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Economic Deficit Theories Were Wrong, the Money Tree Exists

What if deficits and taxes are used to hold us hostage and there is an economic model capable of resolving all our issues?

The economic theories administered in the US, Australia, and the UK state a 3.5% to 4.5% unemployment rate is necessary for running an efficient economy. Sitting in high school econ class, even my dull teenage brain couldn’t fathom why an economic system requiring a percentage of people to suffer through unemployment was the ideal method. To wrap my head around the concepts, I took macro and microeconomics in university; consumers, markets, equilibrium, supply, demand, and a plethora of theories with their adjoining equations exhibited society’s behavior as it interacted in a game of Monopoly on steroids. The year I would enter the workforce as a professional was the year the global financial crisis (GFC) forced a crash course in economics realism.

Free market capitalism had failed, yet the US government bailed out the institutions responsible for the bankrupting and housing foreclosures of millions of Americans. The cruelty blew me away. Were the American people not worthy of a bailout, and why weren’t we considered the economy? Without us, there isn’t an economy. We do our consumerism duty, we obtain loans and credit, and we work, and we work, and we get ripped off. Sure, the financial system collapsing has far-reaching rippling effects and something had to be done, but what about the 10 million who lost their home, $12.8 trillion costs to the public, 23.1 million jobs lost, and 9.3 million left uninsured as a result of the deregulation and predatory lending? The financial market dusted itself off, refilled its glass of Chateau Lafite, and started afresh, but most Americans never regained their wealth.

Foolishly believing the GFC would be the worst economic crisis of our lives, we are bulldozed by a pandemic. Truth is truly stranger than fiction, and the enormity of the situation is unimaginable; how long will we live like this, what if I get Covid, how are we going to pay our bills…what does our future look like? It’s impossible to comprehend and ignore the magnitude of the calamity, yet there’s a large segment of the population going about their lives as if they’re invincible and this whole virus thing is really getting on their nerves. The lack of knowledge about economics is catastrophically high.

There are over 60 million Americans out of work, and this figure doesn’t include those who have given up looking for work and remain jobless. Our health insurance is tied to employment; we lose our job, we lose our healthcare, and even upper-middle-income earners can’t afford a hospital visit or treatments without insurance. The government has already thrown billions at cruise liners, airlines, casinos, private jetliners, and an undisclosed amount to “mystery” companies. As Congress plays tit for tat, Americans face hunger, evictions, and health problems as they await the outcome of the second round of negotiating the value of American life, but what if creating money and deficits weren’t an issue?

“The state has no source of money other than the money people earn themselves. If the state wishes to spend more, it can only do so by borrowing your savings or by taxing you more.” — Prime Minister Margaret Thatcher

Margaret Thatcher and Ronald Reagan; what a duo. They kicked off this hyper-capitalism cut-throat, swim, or sink system, and it’s been continued by every political party since. Whilst the UK cut funding to the National Health Service (NHS), the US never bothered to develop one and allowed interest groups (wealthy elites) to control the country’s health. The propaganda or more simply, marketing and political campaigns scaring Americans into voting against themselves, has mastered the socialist devil-scare tactic. Anything of value to the people that could diminish the potential for a billionaire to become a trillionaire has been stopped in its tracks; we vote, whilst they buy the government. We can’t beat them, but we don’t have to be beaten by them.

We’ve been confined to economic theories for decades and the 2008 GFC proved they were wrong. The US can create a lot more money, it could provide a universal basic income, healthcare, invest in infrastructure, technology, job creation, free education, and as long as the federal reserve monitors the financial system, deficits would not burden the taxpayers anymore than they do now. The theory an economy should maintain the magic unemployment rate of roughly 4%, has also been disproved. We would be most efficient at 0% and policies like job guarantee assists with preventing inflation.

The government has been creating money and working with Modern Monetary Theory (MMT) economists. So, why aren’t they freeing us from this agony? Politics. If we don’t fear, we don’t rely on them. Think about it, the never-ending expensive wars, military expenses, tax cuts to the rich, and billions of dollars to save the financial system. Where’s the inflation? And now, in a time of deflation, the money tree is essential.

For more information, Stephanie Kelton is the lead MMT economist, and articles in ABC Australia and NY Times provide further insight.

Is this the world you would have created?

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