by Gary Alexander
May 21, 2024
A decade ago (May 6, 2014), I wrote a column here, “Happy Birthday, Karl Marx…Now, Get Lost,” based on the dual birthdays of the original brainiac of communism, Karl Marx (born May 5, 1818) and his newest disciple, a young French economist, Thomas Piketty (born May 7, 1971). A decade ago, Piketty’s door-stop-size book, “Capital in the 21st Century” was the #1 best-seller in America, bearing a title (and size, and message) reminiscent of Marx’s “Das Kapital.” He recommended super-high taxes on the rich.
May begins with May Day (“International Worker’s Day”), communism’s call to action day, so what did we see this year but a new film touting huge growth in government through monetary over-printing.
On Friday night, May 3, the nation was treated to a worshipful new film about Modern Monetary Theory (MMT) by its creator, Dr. Stephanie Kelton, who was appointed Chief Economist of the Senate Budget Committee for Senator Bernie Sanders (from Vermont), when he was its ranking Democrat in 2014.
“Finding the Money,” a new 95-minute “documentary” argues that any government capable of minting its own currency can always print more money (a statement so obvious that it earned my subtitle, “Printing for Dummies,” as that is one of many claims uttered so slowly and clearly it seems aimed at 10-year-olds:
“We don’t find the money, we create it. That’s the simplest part of the equation.”
– Stephanie Kelton, Professor of Economics, Stony Brook University
““The government spends by creating money, and when it taxes, it destroys money. We don’t need to tax rich people for their money. We need to tax them because they’re too rich.”
— Professor L. Randall Wray, Professor Economics, Bard College
Perhaps you can sense the seduction in such statements – there’s no need for any taxes; we can just print the money we need and do whatever we want. It’s no wonder this film already won the Audience Award for Best Feature at the Green Film Festival of San Francisco. Professor Jason Hickel (who is “opposed to capitalism…as well as economic growth,” according to Wikipedia) calls it “A Masterpiece! By far the most inspiring economics film I have ever seen… a gift to humanity. Everyone should watch it!”
The film is very well made, and MMT is not all bad – since it accurately shows that most of our debt has an equal and opposite credit offset, as a bond holding, or as savings – but when it comes to the blind spots of MMT, its proponents all seem smitten with Marxist priorities, usually masqueraded as altruism, as they favor better collective use of our national resources, like turning casinos into hospitals, making financiers into cancer researchers, or addressing the “ultimate threat” of climate change in a Green New Deal, or providing Medicare for all, or ending poverty; each of these dreams require almost unlimited new dollars.
Their bias emerges again when they rewrite history, saying markets didn’t exist before governments were born. Markets needed governments and laws to exist first, they say; markets could only develop after we had money, they say. Barter didn’t exist, they shockingly say. For instance, Pavlina Tcherneva, associate economics professor at Bard College, said, “Markets don’t spring up on their own.” And Professor Wray asserted, “There has never been a market economy with no government.” Really? These MMT advocates seem to think that two or three people couldn’t ever agree on a trade without a licensed agent butting in.
A climate catastrophe looms over the entire film. While Kelton thinks the Debt Clock is a silly tool of false alarm, she is truly alarmed by the six-year countdown to oblivion called the Climate Clock. One other MMT advocate, Fadhel Kaboub, Economics Professor at Denison University, addresses his class:
“The planet is on fire. Hundreds of millions of climate refugees will be moving across the planet. Yet we are told there is nothing we can do since we don’t have the money. To solve climate change, we need to move around 10% of our GDP to decarbonize transportation, energy, agriculture, housing…” and more.
The closing line of the film says, “The Climate Clock stood at 5 years 295 days at the date of this film’s premiere.” The implication is that an unlimited printing of new dollars could forestall Doomsday, but that’s a bit wacko. It also reflects another fatal flaw of MMT: Everyone has different spending priorities! If money supply is unlimited, $10 trillion may go to climate concerns and $10 trillion to the poor, but a third $10 trillion may go to military aid for Ukraine, Gaza and ‘Palookistan’ or $10 trillion to pork at home.
Professor Denton shows us the National Debt Clock turning its last six digits over at a tornado’s pace, but she assures us, “You could take the National Debt Clock that scares everyone and just rename it ‘the U.S. Dollar Savings Clock’ and I think everyone would have a very different kind of reaction.” OK, so, here’s a compromise: I’ll quit carping about our Debt Clock if you abandon that silly old Climate Clock!
We begin to smell a rat (or is it a wrat?) when Dr. Wray says, toward the end of the film, that taxes aren’t important for the money they raise, but for social levelling: “What is too rich? You remove that and leave the rest. You don’t stop when you get enough money, since we’re going to burn that money anyway.” So, I’d give this film high marks for the MMT gang giving us full disclosure for their underlying motivations.
Two Key Tests Show Why MMT Will Likely Fail
Films like this are seductive and can easily convince young minds to follow Pied Pipers of easy money into a very dangerous future. Many economists have written fine, detailed refutations of MMT in theory, so I will only add that its good parts are simple and obvious, while its bad parts are dangerous and easily disproven. Rather than spout economic theory, let me examine two road tests of money printing in action:
#1: MMT has no successful test cases, and many failures: We just passed the centennial of Germany’s hyper-inflation of late 1923, which not only destroyed an entire nation’s life savings, but launched Hitler’s Nazi Party and World War II. Where is the success story of a nation printing unlimited money?
If this is a theory, cite the evidence. Dozens of Banana Republics have suffered hyper-inflation in the last century, but if you want to practice this theory in the most powerful nation that ever existed, you’d better cite just one credible precedent of more money (especially with no taxation) creating magical prosperity. Why not experiment in a small nation – Uganda, Serbia, Panama – to see if it can create prosperity there.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
#2: States and cities can’t print money. State and local governments must balance their budgets or float a new bond offering – which voters have lately tended to reject. The Wall Street Journal profiled the case of Chicago (“Chicago Will Need a Miracle to Escape Its Debt Burden,” May 11-12, 2024), with its debt load now at $40 billion, or $43,000 per Chicago resident, with taxes so sky-high – a 12% state and local burden, on top of federal taxes, plus a property tax of over 4% a year on office buildings – that residents are fleeing the city. Both Chicago and the high-tax state of Illinois now have fewer people than they did 15 years ago. As a result, Chicago will likely default on its pension and health plan obligations, which total $26 billion. Mayor Brandon Johnson projects a $538 million deficit this year and $1 billion in 2025.
Mixing these two points, our 50 states are 50 laboratories of tax and spending policies, and the outcome is reflected in business and personal migration statistics – and that is true of other nations around the world, too. When various nations of Europe over-tax their citizens (think Britain and Scandinavia in the 1970s), their leading athletes and movie stars set up residence in Monaco or other tax havens. Super-high 95% tax rates motivated the Beatles’ George Harrison to write “Taxman” (“1 for you, 19 for me”). Later, Maggie Thatcher added, “The problem with socialism is that you eventually run out of other people’s money.”
I expect many young people to love this film, but I don’t expect many to recall the 1923 German hyper-inflation or view the political motivation of MMT advocates with the skepticism I brought to the viewing.
All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.
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About The Author
Gary Alexander
SENIOR EDITOR
Gary Alexander has been Senior Writer at Navellier since 2009. He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks. For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.
Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s. He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division. Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander
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