By J.D. ALT
The
theme and illustrations of this essay are from the new book “Paying Ourselves to Save the
Planet.”
It
might seem, as we observe the U.S. government “instantly” generating $2
trillion new dollars for direct payments and grants to people and businesses,
that the coronavirus pandemic has shed a new light on the authenticity (and
necessity) of modern money theory (MMT). But that light, if it is being shed at
all, is illuminating instead the dramatic limitations of the “standard money
theory” we insist on applying to the exigencies of an unfolding modern society
(including, but not limited to, how to deal with pandemics).

What
do I mean by “standard money theory”? I mean a very simple assumption
implicitly built into our mental models of how money works: namely, that the

By J.D. ALT
The
theme and illustrations of this essay are from the new book “Paying Ourselves to Save the
Planet.”
It
might seem, as we observe the U.S. government “instantly” generating $2
trillion new dollars for direct payments and grants to people and businesses,
that the coronavirus pandemic has shed a new light on the authenticity (and
necessity) of modern money theory (MMT). But that light, if it is being shed at
all, is illuminating instead the dramatic limitations of the “standard money
theory” we insist on applying to the exigencies of an unfolding modern society
(including, but not limited to, how to deal with pandemics).

What
do I mean by “standard money theory”? I mean a very simple assumption
implicitly built into our mental models of how money works: namely, that the

By J.D. ALT
The
theme and illustrations of this essay are from the new book “Paying Ourselves to Save the
Planet.”
It
might seem, as we observe the U.S. government “instantly” generating $2
trillion new dollars for direct payments and grants to people and businesses,
that the coronavirus pandemic has shed a new light on the authenticity (and
necessity) of modern money theory (MMT). But that light, if it is being shed at
all, is illuminating instead the dramatic limitations of the “standard money
theory” we insist on applying to the exigencies of an unfolding modern society
(including, but not limited to, how to deal with pandemics).

What
do I mean by “standard money theory”? I mean a very simple assumption
implicitly built into our mental models of how money works: namely, that the

By J.D. ALT
It’s
ironic that, at this moment, when the truthfulness and utility of modern money
theory (MMT) is being publicly realized—(and even potentially implemented!)—that its singular vulnerability
must emerge as a real concern: hyper-inflation.
The
most recent thing I’ve written—Paying Ourselves to Save the
Planet­­—addresses the issue of
hyper-inflation as follows:

“Hyper-inflation” is a rate of inflation that happens so rapidly there’s no opportunity for people and businesses to adjust. Prices are, suddenly, noticeably higher—and then still higher tomorrow—and higher yet the day after. The money in my bank account suddenly can’t buy half of what it could last week. In a rush to keep the economy from collapsing, the currency-issuing government issues more and more money to

By J.D. ALT
It’s
ironic that, at this moment, when the truthfulness and utility of modern money
theory (MMT) is being publicly realized—(and even potentially implemented!)—that its singular vulnerability
must emerge as a real concern: hyper-inflation.
The
most recent thing I’ve written—Paying Ourselves to Save the
Planet­­—addresses the issue of
hyper-inflation as follows:

“Hyper-inflation” is a rate of inflation that happens so rapidly there’s no opportunity for people and businesses to adjust. Prices are, suddenly, noticeably higher—and then still higher tomorrow—and higher yet the day after. The money in my bank account suddenly can’t buy half of what it could last week. In a rush to keep the economy from collapsing, the currency-issuing government issues more and more money to

By J.D. ALT
It’s
ironic that, at this moment, when the truthfulness and utility of modern money
theory (MMT) is being publicly realized—(and even potentially implemented!)—that its singular vulnerability
must emerge as a real concern: hyper-inflation.
The
most recent thing I’ve written—Paying Ourselves to Save the
Planet­­—addresses the issue of
hyper-inflation as follows:

“Hyper-inflation” is a rate of inflation that happens so rapidly there’s no opportunity for people and businesses to adjust. Prices are, suddenly, noticeably higher—and then still higher tomorrow—and higher yet the day after. The money in my bank account suddenly can’t buy half of what it could last week. In a rush to keep the economy from collapsing, the currency-issuing government issues more and more money to

By J.D.
ALT
The last two and a half months I’ve been at work on a new book. As it evolved, I found I was approaching MMT from a new direction—one which made an explanation of MMT much less counter-intuitive and, perhaps, less controversial. The approach is relatively simple and straight-forward: follow what I began calling “standard money theory” step by step until one reaches a perspective that has, almost seamlessly, become “modern money theory.”

The book first considers why the “standard theory” we insist on applying to the world is incapable of addressing the climate-change crisis. (The exact same arguments could now be applied to confronting and mitigating the pandemic crisis!) Second, it explains how a simple shift in perspective transforms the standard money theory into modern

By J.D.
ALT
The last two and a half months I’ve been at work on a new book. As it evolved, I found I was approaching MMT from a new direction—one which made an explanation of MMT much less counter-intuitive and, perhaps, less controversial. The approach is relatively simple and straight-forward: follow what I began calling “standard money theory” step by step until one reaches a perspective that has, almost seamlessly, become “modern money theory.”

The book first considers why the “standard theory” we insist on applying to the world is incapable of addressing the climate-change crisis. (The exact same arguments could now be applied to confronting and mitigating the pandemic crisis!) Second, it explains how a simple shift in perspective transforms the standard money theory into

By J.D.
ALT
The last two and a half months I’ve been at work on a new book. As it evolved, I found I was approaching MMT from a new direction—one which made an explanation of MMT much less counter-intuitive and, perhaps, less controversial. The approach is relatively simple and straight-forward: follow what I began calling “standard money theory” step by step until one reaches a perspective that has, almost seamlessly, become “modern money theory.”

The book first considers why the “standard theory” we insist on applying to the world is incapable of addressing the climate-change crisis. (The exact same arguments could now be applied to confronting and mitigating the pandemic crisis!) Second, it explains how a simple shift in perspective transforms the standard money theory into

By J.D. ALT
With the essential collapse of the U.N. Framework Convention on Climate Change in Madrid (“Climate meeting goals go unmet” Washington Post, 12-16-19) we now approach the first day of 2020 with much less to celebrate, much more to fear, and much more to accomplish. Here’s a little parable for the coming New Decade:
“One evening of a December day 2019, several observatories in the International Asteroid Warning Network are startled to discover a cluster of incoming asteroids of massive dimensions. Over the next several weeks, other observatories corroborate the finding. Painstaking digital analysis reveals a 97% probability of a collision with our planet Earth on December 24, 2030—almost exactly ten years in the future. Calculations and engineering projections, coordinated

Inflation & Consumption
By J.D. ALT
Let’s quickly recap: I outlined, in PART 3, an argument that modern society has evolved in ways that necessitates a dramatic increase in public enterprise—yet, at the same time, we’ve doubled down on an old-world narrative about “money” that makes it mathematically impossible to meet that need. In PARTS 1 & 2 we reconfirmed a “modern money” perspective by simply observing the actual operations of the Federal Reserve—and reconfirmed, as well, how this new perspective holds out the opportunity to actually confront, through the efforts of public enterprise, the new challenges modern society faces.
It was my intention, at this point, to focus on the unfolding reality that climate change will soon prove to be the most dramatic challenge modern society is

An Explanation of the Federal Reserve Money system and what it means for the potential accomplishments of American Democracy
By J.D. ALT
The big surprise of our tour of the Federal Reserve system (please see PARTS 1 & 2) is that the FED (America’s central bank)—as it is presently authorized to operate—can create “money,” as necessary, to support not only the undertakings of private enterprise, but the undertakings of public enterprise as well. Please recall that public enterprise produces needed goods and services which private enterprise cannot produce at a profit or, to make its profit, must set prices higher than what most citizens can afford to pay. To accomplish what private enterprise cannot, therefore, the U.S. Treasury, as directed by Congress, pays U.S. citizens and

An Explanation of the Federal Reserve Money system and what it means for the potential accomplishments of American Democracy
By J.D. ALT
Let’s begin by restating what I think was the main insight of PART 1: The overarching purpose of the Federal Reserve Act was to enable “money” to be created, as necessary, to support the scale of commerce that American Enterprise decides to undertake and accomplish. If the labor, materials, energy, technology, and ingenuity exist to do something—and it is desirable that it should be done—it is illogical to say it can’t be done because there isn’t enough “money” in the system to pay for the doing of it.
The only questions to be asked, then, are two: (1) Who will create the “money” when it’s needed, and (2) Who will decide when the creation of

An Explanation of the Federal Reserve Money system and what it means for the potential accomplishments of American Democracy
By J.D. ALT

“Reserves”—that esoteric term in money-talk that postures to explain everything but explains nothing at all—have been much in the news of late. The Wall Street Journal even tried, recently, to explain what they are! They didn’t do such a great job. That’s unfortunate because, properly explained and understood, Reserves hold a big key to the political befuddlement—especially acute in the present election cycle—about what we can “afford” to accomplish as a collective society. This includes “paying for” real solutions to the five, money-intensive, life-defining dilemmas America now confronts: (1) climate change (2) healthcare (3) student debt (4) early

By J.D. ALT
Elizabeth Warren has succeeded, I think, in framing an argument as close as anyone is going to get (in the present election cycle) to the progressive position of MMT. Warren acknowledges that she’s proposing goals and undertakings that will “cost” a lot of money. She further acknowledges that everyone asks: “How are you going to pay for it?” And she gives a very specific and simple answer: an “ultra-millionaire tax”—which she details as “two-cents on every dollar of income over $50 million.” She then goes on to list what those “two-cents” will accomplish: The cancellation of college debt; free two-year college education; universal pre-school day-care…etc.
The two-cent message is a powerful framing, I believe, because it gives people “intellectual permission” to support a

By J.D. ALT
There’s a lot of handwringing now about how central banks have no ammunition to fight a recession. The fact that this is apparently true—and, perhaps, uniquely true in modern history—is all the more reason to explore MMT’s premise that central banks are not just instruments of private commerce, but are, as well, instruments of collective, democratic will. The bankers are in a box of their own making, but that box, in fact, is inside another box which, as MMT makes clear, has lots of ammunition not only to fight a recession, but to pursue the betterment of American society whether an economic downturn unfolds or not.
Let’s consider the central bankers’ basic dilemma: If private enterprise begins to slow, they would love to issue more money to get it back up to speed. But

By J.D. ALT
Mitch McConnell is desperate to find investment funds and businesses that will create jobs for his Kentucky constituents. America, it seems, is mostly incapable of being a source for either. Such is the diminishment of our impoverished private enterprise system that only foreign companies seem interested in bringing U.S. dollars to America to build the factories that will employ us.
America, for example, has not built an aluminum rolling mill in over forty years. It must be easier (read “more profitable”) just to import the stuff. If you want to create jobs, though, in exchange for votes from your constituents, “profitability” takes on new dimensions. And while those additional dimensions don’t seem to appeal much to American enterprise, for some inexplicable reason they

By J.D. ALT
Since the Democrat’s presidential debates, the attacks on progressive candidates for their “unrealistic” proposals to address the biggest challenges we face as a collective society have intensified dramatically. The primary criticism is the enormous price-tag associated with each of the big-ticket issues they propose to undertake: universal healthcare, mitigating climate-change, eliminating college debt, free pre-school daycare, re-envisioning and rebuilding America’s infrastructure, a job guarantee and a universal basic income for every citizen. The attacks come from both conservative Republicans and centrist Democrats, each of whom are avowed believers in fiscal “responsibility” and balanced federal budgets.
Unfortunately, while there is growing sympathy with the

By J.D. ALT
With great interest, I’ve been reading about the “Terraton Initiative”—a program designed to enlist farmers to sequester one trillion tons of carbon in their soil using innovative and “regenerative” planting techniques. The initiative was recently rolled out by Indigo AG—a young and rising Boston company recently named by CNBC as “the world’s most innovative company.” Indigo AG’s mark has been the establishment of a sophisticated platform enabling grain-farmers across the country (and around the world) to differentiate the quality-characteristics of their harvest (e.g. organic, non-GMO, heirloom varietal, etc.) and connect directly with buyers seeking those quality-characteristics. What got my attention was the fact that Indigo AG, with its recently announced “Terraton

By J.D. ALT
According to the “invisible hand” theory—long celebrated (in America) as the most effective mode of human economics—private commerce should now be busy directing our efforts and resources toward those things we truly need to prosper as a collective society. Instead, the “invisible hand” seems to be willfully guiding us in the opposite direction. How can that be? Has something fundamental shifted, causing the mechanism of the Great American Enterprise to steer not just blindly, but recklessly?
The answer appears to be YES. And what has shifted is that the secret formula of the “invisible hand”—the profit-motive—is no longer capable of ignoring, or hiding, the collateral damages (unpaid “costs”) that have floated from its wake for two centuries. Or, to put it more

By J.D. ALT
I’ve spent the last month or so tinkering with and observing a diagram-machine representing the workings of the U.S. monetary system. In the process, I can see that I’ve bored a lot of people beyond their capacity with the tedium of the tinkering. I apologize for that, and I’ll hereby discontinue the torture. Nevertheless, I’d like to share a few insights the tinkering revealed—at least to me—that made the exercise worthwhile.
1. Money-creation is a response to what the American people decide they want to produce and consume.
This, it seems to me, is a crucial insight because it reverses the way we habitually think about and visualize “money.” The habitual frame is that money exists first, then we decide what we want to spend it on—and then we determine if there is enough

MMT for People in a Hurry
By J.D. ALT
POST #2  (See POST #1 here)
FIRST: Prime the fuel-pumps
As it stands, our diagram-machine has no fuel (“money”) in it, so it can’t operate. We could go through an exercise to imagine how it could prime itself in order to begin operations. But this would lead to other topics and considerations which would only distract us from our present goal—which is to simply understand HOW the diagram-machine operates—and how, and when, in the course of its operations, it creates money. To move things along, we’ll simply (and arbitrarily) populate the machine with some money to get it started.
We’ll assign to each of the eight “accounts” of our diagram-machine a value of ten dollars:
$10 worth of Reserves (Rs) in Bank#1 Reserve account
$10 worth of future

MMT for People in a Hurry
By J.D. ALT
I’m expanding an earlier essay into a short, book-length piece I hope will be useful in the unfolding public debate about MMT. The piece will utilize the “operation” of a “diagram-machine” to illustrate how our modern money system actually works. My hope is that it will be accessible and easily understood by people who have a genuine interest in MMT, but little time or patience to delve into its operations and implications. I’m posting the narrative here at NEP for comments and suggestions. Efforts to keep things simple and focused on basics might lead to some errors, or important omission—which I’d like to avoid. The diagram-machine, itself, I’m still working on—but I think the narrative, for now, can be followed (and evaluated) without it.
POST

By J.D. ALT
Whenever I get frustrated—which is quite often these days—I vent some steam (and feel somewhat better) simply by imagining a response that Bernie Sanders, Elizabeth Warren, or Alexandria Ocasio-Cortez might give to some conservative pundit when they say, “Yes, but that’s going to increase deficit spending beyond anything imaginable!”
REPLY: “Excuse me, Anderson, I don’t use the term ‘deficit spending’ because it suggests or implies something which is demonstrably not true. It implies that when the federal government spends more dollars than it collects in taxes it is creating a debt that it will have to repay in the future. This is factually not the case. If the government spends three dollars and collects one dollar in taxes, it creates a ‘net spending’ of two dollars.

By J.D. ALT
I know nothing about motorcycles, and not much more about the U.S. Federal Reserve system—yet I feel compelled to dismantle, pick apart, and understand the latter for the simple reason that it seems to be a machine I’ve been riding on (and vaguely writing essays about) for some time now. So, it stands to reason I shouldn’t be ignorant of it. Not that I would get much help in this effort from American economists. Indeed, they seem intent on keeping the mechanism under wraps—as if it were a proprietary secret which they can only refer to in code. Or, perhaps, they are just the kind of bikers who leave it to their mechanic to know how the carburetor works. There are a few exceptions—one being Eric Tymoigne who saw fit to post a kind of on-line parts manual for anyone who

By J.D. ALT
Let’s imagine pulling together a group of enlightened economic planners to create an American budget for, say, the years 2020-2024. What might they come up with? To begin with, how might they even go about thinking about how to create an American budget?
It’s not so obvious as, for example, the way the Congressional Budget Office might go about it. The CBO would begin by tallying up how much money America’s government will have to spend in the years 2020-2024. Then they’d allocate those projected dollars to various pots of spending—with some calculation about what the spending needs will be for each pot. In the middle of this exercise, they’ll discover that the spending needs for the pots far exceed the number of dollars they’ve projected America’s government will have to

By J.D. ALT
I recently read in the WSJ that Modern Monetary Theory is defined as the proposition that the federal government can borrow as much money as it needs so long as the interest rate it pays is less than the growth rate of the GDP. The short article, by Desmond Lachman, went on to argue why this was a dangerously false premise. Thus, MMT got shot with two bullets in one paragraph: first by defining it in a way that negates its most fundamental principle (that the federal government doesn’t need to “borrow” fiat currency in order to spend fiat currency), and second, by declaring MMT to be not only false, but dangerous.
It’s remarkable how stubbornly tenacious mainstream economic thinking is about misunderstanding and fearing MMT. The fundamental belief that refuses to be shaken

Macroeconomic System for Climate Change
A U.S. Patent Application
Inventor:  J.D. ALT (acknowledging all advocates of modern fiat money)
Assignment:  To all citizens of democratic free societies
Abstract:
A macroeconomic system including the issuing of a fiat currency by a sovereign government; the establishment of a tax regime on the government’s citizens wherein the taxes levied can only be paid with the sovereign government’s fiat currency; the sovereign government’s debiting of its tax collection account to purchase goods and services from its citizens and their commerce; the sovereign government’s issuing of future fiat currency certificates—to be redefined as “treasury bonds”—which it trades, at a discount, for existing fiat currency held in private financial markets; the

By J.D. ALT
It’s telling that in the media coverage about the damage inflicted by Hurricane Michael, there are a lot of stories about how the citizens of Mexico Beach would like to rebuild their town, but no stories at all about how they might be enabled to do that. Only the opposite: why it’s going to be virtually impossible for Mexico Beach to ever be Mexico Beach again. Why is that?
One reason: These were modest structures in a modest town, paid for with modest, working-class incomes. They cannot be rebuilt as modest structures. If they are to be rebuilt at all, they will have to be elevated, heavier, stronger, laterally-braced and deeply rooted. Replacement costs will likely be on the order of $2 for every $1 of value they might have been insured for. That’s an expenditure few of

By J.D. ALT
In recent essays I’ve made reference to a new framing of what is actually happening when the U.S. treasury issues a bond. It seems to me, this new framing goes to the heart of MMT and might well hold the key to a practical implementation of MMT principles in real world applications. The framing is this:
A U.S. treasury bond is a certificate of issuance of future dollars.
I will expand on this in a moment, but first it is important to say what this framing says a treasury bond is NOT:
A treasury bond is NOT a promissory note promising to pay the bearer a certain number of dollars at some future date—with interest payments along the way or at the date of maturity. Such a promise, obviously, encumbers the federal government with the obligation to “come up with” the stated