Magic Monetary Theory Goes Primetime

Modern Monetary Theory was interesting back when it was dismissed as a fringe curiosity, but more like terrifying now that it's being taken seriously

The above video went viral recently. It shows one of Joe Biden’s top economic advisers, Jared Bernstein, trapped in a cage of on-camera ignorance when asked to explain why government borrows its own currency to pay bills. Confidence-inspiring comments like, “The government definitely lends… money by selling bonds. Uh, is that what they do?” and “Yeah, I guess I’m just, I can’t really… I don’t get it,” resulted in rare simultaneous left and right guffaws.

Conservatives chortled over Bernstein because it’s a Biden official looking like a douchebag. People on the left howled because they believe Bernstein to be writhing in a net of capitalist denial, unable to face the Great Truth, namely that a government that can print its own currency should never have to borrow. It can just print money!

The scene is from Finding the Money, a new documentary paean to Modern Monetary Theory, a pillar of new leftist thinking. MMT’s high priest is the star of Finding the Money, economist Stephanie Kelton, by all accounts a nice person and loaded to the gills with the currency of the day, certainty. Kelton is sure deficits are fake, part of an age-old political fraud that cons the public into believing national debt is the reason politicians don’t pay for social programs. When talking about MMT, Kelton transforms — I mean this as a compliment — into a master persuader in the tradition of Kashpirovsky or the Amazing Kreskin. If Marcia Clark possessed a fraction of Kelton’s self-assurance, O.J. would have died in prison.

Watch in this clip from the film as the penny drops for audience members as Kelton explains that if you turn the graph of government deficits upside down, the story changes. “Just as a six becomes a nine, when we view it from a different angle, a government deficit becomes a financial surplus,” she says. Not only are deficits not bad, they’re good, because every dollar the government owes is someone else’s asset. Therefore, we can change scary headlines about deficits into awesome ones about surpluses:

That was easy, wasn’t it? Or was it? I saw Finding the Money and all I can say is, Run. I spent nearly ten years listening to people who in previous eras would have been wandering pantless in asylums insist the solution to all of earth’s problems could be graphed on a napkin. “Okay, if you put a thousand junk mortgages in a box, shake it up ten times, tap the lid and yell Abracazam!, 23% will be AAA-rated when you open the box again.” Banks sold this dream to pension funds, insurance companies, hedge funds, each other, and finally themselves. When it went kablooey Wall Street ran to the Fed and successfully demanded to be fully compensated for losses caused by its own defective products, arguing society had an obligation to bail out its delusions.

Self-proclaimed arch-capitalists discredited themselves so much in those years claiming they’d discovered gravity-defying “new paradigms” that after the crash, lefty economists for the first time in ages supplanted conservative opposites to earn the ear of Beltway policymakers. Fifteen years later these bold thinkers are taking the helm — “We’re seeing a paradigm shift away from free market dogmas!” cheers Jacobin, in a recent interview with Kelton — and their solution to the accounting madnesses of the financialization era is… “Just turn the paper upside down!” The pendulum has swung all the way back, and in a twist, belief will be mandatory this time: