Do Budget Deficits Matter? Modern Monetary Theory Explained
Money For the Rest of Us
J. David Stein
4.5 • 1.4K Ratings
🗓️ 20 February 2019
⏱️ 26 minutes
🧾️ Download transcript
Summary
#241 Why modern monetary theory isn't worried about federal budget deficits, why budget deficits never go away and what are the risks if budget deficits get too large. We also explore what else proponents of modern monetary theory believe.
For show notes and more information on this episode click here.
- [0:22] What is Modern Monetary Theory?
- [3:20] Taxes create demand for fiat money.
- [5:32] Taxes and government bonds don’t finance the federal government.
- [8:56] Budget deficits increase the net financial assets of the
- private sector.
- [13:16] Taxes destroy money.
- [13:46] The private sector determines the size of the budget deficit.
- [14:58] The concerns of crowding and losing faith.
- [19:08] Even government spending has to be constrained.
- [20:02] The dangers of the Federal Reserve controlling interest rates.
- [21:45] Modern Monetary Theory is correct in terms of how the economy actually works.
- [23:25] Do federal budget deficits matter?
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Transcript
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| 0:00.0 | Welcome to Money for the rest of us. This is a personal finance show on money, how it works, how to invest it and how to live without worrying about it. |
| 0:11.0 | I'm your host, David David Stein today is episode 241. It's titled, |
| 0:15.9 | Do Budget Deficits Matter? Modern Monetary Theory Explained. |
| 0:22.0 | Last month, the U.S. Representative Alexandria O'Kastio Cortez told Business Insider, |
| 0:28.0 | and here's a quote from the article, |
| 0:30.0 | she said she was open to modern monetary theory, a burgeoning theory among some economists |
| 0:38.0 | posting that the federal debt is not an economic restraint for the U.S. |
| 0:43.0 | She said the idea which holds that the government doesn't need to balance the budget |
| 0:49.0 | and that budget surpluses actually hurt the economy absolutely needed to be a larger part of our conversation. |
| 0:57.0 | Last week's philanthropist Bill Gates said on the Virgast podcast, he was asked, so you're not an inherent of modern monetary |
| 1:08.6 | theory that says, don't worry about the deficit? |
| 1:11.9 | We'll just print the money and do it? |
| 1:15.0 | Gates says that is some crazy talk. |
| 1:20.0 | Finally, Ben Hunt, he's co-founder and chief investment officer of Second Foundation Partners, |
| 1:27.3 | publisher of Epsilon Theory. |
| 1:28.9 | I have quoted from him in the past. |
| 1:30.8 | I highly respect his point of view when it comes to investing. He wrote |
| 1:37.4 | MMT which is short for modern monetary theory is it |
| 1:43.0 | justification for deficit spending without end? |
| 1:49.0 | What is this modern monetary theory? |
| 1:52.0 | And is it crazy talk? It's an economic theory that was influenced |
| 1:57.9 | by the work of 20th century economist George Frederick Knapp, Napp, Alfred Mitchell Eanes, |
... |
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