I met this man but once, maybe forty years ago, but once was enough. He and I sat next to each other at a fancy luncheon in Billings, Montana. At that time I was employed by a woman who was, by means of inheritance, very wealthy, so it was not unusual that I would be seated beside the president of a local bank.
First, Jim was a nice man. At the time I met him he was probably early 50s, as he died in 2025 at age 93. That would make him perhaps 54 at the time, me 35. He was well liked in the community, and if anyone not knowing him takes time to read his obit, he was well loved by kids, grandkids, and was married to the same woman for 72 years. He was a good man and had a life well-lived.
But enough about that. God rest his soul. I only sat next to him for a couple of hours one day forty years ago, and it stuck with me. Why? Perhaps out of the blue, perhaps for some unremembered reason of passing conversation, Jim took time to explain to me war bonds that were issued during World War II. He said, to my young and curious ears, that the money they raised from those bonds was not used to pay for the war. That was just the selling point to get the public to go along.
The money, he said, needed to come out of circulation, as there were shortages of goods everywhere with so much of the economy devoted to the war. There was not enough goods to buy, so to ease the inflationary pressure of too much money chasing too few goods, they reduced the money supply, selling War Bonds on every street corner, at every place of employment.
My words, not his, but I do capture the essence.
Later, maybe just in the last five years, I came better to understand what Jim was talking about. He, as a banker, had an understanding of how the money system works far superior to anyone around him, including business moguls. The rest of this short post is me, not Jim speaking.
There was great consternation in our nation’s history over having a central bank. Finally, after considerable manipulation, of which a Panic in 1907 was probably part, a Central Bank was installed in 1913. Other reforms were also done around that time, like direct election of senators and allowing women the voting franchise, meaning that they alongside men could cast meaningless ballots and imagine they had a say in governance.
But the Central Bank was the major reform with the deepest and most lasting impact. Because the US now had a central bank, the US could engage in foreign wars, financed of course by the Central Bank. How? By printing money, of course. There’s a myth floating around that after World Wars I and II, the US paid off its national debt arising therefrom. Maybe that’s official history (for all I know). But why would they? There was no need.
There is a mechanism whereby the Federal Reserve finances deficits, and that debt is added to our national debt, said at this moment to be $37.25 trillion, or $37,250,000,000,000 dollars. There is often expressed great consternation that we have to pay this down, that it will be our undoing!
Not to worry. It’s a real number, a record of all the borrowing that has gone on over time so that the Federal Government can run deficits, and the economy can keep on churning along, against all reason and logic. Had I the power, I could take a gold coin and walk over to the Fed and announce that I was paying off the debt. If they accepted it, that would end it. There would be no more national debt. And nothing in our lives would change.
There’s a good book on this subject by Professor Stephanie Kelton of Stony Brook College called The Deficit Myth. I read it a few years back, and without total recall, cannot tell you how far back what is now called “Modern Monetary Theory (MMT)” goes, but having had lunch with Jim that day, I can assure you it was a part of our banking system and economy during World War II, and most likely back to 1913.
Why is it kept secret? Many secrets are kept for propaganda purposes, fake bombings and mass shootings, for example, to maintain a State of Fear. But MMT is different. It has to be a secret! If well known, if well understood and taught in our schools, people would be blasé about debt and deficits and national debt. Worse, they would make demands, reasonable demands on a wealthy country, for things like public financing of higher education and Single Payer health care.
As it stands, politicians can avoid those issues by claiming that we cannot afford the programs, that they would add to the deficit. So MMT, while an undisclosed reality behind closed doors, is a closely guarded secret. Better the public suffer myths than come to understand reality.
By the way, taxes, people are taught to believe, are used to pay for government programs. It’s quite a juggling act they do, but no, taxes do not pay bills. They do keep track, and I will file and pay my taxes next year, like every year. I do so because I don’t want to be penalized, have my assets seized, or lose my savings.
However, taxes do not pay government bills. The money we send in is accounted for, as the myth must be maintained at all costs, as with things like the Social Security Trust Fund.** It is belief in our system that keeps us running until the house of cards collapses. (I was told in the 1970s and 80s that collapse was imminent, but it somehow never comes about.)
MMT requires that there be a proper amount of money supply, and that supply is adjusted by removal of a percentage by means of taxation. Money taxed away merely evaporates, but not officially. Did anyone else note that during Covid, when people were sitting home and the government was sending out free money to people, that not too long after we had a major bout of inflation?
Are the two, free money and inflation, connected? Yes, absolutely. Inflation was the little lamb that followed Mary, free money.
Anyway, I tip my hat to Jim Bennett and a life well lived. I am someone he long lost memory of, just a little guy, but I imagined his influence was felt widely. He surely impacted others the way he did me.
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**There is no Trust Fund, but its existence and the imminence of Social Security going broke are used to keep us seniors from having too much disposable income. Social Security is always in jeopardy of going broke, always, we are told. But there is no danger there. Never was.
Piece of Mindful 
Mark, very good column. You explain MMT in a way that is comprehensible. I have always devoted very little time in my life to studying economics, it truly is the dismal science.
Based on my very limited understanding of taxes, and the federal government, is that income taxes are not necessary and pay for nothing. As your readers likely know income tax was not allowed until the early 20th century in the USA. And then there are very strong suspicions that that amendment was bullshit passed by the states – it was rigged to pass, and unlikely it was even formally approved by the required number of states.
My father is a bright man at 82, and has worked for HR Block part time for 20+ years in his retirement. He has some sort of official government tax agent status in doing that, so he takes it way too seriously. Yet he is a conservative, fiscally so to speak, and tends to dislike big government and spending, such as “new green deal bullshit” which I have got him to agree is a scam. We got in a discussion/argument where I threw out the concept federal taxes are not necessary. His retort was they need to pay for national defense. My reply was we would be better off with non-professional militias for homeland defense, and moreover the federal government has massive resources to “pay” for things it needs. For example tariffs, and leasing the rights for mineral extraction on any land. Or the vast forests and lands the federal government owns, they clearly produce massive revenue on their own, so the government should be self -sustaining by any logical argument.
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The key is “sovereign currency issuer” vs “currency users.” Local and state governments really do need taxes to operate, and genuinely have to pay off bonds when they borrow. So do the countries of Europe, which gave up their monetary sovereignty to the EU.
The federal government uses taxes for other purposes, such as keeping people from accumulating wealth, removing demand from the consumer economy (and financial bubble/ investment economy I guess), and to maintain the value of fiat money – it’s required to pay taxes, so you can’t trade in some alternate currency of your own.
Federal borrowing is real in terms of issuing treasuries to savers and excess holders – the dollar is the world’s reserve currency and obligated to serve this role – but backed ultimately by “money printing” – it intentionally obscures the printing the same way collecting taxes does.
The limit on printing is real resources available, and real labor pool, including people who would come into the market or take more work if suddenly their skills were in hot demand. Ie slack. For example a wartime economy booms because suddenly the government is printing all this money, throwing it at people. And then postwar people are spending all that cash, creating a booming consumer economy. But it’s the same people and resources in a depression, it’s just in the latter they’re underutilized, or underemployed. Anyway you can print too much relative to the real wealth of the nation, but probably mostly only if that’s your evil plan, lol, since they study it all extensively. Or at least MMTers do..
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Moreover, the idea that the USA, this massive superpower, would/will eventually genuflect at the knee of the lenders for our debt, said to be now the Chinese buying up our debt. For that I say gimme a break, why not just tell them to F-off with their demands for repayment. If they were stupid enough to give us money that’s their problem, why pay it? The USA still has the biggest economy in the world, which is still ruled by dollars last I checked.
And a few columns back Mark you suggested the world was run by genociders/depopulation freaks. As I suggested it’s still money that drives 99% of human activity. As the controllers want it. I still don’t know anyone not motivated by money, which I see as a Masonic Money Monopoly – to play in their world, you must play by their rules.
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I don’t know of the world is run by “genociders/ depopulation freaks” as you say, but do know that ideas persist over time and are advanced by certain segments … the idea that the world is overpopulated is an easy one to advance, as there are so many stupid people all about. One only need see WalMart shoppers storming the entrance on opening on Black Friday or spend half and hour at Quora … it leaves me disheartened, but I stop short of imagining that Bill Gates and company represent any kind of ideal for humans to emulate.
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Didn’t mean to go off on a long screed earlier this morning, coffee I guess.. really I was going to comment that I do wonder about the real rationale and motives of the “big beautiful bill” and current policy direction.. I’ve been trying to get a sense of it from NakedCapitalism, Yves Smith’s site, and do glean some useful nuggets here and there.
For instance she says it’s stimulative, in the sense of being deficit spending. Commenters point out, and I sort of thought, that the “tax cuts to the wealthy” which provide much of the “spending,” would go mostly toward further inflating financial assets (and potential bubbles like AI and data center build out.) Ie not so much in the “real economy.”
She recognizes that, but says there’s still a large wealth effect from it that loosens pocket books, and somehow projects a number of 7 or 8% boost to consumer spending. From the upper 20% I guess, who hold all that wealth.
I’m not sure how tariffs will play into that. Maybe it could be sort of a “flat tax” by other means. That was an old libertarian/ conservative dream to abolish income tax and collect all federal revenue via a national sales tax. Prices would increase, but so would income, so it would shift the point of collection.
So in a similar way (sort of) maybe cutting income tax on high earners, but adding large tariffs to imports, shifts how taxes are collected. The upper 20% and 50% do almost all the significant consumer spending beyond necessities, I think.. And with a “wealth effect” will probably continue, even if tariffs raise prices. But I’m very uncertain how the tariffs are intended to play out, or will play out.
NC commenters report lately that they are causing small business closures, eg a bike repair shop that can no longer get replacement parts reliably. Amid an already struggling small business sector. So maybe that is part of the equation – continue to build an economy based entirely on a few mega corporations in each industry.
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That’s a great comment, laying out the many unknowns. Tarriffs are a puzzle point for me, as NAFTA was such a big deal in the early 90s, which allowed American manufacturing access to Mexican labor markets, and in my business, allowed Canada to flood the American market with cheap natural gas every time we started making money. I asked at a dinner table a couple of weeks ago “What happened to NAFTA?” and the answer I got was made up on the spot, we just ignore it now. That cannot be done, agreements are in force and there are many sectors that Trump cannot touch with his tarriffs.
Speaking of Trump, I think we understand that he is an actor, The Apprentice, wrestling, having his name splashed on buildings he did not own, refusal to disclose his tax returns due to what they DO NOT show, that’s he’s a billionaire, which he isn’t, though he is old money. But he’s acting as pressure relief, as all the climate nonsense needed a breather, but it ain’t over. So many things he’s gone after, like election machines, PBS and NPR, the tax on Social Security benefits, it is almost like he was put there by a powerful sector that has been shut out till now. I don’t expect it to last, but it has been welcome relief.
Rregarding the big picture that you address in your comment, I hope others can wrestle with it as it is above my pay grade.
[Addition to comment, which I can do since it is my blog: There are at least three things that I cannot and never will understand, two of which are mysticism, where people genuinely appear to grasp hold of the netherworld; macroeconomics, which I have to regard as a pretension of understanding the complexities of human financial interactions on a large scale. The third is the only memorable comment my dad ever made before leaving this world after a long trail of boozing and misunderstanding all that he saw: “Women are complicated.”]
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He’s an actor of sorts I guess, but maybe so in character that he believes it himself –
“After lunch, Trump and I played eighteen holes, accompanied by a bodyguard and John Nieporte, the club’s head professional. A friend asked me later whether Trump wasn’t “in on the joke” of his public persona, and I said that, as far as I could tell, the Trump we were used to seeing on television was the honest-to-god authentic Trump: a ten-year-old boy who, for unknown reasons, had been given a real airplane and a billion dollars. In other words, a fun guy to hang around with. “
https://www.newyorker.com/culture/culture-desk/lessons-from-playing-golf-with-trump
He and his whole crew of outsider populists have to be some kind of controlled dialectic, controlling the opposition, etc but it’s hard to fathom how it works logistically. Even after all the Mathis pieces I’ve read, or endless other commentary from fake news analysts of whatever stripe. Quite a remarkable edifice of perception management..
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One thing not to forget is Trump has been the chosen one since the 1980s, groomed for something big. And he has passed his tests over the last 40 years to be probably one of the greatest actors of all time, right up there with old Adolf Hiter, and FDR, another completely phony populist from NY money. I can remember a good friend in high school in the 1980s had Trump as his idol and role model. This friend was from old money and eventually became a CTO, so clearly, he knew something!
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