and that if it is it’s probably going to be a whole lot less generous, and it’s probably going to be private insurance, rather than a public guarantee.

That’s what we’ve been told.

Here’s Alan Greenspan saying there is NOTHING to prevent the US government from making good on every promise to every future retiree, their dependents, and the disabled, on time, in full, for perpetuity. There is nothing that prevents the US government from doing that.

So the affordability question is off the table.

We can remove it. We don’t have to talk about whether or not we can afford it.

But then he goes on to make the really critically important point, and THIS is the debate we should be having.

He said the question is, how do you setup a system which insures that the real assets will be created which those benefits are employed to purcahse.

What does he mean?

We have changing demographics in this country. This is true in many countries around the world. The demographics are changing. And they’ve been changing for a long period of time.

There will be fewer people working and producing stuff in the future.

Baby boomers are moving out of the workforce and into retirement, but they’re not going to stop consuming.

The question Greenspan is asking is….

How do you make sure that when you send those benefit payments out, on time, in full, in the future, that we are a productive enough economy, a productive enough society, that’s there enough stuff for everybody to take some of it, without causing inflation.

If there is not enough stuff produced to meet demand, then we’re going to have people intensely competing for a smaller and smaller pool of resources, and that’s going to set off all kinds of antagonisms, not just economic ones, but social ones as well.

so the question is, what kinds of investments should we make today, to ensure that 10 years, 20 years, 30 years from the now the US economy is as productive as it can possibly be.

Should we be investing in infrastructure, in education, in research and development? What is the key to raising future productivity growth.

That’s the debate. That’s the fight.

And we/they should be having that fight.

Different politicians take different view points and argue different things.

But fight over the right kinds of stuff.

Fighting over where we’re going to find the money is the wrong question.

That’s the wrong fight to have.

Whose got the better policy ideas for ensuring future growth in the economy so there’s enough stuff that we can take care of everybody without creating an inflation problem, because inflation is the constraint.

That’s Greenspan’s point.

If we have a nest that contains only one egg, then we’re all going to be fighting over that one egg.

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