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“I could buy whatever I want, an iPhone and a computer, AirPods and a Barbie Dreamhouse. A real Barbie Dreamhouse that’s big and has walls. It would be in Paris because of the Eiffel Tower. I would go to the Eiffel Tower every day, and I’d have my own room in front of the Eiffel Tower every morning and make videos about that.” Those are the words of Chloe, a second grader who is attending Creator Camp, a camp meant to teach young kids how to create content for YouTube. Chloe spoke about her dreams of YouTube riches to Washington Post reporter Taylor Lorenz.

Chloe’s career dreams speak to the beautiful evolution of work, an evolution that Lorenz has reported on expertly for quite some time. The present and future ways to produce promise to amaze for how closely associated they are with unique skills and intelligence. To be born today would be a privilege.

Still, that’s not what this write-up is about. It’s more specifically about what Chloe wants. Her aim is to earn many dollars through YouTube content creation precisely because the dollars are exchangeable for real market goods. It’s just a reminder that no one earns or pays dollars, nor does anyone borrow or lend dollars. Underlying all currency movements is the exchange of real goods, services and labor. In Chloe’s case, her aim is to exchange YouTurbe content for iPhones, computers, and various Barbie accessories. Trade is about products for products.

Keep this in mind when members of the left talk up the alleged wonders of Modern Monetary Theory (MMT), and members of the right critique them. Both reveal an impressive misunderstanding of money.

MMT proponents believe governments can essentially have it all by printing money to fund their spending. Except that they can’t. Money creation doesn’t conjure goods and services, rather its circulation is an effect of goods and services. Government spending implies demand from government, but government can only buy things or redistribute wealth insofar as it extracts it first. It can’t just print demand.

If governments were to try to print demand, they might create a lot of money, but that’s it. Printed money isn’t the same as circulated money. Not by a longshot. That’s why the dollar circulates so heavily in countries not the U.S., and that have their own currencies. The problem is that the local currencies not infrequently command little to nothing in the marketplace. Which means they exist, but not as exchange mediums. Real money circulation per the Chloe example implies the exchange of goods, services and labor for roughly equal amounts of goods, services and labor. By putting the cart before the horse, MMT proponents imagine that “money” buys goods. No, products buy other products.

This is important given the right’s critiques of MMT. There’s much to critique, but then members of the right essentially make the same argument as MMTers. Think about it. Mostly wise members of the Austrian School disdain central banks not because they’re wholly superfluous, but because they supposedly enable government of unlimited size care of the printing press. Ok, but how, other than a wise disdain for government spending, are critiques of MMT different from it? Basically, Austrians and would-be Austrians are confirming what MMT types believe about the power of governments to expand via the printing press.

Except that they can’t. MMTers and the Austrians who despise them similarly imagine a world defined by intensely stupid markets whereby producers would blithely exchange real goods and services for printed money. They also imagine even dumber investors willing to buy future income streams that, as a consequence of printing, would be worth much less than the money exchanged to buy the income streams.

Not really. Markets are wise. It’s products for products. See 2nd grader Chloe to understand why. If governments could print in the way that emotional left and right wingers imagine, readers can rest assured that the printing would result in no new demand simply because the printed exchange mediums would cease circulating with great speed. As always, demand is what follows supply, and where there’s supply there’s always trusted money to facilitate its exchange.


John Tamny is editor of RealClearMarkets, President of the Parkview Institute, a senior fellow at the Market Institute, and a senior economic adviser to Applied Finance Advisors (www.appliedfinance.com). His latest book, set for release in April of 2024 and co-authored with Jack Ryan, is Bringing Adam Smith Into the American Home: A Case Against Homeownership

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