Warren Mosler MMT Podcast ep 81 delakoan

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The MMT Podcast with Patricia Pino & Christian Reilly: #81 Warren Mosler: MMT Q&A Holiday Special! (part 2) (libsyn.com)

MMT Podcast (Christian Reilly)@MMTpodcast

2020 abe. 31

(https://www.patreon.com/posts/45556519)

[Transcript] Opening monologue for Episode 81 – Warren Mosler: MMT Holiday Special (part 2)

At the beginning there, you heard our guest this week, MMT founder Warren Mosler and in a moment we’re going to hear part 2 of our interview with him, based on questions written by our patrons.

A link to part one of the interview is in the show notes, so please have a listen to that if you haven’t already, and also if you’re totally new to MMT there’s a link to our first three episodes where me and Patricia lay out the basics in an easy to understand way.

Before we dive in, some notes about things that came up in the conversation.

Regular listeners will know that a good jumping off point to bear in mind is that your government (or its designated agents) is the sole issuer of the currency you use. While there are exceptions to this, it’s certainly true for many countries in the world, such as the UK, the US, Japan, Canada, New Zealand or Australia to name a few.

As I see it, the rest of MMT is largely about getting to grips with what that means for you and me. Many people are drawn to MMT’s implications for the basis of austerity – namely the idea that your government’s just about to run out of money. Spoiler alert: that’s poppycock, or for our American cousins bullshit. Monetarily sovereign governments create new money every time they spend – so as the issuers of currency, by definition, governments like these can’t run out of money, and the politician that says otherwise is either lying or as Warren likes to more diplomatically put it committing an innocent fraud.

So. In this interview, Warren talks about the interest income channel and to understand that, you need to bear in mind that the government is a net payer of interest to the economy, so that means that when interest rates go up, interest payments from the government to the private sector also go up, giving the private sector an increase in potential spending power – so, contrary to orthodox thinking, Warren and other MMT economists think that raising interest rates likely imparts an inflationary bias to the economy rather than cooling it down. And there’s more about this in our episodes 59 and 65.

Warren also mentions the automatic stabilisers and that means the automatic spending and taxing that happens in response to the business cycle. When the economy is booming, private sector earnings go up and as a consequence tax payments from the private sector to the government also go up and at the same time, unemployment comes down, so support payments from the government to the private sector also go down. In a recession the opposite happens: there’s an increase in unemployment, so payments from the government to the private sector go up – at the same time, private sector incomes go down, so tax payments from the private sector to the government also go down. The overall effect of these dynamics is that the government deficit expands and contracts to counter the business cycle and supposedly automatically stabilise the economy, but anybody that’s lived through a recession will tell you it feels about as stable as Donald Trump’s internal monologue. You can listen to our episode 9 for more on automatic stabilisers and our episode 47 for the MMT proposal to improve them.

I’ve linked to all of the above in the show notes, along with more of our interviews and essential writing by Warren, plus a few other things that came up in the conversation…

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So, thanks as ever for the time you put into understanding MMT. Let’s dive in!