A quick trip back in time for a Sunday thread.
MMT basics inbound.
Sometime in early 2020, I decided to get serious about understanding US monetary policy. There was one interview in particular that, well, BLEW ME AWAY.
Its this gem:
@edwardnh interviews @wbmosler about MMT. I learned more in 54 minutes there than I did in three econ classes in undergrad. Seeing as tomorrow is the 2 year anniversary of the interview, I wanted to list few things that blew me away
How Modern Monetary Theory (MMT) Actually Works (w/ Warren Mosler)1
Modern Monetary Theory has become a hot topic of discussion. But is it well understood? In this interview with Real Vision’s Ed Harrison, Warren Mosler, the founder of MMT, describes exactly what Modern Monetary Theory is, and how the framework can be utilized. Particularly interesting is Mosler’s ambivalence about the political furor enveloping MMT. He sees the economic framework as more descriptive of monetary operations than prescriptive of policy. Mosler also outlines why MMT’s operational bent made it attractive to finance professionals long before it became a politically-charged debate among academic economists and politicians. Filmed on May 29, 2019 in New York.
1) “So, that understanding is that comes out that they’re spending first, okay, and then taxes get paid. They spend first and then the funds are there for bonds to be purchased.”
That is Warren Mosler blowing my mind. Right there. Government SPENDS FIRST.
“Once you’re spending first, once you get the sequence right, all these other things that you hear are obviously wrong.” – WM
Warren also wrote “Soft Currency Economics” in 1993 which states the same thing this way… http://moslereconomics.com/wp-content/uploads/2018/04/Soft-Curency-Economics-paper.pdf
“Government fiat money necessarily means that federal spending need not be based on revenue.”
This insight is extremely powerful. It leads into the next mind bender from Warren
2) “So, the tax liability functions to create unemployment as we define it…
…And so, a tax creates a certain number of unemployed…Well, it’s important. It’s important because today, we use unemployment as a buffer stock against inflation”
TAXES ARE JUST A TOOL TO CREATEUNEMPLOYMENT AND CHECK INFLATION.
When I heard that, I went home and told my wife that everything I had ever heard about money, banking, and taxes was a lie. I freaked out. BUT WARREN WASN’T DONE.
3) From Ed Harrison
“Doesn’t there come a point where all of that is inflationary and it spirals out of control?”
WM “Yeah, well, not spiral out of control.
Because once you understand that currency is a monopoly…
…inflation- what we call inflation, it’s just a series of one-time events. Anytime you stopped doing it, it stops. It’s not like if you make one false step, you turn into Zimbabwe or something like that. It’s one time events.”
Warren did more for helping me understand the monetary system in this interview than any other 50 minutes of time I have experienced.
Now, to be clear, I don’t think the world is quite as simple as Warren depicts in this interview, but this interview led me to…
Their thinking helped me so much understand the world as it really is!
Bottom line, this Mosler interview has challenged my thinking and made me challenge my understanding of the world more than almost any other.
If you have any questions you want @wbmosler to answer, let me know. I can’t promise you I’ll ask him as I have a whole battery of questions prepared. But I will try and integrate them in. Airing on
@RealVision next week I believe