For those that don't want to read this entire post, let's not bury the lead: MMT is wrong: - The U.S. does not have a spend and then tax system, we have a tax then spend system - The U.S. Treasury does not issue the U.S Dollar - The Fed does not issue reserves for the Treasury to spend - The Fed does not issue new reserves to pay the Gov's bills directly - The Gov cannot spend before receiving tax receipts or revenue from bond sales Below I explain in detail exactly why. Please let me know if you think I made any mistakes. After many, many hours of discussions with friends here and elsewhere, I think it’s finally becoming clear, I have finally gotten to the bottom of the MMT debate, so please let me know if you agree. We can have a tax and spend system, which many people believe we have today, and under a tax and spend system in 2024, the USG would have taxed roughly $5T and spent roughly $7T, showing a roughly $2T deficit, and the Gov would have had to borrow roughly $2T to cover the deficit spending. Or we can have a spend then tax system, which MMT believes we have today, and in 2024 the USG would have issued and spent $7T and taxed back $5T, showing a $2T deficit, as the USG spent $2T more than they received back in tax revenue. Two different systems that in practice don’t matter much until you have a deficit. Under a tax and spend model, to cover deficit spending the Gov has to borrow, because desired spending exceeds tax receipts. Under a spend first then tax back model, the Gov already spent the $, so the deficit is covered by issuing money, no borrowing or debt, the deficit is created because tax receipts are lower than currency issued and already spent, so all the money issued is not all taxed back. Which model we have is the heart of the MMT debate. A currency issuer always has a liability for the currency they issue, which means when they issue their currency they increase their Liabilities on their Balance Sheet, and when they receive their currency back as payment, they reduce their Liabilities. If they receive 100% of the currency they issued back as payment, their Liabilities go to zero and all currency is removed form circulation.

By nature I’m an optimist, yet I’m writing now about a nightmare and I hardly know how to title this Post. It’s an appaling nightmare, triggered by a ‘Long Read’ article from the Guardian. See https://www.theguardian.com/news/2026/aug/18/the-long-read-democracy-v-the-machine-digital-age-warnings-computer-history-technology I’ve always been interested in ‘What If?’ questions, in a positive or improving sense. But this ‘What If?’ goes the other way. What if humanity’s future is a new Slave Age, where say 10 million of the very wealthy are supported in opulent lifestyle by an host of AI-machines and robots - a host with capabilities that are fully the equal of 10 billion people, who are now superfluous. Of course I don’t believe this nightmare, yet I feel fear. Do the very rich TechBros, and their associates, think there could be a future in which they don’t need the rest of us? If fire and flood should consume most cities and towns, wouldn’t that just be an efficient way to reduce the surplus population? I never thought I’d see that phrase Charles Dickens gave to a fictional character in quite such a new light. The real nightmare is that this scanario doesn’t have to be true in order to happen. It only needs enough of the very rich to believe that it’s likely. A false dawn of machine slaves would, after an attempted dawning, be no comfort. And I’ve not been smoking or swallowing anything ‘interesting’.

The new conversation with Steve is LIVE right now 🔥 Energy is the blind spot almost every economic model still pretends does not exist. Steve walks through the 1-for-1 lock between energy and GDP, why AI may never scale the way the hype claims, and why he thinks the Hunger Games outcome is more likely than the optimistic one. This one has to be a must watch so watch it right now! Drop your take in the comments on YouTube and let’s get this in front of as many people as possible tonight.

Or rather it is according to Robert Reich, in his latest Post at https://robertreich.substack.com/p/an-open-letter-to-scott-bessent He presents much the same data-driven story about the US economy as Steve recently has done. For example - “According to Moody’s Analytics, the richest 10% of American earners — composed of households making about $250,000 a year or more — are driving a record 49.7% of total U.S. consumer spending, significantly boosting the economy through the wealth effect of higher stock and home prices. They own over 90% of the value of all shares of stock, so big gains in the stock market have encouraged them to splurge on everything from vacations to designer handbags. “The finances of the well-to-do have never been better, their spending never stronger and the economy never more dependent on that group,” says Mark Zandi, who oversaw the analysis, based on data from the Federal Reserve. Zandi says the K-shaped economy remains ‘firmly intact’.”. Reich concludes by hinting at a two-tier economy. The lower arm is driven by subsistence and the upper arm is driven by luxury. All growth comes from the upper arm. “Meanwhile, inflation and credit pressures continue to land especially hard on lower-income Americans. In that sense, the K-shaped economy is not just a feature of recent cycles. It’s become the defining characteristic of how today’s economy absorbs shocks and generates growth.”

The ideas of neoliberalism have dominated politics and the economy for about 50 years, leading most visibly to immense wealth for some of us and less wealth for most of us. However, I think history will name another and far longer-term effect as the most consequential - a retreat from the resilience that diversity supplies. I’m thinking of declining diversity in many senses - through monoculture in agriculture, through fossil fuels in energy sources, through ‘just-in-time’ manufacturing and through what I’ll call ‘mono-structural design’ in both the sourcing and supply of electricity and water. Neoliberalism with its forebears, without clear acknowledgement or debate, has increasingly put all of society’s metaphorical eggs in one basket. The downsides of reduced or missing resilience are obvious in a article about the flow of the Danube. See https://www.theguardian.com/news/ng-interactive/2026/aug/16/danube-drought-destroyed-crops-rock-of-starvation-climate-crisis. We’re leaving an era where money was what mattered - being valuable and relatively scarce - and where food, fuel and drink were taken for granted - being abundant and relatively cheap. In the coming era, it’s already clear that things will work the other way around.