Challenging My Retirement Assumptions

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Retirement planning requires making assumptions about the future. Our assumptions are typically shaped by the past. But sometimes things substantially and permanently change. When this happens, the future can look very different than the past. 

The Deficit Myth book cover

One such situation we’re currently witnessing is unprecedented levels of government spending in response to the economic challenges created by the Covid-19 pandemic.

Consider that in 2009, the $787 billion federal bailout package was considered extreme. Some economists thought a larger stimulus was necessary to address the financial crisis, but $1 trillion would produce sticker shock and not be politically feasible. How things have changed in twelve years!  

In less than a year, the CARES Act called for spending $2.2 trillion, the Consolidated Appropriations Act $920 billion more, and the American Rescue Plan yet another $1.9 trillion dollars!

Many people are worried about how this level of government debt will impact a variety of key variables for retirees. How will it impact the ability to pay for Social Security and Medicare benefits? How will this spending impact future inflation, market returns, and interest rates? 

Conservatives say we need to cut spending. Liberals say the spending is necessary, but we need higher taxes to pay for it.

Proponents of Modern Monetary Theory (MMT) think both viewpoints are wrong. I recently took some time to learn about this theory that challenged my own assumptions. Here’s what I learned and how I’m incorporating these ideas into my future planning.

6 Deficit Myths According to Modern Monetary Theory

Stephanie Kelton is an MMT proponent. She published the book The Deficit Myth last year. As such, the book is not specifically about the current spending in response to Covid-19. But the timing of the pandemic was impeccable for the book’s relevance.

Kelton lays out what she describes as six “myths” about the federal deficit and counters them with “reality” according to MMT. Some of these ideas seem bizarre at first glance because they are so counter to conventional wisdom about money, the economy, and the role of government spending. But after reading with an open mind, I see where a lot of the theory makes sense, even if I don’t ultimately agree with many of her conclusions.

Here are the 6 myths Kelton lays out as the basis of her arguments:

“Myth #1: The federal government should budget like a household.”

Kelton argues that because our federal government issues the currency it spends, it operates nothing like a household. The US federal government is also different from local and state governments and even other federal governments that do not maintain monetary sovereignty. Those entities all must pay back any debts they incur. Federal governments who maintain monetary sovereignty don’t.

She explains that maintaining monetary sovereignty requires the federal government:

  • Granting themselves the exclusive right to issue the currency,
  • Not promising to be able to convert their currency into something they could run out of (i.e. gold), and
  • Refraining from borrowing in a currency that isn’t their own.

This framework distinguishes countries that maintain monetary sovereignty, like the U.S. and Japan, from those that don’t. Examples of the latter include European Union countries that use the Euro and other countries that use the U.S. dollar or borrow in it rather than creating and using their own currency.

Under this framework, a government doesn’t need to tax to get the money it spends. It can just create more money at will.

The purposes of taxes under MMT then are not to supply the money needed for government spending. Instead, taxes serve to:

  1. Create ongoing demand for the currency the government creates,
  2. Provide the government implicit authority “without the explicit use of force,”
  3. Control inflation by cutting the ability of individuals to spend while allowing for government spending,
  4. Alter the distribution of wealth and income, and 
  5. Incentivize or discourage certain behaviors.

Kelton argues that free of the restraints of the gold standard, the US doesn’t have to operate its budget like that of a household. However, there are “real” constraints to spending. This leads to her second myth.

“Myth #2: Deficits are evidence of overspending.”

Kelton’s next point is that since our federal government doesn’t operate like a household, deficits are a poor indicator that the government is overspending. Instead, MMT looks to inflation as a sign of overspending. 

Inflation is the real constraint that limits how much the government can spend according to Kelton and other MMT proponents. If too much money is created, then the real production capacity for goods and services can be exceeded. When this happens, high inflation results and money becomes less valuable, or in the worst-case scenario of hyperinflation essentially worthless.

Traditionally, we relied more on central banks and monetary policy setting interest rates to drive the economy. Kelton argues that this works mainly by encouraging consumers to borrow and spend more, driving people into debt.

MMT encourages moving away from monetary policy. Instead, it places more emphasis on fiscal policy, taxing and spending, to drive the economy and control inflation.

“Myth #3 One way or another, we’re all on the hook (for the national debt).”

Kelton argues that “the national debt poses no financial burden whatsoever.” At first, this was really hard to wrap my head around. That is likely a result of the constant political debate around whether we need to cut spending or increase revenue (taxation) to get deficits under control and pay down debt.

Kelton reinforces the idea that the government doesn’t need to borrow at all. Instead, it chooses to offer treasuries, which are essentially a different form of money that pays interest. Eliminating the nation’s deficit spending means eliminating the US treasuries market.

Conventional thinking is that debt is sustainable if the economy’s growth rate is greater than the interest rate. Debt becomes unsustainable when the interest rate is greater than the growth rate. 

According to MMT, the government can manipulate the interest rate because it sets the terms by choosing to borrow at all. Thus, interest rates will always be lower than the growth rate.

“Myth #4: Government deficits crowd out private investment, making us poorer.”

Conventional thinking is that there is a fixed supply of money. Thus, the private sector and local governments are competing with the federal government for these limited resources. As federal government spending increases, interest rates must go higher. This crowds out private investment, making us poorer.

According to MMT, the exact opposite is true. The federal deficit is not a problem. Often, it is a good thing. This is because deficit spending increases our collective wealth and savings. Federal deficits only become a bad thing when so much money is added to the economy that we start to see inflation increase too rapidly.

“Myth #5: The trade deficit means America is losing.”

Kelton’s counter-argument is that America’s trade deficit is actually its “stuff” surplus. This argument had little relevance to changing my assumptions related to retirement planning. So we won’t dive any deeper into it here.

“Myth #6: ‘Entitlement’ programs like Social Security and Medicare are financially unsustainable. We can’t afford them anymore.”

Kelton’s response to this “myth” builds upon her earlier counterarguments to the other “myths.” She states that the reality is, “As long as the federal government commits to making the payments, it can always afford to support these programs. What matters is our economy’s long-run capacity to produce the real goods and services people will need.”

Planning Implications of Modern Monetary Theory

In the introduction to the book, Kelton states that she and other proponents of MMT think the federal deficit is not a problem. On the contrary, it is a good thing. She compares the shift in the way MMT frames deficit spending to the shift in thinking that occurred when Copernicus showed that the earth revolves around the sun and not the other way around, as it was previously believed.

I’m not recommending you fully embrace MMT and the conclusions Kelton’s book leads to. I haven’t. 

It is wise to continuously learn and challenge your assumptions. Try to gain a fuller understanding of the way the world works and see what you may be missing.

Here are a few key points that I took away from The Deficit Myth that will impact my thinking, assumptions, and planning going forward.

Money = Trust

Since the United States went off of the gold standard, the US dollar has become a fiat currency. As such, its value is derived by supply and demand, driven by the stability of and trust in the US federal government. Nothing else backs it up.

This is not news. Still, repeatedly reading how easy it is for the government to create essentially unlimited supplies of new money “with a few strokes of the keyboard” drove that point home and brought it front of mind.

According to MMT, this is simply reality. It’s nothing to be concerned with.

I disagree with that.

Seeing the loss of trust in our government, and the erosion of value placed on democratic processes, institutions, and traditions over the past couple of decades makes me realize how fragile the entire system is.

Gold bugs and crypto fanatics have been making this case for years, leading to the conclusion you should invest heavily in these asset classes. I do not agree with those viewpoints either. 

Our economy, and society with it, could collapse if people lose faith in our system that is backed up by nothing but trust. I’m not optimistic that having some gold coins in a safe or a hard drive with Bitcoin on it is going to do anyone much good if that happens. The currency will likely be the least of our concerns.

My alternative takeaway is to continue to de-emphasize the importance of money in my life. At the end of the day, money is nothing beyond what it can buy. Yet we often waste years or even decades of our lives in the pursuit of more of it because we place far too much value on it and the security, control, status, or power we think it provides.

Faster Economic Cycles

One of the ideas endorsed by MMT is to emphasize fiscal policy (taxing and spending) over monetary policy (interest rates) to drive the economy and limit the impact of economic downturns.

Whether you agree or disagree with the idea, it’s hard to miss how prevalent this viewpoint has become or deny the impact it has had recently. After a near-collapse of the financial system in 2008-2009, then record economic stimulus packages helped the S&P 500 surpass previous highs in just a few years.

Related: The Next Bear Market — How Bad Could It Get?

Even more federal deficit spending, put directly into the hands of citizens, seems to have had an even greater impact over the past year. The stock market and select segments of the economy (housing, building supplies, recreational equipment, online vendors) boomed, even as the pandemic raged on. It is hard to imagine putting this cat back in the bag now that it’s out. 

I won’t make any immediate changes in my investment strategy based on this assumption, but the possibilities of having faster economic recoveries and receiving direct payments from the government during economic downturns could substantially decrease the sequence of returns risk that retirees rightfully worry about.

Related: Mitigating Sequence of Returns Risk

If we see this pattern of faster economic cycles continuing, it may also be a case for changing your policy for rebalancing a portfolio. Rebalancing when assets exceed a threshold away from your target allocation may become more advantageous than periodic rebalancing. The latter may be too slow to capture the rebalancing benefits if economic cycles occur more rapidly.

Related: Is It Time to Rebalance Your Portfolio?

Emphasis on Tax Diversification

With MMT’s emphasis on fiscal policy, there is a flip side to increased government spending to limit the impact of economic downturns. That is increased taxation to take dollars back out of the economy when it gets overheated to control inflation.

The potential for more variable tax rates from year to year if MMT becomes more dominant doesn’t change my financial strategies. It does reinforce the idea that having diversification among different tax-advantaged and taxable accounts is a good idea. 

Years when temporary tax breaks are offered, such as the suspension of the ACA subsidy cliff in 2021 and 2022, may create great opportunities to recognize more taxable income from tax-deferred accounts at favorable rates. This can be accomplished by spending from those accounts directly or doing Roth IRA conversions.

Conversely, in years when taxes are inevitably higher, it could be more advantageous to contribute to tax-deductible accounts or in retirement spend from more tax-friendly Roth or taxable accounts to limit your personal tax burden.

Related: Early Retirement Tax Planning 101

Returning to “Normal” Interest Rates

When I started managing our household investments about 10 years ago, interest rates were well below “normal.” The ten-year treasury rate was about 2% in early 2012, about half its historical average.

Many people smarter than me were predicting that rates “had to” go up. So I assumed the same thing. In the decade since then, rates have not gone above 3%. They bottomed out around .6% last July.

The assumption that interest rates have to go up may have been faulty under any circumstances. One MMT principle written about by Kelton is keeping interest rates low and stable to promote global economic tranquility. As MMT economists gain influence, this may be another factor making interest rates that are low by historical standards the new normal, at least for the foreseeable future.

Related: Retiring With Extreme Low Interest Rates

Seeing a Plausible Path Forward for Social Programs

Last year I took time to seriously consider how Social Security could impact our early retirement plans. Prior to that, I bought into the gloom and doom around how this program would be funded into the future. We didn’t factor Social Security into our projections.

MMT offers a different viewpoint. It presents a plausible path that we will receive full Social Security benefits when the time comes.

This alternative viewpoint does offer some reason for optimism about this important retirement benefit. It also serves as a reminder to remain humble in our ability to predict the future. There are many things we simply can’t know or control about the future.

Ultimately, I won’t substantially change our assumptions and plans based on MMT. I would rather be prepared for the worst-case scenario and be pleasantly surprised than plan for a best-case scenario and get stuck dealing with anything less. Still, if the MMT outlook is correct, it could create considerable upside for those of us who plan conservatively.

Related: How Does Retiring Early Impact Social Security Benefits?


The Deficit Myth was a challenging, but enlightening read. For all of the time and energy I’ve spent learning about personal finance and thinking about money, it was humbling to realize how much faith I blindly put into our financial system that I never took the time to fully understand.

This book challenged me to question things that I “knew,” broaden my horizons, and consider different alternatives. I don’t agree with many of MMT’s ideas and won’t drastically alter anything I do after reading The Deficit Myth. But it is always good to consider different viewpoints, particularly when they prompt you to ask better questions and consider possibilities you may not fully understand or would otherwise overlook.

Have you taken the time to learn about Modern Monetary Theory? Has it impacted anything you are doing to prepare for your retirement? Share your comments below. 

Please keep your comments focused on how MMT impacts your planning decisions so that we can all learn from one another. Avoid divisive political name calling and ideological rants. There are many places on the internet for that. This is not one. I reserve the right to edit or delete comments that do not comply with this request. Thank you!

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[Chris Mamula used principles of traditional retirement planning, combined with creative lifestyle design, to retire from a career as a physical therapist at age 41. After poor experiences with the financial industry early in his professional life, he educated himself on investing and tax planning. After achieving financial independence, Chris began writing about wealth building, DIY investing, financial planning, early retirement, and lifestyle design at Can I Retire Yet? He is also the primary author of the book Choose FI: Your Blueprint to Financial Independence. Chris also does financial planning with individuals and couples at Abundo Wealth, a low-cost, advice-only financial planning firm with the mission of making quality financial advice available to populations for whom it was previously inaccessible. Chris has been featured on MarketWatch, Morningstar, U.S. News & World Report, and Business Insider. He has spoken at events including the Bogleheads and the American Institute of Certified Public Accountants annual conferences. Blog inquiries can be sent to Financial planning inquiries can be sent to]

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  1. What’s the impact of debt -servicing- on federal government budgets? Until MMT can explain that, I’ll persist in believing that growing deficits are likely to lead to inflation, either because government prints more money, or because there’s growing competition for capital, which gets expressed in increased prices.

    1. David,

      I agree that it’s hard for me to wrap my head around how measures of inflation remain so low when prices for housing, health care, building supplies, automobiles, etc. that we all rely on are going through the roof as people are spending all of the newly printed money. Again, I’m not drastically changing anything in my planning at this point, but it is interesting to learn about an alternative way of thinking about all of this as we watch how things unfold. Time will tell.


      1. I stopped reading after the 1st myth seeing both the US and Japan in the same sentence. Is she saying that it’s OK to follow Japan’s example now? If so, how’s Japan doing anyway? Of course, the events that crippled Japan’s might could be totally different, but knowing the fact that it’s not doing well makes me concerned. I think I need now extra effort to open my mind to continue reading the rest. I’ll come back later.

        1. S&M, The point is not that Japan is doing so wonderfully, but that it is not experiencing significant inflation. It used to be “common knowledge” that you could not run giant deficits without runaway inflation. Japan has proved that this economic model does not reflect the real world.

          The real story is that we now have a number of competing economic theories, none of which has
          1. consensus
          2. a good match with the economic history of the last twenty years

          1. I recently listened to a podcast where the economist pointed out one serious issue with MMT – that no one knows where the point of runaway inflation is. In order for us to find that point, we’ll end up going beyond it… And by then it might be too late to avoid ab epic meltdown. 🙁

          2. This is an interesting point Wishful Thinker. As noted above, I wonder myself if we haven’t pushed too far seeing prices of homes, used cars, building supplies, etc. skyrocketing and living in an outdoor town where you can’t even buy a bike because there is so much demand that supply chains can’t keep up even though the economy is supposedly doing poorly and there is talk of yet more stimulus money being spent and pumped into the economy.


          3. Robb,

            You summed up my thoughts perfectly. First off, this theory represents a radically different way of thinking that hasn’t been fully tested under real world circumstances. But there are parts to it that make a lot of sense and that are already in place. Second, extrapolating MMT leads to conclusions, at least in ‘the Deficit Myth’ book, that we can take the theory to extremes that even if we can do them need to be rigorously debated before deciding that we should do them.


            Re: Japan. There are parts to their recent history that should be closely paid attention to. Other parts of the Japan story are quite different than the US, including geography, population size and demographics, etc rendering it an imperfect at best comparison to the US.

            Thanks to you both for chiming in with thoughtful comments.


  2. It would appear that every fundamental concept us baby-boomers were living by for so many years is now being challenged. MMT has got to be fundamentally flawed; if only for the concept that the government can print money wildly. The dollar will eventually be devalued driving inflation, impacting our trade deficit and lead to higher taxes. In my simple mind I cannot see a silver lining. I could go on about how we gave away our middleclass manufacturing jobs to Mexico and China, etc. and how we convinced the population that 2-incomes are better for society, while our younger generation suffered. Not to mention with 2-incomes housing prices soared sucking up that 2nd income (don’t forget the higher tax bracket, child care costs, etc. that went with it). My point is we have strayed from fundamental values and MMT is just another elitist, academic ploy on society. I just retired and I am fearful of the country my now grown children will be living in.

    1. Robert,

      I can’t disagree with any of your fundamental points about drifting from values that the US was built upon, some of which had undeniably negative impacts on society, particularly economic impacts to our middle class and manufacturing sectors.

      Whether it is “elitist” and an “academic ploy” remains to be seen. It does seem that a lot of influential thinkers with many followers are trying to push us in that direction, so time may tell.


    2. Robert -Please show me where in The Deficit Myth did Kelton wrote that “the government can print money wildly”?

      1. Dave,

        In fairness, Kelton writes many times in the book that they don’t even have to bother printing money, but that they can create it with a few strokes of the keyboard.


        1. Chris – Yes of course Kelton wrote that many times in her book.

          I was quoting Robert A Groden’s post directly. It was his phrase and it is nowhere to be found in Kelton’s book or in anything I’ve ever read about MMT.

          It seems to me that if one read TDM, they would not post that money is “printed”.

          Nor would a reader of TDM use the word “wildly” to describe what the MMT economists suggest would be responsible monetary policy.

  3. Thanks very much for this exceptionally thoughtful and timely post Chris! I so admire your willingness to question your own assumptions, and certainly MMT makes me question my own.

    While I don’t dispute many of the key MMT claims as you point out we’re in the midst of an epic battle to see who (if anyone) is going to pay for all of this spending. One wouldn’t think that moving tax rates for the wealthy towards back where they were under Reagan would be as unthinkable as it is, but in reality I suspect the current administration’s attempts to move them far more modestly – towards Clinton admin. levels – may well come to naught.

    You mentioned gold briefly and I wanted to share this piece on it – written not by a gold bug but rather by the head of one of the better DFA fund financial advisory firms – not at all to recommend gold as an investment but because the piece does such a great job of concisely chronicling its history relative to our own fiat currency. MMT doesn’t take into account that all fiat currencies tend to come to an end, and that epic debasement of them (40% of all of the U.S. dollars ever printed were printed last year) spurs flight to real assets while raising the specter of inflation that no amount of government manipulation of statistics can contain or disguise.

    No wonder that so many are concluding that real estate of all kinds – financed at low interest rates and perhaps using a non-recourse loan so as to be able to walk away at will – is far more appealing than investing in absurdly overvalued equities or bonds paying nothing all denominated in a currency that the powers-that-be feel free to limitlessly debase.

    1. Thanks for sharing Kevin. Your resources are always interesting and thought provoking. I’ve printed it out and will give it a read.


  4. Good post Chris – I appreciate you taking the time to thoughtfully dive into MMT. I was listening to a pod recently which made the case that we are in uncharted waters now – we don’t know what the limit is for supporting the economy, but per above – I don’t think there is any “free lunch” and if we hit a tipping point it could end badly with high inflation….we shall see. I’ll dive into it – maybe we do a pod on this to discuss MMT with the author.

    1. Steve,

      If you could get her on the podcast, I think it would be fascinating to discuss the intersection of MMT and how it impacts retirement income, social programs, etc.


        1. Thanks for sharing that Ian. I’ve never heard her and think it would be interesting. Did the interviewer challenge the ideas/theories of MMT?

          Update: Ian, I gave that podcast a listen. It was a great interview, if unfortunately too short, and an excellent analysis and framework for thinking about all of this after the interview was over. I highly recommend it!

  5. Excellent post. Thanks, Chris. I might well read the book.

    One thing I don’t worry about is Social Security. There are too many factors in support of protecting the most popular federal program, and your review above adds more. I semi-retired at 54 but the numbers would have kept me on the treadmill for years longer if we ignored the $70-$80K that will be coming online through SS when we are 67-70. SS experts say the very worst case scenario if the government does not lift a single finger to shore up SS is up to a 27% cut in benefits in the early 2030s. I can survive that just fine. Cheers.

    1. Markola,

      I tend to agree with the idea that they’ll find a way to keep paying benefits until they absolutely can’t. The person/party that decides not to will be committing political suicide given the popularity of the program.


  6. Sure seems like a lot of recency bias in MMT. See, we’ve done stuff that people always said was crazy and it hasn’t exploded, yet.

    As with many financial theories, it looks wonderful until the day it doesn’t. My only question is, when it does eventually blow up, what will the supporters say then? “Oops! Sorry about that!” or “I never said that!” Any accountability if they turn out wrong? Silly me, of course not.

    We are pretty sure that treating government finance like household finance works. It seems like a pretty safe bet. MMT may work out just fine, but the evidence of long term success seems a bit thin. The life of the proverbial turkey looks pretty good too. Right up until Thanksgiving… There is a long list of governments that have debased their currency though. All of them, ever? They all had a really good excuse for it. Is MMT just the latest excuse?

    1. Steven,

      I agree with you there. I thought a lot about the idea that inflation is a better marker of overspending than measuring the deficit or debt. But those are absolute and real numbers.

      I initially thought about how low reported inflation currently is. Yet look at sectors of the economy like housing which are going through the roof and are one of the biggest household expenses and thus determinants of quality of life. Is this an indication that inflation measures aren’t valid? Is inflation too slow of an indicator that we need to change course and they can’t tell us that this spending was too much until inflation is already out of control? I agree that there is a lot that we don’t know.

      The question in my mind is how do we deal with the imperfect information that we have. As for me, I’m not drastically changing course on anything, but I think it’s important to continue to learn the theory, observe what’s happening and, not get too complacent in our thinking or overly confident in our assumptions.


  7. Thanks for the interesting and thoughtful post. I understand very little of economics, and especially of MMT, so the following may be a dumb question, but here goes: would broad adoption of cryptocurrencies and blockchain technology have an effect on the government’s control of the currency and of the economy?

    1. Sharon,

      That’s not a dumb question at all. That’s what a lot of people are proposing. Here are just a few reasons why that’s going to be challenging any time in the near future IMHO.

      -Cryptocurrencies are supposedly rare and finite. But which one is going to replace the dollar. Is Bitcoin going to be the new accepted currency? Or Etherium? Or one of the 100’s of others? Or will there by multiple currencies? And how will we agree on their absolute or relative values? No one knows.
      -They’re complicated. Because they’re decentralized and not traceable, you have storage and security issues. Some people store their tokens on hard drives for more security. But what if the drive is stolen, is lost in a fire, etc. A few months ago I shared the story of an early investor whose small Bitcoin investment is now worth millions of dollars. But he can’t access it b/c he lost his password. Others store tokens in online “wallets”. But there the crypto is vulnerable to hackers. And if your money is stolen would you prefer FDIC insured bank accounts, brokerage accounts backed by a Vanguard or a Schwab and their SIPC insurance, or something decentralized and potentially untraceable with no hope of being made whole? And to be clear, people currently dealing with these issues are mostly intelligent, educated, technologically savvy people who are early adopters. How will this technology be adopted by all the people who do not fit that description? Bottom line, crypto has a long was to go and there are many things to figure out.
      -Finally, if all of those issues are resolved, do you believe that governments with an immense interest in the status quo are going to just sit back and let cryptocurrencies take over that role from them? There would have to be many massive changes for that to happen. As I stated in the article, the events that get us there are scary unless it happens very slowly and gradually. If something happens where the financial system fails quickly, we likely have much bigger problems on our hands than our investment strategies.

      Hopefully that helps clarify some concerns. I appreciate your question.


  8. I am 73 years old and have heard many economic theories in my lifetime. The one statement that tends to dwell in my mind each time I hear a new economic theory is “It is different this time.” Of course it is not “different” this time or any other time and we will all have to suffer the consequences.

    1. Sherman,

      Nothing is ever exactly the same, but I agree that basic fundamental principles tend to be constant over time. Many of the principles outlined about MMT are indisputable since we’ve had a fiat currency since going off of the gold standard. How it plays out over time remains to be seen.


  9. After reading this, I am quite concerned about inflation. Also, the question of taxes. Really, inflation in of itself is a tax, as it minimizes purchasing power. Any sane person knows that “the wealthy” aren’t going to pay “their fair share” as most politicians propose. They employ a whole cadre of professional money people to make sure that they avoid that. The burden of the MMT experiment will fall on the tax-paying middle class.

    At some point, this experiment will not end well. I keep some banknotes from the Reserve Bank of Zimbabwe on my desk, just to remind me that yes, indeed, the entire system is built on trust. BTW, the lowest denomination is Ten Trillion Dollars! Watch the news tonight and LMK how the level of trust in our government is going…

    1. Greg,

      In a way, inflation is the most fair tax because you can’t avoid or evade it. All of our dollars are devalued. That said, I’m not making an argument for why any of us should hope for inflation. It is very punishing to savers that include me and virtually everyone in this audience. Particularly crushing would be a combination of inflation + low interest rates which would destroy the purchasing power of your savings.


  10. I’ve long thought taxes were a good motivator for change. Tax what you don’t like and minimize regulation on what you want to improve and grow. So, the fed can manipulate the money supply for the endless effort to manage the economy, and lawmakers can work the tax and adjust the regulation side to manipulate the private sector.

    The MMT theory of printing money is not reality. Based on the false dichotomy of our financial institutions. Google “ MMT” and read a few more excellent reviews of the theory.

    1. Forrest,

      I tend to disagree with you and I struggled to read the MMT reasons for taxation that are different than what is the commonly accepted reason, to pay for government spending. In theory, incentivizing good behaviors and disincentivizing bad sounds good. So does decreasing wealth inequality. But take a step back and look at how that works in reality.

      Look at our retirement savings system b/c it is extremely relevant and familiar to most blog readers. Instead of a logical and fair system that benefits citizens by helping them save for retirement, we have a mashup of confusing rules that unfairly allows some people to defer hundreds of thousands of dollars of income in a year while others have only an IRA with a limit of $6k/year. And instead of having the freedom to chose the best investment for your retirement, you are often stuck with fee laden products that are in your employers plan b/c the finance industry has such a great influence over the laws.

      And who ultimately decides what we “don’t like” and what we want to “grow and improve.” People have very different views, and when you take money in taxes and spend it on things the people you take it from don’t agree with, it is inevitably going to create resentments in even the best case scenarios. Throw in all of the dishonesty, power plays and corruption that is inevitable in a system as large as the US government and this idea is challenging at best.

      That is one of many challenging issues I was thinking about as I learned more about this theory.


  11. Chris, I just need to thank you, again, for the time, effort and detail you put into your well-researched, well-written and thought-provoking posts. I find that, no matter what topic you cover, I appreciate your consistently, your honesty and your willingness to look at an issue from all sides.

    Kevin mentioned above the current appeal in moving toward real estate. Interestingly, we are moving away from real estate – at least real estate that generates rental income. We’re finding that landlord-tenant law (pre-COVID) is evolving in a way that better protects tenants against slumlords, but hamstrings good landlords in dealing with deadbeat or objectionable tenants. It’s a frustrating situation with painful financial impacts. My advice to anyone interested in using real estate as rental property? Take a good look into your state’s landlord-tenant laws to see if you can live with them before you leap.

    1. Mary, same assessment and situation here. BTW, maybe a good topic for CIRY blog? “The Capital Market Line”. Our financial decision making all interrelated. Low bonds = high stock prices, high stock prices = high real estate values and supply.

    2. Thanks for the kind words Mary.

      That’s an interesting perspective on real estate. I appreciate you sharing your honest experience, as many people (including me) are thinking about it as a way to produce more income from our investments with dividend yields and interest rates so low. It is definitely good to go in with eyes wide open.


  12. Thanks for the post, I think I’ll go read this. What I have been thinking about more seriously in addition to interest rates, deficit spending, taxes is the role of Cryptocurrency in my portfolio mix. As a technology, I see the real business value in Etherium for smart contracts, and Blockchain in general but the real wildcard in the next 20 years for me is the impact of decentralized finance on the broader economic system. What happens if the Dollar loses its standing as the world currency? China aggressively mining bitcoin makes me wonder about risk there. How will that impact my stock investments, bonds, long term cash flow? Will my shortterm spending account one day be a store of some cryptocurrency rather than the dollar. will I one day be paying my bills in Crypto? These are the things that keep me up at night.I spoke to a friend who I admire for their investing knowledge and he shared with me that he has a 4 year crypto investing plan, currently with $500k in crypto, about 40% of his portfolio. That really got me thinking about my exposure or lack of in the Crypto space. If feels like such a volitile space which has heldme back, but Im wondering more and more about taking it more seriously as part of a long term position in my portfolio. I think you’ve writen about Crypto in the past so I’ll go take a look at past arcticles.

    1. Wade,

      I’d be curious to hear what you learn. My position is that crypto is a fascinating technology that I want to learn more about, but I have no interest in it as an asset class/investment at this point in time.

      Thanks for reading and leaving the thoughtful comment.


  13. I’ve read The Deficit Myth several times, including as part of a couple book discussion groups (one local the other national (moderated by financial planner Carolyn McClanahan, MD, CFP).

    One reality that Kelton’s The Deficit Myth made clear to me is that federal budget deficits are ALWAYS good for someone.

    The Tax Cut and Jobs Act of 2017 generated a projected deficit of about $1.9 trillion—mostly benefiting large corporations and the top say 5% of income earners.

    By contrast, the deficits that resulted from the CARES Act, also about $1.9 trillion benefited a very different segment of the population in the US.

    Federal budget deficits are ALWAYS good for someone. Period.

    Also, consider this from Chapter Six – You’re Entitled of TDM:

    “According to the 2019 report, the OASI trust fund will be exhausted in 2034, DI will run out of money in 2052, and the HI fund will be depleted by 2026. Unless something changes, these programs will cease to be authorized to pay full benefits. But there’s one trust fund that isn’t troubled: SMI (aka Medicare Parts B and D). Why is this one healthy while the others are projected to run out of money? The answer is simple: SMI has the legal authority to pay full benefits if the trust funds are ever exhausted, and the others don’t. ‘For SMI, the Trustees project that both Part B and Part D will remain adequately financed into the indefinite future because current law provides financing.’” (27)

    Footnotes 26 and 27 are “Social Security and Medicare Boards of Trustees, “A Summary of the 2019 Annual Reports: A Message to the Public,” US Social Security Administration,

    Should the Part B and Part D trust fund run out of money, Congress can get the money needed to pay benefits that are entitled under Part B and Part D from general revenue, which Kelton and MMT would argue could simply be by Congressional action (no need to raise taxes or borrow money).

    For Kelton and MMT, the constraint to “printing more money” is INFLATION. Period. Kelton makes this point over and over and over in TDM.


    Does fiscal policy or a shortage of single family homes cause housing prices to increase (supply and demand)?

    Do drug prices rise because of fiscal policy or do they rise because Big Pharma has pricing power?

    Does fiscal policy explain inflation in the cost of going to college?

    For Kelton and MMT, deficits (that don’t cause inflation) “matter” because they always benefit someone. In this light, deficits are not just political and economic issues; they are also social issues. The lens of MMT “works” if a deficit is used to build 3 more aircraft carriers or if a deficit is used to provide broadband Internet service nationwide, repairs bridges and addresses child care.

    Today, there is both significant income inequality and significant wealth inequality in the US. What is the social virtue of the deficit created by the Tax Cut and Jobs Act (which deepened inequality) compared and contrasted with the social virtue of the deficit created by the CARES Act?

    1. Dave,

      I think I made the inflation point pretty clear in the blog post. And I agree with Kelton and, if I’m reading your tone correctly, you in that deficits are always good for someone. The problem is our country is deeply divided over who that someone should be. Who gets to define what is good and bad spending? Saying that we could spend the money on aircraft carriers or child care is a straw man argument. The money doesn’t have to be spent at all. When you take money in the form of taxes and spend it on something that some people don’t think you should spend it on, then that person/party is going to be unhappy and feel aggrieved. Always. So the fundamental question to ask is not whether we should spend money on causes that the right or the left favor, but what is the fundamental role of government and whether we should be spending the money at all IMO.

      I let your comment go b/c you are clearly knowledgable on the topic and I think you added depth and thus value to the conversation, but this is where things drift away from the topic of planning for retirement (i.e. dealing with things as they are or may be) and towards the topic of politics (i.e. how they should be). Unfortunately, those conversations quickly spiral away from what I want to spend my time moderating, thus the request at the end of the post. As an example of the difference with and w/o this policy just see the response to my post about the most recent stimulus and its impact on health insurance for early retirees here and the syndicated version of it on MarketWatch where that request was taken out and the comments are not tightly moderated.


      1. Thanks for your reply, Chris. And for monitoring posts. Your post very much made the inflation point, as you did an excellent review of Kelton’s book.

        Where I see TDM and MMT’s lens impacting retirement planning is with regard to Social Security and Medicare viability. Congress could “solve” the Social Security Trust Fund solvency issue and the Medicare Part A Trust Fund issue by passing a law like they have for Parts B and D for Medicare.

        I totally agree with you that the fundamental issue (that Kelton elevates in TDM) is, as you write, what is the role of the federal government? When it comes to fiscal policy, the role of the federal government is determined by Congress.

        She also makes the case that we don’t “take money in the form of taxes and spend it on something.” In Kelton and MMT’s lens, (TAB)S (Tax and Borrow before Spending) is not how it works for a currency issuer. Rather for a currency issuer, it’s S(TAB) Spend before Tax and Borrowing.

        I think you and I would also agree that TDM is a book well worth reading.

  14. MMT’s ascension to me is a byproduct of the collective citizenry wanting everything but being unwilling to pay for it. Faced with these counter trends, politicians do our bidding. All is fine until it isn’t.

    It’s good that we “borrow” in our own currency, mostly from ourselves. I also think long term inflation, call it inflation-10 (like PE10) is a good measurement of our ability to continue on the same path. Eventually that will rise and we will need to come up with something else.

    Until then, party on Wayne! We might be all too conservative with this 4% rule stuff. 😉

  15. Do these MMT geniuses conveniently ignore the elephant in the room – Japan? Japan has the highest debt/GDP ratio in the world. Their economy has stagnated for 25+ years because of this. I would love to hear their “explanation” – or do they just ignore it since it doesn’t fit their narrative?

    1. I honestly don’t know John. In the book, Kelton holds up Japan as an example of a country that has maintained monetary sovereignty, which I suppose could be read as an endorsement of what they’ve done/are doing.

      Kelton certainly doesn’t see a problem with very low interest rates, which IMO are extremely punishing to savers.

      I would advise giving the book a read as a jumping off point to better understanding MMT. Whether we agree with MMT or not, it is being endorsed by many influential economists who have a lot of sway with the political elite. Together they will be developing the policy that we all live with.

      The policy of this blog is to do our best to understand the world as it is and help people make the best decisions possible within that framework. That doesn’t mean we don’t have opinions, just that it is my desire to not let this blog and the comments section of it to turn into yet another place on the web where people pontificate about how we think the world should be.


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