Dismantling MMT | Book Review (and thorough rebuttal) of "The Deficit Myth" - Modern Monetary Theory

The video begins with an introduction to Stephanie Kelton's book "The Deficit Myth," which argues in favor of Modern Monetary Theory (MMT). Joe Brown, the host, plans to systematically rebut the book's arguments while acknowledging some truths. MMT suggests that government deficits don't matter since a government with its central bank, like the U.S., can print money to cover expenses without defaulting. The focus, according to MMT, should be on what the government spends money on rather than how much is spent. The distinction between currency issuers and users is discussed, emphasizing the government's unique position in money creation.

Joe Brown critiques the MMT view by comparing government spending to personal debt, where risks and benefits are aligned differently. Government actions result in redistributing resources, with some individuals benefiting and others losing. Kelton argues the only limit to this spending is inflation, yet the resultant inflation from such policies isn't adequately addressed. Although taxes are posited as a tool to manage inflation, the application appears inconsistent or misrepresented. She views taxes as a means to regulate economic behavior and redistribute wealth, aiming to flatten wealth disparities rather than fund government spending.

Kelton maintains a non-partisan stance but criticizes both Democrats and Republicans for misconceiving fiscal policies. She argues that neither increasing taxes nor reducing spending is necessary since the government can print money. Taxes are purported to create demand for currency, akin to forcing value into a system. Limitations like inflation are oversimplified, ignoring issues like resource misallocation, which isn't addressed by centralized government decision-making. Historical failures of fiat systems highlight these risks, showing the complexity beyond just inflation concerns.

Joe argues that the equating of money with wealth is a foundational error in Kelton's argument. Money is merely a measure of wealth, not wealth itself. Government money printing reallocates resources, benefiting some at the cost of others. When new money is printed, it disproportionately affects the distribution of existing wealth rather than creating new wealth, resulting in unequal impacts on different players in the economy. Spending focus should not just be about where to allocate resources, and government job guarantees lack accountability, potentially harming small businesses.

Kelton's book supports government-funded jobs and programs like the Green New Deal, emphasizing renewable energy and guaranteed employment. Critics argue these measures disregard economic realities and lead to inefficient resource allocation due to lack of economic accountability. Historical evidence suggests that economically freer nations prosper more, contradicting Kelton's belief in centralized planning. High taxes and regulations often stifle economic growth, in contrast to her suggestions. The video suggests that economic downturns reveal inefficiencies masked by overspending.