In this episode, Matt Klein talks with Stephanie Kelton, a professor at SUNY-Stony Brook who was previously the chief economic adviser to Senator Bernie Sanders. Kelton has been one of America’s great evangelists of Modern Monetary Theory — the crazy idea that one person’s financial asset is another person’s financial liability. Put another way, the lines on this chart always add up to zero:
We discussed the main implications of this insight for government policy, including but not limited to:
- The expected effects of the new tax policy
- The reason why governments issue bonds instead of just printing money
- Why the size of the budget deficit is meaningless without context
- The role of the central bank
- The difference between currency issuers and currency users — and what this means for Europe and US states
We also spent time discussing a new paper about student debt forgiveness that Kelton co-wrote with Scott Fullwiler, Catherine Ruetschlin, and Marshall Steinbaum. They estimate that a single one-off jubilee of all student debt would modestly boost growth and employment by less than it would increase the general government budget deficit. Moreover, this jubilee would improve the financial position of state and local governments. We talked about the modeling assumptions used in the paper and the potential risks to their estimate.
Hope you enjoy!
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