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Ex-U.S. Deputy Secretary of the Treasury confirms Modern Monetary Theory

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  • Strongly Liberal Democrat
    Dallas, TX
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    Frank N. Newman, former Under Secretary of the Treasury for Domestic Finance (1993-1994) and Deputy Secretary of the Treasury (1994-1995), recently wrote Freedom from National Debt. In the book, he recommends Warren Mosler's Seven Deadly Innocent Frauds of Economic Policy and lays out an MMT consistent view of how the monetary system actually works.

    The National Debt is just an accounting record of all the dollars that have been net-saved by the USERs of the currency.

    Federal government "borrowing" is not operationally necessary to "finance" gov't deficit spending. The purpose of issuing gov't bonds on a non-convertible, floating fx currency regime is not to acquire funding for the government to spend. Rather, it is a simple reserve drain, the purpose of which is to reduce the amount of excess reserves in the banking system and support the FED's target for the minimum interest rate in the economy. Treasury securities are like interest earning savings accounts at the FED.

    There are no financial constraints on the number of dollars that the federal government can create. Just like how there's no limit because of the math to the amount of points you could score in a football game.

    The federal government can never run out of points, just like how the scorekeeper in a football game can't run out of a points to add to the score when a team scores a touchdown. The consolidated federal government (Congress + Treasury + FED) is the ISSUER of the currency and therefore the scorekeeper. They have to spend/lend the U.S. dollar in-order for us to pay our taxes in dollars and conduct our business in dollars. These are all points of logic and have nothing to do with 'theory.'