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

In The Deficit Myth, Kelton establishes that the federal government’s role as the monopoly issuer of currency fundamentally transforms how public spending should be understood: Rather than being constrained by revenue like a household, the government’s unique position as currency issuer enables it to spend first and tax later, challenging traditional notions of fiscal responsibility and public finance.

Kelton argues that the government’s exclusive authority to issue currency represents a constitutional power that sets it apart from all other economic actors. As she notes, “The US Constitution grants the Federal Government the exclusive right to issue the currency” (35). This monopoly over currency creation means that unlike households, businesses, or state governments, the federal government cannot face genuine financial constraints. The author reinforces this point by explaining that attempting to create US dollars without authority would constitute counterfeiting, emphasizing that “maybe with high-tech engraving equipment, you could set up shop in your basement and produce something that looks very much like the US dollar… but we both know you’ll end up in an orange jumpsuit if you get caught trying to counterfeit the currency” (35).

This unique power manifests in how the government actually conducts its spending operations.