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Articles by J.D. Alt

The People’s Money (Part 3)

9 days ago

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

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The People’s Money (Part 2)

October 19, 2019

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

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The People’s Money (Part 1)

October 15, 2019

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

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Two-Cent Message

September 20, 2019

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

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Awakening the Investor-in-Whole-Society

September 5, 2019

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

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Why Moscow Mitch needs MMT

August 19, 2019

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

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A Modern Money Explanation

August 12, 2019

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

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MMT Carbon Initiative—a modest proposal

June 18, 2019

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

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The Visible Hand we need today

June 10, 2019

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

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Insights from a Diagram-Machine

May 28, 2019

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

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ZEN and the Art of Modern Money (Part 2)

May 7, 2019

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

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ZEN and the Art of Modern Money

May 5, 2019

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

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New Wordology

February 26, 2019

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.

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ZEN and the Art of the Federal Reserve System

February 11, 2019

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

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An American Budget

January 31, 2019

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

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MMT’s Opening

January 21, 2019

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

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Macroeconomic System for Climate Change

January 7, 2019

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

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Let’s Rebuild Mexico Beach

November 20, 2018

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

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FUTURE DOLLARS

November 11, 2018

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

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CHANGE THE SUBJECT

October 10, 2018

By J.D. ALT
So, I will now, once again, court blushing naivete….
In the middle of a contemplative walk—during which, I confess, I was imagining with enthusiasm how the Democrats might extract revenge should they win the House of Representatives in the mid-term elections (hearings and subpoenas relating to the FBI “investigation” of Brett Kavanaugh, subpoenas for Donald Trump’s tax returns, drawing up articles of impeachment, etc.)—I was suddenly struck by the realization of what a terrible mistake it would be to do any of that.
Hard as it might be to bite their collective tongues, what the Democrats ought to do if they take the House this November is to dramatically and forcefully CHANGE THE SUBJECT. Strategically, leading up to the 2020 elections, this would be, by far, the most

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Miscalculating Medicare-for-all

August 20, 2018

By J.D. ALT
A report from the Mercatus Center at George Mason University calculating the “cost” of Medicare-for-all has received much attention recently—first, because Bernie Sanders claimed the report concluded that Medicare-for-all would save the American people $2 trillion over a 10-year period. That claim was still warm when the report’s author, Charles Blahous, told the Washington Post that Bernie’s interpretation of the report’s conclusions were blatantly false. In fact, Blahous told the Post, he posited that savings scenario based on a set of assumptions which he subsequently proved were so highly unlikely as to be impossible.
The real conclusion of his report, Blahous said, was that Medicare-for-all will “raise government expenditures by $32.6 trillion” in the first decade—or,

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How big does the fire need to be?

August 13, 2018

By J.D. ALT
I have written about this before, but it bears repeating now—and perhaps it bears repeating every week until somebody with more leverage than me picks the message up and carries it a step further: America (and the rest of the world, for that matter) has the resources needed to limit and mitigate the enormous damage and dislocations that climate-change is now beginning to impose. The “resources” I’m referring to are not dollars. They are materiel, labor, and human ingenuity. The only question is how and when we’ll stop simply raising warning flags and marshal those resources to take real action against the growing challenges.
To date, virtually nothing concrete has been done, or even started. The reason is because—to date—we insist on imagining that the “money” needed to

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The Explicable Mystery of the National Debt

August 1, 2018

By J.D. ALT
America’s current “national debt” is tallied to be $21.5 trillion. When politicians and economic pundits talk (worry, fret, wring their hands, gnash their teeth) about this “debt” they implicitly assume—along with their listeners, readers, and potential voters—that this fantastic sum will eventually have to be paid back. That’s what happens with debts, right? Someone calls them due! Everyone also assumes the American tax-payer will have to do the paying. (Quick calculation to save you the trouble: Each one of us is in hock for $65,950!)
Depending on which political football is being tossed around, this “national debt” is either a crisis that must be addressed first (before anything else can be paid for!) or it’s something we can simply ignore for the time being—until the

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The Five Stages of Money (and why we’re stuck at stage 4)

June 19, 2018

By J.D. ALT

Like everything else, money has evolved. It began in a primitive form and morphed into something more sophisticated, more successful. Then, probing and testing for an even better form, it morphed again. A simplified history of money’s evolution can be outlined in five stages:
STAGE 1: Money is a tangible thing of value—e.g. a gold coin.
At some point in the pre-history of humankind, the “invention” of money solved a time-gap problem in cooperative trade: I’ll give you my baby goat in exchange for your flint-knife—but you have not yet made the knife, so the exchange is stymied. To solve the impasse, you give me a token of gold to temporarily stand in place of the flint-knife, so you can take my baby goat. The gold token is a promise that the knife will be delivered, and

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Last Exit to the Road Less Traveled

June 10, 2018

By J.D. ALT
We now stand where two roads diverge. But unlike the roads in Robert Frost’s familiar poem, they are not equally fair. The road we have long been traveling is deceptively easy, a smooth superhighway on which we progress with great speed, but at its end lies disaster. The other fork of the road—the one less traveled by—offers our last, our only chance to reach a destination that assures the preservation of the earth.
Rachael Carson, Silent Spring 
What’s important to keep in mind in this quote from Rachael Carson’s 56-year-old warning shot over the bow of corporate civilization is that there are two roads being traveled now. We are no longer at a fork. The fork is half-a-century behind us. The goal is not to get the superhighway to somehow re-route itself and follow the

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Why America is not a Country-Club

May 10, 2018

By J.D. ALT
Everyone knows how a country-club works: Members pay dues, and the dues are used to pay for the expenses of running the country-club—maintenance and improvements, kitchen and service staff, golf-course mowing and landscaping, etc. Sometimes a big expense comes along (like putting a new roof on the main club-house) and the cash-flow from the monthly, or annual, dues isn’t enough to cover the one-time cost. In that case, the club would take out a bank-loan to pay for the new roof and the dues would then service the loan. It might be necessary, under those circumstances, to raise the dues to ensure that while the loan is being serviced the kitchen and dining services continue and the golf-greens are manicured. There would likely be a vote by a board of club-directors to

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Framing a Job Guarantee

May 3, 2018

By J.D. ALT
Note: This essay was first posted on realprogressivesusa.com
Now that progressive leaders (Bernie Sanders, Kirsten Gillibrand and Corey Booker) have placed a proposed “Job Guarantee” program onto the mainstream political stage, it is essential they begin explaining the proposal’s underpinning macro-economic logic. Otherwise they lay themselves, and the proposal itself, wide open to scathing public ridicule—as exemplified by a recent Megan McArdle op-ed in the Washington Post (“A federal job for everyone?” April 25, 2018). But what should they be saying by way of explaining?
Perhaps a point-by-point response to Ms. McArdle’s arguments is a way to begin. First, her title itself is an intentionally misleading—and pejorative—portrayal of the proposal. The Job Guarantee (JG)

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Framing the Progressive Platform

April 17, 2018

By J.D. ALT
This essay was first posted at www.realprogressivesusa.com
I keep reading the big challenge Democrats face in the 2018/2020 elections is that they have moved too far left, proposing a platform that includes “free” universal health care, “free” college tuition, “free” pre-school day-care—and a national infrastructure building and repair program paid for, not by the states, but by the federal government (i.e. “free infrastructure”). Progressives seem to genuinely wonder why mainstream Americans would object to these proposals. Why would American voters be put off by proposals they’d obviously gain so much real—and in many cases personal—benefit from?
The answer lies in three objections which flow together to become an undercurrent mantra of the American psyche:
When the

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Doing What the Market Can’t

March 28, 2018

By J.D. ALT
What decides whether something is undertaken in America is the “market.” The way the market decides what is to be done is by determining whether people are willing to pay to benefit from the undertaking, how many people are willing to pay, how much they are willing to pay, and all this is then compared with the cost of the undertaking. If nobody is willing to pay for the benefit (no customers), the undertaking will not happen. If the number of people willing to pay, multiplied by the amount they are willing to pay, equals a dollar value less than the cost of the undertaking, the undertaking will not happen. If, in fact, that calculated dollar value is not some specified percentage GREATER than the cost of the undertaking (profit), the undertaking will not happen either. If

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The Big Three

March 15, 2018

By J.D. ALT
This essay was first published at www.realprogressivesusa.com
There is a lot more riding on our understanding of modern fiat money than we typically consider or discuss. Human society is now confronted with three epoch-defining challenges and, in each case, the understanding and strategic use of modern fiat money holds out the ONLY real possibility for constructively engaging the them.
The challenges are:
Climate change & ecological collapse
Assault on Democracy
Mass migration
In each case, the challenges are, first, aggravated, amplified, and intertwined by our ignorant, unimaginative clinging to the old rules and norms of “commodity” money. These old rules and norms tell us, basically, that money is (a) a finite resource that people must compete to have a share of; and

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