by DAVID L. GLOTZER
….In December of 2014, well before his decision to run for President, Bernie Sanders appointed Stephanie Kelton to be the Chief Economist for the Democrats on the Senate Budget Committee. Dr. Kelton is a Research scholar at the Levy Economics Institute of Bard College, the founder and Editor in Chief of one of the world’s most prescient economics blogs New Economic Perspectives and an Associate Professor at the University of Kansas City Missouri. She is also one of the leading proponents of a federally funded ELR.
As one of the world’s most prominent experts in the field of Modern Monetary Theory (MMT) she is fully aware of the policy options available to a sovereign country which issues its own free floating currency. That is a country like the United States which issues money in its own unit of account- the Dollar- and does not tie the value of the currency to any commodities like gold or to foreign currencies through a peg (like the Chinese do with the Renminbi).
Dr. Kelton was also among a select few to predict the Eurozone financial crisis and to explain why the currency zone has been impotent in its ability to adequately deal with the ongoing economic crisis. She predicted that Quantitative Easing would not cause general price inflation and would be inadequate to get the U.S. economy back to full employment, the meaninglessness of the downgrade of U.S. treasuries by S&P, and that deficits caused by the 2008 financial crisis would not cause a rise in the interest rates of U.S. Federal debt.
The United States Federal Government as the sovereign and only issuer of the dollar is, like all nations, subject to fiscal policy constraints, just not the one that makes most politicians scream bloody Mary for the sake of their grandchildren. Financing is not an obstruction to enacting policy, in fact, money is created every time the Federal Government spends above the amount it taxes from the public.
The Federal Debt and Deficit are accounting entities with the Federal debt being equal to the net financial savings of the non-government sectors and the debt or surplus being equal to the net change in those savings.
Instead real resources such as labor, capital, natural resources, along with technology, imagination, and the laws of thermodynamics place constraints on the amount of money that can or should be created in order to move resources in order accomplish the public purpose, whatever that may be……