Rhodes Center Podcast: Do Deficits Matter? (MMT Explained)
On this episode Mark talks with Stephanie Kelton, Professor of Economics and Public Policy at Stony Brook University and author of 'The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy'. Kelton is one of the leading experts on modern monetary theory (MMT), a view of macroeconomics that upends many long-held assumptions about federal government spending. Mark and Stephanie start by unpacking a key tenet of MMT: when it comes to spending, debt, and savings, governments are NOTHING like households. But as you'll hear, that's only the tip of the MMT iceberg.
You can learn more about and purchase Stephanie Kelton's book here: [www.publicaffairsbooks.com/titles/step…1541736184/]
To hear the latest Rhodes Center Podcast episodes as soon as they're released, subscribe on Soundcloud [ / rhodescenter ] or on your favorite podcast app.
As a layman, I'm astonished by two things: I am able to follow the discussions and absorb meanings (sometimes on a second listening;) and how Mark seems devoid of defensiveness. By defensive I mean the way many economists hold theories they believe in but which can be exposed as faulty when ensnared in messy reality. Mark speaks frankly about the way we support or oppose economic policies based on emotional responses, social indoctrination, and calculation of how they effect our personal power/income. I love that.
Economics isn't a science, which means it's hard to find truths. So an open mind to figure out what seems to work would be a good idea.
@@autohmae I agree.
@@jeffcampbell1555 it's actually a hard problem: Seems to me 'running an economy' is a balancing game. But if it's not a science and you are trying to strike a balance, how do you do it ? First problem is: what are you trying to balance ? And what would influence it ? But you can't easily test your theories in the real world because it could destabilize a some what working economy. Or make a bad economy worse.
Mark isn’t an MMT skeptic-he has some issues with some aspects of MMT but overall agrees with Stephanie Kelton that there is far more “fiscal space” available than mainstream economics acknowledges.
@@jeff__w I've heard him say he thinks the mmt community is probably right but also go on real progressives and mentally bodyslam Steve on how he doesn't think mmt is right. Also he's a big supporter for cooperatives which I'm a huge fan of.
WOW Thank you Mark! You guest lectured my freshman economics class in 2010 and since then you are the only economist I trust. 1.) MMT proves we can spend much more on public investment. 2.) The Limit is inflation. 3.) We DO need to be cautious because if we unleash the beast the whole game collapses? Would love to see Mark and Kelton talk about what inflation would look like in the 21st century if we actually summoned it. 4.) Every time I've heard someone on the left talk about MMT they sound like ignoramus' who say there is no limit on what we can do, it's easy if you try, politicians are evil. I AM SCARED if those guys go their hands on the lever, because they would push it too far, even if to just prove a point. 5.) We can spend more, but no one knows exactly how much more, so we need to be measured, prudent, and careful about it. Progressive, YET Incremental. That is the answer. Kelton is hesitant about a full $30k/yr UBI because she understands that is a order of magnitude high enough to be very cautious about. Don't leap into the dark, take a step first.
The reason we don’t operate according to MMT is that those in power don’t want a “people’s economy”. They want an economy that maintains their power.
We do operate the way MMT says we operate. How it is used is another matter.
when you have 15% unemployment or 50% that have either retired, stopped looking, thrown off unemployment or underemployed. A jobs guarantee sounds real good.
My 2 favorite economists on one podcast.
You should consider adding Dr Michael Hudson to your list!! He is AmaZinG🖤
Yeah, this is pretty mind blowing to someone who did an undergraduate Econ degree in the UK in the late 90's. This kind of thinking was never on the table, even really at a thought experiment level.
It wasn't on the table in an Econ & Maths OU BSc in 2017 either, though I think most would have done enough wider reading to have a basic understanding of the MMT and UBI ideas. I crudely thought up UBI independently in about 1991 when I was a happily unemployed slacker with a BSc in Business being encouraged to outcompete people who really needed a higher than benefits income to live. I do wonder at the idea that there is no inflation. There has been a tonne of asset price inflation. This conversation did ignore currency risk. I'd have liked a closer look at the link between inflation, money supply growth and resource/energy extraction. These discussions should be at least twice as long and include somebody who is going to give some pushback or has an alternative position. I'd have liked more on the notion that interest on government debt is a problem. My first pass at it is that it a redistributive transfer within the private sector, the government simply acting as middle-men. Some people get taxed and the government pays bondholders with those revenues. Then I remembered this is largely from a US context where a lot of the bonds are foreign-owned and much of the transfer flows out of the country.
@@leetay9132 Good stuff. Yes no inflation - but a 'living cost crisis' perhaps as Ed Milliband liked to talk about in the run up to the 2015 election. Interesting to bring up asset price inflation - suggests if you wanted to have a go a reducing inequality you'd also have to run a sovereign wealth fund (previous podcast on this) or tax the holders of capital more (Piketty?). But I'm not clever enough to understand how those policies would interact with MMT.
@@benday1218 . Hmm, the cost of living crisis. The major component of that seemed to be an increase in house prices/rent from what I recall. So, back to pumping asset prices via low-interest rates, a banking sector that knew a bailout would be offered if lending risk blew their faces off and a pulse as the only condition needed to obtain a mortgage. "asset price inflation - suggests if you wanted to have a go a reducing inequality you'd also have to run a sovereign wealth fund" Or stop feeding huge chunks of money straight to banks and big corporates? I've not looked into Sovereign Wealth Funds but I don't see the point at the moment. We already tax X% of corporate profits so in effect own x% of them. We just spend that and more besides on public services. I'd need to read more on the idea to figure out the logic. I guess it's a tax on asset value which is only imperfectly related to income generating capacity. I have long since liked the idea of Land Value Taxes (LVT). "or tax the holders of capital more" I've never understood taxing businesses more for efficiently turning their inputs into more output which generate more profit. It reduces reinvestment potential. Lower taxes encourage reinvestment. I'd rather weight the taxes onto individuals when they receive profits as income, once the company has decided it no longer has a productive use for profit and chooses to disperse them. "I'm not clever enough to understand how those policies would interact with MMT." Heck, what do I know? I'm just a COVID laid off kid's worker with a bunch of half baked notions too.
@@benday1218 Inflation comes from having production maxed out, full employment, and also monopoly pricing power. Think healthcare, real estate, education. These things affect everything else and so they affect inflation.
@@leetay9132 I think when they refer to 'the risk of inflation' they mean inflation that would be caused by government spending. The housing crisis is proof that inflation can be caused by the private sector on its own. WRT currency risk, you might be interested to read this thread: www.reddit.com/r/mmt_economics/comments/gqyi04/response_to_governments_creating_deficits_and_the/ The TLDR answer to your question is basically money supply growth doesn't affect inflation because, ultimately, the government doesn't control it. The private sector's demand for credit does. If it did, we'd see inflation every time the economy grew and we don't. I had trouble understanding it myself but it boils down to stocks vs flows. Stocks aren't inflationary but flows can be i.e. money sat in a bank account isn't chasing limited goods, but money being spent is. So an economy with £20t sat in banks is unlikely to be inflationary, but an economy with £10t circulating throughout would be. And always remember Japan. 1 Yen is worth £0.006 but Japan is the third richest country in the world. Currency values don't really matter anymore in the fiat age - it's really just the reflection of the cost of doing business these days. Currency 'worth' is a pride hangover from the Bretton Woods days.
Thank you both for a brilliant discussion. I would love to hear more on the topic of JG vs UBI in the context of technologies and the capabilities they now afford us to redefine the meaning of a “job” that may merge the goals of those who advocate for each approach.
This is brilliant. I understood every word. Both Fabulous economists who made a complex subject understandable to a layman. 👍👍👍👏👏
The truth is easy to understand.
I’m no economist but I think the answer to Mark’s question about why we only look at the deficit 12:02, aside from purely cynical political reasons, is that, if you think of government as a household, if you think it can go broke, then you’re concerned about how much more money it is spending into the economy than it is taking in in tax revenue. (A household’s deficit is similarly someone else’s surplus but no one cares about that if we’re looking at that household’s fiscal insolvency.) It’s exactly the reverse of how we should look at it. Deficits literally don’t matter for the issuer of the currency who can never run out of dollars. The “accounting identical” corresponding surpluses _do_ matter for the users of the currency who _can_ run out of dollars.
"If it were that easy to start up inflation, surely somebody would have figured out the recipe by now." Fast forward to December 2021.
thank you Mark I was just going to buy this book ! much appreciated.
When Mark says there's "no inflation" I have to wonder what's being measured. Fifteen years ago my family size was 4; today it's two. Yet, the amount of money I'm spending on food is virtually unchanged. I'm buying the same level of quality. So, in the past 15 years I"ve seen 100% inflation in food costs. Rents, home prices, and health care have all risen dramatically in that same time frame. So, how can anyone say there's been "no inflation" unless the numbers are being "cooked" for political reasons?
Why do you keep confusing you stagnating wage with inflation run wild? You do realize there has always been inflation but in previous times labor was organised enough to get wage increases after productivity increases? Why do you feel happy looking at one side of this argument but forget the history of higher inflation and better living and wage standards?
@@pietersteenkamp5241 Obviously, you are the confused one. Read again what the man wrote.
@@wajnerw When we say inflation is barely in evidence it just means it's at the 2-3% target levels; that still means prices will double in twenty years and since the bottom 1/4 of American wage earners have seen no increase in wages this impacts their lifestyle. Point is twenty years is a long time and the reason the bottom half of Americans are in trouble isn't because of rampant inflation but because wages stagnated or actually declined. So sure, if you are an average American things kinda suck and if you think inflation is the 'real problem' you are merely drinking the cool aid offered by billionaires who are , unlike you, actually impacted by inflation.
With all due respect, of course you would see a rise in prices over the course of a decade plus.
@@pietersteenkamp5241, you do realize that, historically speaking, that which you describe, existed for a very short time, since industrialization. Before that, it didn't!
Maybe someone else has already addressed this but my observation is that the mass of people in America may be ignorant of how different the Federal government spending is vs. their dinner table budget; that said while their collective emotive response to “deficits” at the federal level sometimes becomes misguided, I think people do indeed intuit that the deficit is a surplus someplace else on the balance sheet but that those surpluses seem to be exponentially larger and focused in more narrow monopolistic or rentier sectors that actually hurt the broader public good. Other than a few gated communities outside of town working people don’t feel benefitted but rather exploited and out of the loop.
One of my friends told me that he has taken 7 courses on Economics and when I started sharing MMT ideas he said his whole paradigm had to shift.
don't feel bad! Economics is the "pseudo-science" that can not get the whole X-Axis vs Y-Axis (cause effect) thing straight! [in other words, in econ x and y can be and are often interchangeable ] Oh but does it have arrogant practitioners!
It's important to recognize the difference between productive spending and spending that simply increases consumption. Stimulating consumption causes inflation, but productive spending such as for infrastructure that reduces the cost of production or consumption does not contribute to inflation. Green energy infrastructure that decreases the cost of power and protects the environment is an example of noninflationary spending.
Not true. QE is still ongoing, and before Covid-19, there was no real inflation anywhere in the major economies. QE has worked out like trying CPR on a corpse. What's killing demand? Capital's sequestration of money in the economy. QE was diverted straight into the financial sector, and still nobody could get loans for investment from the banks. Why? Why are large corporations making more money manipulating their share prices that innovating and producing new products? Why are these corporations shedding jobs faster than a case of dandruff. Talk about contradiction. Capital doesn't want inflation so they are persuading governments to everything to prevent it. Wages are stagnant and have hardly moved upwards since 2009,and more workers are stuck in low paid and insecure work. The problem is that no QE went to households, and not much went to employers, so where is the inflation going to come from, when all governments are slashing budgets as well? The money hasn't disappeared. It's just not in the hands of the consumer. Unless you're considering the price inflation of private yachts and Ferraris.
@@BigHenFor I know QE means giving money to banks to inflate asset prices and it doesn't do anything for the economy except for banks and rich people. Stock buybacks and leveraged buyouts should be illegal again, and executive compensation should not include options or performance based bonuses that reward short-termism. Maybe I should only say that spending that facilitates future production or consumption such as infrastructure, power, housing or other projects obviously has a much greater benefit than giving money to banks with QE or subsidizing consumption with UBI.
I wish you'd addressed how MMT relates to the work of Richard Werner. A deeper point that comes out of his work is that if you don't get *political* control of the central bank, there is no hope of creating an economy based in the general welfare. His empirical data on the relationship between central bank policy and economic outcomes in the broad economy seems to be quite penetrating.
@Phil Osofree I understand it as capcity constraints.. and the fact that the government creates services and goods with money printed (think infastucture, RND, Education) which is value added to the economy therefore by printing and using money the government create more money/value in one go..... If you think of the government as a business and money spent as investment (as long it is being invested not given to wall street) it makes perfect sense...
@Phil Osofree MMT do not believe credit creation can go on forever. MMTers usually believe there should be credit constraints. But credit constraints are very different things to government budget constraints. The people who have taken over the central bank and using credit creation to subsidise financial markets denied that governments can ever spend money by credit creation. And these anti-MMTers some how want private banks to create even more credit to buy governments bonds. It is complete lunacy. While yes they is excess demand for safe financial assets, these assets are generally not being bought with 'savings' but with 'borrowed' money. Which means that there is still excess demand for safe assets.
@Micheal Cloud everyone seems to be missing your main point ... 'how does this relate to the work of Prof. Werner?' Follow the money! Werner shows us where the money comes from.
Central banks are presented as 'operationally independent' as a neoliberal ploy to depoliticise economic policy and allow the Chancellor/Finance Minister the excuse of "I have no say" when a politically unpopular decision is taken, but the truth is they are in constant contact with the Treasury each day in order to meet the government's interest and inflation rate targets. After all, the government appoints the CB's board of directors/governor.
I live in a country where we have unemployment benefits high enough to live from, however the people weg receive it have to do "volunteer work" or it will be cut. As you can imagine, this system is woefully abused to exploit these people, going as far as to fire someone from a well paying job, only to require them to do the exact same work but only getting the unemployment benefits. So to me, the immediate question when I hear about "guaranteed federal jobs" is: "How could this system be abused by corporations and governments?"
I don't see how you can live through the last 15 years and claim the FED doesn't create money. I'm willing to believe that both fiscal and monetary policy (as well as private banks) create money, but ignoring money creation by banks seems to be hard to argue, in view of Richard Werner's work.
That is not the MMT argument. Listen again to her discussion of the commercial bank lending example.
Essentially UBI and Jobs Guarantee both are used to absorb excess labor. A third alternative used in the past, but seemingly ignored now, was to decrease the work week. David Graeber at one point preferred this approach but his anarchistic tendencies kicked in and he thought that the increased bureaucracy to enforce such a program wold be excessive and moved on to a substantial UBI so work would be an option not a necessity. I think a Jobs Guarantee would fit nicely with a decreased work week. If excess labor were a problem (excessively low wages) a Jobs Guarantee could be used to take up the excess by making Government jobs available at a living wage but at 35 hours/ week. The private sector would have to compete by decreasing their work week, thereby removing much of the labor excess themselves. If there developed a shortage of labor(excessively high wages>inflation) the government could raise the hours of work required for government jobs pushing labor back into the private sector thereby allowing management to lower wages.. This would help alleviate the Kalecki problem by balancing the employment scale. Not to mention getting us on the road toward Keynes' 15 hour work week.
Congress needs to have hearings on this issue. I would love to see Kelton on C-Span talking to Congress about this.
Start a pool on how many fall asleep cause they have no chance of understanding her.
@@mikegrant8031 So Kelton first makes the rounds going office to office tutoring them and then do the hearing so the congress people can look smart with good questions.
There's a video of Mark Blyth addressing Congress. Stephanie used to work for the govt. Long story short, they (the US govt) already know, they just don't give a shyte...
She served as chief economist on the U.S. Senate Budget Committee in 2015 and tried, but they either don't get it, don't believe it, or even worse it is counter to their justification for running and they deliberately ignore it to win votes.
It is difficult to get a man to understand something when his salary depends upon his not understanding it.
We live in ironic times: in MMT fiscal responsibility means something completely different than staying within the budget. Many "fiscal conservatives" will be very confused. Edit: I've been subscribed to the blogs by economics professor Billy Mitchell for almost a decade now. (University of Newcastle, New South Wales, Australia. The "Billy blogs", bilbo.economicoutlook.net/blog/ ) He's been very good at explaining (and advocating, haha) MMT. At times he assumes more than average knowledge and insight among his readers, causing my mind to twist and forcing me to learn more first. But most of the times it is highly educational to any layman (aka professional politicians) or anyone interested in macro economics. Highly recommendable.
Thanks so much for your comment. I’m an Australian just beginning to wrap my head around this stuff and have yet to hear it applied to our situation down under, so this is really valuable to me. Would you happen to know of any other Australians to read on these ideas?
Funny that... Here's another Australian (Ex-Newie 10 years) delving into the topic. Here in Perth, and amidst Covid, our West Australian Labor government has fortified our state and unleashed the budget. It's amazing to see what's happening over here and serves in part as an example of what small snippets of MMT fundamentals can offer.
I absolutely see how this works for the US as the dollar is the current global reserve currency, however if you haven't got the presses that figuratively print gold it seems slightly more difficult.
Exactly my question. For countries with dollar denominated debt things start getting complicated, right?
Is the difference between now and the 70's that due to private pensions and rising inequality globally, there is a surplus of saving and therefore a dearth of good investment opportunities. Is MMT essentially a way of taxing this and redirecting it from betting on any market available and doing something useful with it.
3 trillion dollars went mostly to people(business) who didn't need it, looks like Congress and Menuchen helped them selves and their buddies and a trickle went to smaller business
Good lord I thought "Menuchen" was some kind of awful Jewish slur while you actually just misspelled Mnuchin. I am a terrible person :)
Its counter-intuitive because we are captured by someone else's intuition. I've read economics since the mid-1970's and MMT makes sense seeing what I have seen for the last 62 years. To Wit: "Living is easy with eyes closed, misunderstanding all you see..." Misunderstanding is the hallmark of American Society this day. Michael Bain Glorieta, New Mexico
I've been trying to explain this to the lockdown doomers for months now.
I've been trying to explain mmt two people for the past 5 years. If you don't mind me asking how is it going for you
no matter what theory you follow there should be lockdown doom. if you are in mmt camp, you can't love the fact that people are getting paid not to work.
@@ddannydaniel3340 sure you can, bc it staves off street crime, homelessness, trauma
The traditional theory is that creating too much national debt devalues the currency. This hasn't happened to the US dollar because China keeps buying our debt, propping up our currency for international trade. The US and China are in an uneasy co-dependent relationship, and I don't know what happens when that fails.
China only buys a small portion of US debt. And if China decides to cash it all in, what do you suppose will happen? The US treasury will give them a nice virtual “stack of US dollars.” In other words, they will create the dollars and buy back the bonds. No problemo.
No, they certainly are NOT "codependent".
The problem with Republican reverse-marketing is that a lie makes it around the world before the truth can get its pants on. There are so many specifics with a jobs guarantee that most people could get on board with but it is so much easier to discredit it with misinformation.
What I have seen is mind blowing in terms of responses. Everything from Nazi work camps to the all too familiar "digging up holes and filling them back up" sort of stuff.
But the ultimate constraint is how you deploy the resources in the economy, and these are ultimately finite, and consist of natural resources, agricultural resources and labour. THe government budget compries a set of choices about what we think is important to deploy people's time, food resources, developed manufactures and mineral wealth. And what the US thinks is important is to put an enormous amount into military materiel, and not much into developing *all* the people at home.
As I see it, for a country like the US which already consumes far more than its share of finite global resources and whose median income must come close to the global top 1% of incomes to push an agenda promising the government can provide jobs for all on decent pay is outright scary.
Tell this to Brussels... Please
The Germans say nein. The stories of hyperinflation during the weimar republic come back to haunt all of Europe again.
@@maxworth4687 that was intentional to pay back reparations for WW1 .... Germany decided to print to pay instead of attempting to create value added to the economy which lead to hyper inflation you have to try hard to get there by continuing to print when Manufacturing capacity doesn't move and new business stagnates and inflation starts to pops its head in you then get hyper inflation you have to ignore all warning signs and continue to print ...
The EU has reached an agreement on the recovery package.
MMT trade off isn't just inflation. The global market uses either American Dollar, Chinese Yen or Euro. tha't more than 90% of the trades, either by currencies attached to fixed values to these three, or by said trades. Increasing the spending that much locally without a constraint of keeping the surplus, makes it harder for other economies to catch up, hence it'd make them replace what currency they'd attach themselves to if the US does this.
Varoufakis rightly shredded it to bits, after you really look at what little money there is you have to realise its a joke
Not sure I understood all this, but it does not seem to address income imbalance (rich richer etc.), the effect on imports/exports, currency exchange rates, and the general overall loss of jobs due to computerization. The model where we use jobs to distribute income is beyond its limit, but a universal basic income does not seem to cut it. Is it time to create a better model of how emotions guide our wants and thoughts? (We are certainly not rational.)
Hi Mark, quite enlightening guest. I just wonder about the argument that government-subsidized jobs will actually kill employment in the private sector. The other problem that keeps popping up for me is that you're still referring to the primacy of growth for the economy while material resources are obviously limited and the climate crisis seems to be connected to it.
Ever since the first banker figured out that he could (usually) get away with lending far more money than he actually had, or had on deposit, bankers have been creating money out of thin air. Dignified by the term "fractional reserve banking" this is how by far most money is created today, either by public or by private bankers. Since conventional economics assumes that resources are scarce, it clearly does not apply to finance. Something you create out of thin air is not scarce. We need a science of finance, just as economics purports to be the science of the real world economy. But I am skeptical that we shall get one. Too many rich and powerful people are dependent upon our not understanding it. For instance if we did we would be most unlikely to support the idea that the rich get to support the government at a profit through making loans to it, while avoiding the use of that same money they loan for payment of taxes like the rest of us.
If we were to go back to using a physical element with a fixed supply as legal currency, this would not be a problem. The good news is that you can get a head start on the rest of us. Just go to the bank and ask for $100 in nickels. But you might want to hurry...
@@AftercastGames Sorry, doesn't work. The first bankers were based on gold.
@@davidford694 Yes, well, obviously gold would be one of the safest "investments" you could make. But nickel has one advantage that gold doesn't have. It has a guaranteed exchange rate, just like gold had up until the 1930's, and like silver had up until the 1970's. Nickel still has a fixed exchange rate, and can never go below 5 cents per coin. Until the government and the banks are forced to take nickels out of circulation, they will be forced to give you at least one dollar for 20 nickels. So, for now, the effective price of nickel can only go up. Check out coinflation.com for live coin metal prices.
Wow, so you're the director of something now Mark? Movein' on up!
This is my problem with a job guarantee. It sounds great in theory but if you raise the price of labour it will only encourage more migrant labour to lower the cost for the private sector as a counter weight. More industries will rely on migrant labour. I'm assuming migrant labour won't be covered under a federal jobs guarantee program ?
I remember a time when there was runaway inflation and it was a problem. How times have changed without minds changing .
this had more to do with interest rates.
@@macrosense It's got nothing to do with interest rates, it's to do with labor bargaining power. Unions have been decimated, wages are suppressed, money pools at the top, and the velocity of money plummets.
@@lutherblissett9070 the federal funds rate was 13.35 percent in 1980. so a mortgage rate or car loan was about 20 percent, usually compounded monthly. reagan figured out you can just keep reducing the rates and required reserve ratios and printout cheaper money. it helps that the alaska oil fields and north atlantic oil fields kicked into high gear at the time
12:05 because gov deficit is national and comes with a running price tag, the surplus is mostly held in non productive entities?
18:05 Isn't there significant inflation in a lot of places when you include housing?
Stephanie’s book is excellent! Anyone who doesn’t think they’re a full cup can learn macroeconomic reality. If you prefer to listen, it’s in audiobook form. Understanding how the monetary system actually works is critical to understanding what’s possible and what the real constraint is (it’s not lack of money). This book is a must read for every politician who is truly in the service of the people, and for activists dedicated to bringing true Progressive change.
Having carefully listened to Mark and Stephanie with an open mind, and other podcasts on the subject, I’m struggling to grasp MMT as being positive or a realistic internationally adopted system. Are they focusing solely on the US and the dollar as reserve currency? The ‘non-government surplus’ creates national debt, but would this not impact currency value, raising the value of imported goods and purchasing power of the public? QE in 2008 may not have impacted prices for the designated basket of goods used by the governments, but as they touched on, property and assets prices grew significantly in relation to stagnant wages, therefore having a major impact on younger generations, or those without assets, widening the wealth gap. The current run of QE seems to be flowing into the stock market, with the wealth of millionaires/billionaires growing significantly, whilst at the same time high unemployment and debt grow for the public. The phrase I’ve been hearing is that ‘wall street’ and main street are on diverging paths, with both runs of QE, this run particularly, being the greatest transfer of wealth ever seen. Similarly, both bouts of QE were during macro events; would applying MMT during a micro event not affect/destabilise a currency? By not dealing with the overinflated money supply, and doubling down on QE, is this not repeating the cycle, with the debt bubble and potential collapse growing in severity with each cycle? The repeated analogy being ‘kicking the can down the road until the next crisis’. Stephanie’s comments relating to changing words and their meanings was quite alarming; it’s not ‘government debt’, it’s a surplus. This, with some of Stephanie’s other comments, seemed very Orwellian, and geared towards bigger government and converting the US into a more socialist natation than we already see. I appreciate that national debt creates money supply, however if no goods or benefits are produced from this spending, with the money either moved to off-shore accounts or used to artificially inflate bubbles, surely it would have been better to allow the collapse and re-build on stronger foundations. It feels as if we are building on the leaning tower of pizza, and its already compromised structure is fracturing. If we can print unlimited money and have unlimited debt, why would another country accept our currency knowing that another trillion can be created tomorrow? At what point would debt to GDB ratio be an issue, and at what point would the US be at risk of losing its reserve currency status? China, Russia, Iran etc are already reducing the volume of trade in dollars, with this trend only likely to increase over time. Federal Job Guarantee is great in principle, but this means either growth in public debt, or increased taxes? Am I correct in saying MMT is reliant on the country out growing their debt? If so, what would be the outcome during a period of extended recession? Higher spending for a further 10 years, supporting an unproductive society with growing inefficiencies and debt, with reducing output and resources? As above, at what point would debt be an issue to country, and how can interest rates every rise if the impact on accrued debt would only serve to increase debt. Stephanie’s comments re UBI were also fairly alarming. It is an individual’s choice to choose to work or not, why should the state support an entity that chooses not to support itself or contribute to society? In that case, who funds this system if everyone chooses to take UBI and spend their days as they see fit? Socialism and Orwellian tactics were discussed and placed on a pedestal, but I was left with no confidence in the proposed system, or wish to be indoctrinated to this new world order. Capitalism to me isn’t the problem, it’s the government’s involvement and the corruption of the system and manipulation of markets. To adopt socialism because it is the opposite of the perceived ‘capatalist’ system is a kin to giving the keys and deeds of your house to the burglar as they ran sack your property. We need less government/taxes, and more freedoms. My preference would be to detach from fiat system, removing government control of currency, and adopting a monetary system backed by a fixed basket of goods/assets. This would allow free markets to set price through supply/demand, promote innovation and development, and allow less developed nations to grow detached from the control of the dollar through their wealth of natural resources.
Thanks for your input. What you say is very true including your understanding of the problems of printing a lot of money and creating doubt in the minds of other countries when the national debt gets so high. Yes printing excessive amounts of money creates bubbles and we need lower taxes so there is effective demand for diverse number of things we need personally depending on our health, age, where we live, how we live and multiple other factors. The national debt is only one part of the money supply. Most money in a fiat system as we have today is created by private bank lending when loans are made. This money is destroyed when the loans are repaid. In fact all fiat money is credit. Government created money is funded by Treasury bond sales to the Federal reserve bank. Bonds are also sold to anyone overseas or in the existing local economy. This like private bank created money (actually it is the Federal Reserve bank creates the money) is destroyed when the Treasury Bonds that Treasury originally sold to the Fed to get newly created dollars actually mature and like private bank loans that debt and credit is destroyed. Those Treasury bonds mature throughout every year. New bonds are sold to fund more deficits. The significant difference however is that to pay off the maturing Treasury bonds the money comes from taxes and those taxes are the burden for the private sector alone. Governmnet and the Federal reserve do not pay off maturing bonds. It's part of the smoke and mirror lies that Kelton uses to avoids admitting because it will ruin her narrative. None of the MMT pushers including Mitchell, Randal Wray, Hail and others can admit to this and when you ask them they stop conversing with you to hide the fact. The winners in money creation are the Federal Reserve who create new money and never have to pay it out and the government who gets to spend it in their budget and get excesses of profit that the Federal reserve is made to pay Treasury. The losers are the private sector taxpayers.
Spot on
It's very true as Kelton says, that the gov't can never "run out of money", because it has the power to CREATE NEW MONEY OUT OF THIN AIR! However, in spite of what the MMT crowd claims to the contrary, whenever the gov't elects to create and spend so much new money that the traditional ratio of money in circulation to actual goods and services being produced by the economy (GDP in economist talk) is significantly raised, price inflation will inevitably be the result, although not necessarily instantly, depending on when and how fast the new money begins to circulate. Currency inflation is nothing more nor less than an alternative to conventional taxation as a means of funding the gov't. It amounts to a tax on the nation's savings, and due to the status of the dollar as the world's "reserve" currency, a tax on the savings of other nations who by virtue of trade surpluses, happen to be holding lots of dollars.
We need a podcast on inflation ASAP. It isn't really that hard to imagine the myriad of ways this strategy could go terribly wrong imo. As I understand it, it's just okay to create money for things which are necessary and productive. Assesing that is, I think, not that easy :)
kzhead.info/sun/eLetmt5tf6ekeZs/bejne.html Inflation comes from spending too much and bidding up prices when resources are scarce. It also comes from monopolies which have pricing power and as Prof Fadhel Kaboub explains, it should be obvious. It comes from real estate sector, healthcare sector, it comes from education because when we have less productive, less skilled, less educated people that hurts our future productive capacity.
@@henrygustav7948 Appreciate it, thanks.
@@henrygustav7948 But what does it mean "too much spending" anyway? :) The podcast doesn't acknowledge that MMT proposes to mitigate excess money (so propagating inflation) via taxation.
@@Tessali666 Too much spending would be when all resources have been employed, in use, factories running at full unemployment at close to 0 percent and we continue to spend beyond that point. The perfect example would be WW2 era when unemployment fell from 25% to near 0 almost overnight. MMT doesn't propose to mitigate excess money with taxation, MMT shows that the function of taxes on the federal level is not to to fund anything but in fact because taxes take away your spending power they are one tool to control inflation.
@@henrygustav7948 "Mitigating excess money" means precisely "controlling inflation".
The reason there is no inflation is that the wages stay flat. Thus, the money pumped into the economy just go into financial shenanigans, stock market etc.
@17:05 Sorry Dr Blyth, things can logically follow from bad premises, too. This is where we part ways. Loved Austerity.
Are you explaining why you think austerity is great?
What insight does mmt offer to countries that do issue their own currency but are heavily indebted in foreign currency? like the dollar or what have you
@@ES-sb3ei No, I meant like say Argentina, issues it's own money but has large USD denominated debt. What insight, if any, does MMT offer for such an economy.
12:05 because the gov deficit is national the surplus is international?
Is inflation a function of interest rates as well as reaching the limits of the capacity of the economy to provide/produce goods and services?
indirectly; low interest rates incite borrowing which increases the money supply which creates price inflation - ssrn.com/abstract=3561330
Can someone explain how these ideas play out when money is spent externally, and also when the bonds the government issues are bought externally to the coutnries economy? This is especialy important to understand how smaller trading nations fare - think Singapore.
I'm not sure what you mean by 'spent externally'? You can't spend money outside of its currency zone because it's not accepted as legal tender by anyone else. Are you referring to money that flows to the external sector? Foreign entities buying bonds from abroad isn't a problem, because the government pays the interest in its own currency which it can't run out of as it is the issuer. For the bond buyers to receive the interest, they either have to have a bank account denominated in that currency or (if they want it in their local currency) find someone on the FX market looking to make the opposite trade.
@@simonturner1 Spending externally - let's say singapore creates a lot of money and buys 30 F35's from the US. While technically it could be argued as "infrastructure", in general it is a depreciating asset that is never used. The have to pay the Americans with it. (You're helping with exactly what I am trying to understand) viz bonds, not all countries issue bonds in their own currency, as best I know. Is it not true that many Latin American countires governments are forced to borrow in US denomination? But I digress. If US "persons" or businesses hold the bonds, then even the interest circulates back into the economy. But for foreigners, they take that as profit, e.g. they are extracting value from the Bond issuer, or they wouldn't do it. That doesn't mean the country could run out of money, but I think it adds complexity to the mix of benefits and costs of governments creating money.
@@redrockcrf4663 well, you don't have to sell the bonds at all. That's the point - but let's say the Saudis reinvest their oil dollars into US treasuries - it ends up being used for government spending purposes instead of buying more stock in Uber, or whatever Saudis invest in
So why have taxes then?Why have loans and deposits? A one liner was slipped in early on and then ignored it completely - "assuming there is no inflation". An example - cheap housing credit by banks creating money, what has this done - in effect created a house inflation bubble and this has crowded out productive investment . You only have to look at UK BTL!. To say there has been no inflation is total RUBBISH. It depends what is included in the index and the biggest bill in a persons lifetime is housing. Multiples in the UK are at record highs!!!
Amen!
Covered in ch 1
money supply = price inflation! Asset inflation due to rent seekers has to do with the way everything is sub contracted out and 3 rent seekers win the same contract only to sell it down the totem poll. It is a much larger and complex issue that is designed by rent seekers making their margins. Inflation that economists and the elites worry about ISNT asset or commodities related. Those things that you own growing in price over time is exactly the point of the private market. Inflation is where the opposite happens. The price of money eats away at profit margins for asset holders/banks/interest rates. Inflation on the money supply means creditors lose, and debtors win. Profit margin spreads shrink on interest rates.
Money is worth less tomorrow, but I still owe you the same amount of cash that you lent me. Lets say I owe you 10 grand and in a single day 5% inflation occurs! That means the 10 grand I pay you is worth 5% less than it was when you gave me the loan. Which could be your entire profit margin. Bad news for you! Like most financial topics not understanding the terminology makes it very hard to grasp the conversations at hand. You cant just jump in head first, especially when every damn academic field uses the same words to mean totally different things.
our current economy does the reverse. tiny bits of inflation occur over time, meanwhile all the assets and commodities continually see price rises. And banks never lower their interest rates against the consumer even as inflation drops to record lows. Guess who wins big in that situation? One of the main ways you get rising real estate costs is due to the global market, making things way more competitive and a sellers market despite pricing out the local population. Anyways are you really going to argue that the biggest savers in history actually need loans to create bubbles everywhere? Playing around with repo's and libor doesn't generate wealthy investors sending the cash over boarders with asset managers in some big fund that is spreading investments everywhere it can. Free flowing cash over borders makes balance sheet tinkering by market dealers look trivial. Especially since shadow banking(money markets lending to capital markets) is mostly just another sort of lending. Massive holding companies and their many subsidiaries do similar things internally between companies all the time. There are so many things going on in the financial world people have almost no clue how important most of it is. Just because the insiders left you out, doesn't mean you aren't fucked if they suddenly go away.
Good to seer you are keeping safe by visionally distancing yourselves.
Thank you, great interview! I wish our elected leaders would implement MMP.
A paper note of currency is a promise to pay what - an identical note - even if it means running the presses why is this scary? I can see inflation might become scary, but only when the cost of printing exceeds the value printed on it - but if it's done electronically?
Great talk. One issue that never seems to be addressed is the fact that whether it's unemployment benefits, UBI, food stamps, etc, that money flows directly back into the economy. It likely has to be spent immediately, and there are certainly no incentives to save...i.e. interests bearing account, at least in the US. So if we want a return on savings we're forced into various forms of speculation, stocks, options, derivatives, and so on, which appear to be rigged by and for the major players. Some hawk gold, silver, bitcoin, freeze-dried food, and beachfront properties in Arizona, but with Covid and various weird nationalist to Maoist movements, others suggest that buying lots of guns might be the wise investment/hedge. Unfortunately, my guy at Schwab doesn't seem to have the skill set to advise me ultimately toward a final investment solution.
In my opinion, the future has rarely been as uncertain as it is right now. I recently retired as a financial planner in part because I no longer felt confident that the plans I came up with, which are necessarily dependent on lessons learned from the past, were going to be relevant to my clients' futures. Anybody who says they can hit you a home run with this investment or that is either lying to you, to themselves, or both. I think the best you can do at the moment is to broadly diversify in a relatively conservative manner and try not to panic when things turn south.
@@RussCR5187Thanks for the thoughtful response. I just retired as well...maybe should have waited but wanted to travel to some exotic places while i could manage long flights, etc. I believe the whole system (government and finance) is far too corrupt at this point. The real problem is what will happen to the dollar...so i'm looking to move some money out, but think gold is ridiculous unless you live in a fort. Asia seems to have a plan...in any case, I feel for younger American who missed the party.
There is an argument that while consumer price inflation is real low, all the inflation is feeding into other asset classes: real estate, stock prices, etc.
because the rich sat on the money. If you look at velocity it plummeted meaning that it is not how much money but what the economy does with the money. So, although I have great respect for both of these economists but I think they are missing the causal relationship between velocity and inflation
I have my doubts, too. Assuming Time is Money, collecting pay role tax is collecting working hours - then converting them into government employed working hours. If you save for a house for example, you collect your working hours and spend them later on construction workers to manifest Time in a building. Now government can borrow those hours and repay later with aforementioned pay role tax, ok. It can even borrow it out of thin air from future pay role tax through the Central Bank, also ok. Thus it can role over any loan. But in effect printing money without collecting hours? Doubtful. ... as far as I see it, you're right. QE money ended up on rich people's accounts through inflated asset prices, either stocks trade or real estate trade.
@@tomasbickel58 well my issue is who is going to control the money supply? It better not be Congress they waited until the last minute to negotiate a stimulus when we're on the brink of depression. China can probably do mmt. I just think our main problem is corruption. We could solve most of our problems easily if we a government that wasn't co-opted
@@tomasbickel58 but they would be collecting idle hours not worked and converting to hours worked, no? That money spent would have to go somewhere right? And at the end of the day you're still missing the point that spending happens first, where do the dollars to pay taxes come from? Debt either public or private but there is an edge case where the treasury could directly print and deposit the money but that never really happens. Spending and debt has to happen before taxes can even be collected.
@@dakotacouch5642 hmm .. if you work 200h a month, pay 25% pay role tax, IRS collects 50h of your work - and you got paid for (so: I don't get your point). .. Yes and no: the Lender of last Resort is the true source of money - imagine it as "infrastructure" like "roads" or "judiciary". It's value derives from it's usage, from the hours it contains or is able to purchase. A road has only value if people drive on it. I have no issue with" Government" providing/borrowing "infrastructure" (through commercial banks) so we, the citizens, can exchange "work" - even if the Central Bank takes a service fee in form of Interest. Now: traditionally Government has been basically a Supermarket, where we were forced to buy Public Goods - 75% of our income we can spend freely, 25% forced on Public Goods. That mmt smells like "Goverment is like a bank" - that seems doubtful. Especially, as Mason points out, particular factions have an interest to borrow the hell out of it.
@@dakotacouch5642 , "Spending and debt has to happen before taxes can even be collected." .. even when money wasn't a thing (in the past/history) people had to pay taxes .. in naturals .. wool, butter .. name it .. so, no.
This is all lovely but try explaining this to a 60 year old politician on his way out.
@Mark Johhson Prof Linsey McGoey's new study (University Essex) explores this use of 'deliberate and wilful ignorance' by elites in pursuit of the retention of power. Resonates with your comment exactly...
60 year old is fresh meat in politics
Explain it with guillotines.
@@wthornton7346 thanks!! Strategic ignorance and knowledge resistance www.bbc.co.uk/programmes/m000ktyc www.alibris.com/The-Unknowers-How-Strategic-Ignorance-Rules-the-World-Linsey-McGoey/book/39804903?qsort=p&matches=20
If the Herbert Hoover Administration and the Federal Reserve at the time knew this, we would never have had the Great Depression.
This is brilliant! Wonderfully mind altering brilliant. I’m a poet, not an economist, however this conversation was poetic. Just the way Robert Frost described poetry... A stay against confusion.
Go look up Keynes Vs Hayek Rap Battle rounds 1 and 2 on KZhead. Mainstream media “ conversation” is a beastly shouting match. Oh brawling love, oh loving hate, why then, of nothing first create?
Thank you Mark. A great interview
Live this! 2 of my favorite speakers together! Well done and am sharing this. ❤️
Deficit is nothing but Debt. Debt is a form of Enslavement. It's not a good thing. Fiat currencies always ends to $0.00 while the corrupt politicians, central banks, and corporations benefits their pockets while we pay taxes to their shenanigans. We need sound money. And savings. Allow people to manage their own finance. Gold will destroy fiat money & central banks. How come they don't teach basic finance in schools? It's easy to control the masses when they are ignorant. 💜
The illusion of scarcity serves the masters well.
Non-governmental surplus, S.O.B! I never thought of the deficit as only one side of a coin. Particularly, if the other side of the coin is wealth? In terms of goods and services; what if the goods were my well being? The services would be Healthcare, education, food and housing. A supplental job then would be then for prosperity. If the Pandemic has shown us anything, it is that our government can flip switches. And, if we had a universal income and universal Healthcare system in place, then lots of the severity of the shutdown could have been mitigated.
You are wrong because you equate increased money with wealth. The very basic and fundamental understanding of wealth and money is that Wealth is not Money. Wealth is created by increased output and not increased money. The MMTers even state this when they argue that Zimbabwe's o inflation was caused by loss of output not increased moeny. But strangely because their theory is so contradictory within itself they deny it when they later claim more money will produce increased wealth.
MMT. MMT. Money for the people
"non-government surplus" is fine when the money are use to stimulate the economy, build the infrastructure (improve assets) get people out of poverty and help them build up equity.. NOT when it's wasted on WARS, taxes cut to the wealthy that transfer wealth to offshore factory or account. build up the economy THERE not HERE.
Excellent, as usual.
6:41 did people forget the concept of "you have to spend money to make it" aka "build it and they will come" aka induced demand ?
I'm pretty sure whoever said "you have to spend money to make money" was talking about investing, not borrowing a bunch of money and then giving it away.
@@AftercastGames "borrowing money to give it away" who are they giving the money away to?
The real question here is whether she's actually correct about her assumption and the problem is that we won't know until we try these principles. The main problem, however, is that if she's wrong we're screwed and she would pay no price for being wrong. Keep in mind it's the printing of money without any backing that is the source of all inflation and inflation is the bane of a society. An example of a country printing money without any basis is Iran. The exchange rate of Dollar to Rial was $1 equal to 7 Rials(Tomans) in 1979 before the revolution. After the revolution when their government began printing unbacked money to pay for their bills we fast forward to today when the exchange rate is $1 equals 22,000 Rials (Tomas). So, go figure! If we could print money inconsequentially like we could photocopy Monopoly money during a game we would have done that already. The consequences are inflation which makes the poor poorer! The QE going on right now to uphold the economy will have serious inflationary consequences in the ensuing couple of decades. The MMT reminds me of the meme during the .com boom of late 1990's where the economists were saying we live in a new economy and PE Ratios don't mean anything anymore. Well, that bubble burst causing a lot of loss of capital. What do you think?
The elephant in the room is the need to nationalize the Federal Reserve. Debt free, state issued currency with the people of the US as the ultimate creditor makes this work. Of course, trying to nationalize the Fed would probably get you disappeared.
“...As long as there is no inflation in the system.” These are the most important words of the entire episode. The truth is that inflation comes first, and higher prices, (think $25 hamburgers), comes later. The “theory” in MMT is that $25 hamburgers will never happen. The moment you see $25 on the menu at McDonalds, you will know that the theory has been disproven.
“If the government borrows $100, and taxes $90, then that means it deposits $10”. Well, yes, but you left out the part where they still have to pay interest on the full $100, every year, forever.
Aren't wages subject to inflation as well? They count as a cost (price) to businesses. So your 25 dollar hamburger doesn't matter if the lowest wage is 25 an hour as well.
Prices increasing over time at a steady rate is not inflation. And certainly not the kind of inflation that gets mentioned by people arguing against MMT, which is hyperinflation, a whole different kind of beast. The primary driver of inflation is wages. That's why we see deflation everywhere if anything: workers don't have a say anymore, the financial market and top income and wealth earners are absorbing an increasing share of the returns of the economy relative to the labor force and consumers.
Actually, you are pretty much guaranteed to some day see $25 McDonald's menu because the inflation target is: 2%, so their is basically always inflation. A McDonald's burger menu priced at US $6 in 1977 would be: $25.66 in 2019
@@itsthekush My $25 hamburger doesn't matter, unless you plan to retire, or pay for college for your kids, or leave them an inheritance that they can use to survive if something terrible were to happen, like, say, a global economic shut down due to a pandemic, for instance.
I'm not an economist and I like the radical left or at least anti-austerity / anti-capitalism as it exists now politics MMT. However (and Wolfgang Streeck flags up this in a different context, praising Adorno in the preface to 'buying time', so I'm not being mad), doesn't it presuppose a natural equilibrium that simply isn't there? Public and Private sectors behave CONSPICUOUSLY Differently. Also on the Practical side of this: would acting in accordance with this Theory work outside of the United States? Outside OECD countries. Seriously would appreciate thoughts.
*MMT implies
And there's supposed to be a question mark after oecd cuntries.
Like average household with a million quid windfall behaves differently from say, chris brown getting the same, can currency really mirror itself in that way.
@@ejws1575 Why don't you just delete your comment and rewrite it. This time in English.
Guaranteed employment sounds like what Hitler tried before WWII. Not withstanding the moral deficits of the source, did it actually save a serious portion of the german population from destitution? And, if yes, was there something identifiable that made it a bad thing? Btw, this is a question, not a statement!
Isn't all the inflation hiding in property prices and the price of education?
if you can manage to convince Doug Henwood, I'll consider it.
Economics, it is said, is that thing which is most distant from reality. When language is tripped up to misrepresent reality, we can all be duped into fantasyland. But sure, we could choose to mutually agree to pretend this is a new reality, and if we do, i sure hope it doesnt lead to anywhere but bankruptcy
What about the aspect of non-productive jobs? Is employment just about putting people to work or given them meaningful employment and if you think the government can do the latter, you’re going to have to explain that one to me.
Have you seen corporations lately? Tens of thousands of employees while their core businesses are falling apart, how many "gig economy" shitters are just fundamentally unproductive?
The limit of your imagination is the only limit to the scope of the Job Guarantee. You could have people digging holes and filling them in again but it's probably better to have them doing something more socially beneficial. That's why the 'locally administered' point is emphasised - it's up to the local community to decide what work would be 'productive'. JG jobs are supposed to provide things that are 'nice-to-have' but aren't essential to the functioning of society (those get done by the public sector) but don't get done by the private sector because there is no profit incentive. Things like tidy parks, checking up on elderly neighbours, teaching kids how to swim etc could all be jobs if that's what people feel their area needs. With a JG in place, non-productive jobs could/should be automated away as it frees people up to do something more meaningful.
@@EvsEntps That's a very unlikely what-if. No progressive party wants to 'destroy capitalism'. At most, they want to make it work fairly i.e. socialism. And even if they did, they are accountable to the electorate via the ballot box. If they get re-elected, we can assume the public is happy for them to continue doing that. Keeping things away from politicians has only been a concept for the last 20 years or so, as a way to depoliticise economic policy and give politicians an excuse when unpopular decisions are made. Central banks may well claim they are 'operationally independent' but MMT clearly explains that they work hand-in-glove with their country's Treasury department, in order to hit the interest and inflation rate targets. Economic decisions should be democratically accountable which is why MMT advocates explicitly bringing central banks back under direct political control, if not merging them into one department outright. That Soviet scenario bears no resemblance to an MMT JG proposal. The JG is meant to be a permanently available alternative paid at a proper living wage for anyone who wants a job but can't find one. The work done would be socially productive things that don't currently get done because there is no profit incentive for the private sector to do it. If someone really enjoys doing what they do they are more than welcome to stay in the programme, but really it's designed to just give people something to do until they find a new job in the private or public sector. Think of it as people doing stuff that is 'nice-to-have' - things we'd like but aren't essential and can be shelved if the worker gets a better offer somewhere else. The JG doesn't try and keep people, it lets them flow in and out countercyclically with the business cycle. The wage is also fixed at a minimum (e.g. £10 an hour) so it operates as a new price floor - it would not be raised to compete for labour with the private sector, thus avoiding the inflationary wage spirals that were seen in the 1970s. It just provides a bar that companies must jump over if they want to hire someone, and ends the current scenario of employers paying poverty wages and having the State top those up with benefits. If a profit-seeking company wants to hire staff, they should pay for the full cost of the labour. A JG actually encourages productivity. By giving everyone an alternative, it forces bad employers to offer better pay/conditions in order to keep their workers. Those that can't then have to either find a way to automate those jobs, which is what brings productivity increases, or go out of business. That's how capitalism is meant to work - survival of the fittest for businesses and those that do reap the rewards. The labour supply should be restricted and unfit businesses should be allowed to go bust. I promise you that the substantial body of MMT literature that now exists has considered everything you bring up. I recommend the work of Warren Mosler, Bill Mitchell and L Randall Wray, as they (plus Stephanie) are regarded as the Mt Rushmore figureheads of MMT. Here is one such article about central bank independence with links to previous articles if you need more: bilbo.economicoutlook.net/blog/?p=44417
I think selling pizza might be quite enjoyable if it paid reasonably. Out in the air, interacting with people, ... . I don't think it should be dismissed as a un-worthy occupation. As MLK said, All work has dignity.
Could the government eliminates taxes entirely when it can create as much money as it needs?
If the Govt eliminated all taxes then eventually the USD would become worthless as taxes are what give the USD its value and drives the demand for its use. Its not used to fund the federal govt, its a tool to control inflation.
@@henrygustav7948 If the government eliminated all taxes, then the people would start asking where all of the money is coming from.
@@AftercastGames If all taxes were eliminated no one would be using the USD, money is created when the Govt spends and also when banks loan money.
I would love to know how trade would play out in a MMT world. Please give me your thoughts...
How do you mean? We have a MMT world right now, we had a MMT world for thousands of years. MMT is just a description of how fiat money in a modern economy works.
You might find this helpful. I recommend searching the blog because there is more than one post on this subject: bilbo.economicoutlook.net/blog/?p=39282 bilbo.economicoutlook.net/blog/?p=41327
Do this again now but with the current status of inflation
I think I kind of begin to get it. It doesn't mean that the sky is the limit for deficits. Deficit spending has to enhance productivity and grow the economy. Otherwise, it causes inflation. Another qualification is a nation has to have its own currency. The reasons deficit spending by say Greece and italy has only dug them steadily deeeper into holes, one, they don't have their own currency, and two, the lender, Germany, simply vacuumed the money right back out of the economy it lent the money to, and so the borrowed money didn't build any new capacity. Our deficit spending here in the USA is all right provided we get better educated people or a modern infrastructure or better more affordable health care or less crime or less pollution or something else of value.
If government can guarantee me a job as an artist I will take it, otherwise I prefer UBI. Can government guarantee anything but a bull-shit job?
We we create the money then why charge interest at all.
Deficits can matter. But just because you have one doesn't mean automatically bad. What matters more is what you spend that money on.
I cant understand how constantly printing more and more wont lead to inflation?
They are not saying that inflation wont happen there are saying until there is you can print as much as you want until you start seeing that manufacturing capacity hit 100% when you see new industries being made left and right and you still countiue printing only then will you see some inflation and if you decide to still print in the face of that you will then get hyper inflation.... But that requires 100% industrial capacity and new business being made at a slower clip then printing. Also their main point is you dont need to tax the govt just prints money and taxing money is simply burned not used for anything its a rebalancing act at best which has been used ignorantly in a false assumption that the govt, the issuer of currency, for some reason has to get the money from peoole instead of simply printing and then taxing when inflation is actually there to prevent it ....
Cormac Sheedy pasting my response to Another comment as I feel it answers your question. The inflationary impact is intrinsically linked to to the distribution of said money. Since neoclassicals do not focus on differences in income they treat all money creation as a shift in the aggregate demand curve rather than understanding that different demographics have different demand curves. Simply put, inflation is not an issue of equilibrium of the money supply and prices. Inflation has a floor( the aggregate liquidity preferance of households) and a ceiling(degree of labor employed). Hyper inflation is either deliberate (Weimar republic) or a result of printing money after reaching full employment (stagflation). Let's put this another way. If I give everyone a ten dollar per hour raise , then aggregate prices will rise as the spending power of the average consumer will go up significantly. If I give someone who didn't have a job a 10/h job or even a 20/h job they are not going to have the same effect on aggregate spending. They will be able to consume more goods yes, but not proportional to the entire population getting a raise. You could do the same for every unemployed person and still not drastically reduce the supply of basic commodities like food and utilities. Housing could see inflation, but if the money was printed to create low income housing (for example) this could be mitigated. Modest inflation is a good thing. Hyper inflation is not.
You didn't listen to the video?
Bear in mind that currently somewhere in the region of $30 trillion has been printed and dumped into the global money supply in various forms and currencies in order to mitigate the effects of the financial crash - and there's been no inflation. This at least should tell us that the relationship between printing money and inflation is not as simplistic as we have been led to believe.
Inflation didn't disappear, it went into the stock market, 2008 only the rich were bailed out. 2020 only the rich are being bailed out. This is why the stock market has been booming despite a collapsed economy.
You can't let the dollar circulate freely while you got a big sector of the economy doesn't pay tax or doesn't refill the Gov tax coffers on top of that pay really Low wages and offer unsecured jobs were workers can't take initiatives to build assets through a safe jobs.
The point of MMT is the Government doesnt have to refill a dam thing they have a printing press unlike you at home who has to budget the government can print money to create services which itself is value added to the economy so the money printed becomes value added to the economy through services its only when the services are worth less then the money invested that we have an issue but a bridge a road, infastucture is always worth investment as it yields far more profit through commerce
They should pay you to take an English class.
@@webfreakz oh....Thanks for the reminder
I don't believe in MMT, It overestimates the ability of fiscal authorities to control inflation. One more thing Debt that might look manageable in one economic environment may become unsustainable in another, as Greece learned during the Great Recession.
@@tareklandoulsi1734 the problem with greece was two fold, not enough government spending, and too much private debt growth. sorry for the insult earlier ;)
Money Printer Goes BRRRRRRRRRRRRR
so how comes Argentina every ten years gets into debt that it cannot pay? if debt does not matter why are there countries collapsing because of it?
Argentina garners little confidence from the investor class, both national and international, constant capital flight from the accounts of the elites in Argentina to the rest of the world. Also MMT is not debt, its the government printing money. While this often elicits fears of hyperinflation and ensuring economic problems the counterfactual would be that following the '08 crash the developed economies that printed money didn't suffer any of those predicted effects and in fact recovered faster than the European nations who were hamstrung by an ineffective ECB.
As far as I understand it - this would only work in a stable low inflation democracy?
Im not an economist but from my limited understanding there's a caveat to the "deficit doesn't matter" case. There needs to be economic growth to offset it. If I recall correctly the percentage of economic growth must outpace the percentage increase in government spending. The nice thing is that some of that spending will be converted back into tax revenue due to the economic activity that the spending stimulates. I could be wrong though. I need to read more books
Roc, Argentina borrows in dollars but can't print dollars.
Because they get in trouble with their foreign exchange reserves (US Dollars, they cannot print it in Argentina), not because of internal problems with their Argentine Pesos (they can print this). For the US it's the other way around.
7:01 money is the blood and irs is the liver...
You only talk about the predictions of MMT but never explain MMT itself. It's a theory, so it models reality in some way. What is the actual model??? And how does it differ from more traditional economic models?
The theory is as follows: I've been eating McDonalds cheeseburgers, fries and a milk shake 3 times a day for the past 50 years, and I haven't had a heart attack or liver failure yet. So that proves that eating healthy and exercise aren't important. Sure, I can't do some of the things that I could 50 years ago, like run, or fit in an airline seat, but that's perfectly normal. I really don't see any reason why I couldn't start eating McDonalds 6 times a day. Except in our case, hamburgers are debt, and running is space travel.
@@AftercastGames That's a pretty good analogy, but there's nothing that will make MMT cult reconsider their nonsense. There is nothing that will make Argentinians (for example) realize they might be doing something wrong and fail every time.
@@wajnerw yeah, but people like you can't seem to realize that Argentina does not have the world reserve currency. Literally trillions of dollars were spent last year and inflation only occurred because of crumbling infrastructure and supply chain breakages
‘No inflation” - isn’t this because the inflation has been in the stock market and not in CPI?
Asset bubble is not inflation
On the point of inflation: Soviet union ran full employment for fiffty years without inflation. Inflation in socialist economies is only present where supply side has the freedom to price essential goods with limited competition, the goverment responds to a shortage by hiking prices, or there is a shortage in goods priced without regulation. So US could abolish inflation trough simply having the state compete with the private sector. While this idea is simplistic and not a good idea to implement alone, that is exactly what the rest of West does with healthcare. This showcases, as Marxist theory predicted, the nature of general price of commodies and their logical limit. Avarage work can not cost less than the basic needs to replenish it, and market competition is insufficient to control price of essential goods, unless there is an astonishing surplus of them. Thus the price of basic needs will always be more or less derived from normal wages, such as the avaragely skilled worker can always just get by with avarage quality of life that the real production of basic goods allows. Money surplus, money invested as capital, higher wages or capital gains bear no affect on what most people consume, as capitalist will not spend their surplus gains on renting apartments or groceries. What this means is that labour bargaining power on wages, unless a great surplus is created or already exist, is the sole reason for surplus, along for example UBI or goverment covering some expenses such as healthcare and education. It is a conflict between two economic classes that drives inflation, and the inflation is a tool for the bourgeoisie to lower real wages. It has nothing to do with fiscal policy directly - hyperinflation is born through goverment or labour unions trying to again and again increase wages in real terms in unregulated market with insufficient surplus and competition. The total amount of money in circulation is irrelevant if it isn't spend by the working class. And likewise the spending power of working class is better described in terms of surplus value capitalist take from their labour in terms of time, instead of prices in money. Inflation is just manifestation of that ratio staying the same when income of the working class increases in terms of money. Which is why goverment can spend however much it want on military without huge effect: while it can have huge affect on local economies near the military personnel, if the wages of those manufacturing drones and missles don't increase the avarage spending power of all workers, no inflation is created. Unless the work hours tied to upholding American military empire result in increase in the bargaining power of the rest of workers, or a shortage in basic needs, it simply can not create inflation. Drones don't buy groceries.
Generally hyperinflation happens only in the context of the massive destruction of supply of goods while nearly unlimited amounts of cash enter a market. Demand or competition for goods becomes very high and the supply of money becomes very high as well. This is illustrated by the Weimar Republic and Zimbabwe's agricultural crisis. The Weimar republic had an entire region's production shut down but started printing money by the ton. Zimbabwe's agricultural sector basically stopped functioning but instead of addressing the inability of farmers to produce food the government instead pumped money into the economy without addressing the root cause of failure. Hyperinflation is therefore a failure of logistics in the context of massive cash injections into market circulation. It is absolutely not born of government or labour unions trying to increase wages with insufficient surplus and competition. That is a monetarist or neoliberal view of the economy and presumes that competition somehow drives prices down when in actual fact the opposite can happen for complex supply chains with products requiring multiple intermediate components. You could see this in the Soviet Union at the beginning of marketisation where prices shot up through the roof for complex products as factories were privatised and demand was failed to be served. Inflation should in this context be viewed as a reflection of how badly the logistics of an economy (goods being allocated to people that want it) is performing and not as some sort of spectre haunting capitalism or haunting the buying power of workers' wages. Inflation can and will exist as long as markets exist, even in market socialism like Yugoslavia. In fact in the Soviet Union with full state control of the economy (zero competition) there was zero inflation after the chaos of the war years. Shortages and embargoes (i.e. logistical disruptions) however, _did_ produce inflation. Inflation is actually good for people that owe money because it decreases the relative value of their debt. It is bad for creditors (capitalists) who rely on debtors to pay back more than what they got the loan for. Inflation should therefore not be viewed as some kind of primarily negative thing in the context of a market economy. It is bad only in the context of surplus extraction (profits) because inflation eats into the profit making of firms. The inflationary crises caused by the marketisation of the Soviet Union, and the Volcker Shock of the United States that helped spell the death knell of organised labour, should absolutely be viewed as an outcome of class conflict but not in the way that you have described. What they represent is not a bad outcome crushing workers' wages, but as a deliberate engineering of supply scarcity or logistical disruption, in order to achieve the political goal of demobilising worker militancy. You can't argue for better conditions if you can't get the basic services for survival. The trap of viewing inflation as a way to lower wages was the one the labour unions fell for back in the 80s in the West. They could only see buying power of workers going down with inflation - instead of seeing the supply shocks for what they were: demobilising tactics to quell militancy and lower expectations. Some unions pushed for higher wages; some like the Australian unions actually pushed for wage restraint to try to maintain the compact between labour and capital. The goal should have absolutely been to push not for better wages, but for workers' control of production, because it was clear that the capitalists had failed to deliver on their promise of steadily improving living standards as long as control of production stayed out of workers' hands. This strategic error; this misinterpretation of circumstances, is what gave us today's world. Do not fall into the same trap.
What's being described here is basically the temple economies of the ancient world at the time of the God Kings of Sumeria and ancient Akkad. It's funny, one of the economists that constantly predicts economic collapses does so by using an ancient formula used by Bronze age economies, that they used to determine when a debt jubilee should be announced. When Keynes wrote his theories (which did work when done correctly) he provided tools for managing economies but he also provided the means by which to undermine and destroy those ideas and the powers that be took that option, which is where all the modern economic theory that doesn't work, that Friedman et al created, came from.
Cool. For 2 decades, Iv driven my family ,coworkers, and random crowds at Taverns, ranting exactly thus! add my rants on Sequestration, and Austerity, it's like you people read my mind. Iv not changed in 40 frickin years, either. A pothole, is just a trickled down Tax Cut. There is exactly zero pot, in any of them. I looked...no joy.
Taverns? You spend the kings coinage in there dust thee?
July 2020 when this video was posted the inflation rate in the US was 1.23 % - Now February 2022 it has been 7.0 %. - Five and half times more which is no surprise if you understand real economics instead of MMT fallcies and denials.
As supply chains were still broken. 5 months later, they resolve, just in time for the interest rates to crash the economy, and thus inflation. Either way, workers and small business are screwed because they weren't really helped, and are now way over leveraged. GG HF
@@trollamos Yes. there is no help from deficits unless you area large organization with political connections or in some instances a person on welfare who gets a bigger hand out.
Sadly, I don't see this get into practical use. Companies (owners, share holder) want profit. What is the easiest way to get more profit? Cheaper labor. How do they get cheap labor if there is a basic income and/or full employment … they don't. So, keep a certain level of unemployment and such little income that people have to work more hours and/or at 2, 3 or more jobs. Keep them desperate, so they take any job. Otherwise companies would have to raise income to get good staff. Some might not even want to work at certain jobs, like fast food chains. And even with full employment, nobody would pay more for the same product just because the staff is more expensive and the company wants to keep its profit. Companies would need to become much more creative to increase their profit … which company wants that?! Sure, more people with more money would lead to more consumer. But that also leads to more work for the same profit if the staff becomes to expensive. I would be glad if someone could show me a solution for those situations or explain to me what I get wrong here (if anything).
Look up Kalecki, or one of Blythe's lectures on the topic. Mark mentions this in this discussion, but you can find whole lectures on it, plenty of them on youtube. Is there a "solution"? I don't think that's the point, it's a political problem, politics is fundamentally about values and beliefs and ideology. What you talk about also has a bit of a Schumpeterian aspect to it, and you can find a real-world example of a system that handles this issue fairly well by looking at Scandinavia, particularly Sweden. Try searching for the Rehn-Meidner model and go down that rabbit hole if you wanna learn more.
@@SomeOne1121 Thank you very much for the hints! I just start to look up Joseph Schumpeter. Sure, it is a political problem. What I meant with "solution" was something like economical arguements which convince even the most hard core capitalist, e.g. by showing that there is plenty of profit aswell. Regarding "politics is about values, beliefs and ideology" .. well, I would say yes and no :) From the voters point of view, more likely. But at the end the lobbyists will "dictate" the politics. And financially supporting companies trust/belief more in numbers and scientific results than voters.
The solution is to elect a progressive government who puts the needs of the people above the needs of the wealthy. As Britain saw in December, that's a massively uphill battle when the entire Establishment dedicates itself by any means necessary to stopping the one man who would have done that. On the plus side, it only delays the inevitable. I'm sure the 'nobles' in late 18th century France never thought they'd find themselves on the guillotine either...
yep, so instead of improving the economy (which is hard), the companies go rent-seeking (jack up your phone bill). The solution is keep economy out of politics (lobbyism), and trust-busting.
Nice plan, next step is to establish an American Cheka to enforce it.
the main issue with mmt is inflation. raising taxes isn't good enough to control inflation.
You need to spend in some was as to grow the economy, e.g. infrastructure, R&D, education, business formation, etc.
@@ws-ob4wy sure, but not from printing endless money
Blythe's comment to the effect that price inflation is virtually non-existent would indicate that perhaps he's never heard of Venezuela or Zimbabwe. What's he thinking of to say that?
Clare Stucki completely foreign examples. He is talking about the context of rich countries. They aren't the norm.
The USD is the *world reserve currency* and is used in nearly every piece of trade. Venezuela and Zimbabwe is not inconsistent with anything they said - you're missing the context
@@5508Vanderdekken One has to wonder, would Blythe make that same statement today? It was a lie then, and it's an even bigger lie now!
@@clarestucki5151 it's not a lie at all - "inflation" that you hear about today is caused by businesses raising prices and supply chain issues. Even then, inflation has been decreasing, when you look at all prices for all goods in the economy. Why did the price for used trucks go up? Because there wasn't enough new trucks for people who wanted one. But, the price didn't have to go up - businesses realize that if people want something enough, they will pay higher prices for it, so they see how high they can charge for something before someone says *no*
@@clarestucki5151 I'm not trying to be mean, but can you explain why you think it's a lie?