#154 Warren Mosler Answers Audience Questions
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MMT founder Warren Mosler answers listeners’ questions on topics including: how governments spend, the role of taxation, government bond issuance, central banking, commercial banking, interest rates, exchange rates, inflation, the NHS, the MMT Job Guarantee, the Eurozone and more.
Transkripzioa
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I would start by explaining what actually happens when you pay anything to the government with online banking
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you can see it you look at your bank account it might have five thousand dollars in it and you send a thousand
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dollars to the government and you watch your account online very closely and it goes from five thousand to four thousand
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so what actually happened all that happened was the government changed your number from a five to a four nothing goes anywhere nothing comes from
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anywhere they just change that number now if you receive money from the government like when I get my Social
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Security check and if I had four thousand dollars in my account the four thousand changes to seven thousand I get
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my three thousand dollar payment and all the government does is change the four into a seven they don’t have money they
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don’t not have money they’re just the score keeper changing numbers up or down nothing’s constrained by the number it’s
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just constrained by their desire to change it up or down these Social Security trust fund is just a record keeping of what numbers they changed up
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and what numbers they changed down
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[Music] this is the mmt podcast with Patricia
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big thank you to all of our supporters so far and thanks as ever for the time
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you put into understanding mmt let’s dive in welcome one and all to the mmt
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podcast I’m Christian Reilly and I’m Patricia Pina and we’re delighted and honored to be joined today by mmt
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founder Warren Mosler thanks for joining us today Warren good to be here again so we’ve had lots of Juicy questions come
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in from our patrons to ask you Warren and I’m going to read the first one and I chose this one to start with because
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it’s about the fundamental mmt money story so here we go this is from Mark Cano he writes reading kelton’s can
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taxes and bonds Finance government spending helped me understand why our tax dollars aren’t funding the
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government since there are funds that exist specifically for Social Security and Medicare though is there a better
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angle or more simple way of engaging with folks about how their tax dollars aren’t funding these programs even
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though they clearly see the FICA deductions from their paycheck so that
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would be chapter 4 and my seven dif book you know free online non-technical take them five minutes to read it and I would
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start by explaining what actually happens when you pay anything to the government the tax or buy anything and
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with online banking you can see it you look at your bank account it might have five thousand dollars in it and you send
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a thousand dollars to the government and you watch your account online very closely and it goes from five thousand
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to four thousand so what actually happened all that happened was the government changed your number from a
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five to a four nothing goes anywhere nothing comes from anywhere they just change that number now if you receive
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money from the government like when I get my Social Security check and if I had four thousand dollars in my account
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what happens on the first of the month or so is that the four thousand changes to seven thousand I get my three
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thousand dollar payment and all the government does is change the four into a seven it’s just score
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keeping so it’s the same um if you go to a football game and your
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team kicks a field goal in America you get three points and your score goes from seven to ten and so where did the
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stadium get those points from you know it’s just not an applicable question so any payments made to the government all
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they do is change the number in your account down and any money they give you is the way they say it they just change
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your number up so they don’t have money they don’t not have money they’re just the score keeper
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changing numbers up or down and you can call it anything you want you can call it Social Security you can call this you
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caught that they’re just changing numbers up and down there nothing’s constrained by the number it’s just constrained by their desire to change it
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up or down these Social Security trust fund is just a record-keeping of what numbers they
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changed up and what numbers they changed down it doesn’t cause anything it’s just residual record keeping so let me leave
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it at that and uh please read chapter four okay so the second question is from Peter Cunningham I hope I pronounced
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that right yes how do I best convince an mmt skeptic that in the UK taxation
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drives the need for the pound they seem to think that Sterling has intrinsic value in which the user must
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have confidence does that allude to the monastery Warren yes given the money story but tell them
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look if that was true don’t you think the brown would have gone to zero a long time ago yeah nobody has any confidence
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in the pound and yet it remains and even during a major crisis it may go down a few percent but it remains and it still
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drives the all the production and all the consumption in the country and uh you can use the money story you can use
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other examples it’s a conceptual understanding and if it’s too hard for somebody I guess it’s too hard for them
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I’m not sure where you go from there okay third question this is from uh John Everson if taxes are needed to fund
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government spending how can the left argue for taxing the high paid and Wealthy why wouldn’t the right argue for
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tax cuts well they would and they do and they’re successful and they don’t have
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the inflationary consequences but they do exacerbate the income distribution issues and the left should be arguing
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them on exactly that using that criteria that the reason we want to tax away money is because we don’t want them to
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have it not because we need it they just to be honest about them we don’t want them to have the power and influence
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that they have due to having money that’s the intellectually correct
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argument and you know either you believe in a you know informed electorate making
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decisions or you don’t so give them the accurate information and let them decide okay so the next one is Paul Paul
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danderand and he asks a question about government selling bonds to match the
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spending or deficit when the government spends the government creates money if I understand this correctly in order
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to keep Central Bank interest rates stable the government sells government bonds to mop up the liquidity that is
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Created from government spending Banks can then buy those government bonds to gain interest earnings is it correct
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that this is the main reason why the government establishes bonds in equal amounts to the spending or is it in
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equal amounts to the deficit the difference between spending and taxing since this is a Cornerstone of the bond
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part of the national debt can you explain if this is still necessary today if the government stops issues issuing
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bonds then are there other means to stabilize interest rates for the banks okay so that’s in soft currency
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economics that’s what started the whole thing and that was written 30 years ago it’s fairly short and it’s also covered
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in the 7dif book Which is less Technical and
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um you know parts of that are correct but the basic understanding is that the
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government spending adds money to people’s bank accounts as I spoke before they just change the numbers higher
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and then when someone pays taxes the number gets changed to a lower number and that lower number that remains in
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the account represents the deficit spending the difference between spending and taxing spending makes the number higher taxing makes it lower then you
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have a number left over and that’s the public debt and rather than leave it in
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non-interest bearing accounts that accounts that used to be non-interest bearing the government offers government
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bonds securities bonds bills and notes that were nothing more than alternative Accounts at the
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central bank that paid interest well nowadays what they do is they just pay interest on the original checking
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accounts they call it interest on reserves and that’s a perfect substitute for offering separate accounts so they
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can now support interest rates simply by paying interest on these Reserve accounts which they didn’t use to pay interest on before and now that will
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support interest rates okay this is number five from Peter janovsky how is
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the job guarantee anti-inflationary so what we do now for Price ability is we
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use unemployment as what you call Buffer stock so there’s a there’s this Army of
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unemployed out there they are the thing that keeps downward pressure on wages because people working are afraid to
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lose their job and become unemployed and businesses can hire people who are unemployed who aren’t working getting
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any money presumably at a lower price and hiring somebody who already is working at a higher wage where you have
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to pay them extra so by having a reserve of unemployed always today are looking desperately looking for work you know
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that’s what we do now as inflation control all right so what we’re saying is alternatively what we can do is use
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people who are already working as inflation control rather than unemployed and all we have to show is that that’s a
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better inflation control than what we already have to make it absolutely compelling we don’t have to show that
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it’s a perfect inflation control and controls inflation everything just that it’s better than what we have now so what we say is that in an employed
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buffer stock which is a job guarantee the transition job an employed buffer stock is a superior price anchor to an
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unemployed buffer stock and why is that and that is because business prefers to hire people already working they don’t
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like to hire unemployed for a variety of reasons they might be on drugs they might get fights they could have all
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kinds of poor work habits they don’t won’t show up on time they don’t know it’s a high risk hiring somebody who
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hasn’t been at work for a while and so they’d rather pay a little extra and hire people already working well that
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reduces the value of unemployed as inflation control we’ve seen inflation
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go up even with high levels of unemployment because they don’t act as a buffer on wages the way we like them to
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because business really doesn’t want to hire them to begin with so by using a employee buffer stock offering anybody a
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job who wants a job at the buffer stock wage which will this point logic be the
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lowest wage in the economy right and let’s say it’s 10 pounds an hour just for a number okay now we have people
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already working so now when a business goes to hire they’ve got people who already have been coming into work to
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jobs every day they have a supervisor they can ask them if they get along with people or if they’re clean if they
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recommend them or whatnot and they will be more likely to hire a worker in the
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transition Job Program than they would be to hire somebody who’s unemployed and so that makes the transition job a
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superior price anchor to unemployment again not that it’s perfect but it’s far better than what we have and so there’s
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absolutely no reason to not do it immediately and massively improve output
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employment standard of living everything the only reason you might not do it is because you didn’t understand government
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Finance as we just explained before and you might be worried that it might cause the deficit to go higher even though
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it’s a better inflation prevention than having an unemployed buffer stock isn’t it the case that you and Bill have
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projected that you would need a much smaller neighbor than you would in nairu if you know what I mean yes yes because
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employed buffer stock is more effective at transitioning people into the private sector which is the whole point then uh
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it doesn’t need to be as large and so you can have fewer a lower level of transition job employment than you would
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unemployment and still have a better price anchor yeah absolutely and there’s a lot to read on this you know on my
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website I have a paper called Full Employment price stability fairly short and it goes into some of these details
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so the next question is from NYX Stewart and it says my wife is a nurse and would
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rather she was better paid the state is the price header when it pays higher prices it revises the value of the
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currency down reducing purchasing power I.E it’s inflationary can nurses get a
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pay rise without creating inflation I’ve always been concerned that the mmt lens could be used to argue against fair
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wages yeah so um the answer is right now for example in the UK there’s a lot of
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unemployment so by paying more to the nurses it would add to aggregate demand and you’d have
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the private sector more likely to hire although it would be better if they weren’t unemployed or people if they were in a transition job but still the
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way the program works now is that you know the unemployment is the evidence
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that the public debt is too small that the deficit is too small that the government has not spent enough to cover
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the need to pay taxes and the desire to save so there are different ways to get to that level and one of them would be
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to pay nurses more now that would give nurses a improved what’s called real
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terms of trade their real wage would be go higher than somebody that didn’t just
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get an increase and what you have to look at is and what real wages are and on that scale are nurses a relative
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value compensated where they should be relative to doctors relative to workers
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in education you know teachers and things like that and if they’re all kind of On a par as to where they should be
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that’s one thing if one group has fallen behind and needs to catch up that’s another thing and I think the situation
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in the UK is that nurses have a long way to go to just catch up in any minimal Ripple that would have on distributional
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issues would be trivial compared to the their need to catch up particularly compared with their usefulness and any
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kind of social equity in the society this is from John Everson millions of workers in the UK public sector
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including the National Health Service are striking for large percentage pay increases if Paid in Full the wage
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claims could add 10 billion per year to government spending the health Minister says it’s not affordable what does mmt
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say are the options implications and consequences well number one the checks won’t bounce number two it won’t cause
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interest rates to go up those are independent decisions look if the UK Cuts interest rates to zero how much
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does that cut fiscal spending like a lot far more than that 10 billion you’d have a lot of room to increase spending just
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to get it back to where it was before all right number one number two spending at the moment is deficient based on the
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unemployment rate in the UK so there’s plenty of room to do that right now in the UK economy so what you look at is is
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the government spending enough to cover the need to pay taxes and the desire to
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save and the evidence they’re not is unemployment why because any additional
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money the government might spend on unemployment any additional deficit spending there’s only one of two things
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that can happen when those funds are spent either they can be used to pay taxes that is when the government
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credits an account they can either pay taxes and that account is debited or they’re not used to pay taxes and they
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wind up as Savings in somebody’s account and the only reason the economy would be throwing people out there are not
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throwing but putting people forth looking for work at the macro level is
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either to pay taxes or net save so unemployment is the evidence that spending is not enough to cover those
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two needs that are created by the tax liability okay and again that’s outlined in my 7dif book Seven Deadly innocent
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frauds uh hand in soft currency economics so I’d highly recommend reading the seven deadly innocent frauds
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I think that’ll become painfully obvious after 15 minutes I have a follow-up question you mentioned that the UK has a
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lot of unemployment and full inflation isn’t a concern but we’re always told
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that the UK has very low unemployment and that we’re record low unemployment and unemployment rate is like 3.6 if I’m
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not mistaken at the moment um so can you explain a little bit more of why what you’re saying is so
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different from what the main narrative about UK unemployment is they have this
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narrative that if you hire people down to a lower level than that would say two percent you will cause inflation it’s
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called the Phillips curve and it’s just shown not to be true you see much lower rates than that in other countries also
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I think you have another measurement that it includes like part-time workers and people marginally attached and that
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type of thing and people who you know in the labor force that would take jobs if they were offered but they don’t strictly qualify as unemployed because
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they haven’t been actively looking for work or something generally that number’s about double that particular
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rate the second thing is is they say inflation but what they mean is the cost of living right the CPI and that’s a
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very different thing and inflation is a continuous increase in prices and what they’re talking about or what they’re
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afraid of worst case might be a one-time increase in some of the components of
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the Consumer Price Index and not a continuous increase you know over time
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that’s going to have some kind of Presumed negative effects now the other thing is there are no negative effects
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to the economy because of high inflation no Economist has ever been able to detect any negative effects there are
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negative political effects because people don’t like it what they’re talking about you know behind the rhetoric is if they do this and the
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Consumer Price Index goes up they might lose the next election there’s no way it’s going to make the economy which look at Argentina with 90 inflation and
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they’re outperforming the UK okay in other countries in terms of you know GDP growth and you know the stock market’s
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going up and all kinds of things and so the way to say this if you look at real standards of living and what’s happening
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in the UK the idea that because unemployment’s only three and a half which is what millions of people that
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having those people working productively is somehow going to have an adverse effect on the well-being of the United
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Kingdom is complete nonsense there’s like no basis you know to that statement this is from Danny Roberts I’m reading
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John Kenneth galbraith’s 1954 Book American capitalism in which he
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introduces the concept of countervailing power as the operative check on Market power in the absence of classical
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conditions of competition a union wields countervailing power against a large
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employer for example in the presence of a job guarantee what are the primary checks on Market power is one or both of
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classical competition or countervailing power strengthened as a check on
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exercise of Market power okay so what’s happened is of course Labor’s Market
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power if you want to call it that has vanished you know for the most part since the 1980s and you can see it in
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the share of wages versus profits and that just went flat due to International
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competition and you know all kinds of forces come in but what’s at the root of
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it is that the labor market is not a fair game it’s simple mainstream game
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theory that they conveniently Overlook and the reason is that you know people have to work to eat while business only
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hires if it feels like it’s a good return on an investment that’s a huge disparity of power so look even if
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you’re the last guy unemployed looking for a job and somebody and you can’t find one and then somebody offers you
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one your choices are take the job or don’t eat right and so you don’t have any Market power even if you’re the last
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guy so the idea that as the unemployment rate gets smaller the market power the remaining under Point goes out that’s
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complete nonsense and so what that means is that real wages will stagnate it somewhere near subsistence levels unless
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there’s some support for labor and so if you want a society where real wages are near subsistence levels all the time
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then you just leave it alone and that’s what we have what we have and if you want a society where the share of wages
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you want to be higher than it is the higher than subsistence levels and the real standard of living of working
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people is above subsistence levels you know maybe at the expense of the ultra
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Rich having a lower standard of living you know they can’t have a super yacht that’s quite as large or something like that if you want the distribution of
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resources of real consumption to be skewed other than a bare minimum to the
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people who work and produce for a living then there has to be some kind of institutional structure to achieve that
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otherwise the institutional structure that we have forces real wages down to stagnate down a subsistence levels and
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that’s just a simple point of Market logic based on on Elementary game theory that there is no dispute for that when
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confronted so when you confront any mainstream Economist with that they’ll agree but nobody ever confronts them
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with that they all go with all kinds of other discussions that one they have you know no way to disagree with and so
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because we have a government that employs a coercive taxation to create
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for sellers in the private sector to do things to get the government’s funds so that it can pay its taxes and that’s the
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basis of how we transform resources from private to public domain then the institutional structure that starts with
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that you know determines the distribution of real consumption and by
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leaving it as it is now that structure is determining that real wages will stagnate it can just as easily be
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adjusted for real wages to be a much higher percentage of GDP and that’s a political Choice those two choices are
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political they’re not something that naturally happens in market economies that don’t have coercive taxation
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because there is no such thing all of the economies today that have a government have coercive taxations that’s a monopoly so there’s a big fat
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Monopoly right in the middle at the center of all economies and the idea of
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Market forces doing this or that is obviated by Monopoly so those are the facts we face and we take it from there
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yeah so the next question
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politicians have an endless debate about public investment in rail transport infrastructure the sum seem small 40
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billion over 15 years or so compared to covet’s support and waste hundreds of
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billions the same goes for public investment in energy infrastructure and in hospitals is there an mmt perspective
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that can get the nation what it needs quickly is there any limit to government spending in Brackets right now GDP is
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approximately 2.5 trillion and annual government spending is approximately 1.1 trillion government debt is at 100 of
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GDP yeah or the finances aren’t the issue the issue is for rail whether there’s enough steel there’s enough rail
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cars or enough people that you’d rather have driving trains and servicing trains than you would doing something else so
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if you had a war and you needed everybody in the military you’d say I don’t want to pull people off the front lines to build new rail cars but you
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know maybe you would if you needed them to service the military I suppose but those are the types of questions that you ask is how do I want want the real
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resources of the country allocate now personally for me it’s not an mmt thing I think buses are more efficient
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allocation of real resources than trains at least in the United States they’re a whole lot less expensive because in real
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terms they consume less energy per Rider and they are less expensive to build and operate and everything else so we
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already have the rails and there are already some limited areas where we ride buses on Rails by you know Paving the
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areas on both sides of the rail so a bus can ride on it and then you get no traffic bus transportation at a fraction
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of the price of rails so a trend might cost a hundred dollars to go from New York to Washington a bus might cost 25
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or something like that reflecting you know those kinds of resources and the bus on the rails of course would go a
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lot faster and be more efficient than the bus on the road so it would be even lower cost to do it I’m not trying to
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argue for that but I’m just saying that those are the kinds of arguments that are public purpose is about which
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resources we want the private sector which resources do we want in the public sector and then once you’ve decided that then
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the monetary system can accommodate and get get us from here to there this is from Colin Ken Warren please talk a
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little bit about how rate hikes are inflationary via the interest income Channel yet rate hikes also appear to be
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correlated with the onset of recessions not sure what to make of this push me
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pull you effect so number one I haven’t seen a research paper out of any Central Bank in at least 20 years in support you
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know of the idea that rate hikes slow down the economy and bring down inflation the last one I saw was I don’t
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know Bank of England 25 years ago or something saying that a one percent increase in rates would bring inflation
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down by a tenth of a percent with a two to four year old act okay there hasn’t even been anything like that in 20 years
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now they’re all pursuing these policies presumably based on science you think they’d have some research papers showing
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that this stuff has some basis in you know in their research when they do the economy metrics for the real economy but
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they don’t it isn’t there and if anything there have been papers around the edges from the FED some of the regional feds coming out showing what
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I’ve been saying so number one there is no research behind any Central Bank assertion that rate hikes will slow the
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economy down and bring down inflation now anecdotally you can say that that recessions have followed rate hikes but
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they’ve always followed something they’ve also all followed the jump in oil prices you know uh like in like 2008
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up to 155 dollars a barrel because certainly in 1979 oil went from three dollars to forty dollars and and those
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types of things so and you’ve seen budget deficits in real terms collapse in front of all the recessions and so
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you’ve seen fiscal collapses in front of every recession and so you know things happen in front of recessions and when I
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look at the rate hikes they were delayed the onset of recession until one of these other forces came along and drove
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us into recession that’s how I read the data so number one I don’t read that the data the way your your questioner does
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now as far as interest expense goes every mainstream Economist forever up
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until two years ago has been screaming at us watch out for budget deficits I
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mean I had a discussion with Paul groupman when he was having that discussion with Stephanie Kelton about why it’s not a good idea to use deficit
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spending to sustain a job guarantee he said look if the deficit gets too high you know that means uh we’re paying
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interest on all that debt which is true and if it’s too high that means If the
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Fed wants to fight inflation it can’t do it by raising rates because the interest
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expense will cause inflation rather than slow it down and that was this argument as to why we can’t use massive deficit
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spending to sustain Full Employment and I agreed with them that’s absolutely correct and that’s the reason I support
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a permanent zero percent rate so we can use deficit spending we can deficit spend to support full employment
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maximize output real standards of living and not raise rates to fight inflation
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because why would we want to do you know there are other things to do and that I agree that you can’t use rates to find
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inflation now back then the debt to GDP was only 55 or 60 percent of GDP and all the other economists were saying the
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same thing you know that you got to be careful and I watched after in 2008 to see what the data was telling me I and I
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talked to about it then I said I don’t think these rate cuts are going to help the economy in any noticeable way
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because they’re cutting interest income to the economy by cutting rates and bernanke’s rate cuts from five or five
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and a half to zero cut maybe 400 billion dollars a year of government interest expense and I was saying you know that’s
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works against growth you know so that’s cutting cut of the deficit by those
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large amounts and if you looked in Europe I was at uh Remini in 2012 when
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uh draghi muradragis made the statement that we’re going to do what it takes to prevent the fault and rates were seven
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percent in it’ll either rates and on the way to Infinity they were all panicked that’s why draghi said
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that and they started coming down and I said yeah rates are going to come down and there’s not going to be a default
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and the government is going to be you know saving money on interest expense but that means the private sector is
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going to get a lot less money on interest expense their debt to GDP was 125 at the time and so the private
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sector in Italy is going to stagnate as rates come down because of those lack of interest income it’s taken away from
28:47
them and looking at the data over those 10 years or so I think it played out that way which is why the FED doesn’t
28:54
have any reports anywhere showing how rate Cuts help the economy because they didn’t and they certainly didn’t cause
29:00
inflation or anything else nothing happened until after covet inflation stayed very well in Japan you know 30
29:06
years of zero rates have with no inflation and so um once you know covid hits and
29:13
they also proved that government checks don’t bounce they just add 2 trillion of deficit spending and no taxes and it
29:18
just goes through like water and rates stay low and none of these bad things happen no solvency problem the FED did
29:24
estimate that CPI went up by a half a percent a year because of the additional deficit spending okay and then we got
29:31
the large jump in the CPI when oil went from I don’t know 30 or 40 up to 120 and
29:38
that pushed up CPI fine now I’m saying the question is about rate rate increases and so the the FED response to
29:46
that has been to increased rates and as soon as I started doing that I’m saying look debt to GDP is now 120 it’s
29:53
doubled so the effect of these rate increases are decreases the income effect is double what it was
30:00
historically over the last 30 years because jet to GDP was always half that and now we’re back to like what it was
30:05
in Italy in 2012 and had a dramatic effect so I’m saying that these rate
30:11
increases are just going to be throwing gasoline on the fire the extra deficit
30:17
spending from this increasing interest rates which ultimately on a 30 trillion dollar public debt which is 120 percent
30:23
of GDP is um if you increase rates from zero to four where they are now three and three quarters you’ve added over a
30:30
trillion dollars annually of interest expense it’s all deficit spending you’ve increased the federal deficit by a
30:36
trillion dollars paying interest which is you know basic income for people with money it only goes to people who already
30:41
have money in proportion of how much they have there’s nothing on the supply side it doesn’t add anything for sale
30:46
this is just you know your demand side with no supply side you know that is
30:52
going to support to some degree you know maybe a large degree output employment growth and prices and it’s not going to
31:00
slow things down it’s going to speed things up and maybe we’re on the fence when debt to GDP was 55 at 60 I don’t
31:06
think so I think even at that high level we were you know they had the interest rate thing backwards I think Greenspan’s
31:11
rate hike supported the economy and I think the data shows that but now at Double that it’s got to be you know
31:17
gangbusters and if you look since the rate increase has started GDP was struggling around zero and then second
31:24
quarter went up to two something and now the latest estimate out of fed the nowcast we’re getting to the end of the
31:30
quarters 3.4 and then you look at all the personal income numbers which are all supported by high rates households
31:37
on net Savers they’re just going through the roof and the economy is strong yet
31:42
everyone’s forecasting that we’re going to have a recession next year because the stronger economy is going to cause
31:49
the FED to raise rates even more to in order and so the recession is going to be that much worse and I’m
31:55
going no you’re going to raise rates even more but that’s going to make the expansion that much stronger now the
32:01
markets can’t foresee that yet because they’ve got it stuck in their head you know that the rate hikes cause
32:06
recessions and so here we are and where does it end well I was in Argentina in
32:11
April talking to people including the Central Bank inflation was 40 percent rates were 35 they were keeping a real
32:17
rate of 5 to slow down inflation I made this exact same argument you’re spewing
32:22
out all this peso interest which over there they don’t even spend it or anything just goes to a Foreign Exchange
32:27
Market they sell it for dollars the currency goes down they get inflation through the import prices which causes
32:34
the government to raise rate you know so inflation goes to 50 so the government raises rates to 55 and so they’re paying
32:40
more Pesos into the foreign exchange markets because the Savers here don’t want pesos and they want dollars so they
32:46
just sell pesos and five dollars and inflation goes up to 60 so rates go to
32:51
60 C5 so I was there in April When Rachel about 40. now they’re about 85 and inflation is about 90. like there’s
32:58
no end to this you know they’re carving this thing to happen and start we’re started on that
33:04
path does it go as far as Argentina probably not we’ll probably get something to knock us off the pedestal
33:09
you know before then maybe oil goes to 300 or something but that’s the path we’re on right now is it fair to say
33:15
that um the rate hikes aren’t having the stimulative effect that we would kind of
33:21
Desire has you know humans in an economy wanting a progressive distribution of
33:27
wealth yeah this is the most yeah it’s the most obscenely regressive policy
33:32
possible the worst dramatic iteration of trickle-down ever invented the people
33:38
who are getting the benefit of these rate hikes the recipients of the interest income their marginal
33:43
propensity to consume is relatively low basically yeah and you know not that that’s a bad thing but it just but
33:49
what’s happening is that they’re getting enough interest in come to so that the money they do spend is supporting the
33:55
economy and that’s a regressive trickle-down economy where now the rest of us are bad Beggars to the people
34:01
getting the interest income for jobs and what in scraps at the bottom of the file look the FED is independent we all want
34:08
independent monetary policy right so they have independently decided to give
34:14
over a trillion dollars a year when they were giving nothing but to give a trillion it’s not really nothing because they’re paying a little on bonds but to
34:20
give it another trillion dollars a year to people who already have money in proportion they already have in order to
34:26
fight inflation we’ve got our independent guys do that without Congress without discussion with anybody
34:31
else except their own internal discussions and here we are and that’s what’s supporting the US economy right
34:36
now it’s like wonderful huh I was in Christian said for lunch today down by the water
34:42
and we have something that I forecast or you know Muse about 40 or 50 years ago
34:48
with my partners that yeah you know tourists on cruise ships from Latin
34:54
America having lights being serviced by American the equivalent of what back then was what’s called peasants right just to
35:01
make the point working for you know eight dollars an hour or something ten dollars an hour at these restaurants
35:07
servicing tourists from South America now back then of course it was a reverse the Americans were down in South America
35:13
getting serviced by people down there working for nothing so we’ve come full circle now and congratulations to us
35:19
great does that mean we’re a developed country now the insanity there’s no end to it well I
35:27
just wanted to clarify one thing to get it clear in my head earlier you said that the means we have to control
35:34
inflation right now is to move to manipulate unemployment effectively and to increase unemployment and decrease in
35:40
employment but you now you’re saying um that even the mechanism by which they
35:46
attempt to do this doesn’t actually do what they think is going to do right it makes unemployment lower right
35:53
unemployment’s been coming down since started raising rates employment’s been going through the roof the last headline
35:59
was the FED Now is really in trouble because the job Market’s so strong you’re going to have to raise rates that
36:04
much more because you know I used to talk about the carpenter with this piece of wood no matter how much I cut off it’s still too short you know or the
36:11
hairdresser no matter how much I cut off it’s still too short that’s what we’re that’s what the central banks all over the world are doing now so the next
36:18
question is by Kenny Subarus and I kind of feel I kind of wish we had a visual medium to answer this question but I’ll
36:25
ask it anyway he says um hi Warren if I remember correctly you often talk about
36:30
how raising interest rates generally does not slow down business borrowing can you show us what data we can use to
36:38
show this point you often tweet graphs from Fred can you explain which ones we
36:43
need to use to show this can you also show the different graphs to differentiate between business borrowing
36:48
borrowing for business buying homes and refinancing and finally government interest payments I just want to make
36:56
sure I am reading them correctly when showing them as evidence to others yeah just go to Fred and start with bank
37:02
loans and they’ll give you a whole series of things and you can just pick the ones you want Total bank loans for
37:07
Real Estate Bank owns for consumers they’ll have credit cards total credit all kinds of securitized credit they’ll
37:15
have all that then they’ll have federal government expenditures for interest and they’ll have receipts and they’ll have
37:21
all kinds of things and you just start looking these things up and you’ll find them now what they don’t have that I’ve
37:26
been able to find is because of all this equipment I’ll discuss it for quantitative easing so fed owns the
37:33
government securities but they pay for them they’ve created balances in account set to Federal Reserve which are held by
37:39
commercial banks on behalf of people regular people who have money in their Banks and so they pay interest on those
37:46
and it’s like eight trillion dollars it’s a lot and those interest payments I haven’t been able to find on Fred where
37:52
the interest on those payments is but you’d want to look at the difference in those how they’ve gone up since the rate
37:58
hikes have started so you’ll get the government interest expense but it’s just the U.S treasury it doesn’t include
38:04
the Federal Reserve so I’ll go through it look it all up and just be careful that some of the things are very
38:09
specific you know interest paid by the US Treasury not necessarily interest paid by the Federal Reserve this is from
38:15
AJ Wales if we could assume central banks around the world are not stupid and they know interest rate increases
38:22
doubt curb inflation that’s a big if then why do they insist on raising rates
38:27
are there any other outcomes than the potential for increased unemployment are
38:32
there any potential benefits okay so let me say all I can think of this is all
38:38
premise by all I can think of why they do this is that they don’t understand where the value of the currency comes
38:45
from which was an earlier question just like one of your readers and they believe it’s all confidence and if
38:52
people lose confidence like they saw what they thought happened in the UK rather than a technical thing in Pension
38:58
funds but if people lose confidence then you know they turn into uh Zimbabwe or
39:03
Venezuela or something like that and so they have got to be very careful to maintain confidence because they don’t
39:08
understand tax liabilities are the source of value and so they also know that people that are
39:15
worried about inflation and the you know what in whatever form they Define it and
39:21
the monetary system in general and that people also believe that raising rates
39:27
um is the medicine to cure this problem that
39:32
to keep confidence they have to raise rates and and they’re hoping the monetary system cures itself in the
39:38
meantime while in the meantime they’re keeping confidence high enough to get through the crisis all right if they
39:43
ever decided you know what we really need to lower rates to reduce inflation because that’ll cut the U.S the budget
39:49
deficit by a trillion dollars a year the biggest deficit reduction they could possibly do and that will cause prices to go down which would be true or you
39:57
know to stop going up be a deflation or bias then uh people would think they’re crazy it would lose confidence in the
40:03
whole system would collapse I can’t tell you that’s what you’re thinking but I’ll throw that on as like a remote
40:09
possibility so the next one is by jarno letola I
40:14
hope I pronounced that right um can exchange rates and imported inflation become a problem for a
40:21
monetarily Sovereign government that depends on for example food and energy Imports and isn’t a major exporter of
40:29
for example oil or natural gas so that comes down to what are called your real
40:35
terms of trade and so any nation has you know imports
40:41
and exports in pretty good size and the difference is the trade deficit or the trade surplus and if you look at these food importers
40:49
uh and these people are always referring to Emerging Market countries African countries correct that type of thing
40:56
they don’t look so much it’s Japan right it was importing all their resources and I believe it’s a food in Porter last I
41:02
checked so they’re looking more at these Emerging Market countries I thought he might be referring to the UK but but
41:08
maybe I’m wrong yeah maybe the UK and so the UK has a fairly large trade deficit
41:15
right uh yeah last I checked okay so that means the UK is importing more than
41:22
it’s exporting at current prices and so the UK is benefiting to that extent
41:27
right it’s real terms of trade or or what they are they’re very they’re favorable because when it’s running a
41:33
trade deficit and it’s got favorable terms and trade the rest of the world is sending more to the UK than the UK is
41:38
exporting so worst case those would get equal because you can always use export
41:44
revenues to buy imports anybody can do that the problem is when you want to get more Imports than you have export
41:49
revenues in the UK has managed to do that for a long time so the UK’s managed to stay you know ahead of that game for
41:55
a long time what can happen though is your real terms of trade can change so
42:00
whatever the UK is exporting it might need to export more to get the same
42:05
amount of food for example or might need to export more to get the same amount of energy and that’s what’s happened okay
42:12
so energy in real terms has gotten more expensive and I’ll just focus on the energy things just to make the point
42:18
here and so that means when you’re terms of trade deterior rate where you need to export more I don’t know Range Rovers to
42:26
get the same amount of you know natural gas you have to work more labor hours to
42:31
produce exports that bring in the same amount of gas because there’s a foreign monopolist setting price or for whatever
42:37
reason the scarcity where they’re real or contrived then your real standard of living drops in your and so real terms
42:43
of trade are critical and yes if you’re cut off from that then your real terms
42:49
and trade can drop now if you don’t import gas and somehow want to produce your own that’s going to take a certain
42:55
amount of Labor or other things and that might be even worse than the labor that
43:02
it takes you know that might require more labor than the labor it currently takes even at the high prices to produce
43:08
the exports to get your gas so if it takes you know a thousand hours of Labor to get a certain amount of natural gas
43:15
today now waiver is going into exporting of something financial services I don’t know and you just decide to produce your
43:22
own natural cast but it takes two thousand hours of Labor to produce that now you’re now you’re even worse off
43:27
okay and that’s what productivity is all about and those are public decisions that you know governments should be
43:33
looking at and considering when determining you know what makes sense and what doesn’t make sense for an
43:38
economy to do and they’re not they’re not even beginning to look at those types of things they’re just letting
43:44
your real terms of trade you know flap around in the wind and your standard of living is just going up and down all
43:49
over the place and they’re not making rational decisions on to do that based on you know real terms of trade and
43:56
standard so you’ll see some countries decide you know they want to grow their own food well that’s fine but it takes so
44:03
many more people to grow the food they’re actually worse off and that’s kind of happening in the U.S we’ve decided we want to do our own
44:09
manufacturing well now we have far more manufacturing jobs but that means fewer
44:14
other things and that shows up as manufactured products being more expensive and our real terms of trade
44:20
are worse off for having done it and that’s what the tariffs have done to us that’s what tariffs do to everybody so
44:26
it’s a little bit complicated I’ve got a chapter five on trade goes into it a little bit in my seventh deadlines and
44:32
fraud books and maybe enough to answer the question this is from John Everson Max on the unft all podcast argues that
44:40
it’s not OPEC keeping the oil price high but quote unquote Wall Street he says
44:46
there’s no oil supply shortage demand elasticity is close to zero below about
44:52
110 dollars per barrel the oil price is set on nimex and Ice if I I’m saying
44:59
that right they bit it up immediately following the pandemic and keep it high
45:05
because it suits their books the market participants are mainly oil majors and
45:11
mega Banks what do you think of this Theory so as a point of logic I entirely disagree when you have a market with a
45:17
fixed demand and I agree with that and available Supply right now so let’s say the fixed demand now is 100 million
45:23
barrels a day the available Supply might be 101 million barrels a day or something like that you don’t have a
45:30
market in the normal sense of the market where and what I’m saying is if all the suppliers decided to compete to get
45:36
their whole 101 million sold they could drive their price down to zero and you know very well before somebody is forced
45:43
to cut production and in a very short run that might not happen we’ve seen that type of thing happen on the Futures
45:49
Market where the price went negative and so markets can’t don’t work when you’ve
45:54
got fixed demand and when there’s a supply and excess of demand but think of a restaurant front that has a hundred
46:00
people coming to dinner and they all want fresh fish and their the restaurant has 102 fish and if it tries to sell
46:07
fish at the market price it has an auction for those 102 the price will go down and down and down until they’re getting nothing for their fish okay they
46:13
have to restrict Supply and say look I’m only going to sell 100 and it’s 50 pounds per dinner or whatever otherwise
46:19
it’s not going to work on the other hand the opposite happens if they only have 98 fish or 99 fish and there’s 100
46:26
people at this Wall Street restaurant who want to buy fish and the restaurant says okay it’s going to the highest
46:31
bidder in the short one fish it could go up to anything right that’s kind of what the oil Market’s like when there’s an
46:38
excess it would go to zero if some supplier was not restricting Supply in real terms and it would go to infinity
46:45
or until demand is reduced come if there’s an actual shortage and that
46:51
supplier who’s restricting has to have as the evidence that there is a supplier doing that is there’s a supplier with
46:57
you know material excess capacity and the only supplier with the material access capacity is Saudi Arabia right
47:02
now and they work with Kuwait but it’s basically Saudi Arabia and it’s uh Saudi aramco and they also don’t forget trade
47:09
for their own account which is perfectly legal they have a huge profit crop test which makes huge profits trading for
47:16
their own account they’re the marginal supplier they’re the price Setter you know it’s good work if you can get it as
47:21
they say and so somewhere in this mechanism they have to be the one somehow setting price and letting
47:29
quantity adjust and that’s exactly what they’re doing you have to look closely at it you have to have information I
47:35
don’t have to know precisely what’s going into their decisions but what they set are called the official selling
47:40
prices and they are spreads to benchmarks so their spread to Europe might be two dollars over print or
47:46
something like that and there’s a fair value between Saudi crude and Brent crude based on the sell for content and
47:52
I don’t know what that is but they know what it is and if they set it above that fair value maybe the fair value is a
47:58
dollar premium because it’s got less sulfur so they sell it send it two dollars over they put a dynamic in place
48:05
that causes them to be the highest priced seller because they’ve said it higher than fair value but the market
48:11
has to comfort them come to them at the end of each day or shut the lights off or change their inventory basically that
48:17
doesn’t happen I agree with his assumption that demand stays fixed which would include inventory changes and um
48:24
they set an upward Dynamic the prices by doing that or if they send it at a slight discount you know they said it
48:29
even with Brent when it’s worth a dollar more than they said in the opposite Dynamic and the price goes down until they change policy and that fair value
48:37
is changing all the time as refining margins change so it’s a moving Target and every month they reset the their
48:43
osps based on their calculations of where things are going based on what they want to see in the market do they
48:49
want to see prices going up going down or staying as unchanged as possible and they watch it they don’t have exact
48:56
numbers either so they’re watching the Dynamics and then when they change their osps they’re deciding whether to put a
49:01
little more upward pressure a little more lower pressure and just because they lowered their osbs doesn’t mean they’re putting less upward pressure it
49:09
could mean refining margins have come in and they’re maintaining the same spread
49:14
to fair value which is not publicized right that’s something you’d have to calculate and as a point of logic
49:20
there’s no other way this thing can happen and they will be in control of Crisis doing that until the demand
49:27
exceeds the supply if the demand goes to 102 and the supply is only 101 then they
49:33
can’t do that they have no control and it just goes up or if the demand drops enough work they’re not selling any at
49:38
their posted prices and then the price just collapses because their oil is no longer needed at the end of day and
49:44
that’s my story and I’m sticking to it next question is a great question by
49:50
Shane dowds um who asks my possibly mistaken
49:55
understanding is that the vast majority of money circulating in the economy is created by commercial Banks when given
50:02
loans of various kinds and overdrafts is this accurate if yes does it follow that
50:09
government policy regarding regulation guidance Etc of the banking sector is
50:14
much more important than fiscal policy right well you know when you say much more important that could be anything
50:20
right but yes they uh you could consider it part of fiscal policy in a sense the
50:26
banks are all members of the you know fed member banks taxes are paid by having Reserve accounts debited anybody
50:31
who’s not a member has to have a correspondent bank relation with these Banks and lending is entirely controlled
50:39
by the Federal Reserve Act and The Regulators established by the Federal Reserve Act in the terms of lending
50:45
established by the federal government through its regulators and that policy is determined with an eye to exactly
50:51
what you’re saying is Bank lending expanding to the point where it’s a problem we need to change policies on
50:59
Bank lending if it’s we want to influence Bank lending to be more expansionary like they did after 2008
51:05
2009 because they wanted more of that kind of expansion than we have to adjust accordingly now the interesting thing is
51:11
the way they adjust largely is by changing interest rates which you now know is backwards and doesn’t work as
51:17
intended and has adverse consequences the more uh informed way to alter Bank
51:24
lending would be through other Direct Tools of lending such as don’t accept Financial assets as collateral that’ll
51:30
be a good start to stop all this financial speculation and they can do that by decree very easily then there’s
51:35
absolutely nothing that I can see that serves public purpose in the current rules which permit accepting Financial
51:42
assets as collateral and that’s just one example so I guess I the answer to any
51:47
questions I I agree with you and to clarify it is an active part of
51:53
government policy much like fiscal policy and we’ll link to your proposals for the banking sector which I think
51:59
come from maybe 2010 uh yeah we’ll link to that in the show notes as well
52:05
because that’s a that’s a again it’s not an overly long set of recommendations it gets about you know six or ten
52:12
recommendations which are very easy uh to to read through so we’ll link to that
52:17
um related to that this question is from KAG Lee the way I understand it a bank creates money when it makes a loan so
52:24
long as it has sufficient reserves required by regulations if it lacks sufficient reserves it has to borrow
52:30
excess reserves from other banks in order to be compliant if there are insufficient reserves in the entire
52:36
system and the FED adds reserves to the banking system through the sale of treasuries the commercial Banks now have
52:42
enough reserves to comply with the regulations the loans are made and the money is added to the money supply
52:49
ultimately the money is created by the FED added to the economy through the
52:54
commercial Banks to cover the loans originating at those Banks why not say a
53:00
Commercial Bank acts as a conduit through which the government creates money adding to the money supply even
53:06
though it seems to be a matter of semantics describing normal Banks as a creator of money I think adds confusion
53:13
to the understanding of where money comes from at least for me let me just correct part of the question that the FED would buy Securities down reserves
53:19
not self but that’s just a type of person so I the way I said is the banks are agents of the Federal Reserve uh
53:25
however it’s not reserve requirements that constrain lending Banks make loans that create deposits because when the
53:31
bank makes a loan they’re buying your signed note and they pay for that note by crediting your account so that is a
53:36
new deposit that wasn’t there before so it’s a purchase and uh purchase of a financial asset funding is a purchase of
53:43
a financial asset so it’s all about government spending right near the agent of the government and then two weeks
53:49
later because there’s a lag you know they look at their deposit balance you look at what your deposit balance was two weeks ago when you calculate your
53:56
reserve requirement if you’re deficient you know it’s history there’s nothing you can do about it so the loans already
54:02
been made the bank’s already bought your note they’ve already paid for it the quote bank deposit which we call money
54:08
supply casually but it’s a bank deposit has already been created and it’s determined there were no
54:13
reserves and so not having reserves did not constrain that process what the FED does then is they say okay you have a
54:20
negative balance in your reserve account okay because you made a loan in your reserve requirements 10 million dollars and you don’t have it yours Reserve
54:26
requirement your reserve account is now negative 10 million it’s like if you
54:31
have an overdraft account at your bank and you write a check and there’s no money in your account they say okay you have an overdraft 11 of in this case 10
54:38
million now overdraft is alone from the Fed okay so that overdraft was created at
54:46
the time the bank made the loan by the bank doing it by not having any money in
54:51
a reserve account it results in an overdraft as a matter of accounting so the loan created the deposit and the
55:00
overdraft which is the loan from the feds so it already happened it’s not the FED doesn’t say oh you’re overdrawn so
55:08
we’re going to lend you money the overdraft is alone the bank now goes out and says okay I don’t want an overdraft loan from the FED because there’s a
55:14
penalty rate so now I’m going to go borrow it from somebody else and they try and do that and to clear out the
55:20
overdraft from the loan from defend I’ve been saying it’s in my proposal so well I just leave the overdraft alone from
55:25
the FED it doesn’t make any difference whatsoever it allows the FED to control the system better it’s more efficient
55:31
you don’t have to hire guys to buy and sell fed funds from each other for millions of dollars a year and burn up
55:36
all that electricity and overheat the world for nothing you know it’s just a huge inefficiency built into the system arguably left over from the gold
55:43
standard but in any case certainly nothing you would ever do today clean sheet of paper John Lowe asks um
55:49
recently Jon Stewart had Johns Hopkins Economist Steam hanke on his show who
55:56
quoted his study that said the increase in the money supply creates inflation for every nation studied some countries
56:03
like Japan and are seeing are not seeing much of an increase in money supply and therefore inflation is lower
56:10
therefore U.S inflation is caused by the government creating too much money bank loans were included in the money
56:17
supply in fact they were the largest factor would you agree but let me just interrupt and say there is no fed study
56:24
or Central Bank study anywhere that agrees with that but go ahead you’re right um so bank loans were included in the
56:30
money supply in fact they were the largest factor would you agree if you were debated him debating him what would
56:37
be your reply I would say that the causation to me is clear into any fed researcher who studied this that the
56:44
inflation causes the money supply to grow inflation causes a shortage of money supply if you’re uh go shopping
56:50
and you normally go with two hundred dollars in your pocket and suddenly price is double now you need to have 400
56:55
in your pocket if your Apple computer with 250 billion in cash and prices double on everything your operating
57:02
expense is double now you need 500 billion in cash it’s been clear in all the studies I’ve ever seen the real
57:08
studies that inflation causes of money supply shortage which can also cause uh
57:14
also other severe problems and that the money supply that’s the charts associated with inflation is with the
57:21
inflation that creates the need for them but the inflation leaves the inflation happens first and then money supply catches up and that’s been Bob way the
57:29
German Bi-Mart it’s all the same thing so I completely disagree with them I’ve talked to Steve before a few years ago
57:35
he’s in favor of these currency board things to control money supply and I’ve pointed out that if you have a currency
57:41
board like that you know you have to have net exports to fund your own Financial assets and that costs your
57:46
economy five percent of GDP every year year in and year out in real terms and your standard of living is reduced on a
57:54
compounding basis five full percentages every year he goes well yeah you’re probably right he says but I think it’s worth it so I don’t want to talk to him
58:01
anymore after that this is from Thomas Clarkson wouldn’t a job guarantee at 15
58:06
an hour plus benefits raise the cost of entry level labor for all firms pay less
58:11
than that Oxfam saves 32 percent of U.S workers earn less than 50. okay so the answer is yes
58:18
good and what is some of that additional firm costs be passed on to Consumers the
58:24
answer is yes however after that the federal government would control the price of entry-level labor by setting
58:30
the job guarantee wage so no more increases unless the federal government wanted them right right plus the job
58:36
guarantee especially with free child care as a benefit would likely increase the supply of work-ready people right
58:42
right that was it I’d also someone had that I think it’d be hard pressed to
58:48
make the case that it would raise the cost of living for everybody by more than you know a tenth of one percent and
58:54
probably less than that but it also increases the total real wealth it would
58:59
also increase incomes for everybody else because that money gets spent and you know the reset would be a tenth of a
59:05
percent higher in the CPI for a year and then a level off after them and the real
59:10
wealth would go up by more than that because of the useful output created as these people transition out of the job
59:16
guarantee into the private sector another those people argue that the private sector jobs don’t add to real
59:21
wealth and so the whole point of the transition job the job guarantee is to promote the transition from unemployment
59:28
where they’re not adding anything to the private sector you know and the idea is that if the public sector needs more
59:34
employment it should just hire them at the normal public sector wage scale not the job guarantee wage job guarantee is
59:40
only for people the government doesn’t want and therefore doesn’t hire at the normal you know wage scale and therefore
59:46
these people are intended to transition to the private sector and they will and
59:52
the number of them in the transition job will be minimal you know if the policy is maintained properly so the next
59:58
question is by Davey and it says how can the Euro be saved and in Brackets and by
1:00:06
saved I mean from the forces of plutocracy and generational debt peonache such that elected leaders can
1:00:13
have access to the means to spend on subsidies the people want and tax Behavior is that are deemed to be
1:00:19
socially excessive alternatively is the euro worth saving so they’re asking how can it be saved
1:00:27
politically or operationally it is politically you know that’s like
1:00:33
interesting question operationally I mean but politically uh you know I don’t
1:00:39
know the answer to that except it’s gone a long way so back when I started this at you know
1:00:45
and the euro is just being came along that was one of the things that got mmt
1:00:50
going got me thinking in these lines we had our 1996 conference on here when we talked about the things that had to
1:00:56
change and that were going to change it’s just a question of how long and when and one of them was that um do what
1:01:04
it takes to prevent default by Mario draghi that had to happen to keep the banking system from bringing down the
1:01:09
whole system he had to do that or somebody had to do that somebody would be faced with that decision it would
1:01:15
make it in that way and I I wrote a paper called Rites of Passage in 2001
1:01:20
which is on my website and it’s all outlined in like one page so you can see the whole process and what the forecast
1:01:26
was in 2001 and how it all happened and the other thing that has to happen and will happen is that the three percent
1:01:32
limit would become become moot in in the deficit needs to be a policy tool rather
1:01:39
than some kind of fiscal limit and with covid you saw how the deficit became a
1:01:44
policy tool they wanted 11 they went to 11. you know now they want five or three
1:01:49
or zero but they’re using it now as a policy tool the idea that there’s a three percent women is kind of out the
1:01:55
window so that was important so now they know they have to guarantee all the member Nation debt and it works and
1:02:01
they’ve done that so there’s no more risk of default and now they understand that they can use a deficit limit as a
1:02:08
policy tool to get the outcomes they want now how they use it when they use it is that’s the process they’re going
1:02:14
through now so they’re there you know and just simply using that as a policy tool and a alcohol for me would be a
1:02:21
Progressive Construction constructive manner we’ll get the outcomes that they want and the Euro area will be the most
1:02:26
prosperous area in the world and so they’re close they’ve got through the hard part they’re now just deciding how
1:02:34
to use this new policy tool the fiscal limits I think there are you know certainly won’t take more than another
1:02:40
30 years to get to that doesn’t sound long yeah no I don’t know how long it’ll
1:02:45
think it might take less than that maybe the end of maybe tomorrow but if you know they’re they’re on the right path
1:02:51
but they tend to take a long time on these things and maybe because they get paid so much to discuss it you know
1:02:56
they’re charging they had a thousand Euro night hotels while they discuss it they don’t have a
1:03:02
lot of incentive to get it done result space to wages yeah okay this is a
1:03:07
follow-up from Paul danger and he asks I understand now from the accounts to each
1:03:13
EU country has its own Central Bank and that’s where money is created in the EU not at the ecv I’ll just dive in and say
1:03:20
that’s not quite what Dirk said no the central banks are part of the they’re just branches of the European Central
1:03:25
Bank functionally they’re a Euro institutions so yeah I think but Dirk said you know when you talk about the
1:03:31
currency issues in the EU you want to talk about the ECB and the Euro system that I think that’s how he put it but
1:03:37
anyway Paul goes on to ask however the European Parliament and the council
1:03:42
managed by member states Define country fiscal spending limits and also whether
1:03:47
or not the ECB will jump in to buy bonds if needed remember Greece right I guess
1:03:53
it’s the pandemic these limits have been relaxed the question is what’s next does each country have more power than their
1:03:59
citizens believe the power is still at the central level they’ve got to find
1:04:04
the commission Central Bank they’re going to be deciding you know how much we weigh every country has right now and
1:04:11
so there can’t be individual country decisions just like the U.S states can’t decide how much deficit spending each
1:04:17
one can do that’s to come from the federal government otherwise you get a big race to the bottom for whoever deficit spends the most wins or whoever
1:04:24
doesn’t gets left out you just have a hyperinflationary situation so it has to be controlled from the top down I think
1:04:31
what Dirk was saying is because the ECB have kind of had a bit of a another whatever it takes moment and pledge to
1:04:38
buy I have any debt from any Eurozone member Nation yeah that’s different from that’s different from being able to
1:04:44
spend additional money that’s just controlling the rates under death but it’s more more a case of like if they
1:04:49
end up having to issue bonds to uh uh do more deficit spending and the ECB have
1:04:55
said yes we’re gonna buy Infinity of Euro debt well it’s just what I just said the Federal Reserve said to buy all
1:05:03
the state bonds then making deficit spend all they want we just have hyperinflation but I think that’s kind of what’s happened in the Eurozone it’s
1:05:09
you know since they’ve taken the debt break off but I guess what Paul’s asking is in in that context then the uh the
1:05:16
individual Eurozone elimination Banks do have a little bit more power than they did a few years ago to deficit spend to
1:05:23
the moon and uh well they’re not allowed to do that by the commission oh okay there is a rule in place yeah they
1:05:29
control that and what they’ll say is if you start doing that if you violate the rules then you know we’ll pull away this
1:05:36
umbrella of solvency and then you’re spreads white Now You’re Gonna Go install it so they use that for their
1:05:42
compliance you know for the whip to keep them under inside the rules to keep them in bounds uh so the next question is by
1:05:49
Paul Dan Durand what’s your guess as to why we have not seen top quality invest
1:05:54
investigative journalists do deep dives into mmt to see what it’s about which
1:06:01
could expose the lies about the deficit there must be a few out there that are not puppets of neoliberal media owners
1:06:07
why are they not pushing back on the lies about how money works yeah I think it’s just personal you know they don’t
1:06:13
want to give me the satisfaction While I’m Alive let’s go on to the next question okay
1:06:20
all right this is this is the last one this is from John Everson was Jesus an Mt Economist show
1:06:28
me the code used for the tax and then they brought a Denarius then he said to them whose head is this and whose title
1:06:35
they answered Caesars and then he said said to the give therefore to Caesar the
1:06:40
things that are seasons etc etc yes so I think that we win I think up until up
1:06:47
until 200 years ago everybody understood it was obvious that the you know the movie theater has to sell the ticket
1:06:54
first before it can collect it you know this used to be obvious and somehow it’s gotten all turned around
1:07:00
excellent mmt in the Bible Jesus the mmt yeah well
1:07:07
it was called trippy money back then it was called tribute money for a long time they demand taxes be paid you know
1:07:12
tribute money be paid in the king’s coin when you lost a war and you had to export to get it so sure that was the
1:07:18
way it operated everybody knew that there was no mystery I think that’s a great place to leave it we’ve been speaking with mmt founder Warren Mosler
1:07:26
and we’ll link to where you can stay current with Warren in the show notes for this episode and also to some of the
1:07:31
other things that we spoke about in the episode but for now thanks so much for joining us today on the mmt podcast
1:07:37
where foreign
1:07:43
[Music] [Applause] [Music]
1:07:50
that was the mmt podcast with Patricia Pino and Christian Riley
1:07:55
don’t forget you can support the show through patreon starting at a dollar a month and get access to Patron only
1:08:02
episodes you can do that by going to patreon.com mmt podcast you can also
1:08:08
find me on Twitter at mmt podcast and you can find Patricia on Twitter at
1:08:14
Patricia npino and you can email us at mmtpodcast
1:08:19
outlook.com thanks for listening and we hope to hear from you [Music]
1:08:34
thank you
