MMT: The National Debt Is Actually A Government Savings Account


Alright. Well then why does [the government] sell bonds?
What are bond sales all about? It’s not selling bonds to cover a shortfall because it needs to borrow money from us. A lot of people have argued, and Bill talked about this a little bit earlier with the Rogoff and Reinhart piece, that there’s a
tipping point out there. Won’t we sell too many bonds? Won’t the debt get too large? Isn’t there some point of no return beyond which, right, the whole system collapses. What if the interest payments become too large? What if the rest of the world decides they don’t want to buy the bonds?
Bonds are nothing more than a savings account at the Fed. We give up dollars
today and we receive dollars plus interest at a future date. Okay, so if the government sells bonds
today, funds get moved from checking accounts. People who have money buy the bonds. Funds moved from the checking account into what’s effectively a
savings account. It’s the interest-earning asset, IOU of
the government, so that’s what we hold now. When the bonds mature the government credits our account, principal plus all of the remaining interest and the funds are
converted back into checking accounts, right? They move from saving back into
checking accounts. So if you want… I couldn’t get the 12 trillion. I wanted
the actual number, right? 12.4 wherever we are today but this is as recent as i could find. This is the National Debt Clock, right? The sum total of all of the outstanding bonds that the Treasury has issued and what we would argue is that we shouldn’t call that the National Debt Clock we should just rename it. It’s the national World dollar savings account, right?. All it does is keep a record of the total amount that’s invested in savings as opposed to checking
accounts at the Fed. It’s nothing more than that Alright something about the issue of
solvency, the tipping point problem. Can the government run out of money? The US government can’t run out of money any more than the Washington Nationals baseball team stadium can run out of
points. Okay. Every time a ball game is played at
Washington Nationals stadium some team score some points and they appear on the
screen and then the other team scores and some more points appear on the
screen and there’s nobody behind the screen going, Hey Johnny! We’re running out of points here!” You know? Right? “Look in the trust fund!” That’s not the way it happens. You just
add the points, okay? Same exact thing with the way the government operates and this is the quote that Marshall brought up earlier
and the one that Warren likes to use a lot and I like it too, so here it is in
writing so that you know we didn’t make it up. This is Ben Bernanke in an interview on 60 minutes just last year when Pelley asked him, “is
that tax money the Fed is spending?”, and Bernanke says, “it’s not tax money the
banks have accounts at the Fed much the way that you do have an account a
commercial bank so when we want to lend to a bank we simply use the computer to mark up the size of the account they have with the Fed”. It’s exactly like putting points on the screen at the baseball game. They just mark up the balance. Can you run out of points? Can the
government run out of money? No. There is no solvency issue when you are the issuer of the currency.

Maurice Vega

18 Responses

  1. does the governmet issue bonds for all of its deficit spending? Lets say they deficit spend 2 trillions. Can they issue 1 trillion of bonds and not issue bonds for remaining 1 trillion?

  2. Man, they couldn't teach me this in school. So much time wasted I probably learn more on youtube and google. Nobody knows what debt is. I want to relearn how our monetary system and economy works the right way.

  3. People need to understand that Money is Credit and Credit alone, it's a Universal Credit that is accepted within a group of people and their Govt to cancel debt incurred against each other, it's usually in form of Bank Liability/Credit , it's intrinsically useless

  4. I know i have told atleast 4 hundred people how many people followed up and watched the video's is another question 👏

  5. Is this real? Stephanie Kelton is an economic advisor to Bernie Sanders, but is this actually her or someone spouting a bunch of nonsense? Nobody can be that dense to think that government borrowing is like a "savings account". Yes, there is a huge downside to borrowing massive amounts of money. That borrowing is owed to someone – either private individuals, pension funds, or foreign investors. And, it must be payed back, or the government defaults. If the government defaults on its debt, then nobody will lend money (buying the government bonds). And while the government can print more currency or introduce more into the supply, doing this causes inflation and de-values our currency. See what happens when Zimbawe or Venezuela did this. https://thefinanser.com/2013/07/zimbabwes-currency-crisis-and-the-100-trillion-dollar-note.html/ and http://money.cnn.com/2018/01/17/news/economy/venezuela-cash-crisis/index.html

  6. This is total bullshit because the more dollars are made the less purchasing power they have. This viewpoint TOTALLY ignored that.

  7. It’s amazing how some people understand this yet there is another group that can’t for the life of them understand it.

    Who did I tax or borrow letters from to make this post ?
    Or did I just create them ?

    The govt just creates dollars
    Taxes are a drain
    Bonds make up the difference but neither taxes nor bonds fund the govt.
    Although the accounting makes it look that way.

    It’s just a con much like a pool shark making it look like he is an easy beat so you buy into getting beaten.

    Kelton is correct and yet economists like Krugman attack her, not with a strong intelligent arguments but with insults.

  8. The dollars you get back won't be able to buy as much as the dollars you bought the original bond with, this is why treasury notes barely perform better than savings accounts – and we're not even operating in an MMT paradigm, yet….

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