The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy

“MMT radically changes our understanding by recognizing that it is the currency issuer—the federal government itself—not the taxpayer, that finances all government expenditures. Taxes are important for other reasons that I will explain in this book. But the idea that taxes pay for what the government spends is pure fantasy.”

This passage exemplifies the theme The Government’s Unique Power as a Currency Issuer. Kelton employs stark, definitive language (“pure fantasy”) to underscore the paradigm shift MMT represents. By directly contradicting conventional wisdom about taxes funding spending, Kelton establishes her book’s revolutionary stance. The word “radically” signals to readers that MMT isn’t proposing minor adjustments to economic theory, but rather a complete reframing of how money works.

“Every economy has its own internal speed limit, regulated by the availability of our real productive resources—the state of technology and the quantity and quality of its land, workers, factories, machines, and other materials. If the government tries to spend too much into an economy that’s already running at full speed, inflation will accelerate. There are limits. However, the limits are not in our government’s ability to spend money, or in the deficit, but in inflationary pressures and resources within the real economy. MMT distinguishes the real limits from delusional and unnecessary self-imposed constraints.”

Illustrating the theme Real Resource Constraints versus Financial Constraints, Kelton uses the metaphor of a “speed limit” to make abstract economic concepts more accessible. The structure moves from explanation to warning to clarification, building toward the key distinction between genuine and artificial limits. By characterizing traditional financial constraints as “delusional,” Kelton uses strong language to challenge established economic thinking. The parallel construction of “real limits” versus “self-imposed constraints” reinforces the central contrast MMT draws.

“That’s why MMT sometimes describes the Fed as the scorekeeper for the dollar. The scorekeeper can’t run out of points. Think about where the points come from when you play a card game or go to a basketball game. They don’t come from anywhere! They’re just conjured into existence by the person doing the recordkeeping.”

This extended sports metaphor explains a complex economic concept. By comparing the Federal Reserve to a sports scorekeeper, Kelton creates an analogy that conveys how currency creation works. The exclamatory tone in “They don’t come from anywhere!” emphasizes the counterintuitive nature of this concept while making it more digestible through the familiar