MMT Syllabus

How to pay for it, and why that's the wrong question. MMT illuminates that employment, interest, and the anchor to prices are direct policy choices. This overturns the former economic mainstream view of why things are as they are and what is possible. MMT changes how we think of people and policy at all levels. The answer to how to pay for things is the least of MMT's contribution.

This MMT syllabus succinctly conveys the elements of MMT staged to be most relevant for policy analysis. It is designed to quickly lay the most important logical building blocks first, and to be free-standing and correct if interrupted at any point. Scores of candidates for public office in Virginia and nationally have modified their platforms after the training this outline supports and the 2020 DPVA resolution package and DNC elections reflect its influence.

The stages are as follows: derive a monetized economy from sovereign state power, note the print on a dollar bill confirms the US currency is a permission to have liabilities canceled, then define the federal deficit, its relation to current productive capacity and national debt and derive that unemployment is the fault of the currency issuer and that the Job Guarantee employed buffer stock is a superior price stability mechanism. Optionally, derive the private banking system as bankers underwriting the credible beliefs of entrepreneurs that they can design schemes to get money from customers' pockets, with the central bank accommodating money creation to keep the payment system sound.

The tutorial in writing:
MMT White Paper, Warren Mosler.
Executive outline interview, Bill Mitchell and Warren Mosler Billy Blog post, with links.

Axiom 1:

A sovereign can impose and forgive liabilities.
Historical basis for Axiom 1 as sufficient to coordinate on a unit of account, Christine Desan video.
How this upends notions of money as a democratic medium. State Theory of Money
Unit of account and scale of society .
What if we didn't start with state power? David Graber.
Result 0.1: the sovereign can never run out of permissions.
Says Fed Chair Allan Greenspan
Definition 0.1 Inflation: an ill-defined notion.
Resources become: whale oil , lighting, and technology
Technical links on inflation. Basically, watch out for it if running up bidding against capacity, but it isn't as simple as "printing too much money." See notes and policy links arranged by Fadhel Kaboub in the form of a poem.
Technical discussion of inflation

Definition 1:

Federal Budget Deficit.
The Deficit Myth , Stephanie Kelton, 2020.
Definition 1.1: Treasury Securities are special savings accounts.
Federal Reserve on reserve accounts, security accounts.
For more detail in textbook form, Eric Tymoign Money and Banking
Result 1.1: Taxes don't pay for anything.
Says Fed Chair Ben Bernanke
Stephanie Kelton's landmark technical paper showing the net balance sheet effects proving taxing and borrowing doesn't pay for anything.
TT and L accounts buffer taking reserves out of the banking system.
Definition 1.2: Entrepreneurs and Bank Credit.
The private banking system and endogenous money, a technical reference on private banking monetary creation by the Bank of England. Diagram of the payment system.
Result 1.2.1: Banks don't lend reserves.
Lending regulations from the FDIC. Financial Fragility
Proposal for the Banking System.

Definition 2:

The National Debt
NY Fed on primary dealers who bridge between the Treasury issuing securities and the Fed providing reserves.
Wray providing an overview in these terms with more references.
Result 2.1: Interest on the debt is a policy choice.
Federal Reserve interest on reserves
Federal Reserve sets reserve requirement to zero.
Nuts and bolts on central bank monetary operations
Definition 2.1: Trade with Other Countries.
The trade deficit and the imperative to run a budget deficit if we want to enjoy foreign goods. Sectoral Balances
Fadhel Kaboub on Venezuela and degrees of currency sovereignty (though Warren Mosler suggests it is less confusing to simply speak about what can and can't be done under various conditions rather than defining degrees of sovereignty). Fadhel Kaboub on the logic of structural deficits and foreign denominated debt in 5 minutes.

Definition 3:

Unemployment.
Personal responsibility: not your fault. Bernie Sanders campaign.
The Case for a Job Guarantee , Pavlina Tcherneva, 2020.
Result 3.1: The Green New Deal
Rebuttal of Carbon Fee and Dividend followed by how expanding capacity through GND fights inflation in energy, education, housing, health, and costs in health and community, and "how to pay for it."
Lecture by Fadhel Kaboub covering most of these items starting from a debt and "how to pay for it" perspective. GND and Functional Finance
Result 3.2: How to pay for it
Scott Fullwiler on financial ability to pay, legal authority to pay, & productive capacity.
Embedded in aspects of the legal system that we left out in order to focus MMT for US congressional candidates: Rohan Gray.
L. Randall Wray, picking up where we did and continuing with policy implications, ending with China.

Definition 4:

Capitalism
Capitalists (or, those with the capacity to make employment decisions) employ only the amount of labor they think[12] they need to produce the amount of output they think they can sell at profit. Expansion of employment can proceed only up to the point at which "the own-rates of own-interest of all available assets is equal to the greatest amongst the marginal efficiencies of all assets, measured in terms of the asset whose own-rate of interest is greatest"[13]--which will be that asset with the special properties normally embodied in money. In other words, employment can expand only to the point at which all expected returns are equalized—since money is likely to be the asset that sets the standard (due to its special properties), they must beat its return.
Minsky added a financial theory of investment to Keynes's theory that holds investment to be the key determinant of the point of effective demand. This gives us a dynamic version of Keynes's General Theory by providing a key role for financial conditions. I developed an endogenous approach to money that is consistent with Keynes's liquidity preference theory.[14] Modern Money Theory[15] has put the state into the monetary system—not simply as another autonomous source of demand, but as the provider of the currency denominated in the money of account it has chosen. From Wray. Fall 2021 -- A Symposium on: Stephen A. Marglin's Raising Keynes: A Twenty-First Century Theory L. Randall Wray, Keynes on Money

Homework

Warren Mosler walking through exchange rate scenarios and their domestic implications.

Words

The biggest obstacle for MMT isn't our messaging to ordinary people. It isn't even our nominal opponents. It is our nominal friends. On February 24, 2022, we have war in Europe. Good luck cutting the defense budget. We saw full employment during WWII, and that left ordinary people calling for "peace time full employment." We saw prosperity in the hinterland that was unot touched by battle during the Civil War and that left ordinary people calling first for Greenbacks and then for free silver. Now we have been through the shortest recession in US history, and we are facing a pandemic inflation. Where have our peace-loving friends who wanted to cut the defense budget and tax the rich left us? What have we gained for sitting on our hands and not talking about MMT, meeting after meeting to avoid being thrown out? Who is our real enemy?

For those who still think messaging is an issue, words to help you speak and think clearly:

We don't need the rich:
not their money (it's our money of which they took more than their fair share)
not their jobs (we are the job creators)
not their charity.
Deficits that matter:
Child care and early childhood education
Higher education and precarious higher ed work force
Health and health care
Physical infrastructure
Work that can build a life, country, and future
Housing fit for a post-COVID global heating reality
A food system that sustainably provides nutrition to all
An ecosystem that can sustain life

Examples

Key legislation

  1. The Green New Deal resolution
    H.Res.109 - Recognizing the duty of the Federal Government to create a Green New Deal.

    S.Res.59 - A resolution recognizing the duty of the Federal Government to create a Green New Deal.

    This provides the framework containing the major progressive policy proposals.

    Policy pitch: Postcard from the future.

    Research support: How to Pay for the Green New Deal by Yeva Nersisyan Franklin & Marshall College and L. Randall Wray Levy Economics Institute of Bard College, Levy Institute Working Paper No. 931 May 2019
  2. Cancel all Student debt
    H.R.3448 - Student Debt Cancellation Act of 2019
    S.1947 - College for All Act of 2019
    Policy pitch: The Sanders Institute Talks: Student Loan Debt by Dr. Jane O'Meara Sanders , Dr. Stephanie Kelton
    Policy support: Canceling Student Debt Reduces the Racial Wealth Gap, by Marshall Steinbaum, Current Affairs, September 05, 2019.
    Research support: The Macroeconomic Effects of Student debt Cancellation, Scott Fullwiler, Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum, Levy Institute Research Report, February 2018
  3. Job Guarantee
    H.R.7477 - WPA Act
    This bill and its companions are not really a job guarantee, and having the transaction tax built into the bill is a problem. However, they motivate localities and organizations to think about how they would restructure the local economy to provide guaranteed jobs.
    Policy pitch: Securing the American Dream for Working Families: Future of Work ft. Pavlinia Tcherneva.
    Research Support: Public Service Employment: a Path to Full Employment, L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, and Stephanie A. Kelton, Levy Institute Research Report, April 2018
  4. Housing for All
    H.R.5244 - Homes for All Act of 2019
  5. Medicare for All
    S.1129 - Medicare for All Act of 2019
    This has the right funding formula. H.R.1384 - Medicare for All Act of 2019
    This has the bells and whistles
    (both are superseded by the clean 2021 HB1976 incorporating above suggestions.)
  6. Emergency income support
    H.R.6553 - Automatic Boost to Communities Act
    Provides emergency income support during the present crisis while demonstrating that deficit spending can take place without concurrently issuing Treasury Securities.
  7. Financial Services
    H.R.8721 - Public Banking Act of 2020
    Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act.
  8. Biden Green New Deal lite
    EPA Programs

Addressing points of confusion and refuting foes

If you think you have found a refutation for "how to pay for it, and why that's the wrong question," please consult with the person who wrote this syllabus before becoming attached to it because you can be pretty sure it didn't work.
  1. L. Randall Wray's submitted testimony before the House Budget Committee. Video of Hearing Reexamining the Economic Costs of Debt.
  2. MMT key resources organized as a debate brief: MMT FAQs
  3. Narrative version of the above written by a non-academic financial sector professional.
  4. In the past 20 years, no element of MMT has been successfully refuted. Confusion has, however, been sown by people with platforms such as Matt Bruenig, Paul Krugman 2, 3, Doug Henwood, 2

3x5 MMT:

A whimsical exercise inspired by William Byrd on "The Most Beautiful Program Ever Written"
state power
(impose a liability in the central bank unit of account)
(spend in zero maturity unit of account financial assets)
(charter private banks to pay liabilities on the public's behalf)
(create marketable accounts with non-zero maturities for all)
(allow free international trade in financial assets)
 		(define $ unit of account)
(define Federal Budget Deficit ($ assets spent - $ liabilities canceled this year))
(define Treasury Securities special $ savings accounts)
(define National Debt (accumulated Treasury Securities))
(define Unemployed can't (meet induced $ need through work))
State Theory of Money (Knapp, Innes)
Sectoral Balances (Godley)
Monetary Theory of Production (Marx, Veblen, Keynes)
Functional Finance (Lerner)
Financial Fragility (Minsky)

Reliable Sources on MMT

The following comprise the public core of the Kansas City MMT perspective. They have all written extensively and bear much of the weight of carrying forward MMT in the rapidly changing political sphere. Thus, their writings should be consulted rather than trying to reach them directly.

Organizations

Activist Groups

The following groups are eager to get MMT right and spread the word among activists. They are glad to engage and can benefit from the practice.

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