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

Reviewed by Diario de un Inversor · UpdatedJune 13, 2026

Our review

«The Deficit Myth» is the most accessible exposition of Modern Monetary Theory (MMT) written for a general audience. Kelton, a former US Senate economic adviser and Bernie Sanders campaign advisor, dismantles six myths she argues distort public debate about government finances: that the state can «run out of money», that the deficit burdens future generations, that deficit spending crowds out private investment, among others. Her central argument is that a sovereign government that issues its own currency is not subject to the same financial constraints as a household or a business; its real limit is not accounting-based but inflationary. The book is clearly written and pedagogically grounded, and remains stimulating even for readers who disagree with its conclusions. The main critique from orthodox economics is that it underestimates inflationary risks and the dependency on external debt markets — something the experiences of peripheral economies illustrate forcefully. Reading it equips investors with precise vocabulary to follow fiscal policy debates that directly affect interest rates, inflation, and asset valuations.

Key takeaways

• A currency-issuing government cannot become insolvent in its own currency; its real constraint is inflation, not the deficit.
• MMT distinguishes between sovereign currency issuers (like the US) and countries operating with an external currency (like eurozone members).
• Full employment, not budget balance, is the central macroeconomic objective in the MMT framework.
• The MMT debate has direct implications for fixed-income investors and anyone tracking central bank monetary policy.

Fact

The Spanish edition was published in 2021; the original English edition (PublicAffairs) appeared in 2020.