On this Earth Day, we\u2019re called to reflect not only on our relationship with the planet but also on the systems of thought that shape how we live with it. The challenges facing Earth today\u2014climate chaos, ecological degradation, social inequity\u2014are symptoms of a deeper issue: outdated ideas still guiding our economies and our policies. This reflection is a call to question, to learn, and to evolve. <\/p>\n\n\n\n
When The Limits to Growth<\/em> was published by the Club of Rome in 1973, it was immediately controversial. While the controversy helped it sell 12 million copies in 37 languages in the years that followed, many of the world\u2019s most prominent economists including Milton Friedman, Robert Solow and Julian Simon, scoffed at the suggestion that there could be such limits. Under the influence of such expert opinion, the mainstream media trashed it as \u201cirresponsible nonsense.\u201d A half century later, we are now living through a remarkably similar scenario as the book\u2019s baseline case\u2014not a forecast, just the \u201cbusiness as usual\u201d scenario. <\/p>\n\n\n\n Fifty years wasted, now the chickens have come home to roost. We have now named it the polycrisis. Ignorance among economists who have more power over our lives than we know has a cost. Ideology promoted as theory is downright dangerous. <\/p>\n\n\n\n It was deja-vous all over again listening to a debate last week between Stephanie Kelton, author of The Deficit Myth<\/em> and a leading expert in what\u2019s called Modern Monetary Theory (\u201cMMT\u201d) and Steve Moore, senior economist of the Heritage Institute around the question, \u201cShould the US federal government make reducing the national debt a fiscal priority?\u201d<\/em> <\/p>\n\n\n\n Moore is certainly no Milton Friedman, but he would proudly consider himself a disciple. He is also the co-author of the chapter on The Department of the Treasury in Heritage\u2019s Project 2025. <\/em>So he has influence in Washington at this moment in time. And that\u2019s what\u2019s both terrifying and so reminiscent of the response to The Limits to Growth.<\/em> <\/p>\n\n\n\n This debate is critical right now for two reasons. First, Minister Musk\u2019s DOGE project is premised on Musk\u2019s ignorant declaration that the US \u201cwill go bankrupt\u201d if it doesn\u2019t get the deficit under control. This view is reinforced by several high-profile Wall Street \u201cexperts\u201d such as retired hedge fund magnate Ray Dalio proclaiming the debt problem is the county\u2019s greatest threat because there\u2019s a \u201csupply-demand problem\u201d with the debt. You might find it easy to dismiss an extreme right wing economist\u2019s perspective, but should you dismiss the founder of one of the world\u2019s most successful hedge fund\u2019s perspective? I admit, it gives me pause. <\/p>\n\n\n\n But let\u2019s consider the debate. Stephanie laid out the thesis of MMT that in reality should be called modern monetary mechanics. It\u2019s not a theory at all, but a description of reality. It is literally about the actual mechanics of government spending and taxing, and the \u201cproof\u201d is already worked out in the balance of accounts between the private sector and the public sector published by the government for all to see (if they care to look). But this is not my point here. <\/p>\n\n\n\n My point here is that Moore never once addressed the mechanics and the explanations Stephanie gave during the debate. He ducked. Instead, he pontificated about his pro-growth ideology. At one point he referenced a recent study that \u201cproved\u201d that countries that run high fiscal deficits grow slower. I\u2019m pretty confident that the study included countries that become over indebted economies with hard currency debt (think Latin American and Asian debt crisis with US dollar and Euro debts, not local currency debts). These examples have virtually nothing to do with the US federal deficit which is denominated in US dollars, over which the US central bank has monopoly control, and just so happens to be the world\u2019s reserve currency. Statistics and averages are not meaningful when the sample size is one. <\/p>\n\n\n\n Kelton attributes her fascination with MMT to a man named Waren Mosler, one of the architects of this school of thought. Mosler was a Ray Dalio of a different time, just not on such a grandiose scale. He was also a client of mine when I ran the derivatives desk for JPMorgan in Tokyo in the late 1980s. Mosler was and remains unusually smart and articulate on financial markets. I\u2019m sure he is rolling his eyes at Dalio\u2019s warnings in all the spotlight his wealth garners. The US government is not like you and me, nor is it like Argentina with massive foreign debts. It cannot go bankrupt from dollar liabilities when it can print dollars. This does not mean there are no limits to deficits as Kelton explained nicely in the debate. <\/p>\n\n\n\n It turns out you can become a billionaire speculator based on your truly impressive capital allocation and risk management skills (a large, institutionalised poker game of tightly controlled positive expected outcome bets) without understanding as much as you think you do. You can also become the senior economist at the Heritage Foundation. You can even become the richest man in the world. But you can still lack the wisdom the times demand. <\/p>\n\n\n\n The second reason it matters, is that Trump\u2019s tariff war, regardless of what you think about \u201cunfair trade practices,\u201d appears increasingly likely to trigger a recession by the end of the year (JP Morgan now puts the probability at 60%, up from 20% before the trade war). The Federal Government\u2019s fiscal response will be critical to contain the bleeding and to mitigate the inevitable pain. This was the primary lesson of the Great Depression. And with the thinking of people like Moore, Dalio, and Musk influencing policy, the risks are high that a bad situation could spiral out of control. Moore\u2019s panacea of more growth at all costs to attack the deficit while at the same time scoffing at \u201cinvestments in windmills\u201d is beyond ignorant. It\u2019s suicidal. <\/p>\n\n\n\nA Modern Monetary Debate: Kelton vs. Moore <\/strong><\/h2>\n\n\n\n
Why the Deficit Narrative Persists <\/strong><\/h2>\n\n\n\n