Posted To Stephanie Kelton’s Substack Newsletter 12/18/2022

A stipend/revenue sharing policy to state and local governments is a good idea and I have suggested that also in my book. The ultimate stabilizer and “revenue” sharing policy however is a 50% Discount/Rebate policy at retail sale. Why? Because everybody participates in retail sale making a 50% discount to the price of virtually everything an immediate and continuous MACRO-ECONOMIC doubling of everyone’s purchasing power. It also will potentially double demand for every enterprise’s goods and services so it integrates the self interests of both the consumer and enterprise. Finally, it will forever end inflation because we’ve never had 50% y/o/y inflation let alonf moment to moment such inflation rate. And with the proper carrot and stick taxation regime you can stop most if not all anti-social arbitrary price rises by all business models not just finance.

The real problem with economic theory is not even the leading reforms are analyzing on the operant concept/paradigmatic level. Hence thats what they are…reforms, when if you find the new operant concept and how to most efficaciously apply it…you’ve changed the ENTIRE pattern of the economy and also in this case the money system.

Part of the reason reformers are stuck in the current paradigm is they are so caught up in their abstractions that they don’t look directly at the economic process itself. Hence retail sale occurs hundreds of millions of times every day but no one sees the potential personal, commercial and systemic benefits of the retail price discount/rebate policy.

Reformists also miss the “knock on” benefits that come with genuine paradigm changes. Like for instance if you combine the 50% Discount/Rebate policy with a $1000/mo. universal dividend you make the payroll taxes every working person and every enterprise pay for welfare, unemployment insurance and even for social security completely redundant including their concommitant bureaucracies. That would raise everyone’s net pay 8-12%, cut business costs and insure every adult had $24k/yr. income for their entire adult life instead of having to work for 45+ years to get probably less than $2000/mo. Job guarantee? Sure, that also aligns with the new monetary and financial paradigm. Why not? When you’ve utterly ended any possibility of inflation you shut the mouth of every conservative and libertarian pundit and can run the kind of fiscal deficits to fund any rational program including a new Works Project Administration like the job guarantee, and even the under planeting or off planeting of the worst carbon emitting means of production so we don’t kill off most of the flora and fauna of the planet.

Paradigm changes are the most integrative of opposites and problem resolving phenomenon humans ever experience. They are the synthesis of Hegal’s dialectic that puts egg on the face of everyone who can’t see anything but the conflict of thesis and antithesis.

Here’s a few more problem resolutions and economic benefits of the new monetary and financial paradigm:

1) re-industrialization of the US in the most technologically efficient and ecologically sane way possible
2) elimination of most of the costly international supply chains we now have with China etc.
3) the opportunity for China to stop being paranoid about the fractious nature of their diverse cultural heritage and make a new social contract with their people…by implementing the new paradigm program in their own country
4) Imagine the possible social and psychological benefits of creating a continuous daily infrastructure for everyone to consciously or even unconsciously self actualize gratitude for being gifted 50% of the price of everything they buy…instead of feeling resentful about chronic inflation and thrashing around blaming everyone and everything…except the current human civilization long monetary and financial paradigm???

MMTers, Steve Keen, Michael Hudson, UBI advocates and Ellen Brown need to stop being erudite dunces and awaken to the power of the paradigmatic level of analysis.

DC: This conversation is way past orthodoxy nonsense that is just repackaged classical economics that was discarded to the trash bin during the great depression.


This time is not different. Progressive fantasy economics, encouraged by new age economics, are leading our economy to a dark place.

20% of our debt it owned by the Treasury. MMT. 33% is owned by foreigners. The rest is owned domestically. The supposition that a direct transmission of credit from and to our government may at times work on the margin. However it does not happen in isolation. Inflation which can be transmitted by our currency weakening increasing the supply of money tipping the economy into an inflationary period as we are seeing now. Japan has seen its currency get destroyed by a third by essentially MMT. Essentially all salaried workers in Japan have seen their wages go down by a third while imported goods prices skyrocket. Japan with D?GDP at 250% is in a prisoners dilemma. They need to raise rates to defend their currency but the cost could send the country into a default.

Britain in the 70’s had 90%+ marginal tax rates, Fiat currency. An MMT paradise. It had to borrow from the IMF. Inflation was over 20%, a technical default. Each time the Callaghan government went to finance expenditures the currency collapsed. They only escaped through tough measures and going for growth.

I’d love to hear from the professor why I might be wrong but MMT as an expression of Keynesian economics that fits a coercive political philosophy is sadly “au courant” but wrong. Debt matters.

Me: Orthodoxies. Errant orthodoxies. Sorry. Debt that is actually debt matters. “Debt” that is actually just plain old money but is immediately prestidigitized into “debt” by the FED or treasury so it becomes a guaranteed asset primarily for the banks…is “DEBT”. That characterizes the national “debt”.

So don’t worry about it….just awaken to what has always de-stabilized domestic economies, namely PRIVATE PERSONAL AND COMMERCIAL DEBT, and on what will break up the monopoly paradigm of DEBT ONLY…which is to strategically integrate the new monetary and financial paradigm of Direct and Reciprocal Monetary Gifting into the debt based system.

RP: The currency itself is a government IOU, regardless of if it’s a green dollar or yellow dollar (treasury security). That US Federal Government IOU is excepted as means of payment in many areas of the world or can be exchanged for foreign currencies. You can exchange your yellow dollars for green dollars anytime you want. Just what do think the US Federal Government owes holders of Federal Government IOUs. You can pay Federal Taxes, fees and fines, but outside of that the only thing you’re going to get for your 20 dollar IOU is two 5s and a 10. You can buy whatever is for sale in US dollars with those US government IOUs (fed debt) any place in the world. They will remain in circulation or savings till the US government redeems in federal taxes. The only thing the US federal government owes is US dollars. US dollars are tax credits which drive’s the need for the currency (value) and assures acceptance at your local car dealer.

This quantity theory of money as the source of inflation has zero empirical evidence to support the theory in the real world (name one). The primary driver of inflation over that last 30 years has come from abusive market power coming primarily from energy, health care, housing and education sectors. Other than those primary area’s it’s always been something to do with a problem on the supply side. The high tax increases during WW2 in the UK and the US, was to control inflation due to the retooling of production to war supplies. As Keynes put it in his 1940 book “How To Pay For The War,” “moving from the Age of Plenty to the Age of Scarcity.”

The 70s and 80s oil price shock drove the inflation (cost push). US inflation around 20%, nothing to do with the money supply creating too much demand.

The US economy had been suffering from lack of aggregate demand for 50 years with high levels of unemployment and underemployment. This is not characteristic of the currency issuer issuing to much currency (Federal government “debt”).

Since COVID, demand has out stripped supply due to changes in consumer demands (what people buy) and loss of production from COVID. Other factors driving inflation are energy prices and abusive market power. This “federal government debt” you’re so worried about is responsible for the recovery of the 22 million jobs lost during the pandemic. IF you want to focus on debt you need to focus on private sector debt, that’s where the problems come from yet not word from you on private sector debt.

The value of the US dollar on the foreign exchange market is up, not down! How do Orthodox models explain that? It doesn’t sound like the capital market flows are to worried about the US dollar Armageddon. The backward fundamental starting of thinking that the taxpayers funds the federal government as opposed to the federal government funding the taxpayer is the starting point that leads to a bunch of nonsense that doesn’t add up.

Me: Excellent exegesis Rick. Especially your last point that the continual build up of PRIVATE debt is where the actual problem exists. That’s why my twin policies of 1) a 50% Discount/Rebate at retail sale which goes a long way toward addressing the failure of American wage gains for the 99% over the last 50 years and 2) my 25-50% Discount/Debt jubilee at the point of loan signing which (finally) continuously integrates debt jubilee into the economic process…are so paradigm changing. Imagine buying a new $60k Tesla for $30k and when you go to the finance guy you only have to borrow $15k. If you buy a $40k internal combustion auto you pay $20k at retail and get a 25% debt jubilee at Finance so you only borrow $15k.

I love MMT’s (correct) observations regarding the money system. I love Steve Keen’s (correct) Minsky’s Financial Instability Hypothesis. I love Michael Hudson’s (correct) Financial Parasitism Hypothesis. I love Ellen Brown’s (now somewhat watered down) Public Banking. Why? Because they are all valid observations regarding the paradigm of “money, debt and banks”. Their only problem is they are palliative reforms instead of an Operant Concept/Paradigm Changing program…like what I advocate.

So should we maintain the lesser value of reform or go for the gusto with paradigm change where all of the valid research is acknowledged and integrated into a more ethical, efficacious and PERMANENT survival phenomenon???

Intellectual vanity only hurts for a moment, but the death by a thousand cuts where an excellent reform like Keynesianism gets morphed into neo-classical macro leaves the well intentioned full of frustration and regret.


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