Did you know that if you run out of the paper money in a game of Monopoly, the banker is permitted to create more to continue the game? So it is in real life, that the Federal Gov’t can print cash and mint coins as it needs, and can borrow its own money to spend, just as easily as the banker in Monopoly. It’s quite a shift in mindset, because we are led to believe by politicians and corporate news media that federal government spending is restricted to what it earns (taxes) and what it has in savings (reserves). As individuals, we can’t just photocopy some dollar bills or create an IOU to pay our monthly utility bills and rent. If we can’t make our payments, we have to take out a loan or put it on our credit cards. In other words, our deficit spending results in real debt and we will bankrupt ourselves in no time if we don’t have a plan for repayment. It is pounded into our skulls that the Federal Gov’t is racking up an eye-watering, incomprehensible amount of national debt from all its deficit spending, year after year. The corporate news media LOVE to make this crazy number more relatable to us by breathlessly telling us how much our individual share of it is, as if this debt is our own personal burden.

Now take a moment to understand that the words “deficit” and “debt” don’t apply to a federal government who issues its own sovereign (fiat) currency through a central bank. If you understand that this fiat currency is “not real” and that is actually incredibly easily conjured up out of thin air, you can see that federal gov’t taxing and spending are just accounting entries, nothing more. Monopoly money is more “real” in this respect because it is harder to fabricate (unless you are playing the electronic version.) You can figure out pretty quickly that deficit spending is actually a “surplus” and that debt from borrowing is actually “savings”. That crazy huge number you see is NOT what the country owes, it’s what it OWNS in the currency it created! The gold-standard, by the way, is just pegging a currency to an imaginary value of gold… gold has little intrinsic value it’s market price is merely a very long running commodity bubble… but that’s another topic for another day. But as an aside, think about it: if you were on stranded on Mars and you had a bar of gold and a bar of sheep manure, which would you think would be more valuable? The useless bar of gold would be worthless, and I digress.

Modern Monetary Theory (MMT) puts all this talk about deficits and debt on its head, and it shows us how we have everything backwards. It shows us what is real, and what is made up, to keep the game of capitalism going. The key point to understand about government deficit spending is that MMT applies to the Federal Gov’t as a currency issuer. Provincial and municipal gov’ts are currency users, on the other hand, and so their deficit spending and debt accumulation are appropriately named as such and deserve all the hand-wringing, smelling salts and fainting couches we hear about. This is why provincial and municipal politicians are forced to go hat in hand to the federal gov’t to help cover their deficit spending for big projects and social services like healthcare. At the end of the day, the gov’t debt that we get harangued about IS NOT OUR PERSONAL DEBT OR GENERATIONAL DEBT. As individuals, we can walk away from that debt as easily as moving to another city, province or country. If we choose to stay put, we need to pay attention to who we elect to run our provincial and municipal governments and give them a kick in the ass to go begging to the federal gov’t for the cash it can’t create.

So why do politicians on the left and right play this “gov’t debt is your debt” and “we can’t afford social services” game with us? We are made to feel on the hook for this debt by public officials, because gov’t spending and taxing policies serve their wealthy and powerful backers, who gain their wealth and power precisely by limiting resources to average folk like ourselves. Imagine that a capitalist economy is like a champagne glass fountain or a stack of champagne flutes in a pyramid. The government pours the champagne (ie. spending the money it prints and borrows) at the top, letting it overflow the upper glasses to fill the lower glasses. If we knew that there were an endless supply of champagne and no one was covering the glasses in between or filling their glass out of turn, we would patiently wait until all the glasses in the pyramid fill, so we can put our glass at the bottom to scoop up the overflow… everyone around the fountain gets to fill their glasses! If we also knew the federal gov’t could fill glasses anywhere in the pyramid to keep it flowing, we would expect the gov’t to keep an eye out for glasses that weren’t filling and intervene as needed.

The wealthy and powerful are greedy by definition and want their glasses filled first and continuously, even if it meant the champagne was not flowing all the way down to everyone with waiting glasses. They don’t want to wait like everyone else, and are loathe to see everyone enjoying the champagne equally… their gain should be at your loss! So instead of making sure that everyone is getting a glass of champagne to enjoy, the wealthy and powerful cut into the queue by influencing (ie. bribing) politicians to put restrictions on when/where/how long to pour the champagne. Those without influence are left with half-filled or empty glasses by these queue-cutters. This champagne tower also demonstrates the mythical trickle-down theory of economics… it works great if the champagne is flowing continuously and evenly. But as we all know, the wealthy and the powerful make sure it doesn’t work fairly for everyone, and the distribution is made uneven to their benefit. They don’t work harder are smarter, they are just more lucky, selfish and competitive (competition is entertaining, but it’s not realistic.) To top it all, they have made us believe that we don’t deserve champagne to begin with, and we are somehow indebted to them for the whole pyramid scheme (literally).

What about inflation from all this champagne flowing around freely and splashing around all over the place? So, what about it? Inflation is merely the general increase in prices. We need inflation to keep the capitalist economy chugging away and the champagne flowing down the pyramid. The wealthy and powerful are experts and sucking out the excess champagne, so don’t worry about it. But high inflation! Nothing is affordable! Those are other issues caused by a myriad of reasons, one of which is the federal gov’t is not doing its job watching the champagne tower for sections that are overfilling or under-filling. It all evens out in the end if the champagne-pourer is attentive.

In a nutshell, federal gov’t spending of their own sovereign currency is necessary to keep the wheels of capitalism moving (and the champagne flowing!) and we shouldn’t be led to believe that our real life needs are somehow unaffordable for purchase with money that isn’t real. Of course, Modern Monetary Theory is far more complicated and nuanced than a game of Monopoly, a champagne tower or my inexpert opinion. I highly recommend reading “The Deficit Myth” by Stephanie Kelton. If you are a little suspicious that our politicians know something we don’t when they huff and puff about how unaffordable social programs are (and don’t get me started about trade deficits), they should be told the jig is up and smacked over the head with this book!

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