Money is mysterious. We love it, we hate it, but few people can tell you what the heck it really is. Wouldn’t it be good to get out of the fog?
This book will help you understand both the way money works and how to leverage its power. The authors take you on an illuminating journey from your piggy bank to the Federal Reserve with no pesky jargon or complex math.
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https://youtu.be/MsBsHI_9PKM Interview mit Randall Wray über sein Buch „Geld für Anfänger“
Geld für Anfänger [Money for Beginners] – Randall Wray
Interview mit Randall Wray über sein Buch “Geld für Anfänger” (Money for Beginners). 07.07.2023.Link um das
(Interview in English)
today we are with Randall Ray an old
Lola books because we have just
published the German version of money
and we are also going to publish the
Spanish version of money for beginners
in German it’s called Guild food and
finger in Spanish
so we are with him and uh Randal thank
you very much for for being with us
thanks for having me on
um so this is a great book I think that
it is uh probably the best way to to
start with modern monetary theory that I
know because it goes direct to the point
to to money money for for beginners so
first maybe the first question would be
what is money
well so that’s uh actually the first
question we try to answer in the book
um so what we want to do is get at the
nature of money
often in uh basic economics courses
you’re you begin with the functions of
money and so then money is sort of
defined by what money does
and um so I like to joke and say that
that’s like describing what a human is
as something that sits on the couch and
munches potato chips while they watch TV
okay that doesn’t really get us at the
nature of a human being so uh By Nature
money is always an IOU this has always
been true there are no exceptions to
this that is the nature of money it’s an
and as my professor Hyman Minsky used to
say anybody can create money all you
have to do is write I owe you five euros
I owe you five dollars that’s an IOU you
have created money but the second part
of his statement was
but you have to get it accepted okay so
now if you will accept my IOU I have
created money and you are holding my IOU
so that’s the fundamental nature of
money that’s what money is
and what is the difference between the
money that you or me can do or a private
Enterprise can do and the money that the
that the government creates or the state
yeah well uh the difference is in that
second part of the Minsky quote
acceptance your IOU will be accepted by
your close circle of friends your family
but probably not much beyond that
without further investigation into your
credit worthiness so that’s what a bank
will do maybe a bank will take your IOU
they specialize in determining whether
you are credit worthy are you good for
the five dollars okay
um in the case of the government its i o
user the most widely accepted ious
almost without exception uh in every
nation and there’s a fundamental reason
for this and that is that the government
can put you into debt by proclamation in
democracies or Congress or our
Parliament will pass a tax law that puts
you into debt and you can get yourself
out of debt by using the government’s
own ious and this is the second sort of
fundamental thing fundamental nature of
these money ious is they must be
and when you return the currency to the
government that issues it you have
redeemed the currency and in English uh
you know we’re very clear about what
Redemption means and we know where the
term comes from comes from uh religion
uh getting yourself out of a different
kind of debt right sin
uh but in the case of tax debt uh you
use the government’s money to redeem
yourself you’re no longer in texted and
the government is simultaneously
redeemed it no longer owes you
so you are saying that the taxes are not
used by the government to finance public
spending because the money is created by
the government so what what uh what is
the function of of uh of taxes why why
do we need taxes yeah well the
functional taxes is to put you into debt
so that you will desire the government’s
money and this is what allows the
government to spend its money very
widely it will be widely accepted within
its own country let’s be clear it may
not be accepted outside its country but
we can be sure it is accepted within its
country because we have to pay taxes to
in the past uh fees and fines were more
important than taxes but today tax is
the main liability but of course if you
drive your car too fast uh you can get a
fine that also is payable in the
government’s currency and the government
can charge fees go to the National Park
you got to pay a fee to get in so for
all these reasons we want the
uh to get uh to pay down our fees fines
so that’s what gives uh Worth or uh
makes the the money uh worth it no or
yes value gives value to money
and in the book let me let me just give
one other example because this will uh
be very clear to people
um so we give an example of a uh Pizza
Joint a pizza restaurant that uh mails
out coupons for free pizza uh when the
pizza joint first opens they want to
build up business so they mail out
coupons for free pizzas what is that
coupon that coupon is an IOU now it’s
not a money I owe you it’s a pizza I owe
you so Joe’s Pizzeria owes a pizza to
anyone who has that coupon when they
bring it in
uh Joe accepts the coupon
Joe redeems the coupon by giving a pizza
to whoever brings in the coupon and then
what does Joe do with that coupon does
he go try to spend it
no he burns it okay and this is uh the
third fundamental sort of law of money
when the money is redeemed you burn it
so you it’s not you do not spend tax
revenue you burn tax revenue and the old
days literally the government would burn
the paper money that came back in
payment of taxes it would melt the coins
that came back in payment of taxes it
would burn the tally sticks which was a
all over Europe uh the way that most
governments spent was using sticks they
would burn the tally sticks and then
finally today we don’t use tally sticks
or we don’t pay taxes with coins and
we use uh bank accounts and our bank
deposits are just debited so the modern
equivalent of burning the tax revenue is
just debiting accounts
all right so the government cannot run
out of its own money it’s like yo cannot
get cannot run out of his own coupons
for pizza right that’s right as long as
there’s one one person at the treasury
with one finger who can keystroke
credits to bank accounts the government
cannot run out of money
so to our breeders in Germany and in
Spain why do you think that this book uh
is important and probably uh for
different reasons if you are in Spain or
in Germany right or or in Austria yeah
well what it means is that uh as we said
governments cannot run out of money this
applies also in Europe to countries that
use Euros however
uh from the very beginning the so-called
maastric criteria were trying to limit
government’s ability to spend and
although there’s been some relaxation
there is still this bias toward what we
call fiscal austerity
which is to eliminate government
spending as if it might run out of money
when it really cannot
so uh we are saying that this monetary
sovereignty now is in the European
Central Bank even though it doesn’t use
well it doesn’t it doesn’t use it up to
uh what is necessary that’s true
all right so
um can you please uh tell us about
um uh the um the depths that the
government uh has you know many people
are very worried that the uh the debt
level is not going to be payable that
the government is gonna go broke that we
are gonna not being able to to uh to to
pay our debt meetings is that possible
when you have your own currency
okay well so government i o use
we can look at it from the other point
of view from our point of view
from our point of view those are
government owes uses they owe us that’s
a good thing
from our perspective the more government
debt the better it means the government
owes us more it means our financial
wealth is higher uh would you rather owe
the government or would you rather the
government owes you
it’s pretty obvious I would rather the
government owes me and the government
promises to pay me interest uh on its
ious so from the perspective of the
non-government sector the government’s
debt is our wealth the government’s
liabilities are our assets
um now the the great fear is someday the
government won’t be able to pay the
interest but how could that possibly be
true all government payments in modern
economies are done through keystrokes on
and it’s literally impossible for the
government to run out of keystrokes so
the government can always make those
um they’re uh there there are sort of
stabilizing uh processes that go on in
so that as the economy grows as
employment is created
deficits which just means the government
spends more than tax revenue
automatically go down and the government
stops issuing debt as the economy grows
when the economy slows down government
tax revenues fall and so deficits get
bigger and debt gets bigger
um this is a cyclical nature of deficits
and so when you look at a country that
has a relatively big Derma deficits it
is because the economy is doing poorly
and those deficits are helping to turn
the economy around
so they are automatically limiting and
so all this fear-mongering that says oh
the deficits are exploding and they’ll
get bigger and bigger and bigger and
bigger it never happens that way the
deficits always automatically turn
around and get smaller and smaller as
the economy recovers and grows
and what about the fear that many people
have uh in the sense that they think
that a lot of deficit or uh deficit
itself is always inflationary well again
the uh the deficits are self-correcting
so as they uh as an economy
recovers and begins to grow faster which
could possibly cause inflation as
economies grow faster that inflation
itself increases tax revenue quickly and
that automatically reduces the size of
the deficit now I know everybody’s
worried about inflation right now clear
okay inflation is a problem it’s at
least a political problem you could
argue it could possibly be an economic
problem but the inflation that we’re
facing now is not because spending is
too high it is not because employment is
too high it is not because the
government spent too much money it’s
because of covet it’s because of war in
Ukraine it is all on the supply side
it’s not the demand side and so blaming
government spending for today’s
inflation is just wrong
so once we get rid of the problems that
we are having because of uh of covet and
the War uh is it possible to achieve
full employment without inflation
um but you you really have to have
um you you have to have in place
something like what’s called a job
guarantee you have to have the
government get involved in ensuring full
um there’s a big difference between the
so-called Keynesian approach
of just government spending money it’s
called priming the pump trying to
increase anger demand and hoping the
private sector will hire everybody who
wants a job okay that method of trying
to get full employment is very likely to
cause inflation it’s also very likely to
cause Financial instability that’s not
what we recommend we recommend targeted
spending the government should Target
its spending toward job creation
um so that doesn’t necessarily mean the
government has to uh itself provide
those jobs but it has to ensure the
spending is creating jobs not just
pumping up demand
uh this is why
mmt was blamed
uh for the coveted inflation in the
United States which supposedly resulted
from mailing out checks to everybody
so that was uh both president Trump and
President Biden uh ramped up spending
sending checks to every household in
and that was said to be an Mt policy
well that’s not mmt policy because it’s
not targeted and that kind of policy
could possibly cause inflation but if
the spending is targeted to job creation
then it’s not going to be inflationary
what about other social programs no not
only the joke guarantee but what about
uh Universal Health Care or Universal
education or or um
retirement money for the pensioners yeah
well again I would say that uh spending
on education and Health Care is targeted
spending and uh it is like investing in
Investments are not inflationary
Investments increase the capacity of
your economy to provide for itself
so these are actually Investments That
improve economic performance they’re not
all right so from the point of view of
um economic policy it could be possible
to have enough uh public spending to
have full employment and Welfare for
everybody without creating inflation
once we get rid of of the supply
side problems like like the war
yeah yeah and I think that um what
covert has taught us
is that the the way the global
production system uh had been set up was
very fragile and very easily disrupted
uh by a virus by War it could be
disrupted by an earthquake that hits
Taiwan a tsunami uh they were very
fragile Supply chains this was a mistake
and I I think that uh that is one of the
lessons we learned from coven that uh
yeah we we need to boost our productive
um all over Europe in America we can’t
rely on Supply chains
um from Asia
all right so well we can call this uh
conversation or we can frame this
conversation into the what is called
modern monetary Theory we have published
several of your books in German and uh
and in Spanish uh what other books do
you recommend or what other authors do
if if some of our viewers would like to
know more about modern monetary Theory
yeah well uh so for much more on the job
guarantee pavlina chernova has a book
out um two years ago I think
um with the same English press as money
for beginners that is a great book
Stephanie Kelton has a very good book on
the deficit myth that was out two or
three years ago that’s a basic
introduction to mmt
um and just recently
um uh I was a co-editor of a book on
monetary Theory I I prefer modern money
Theory but it has monetary in the title
um with um uh the
um Gower that uh has a a bunch of
chapters written by
um uh various authors that
um presents uh mmt so that’s also a very
yeah we have illola books we have
published Pablo and Stephanie Kelton so
it’s very good to have your your
insights on that okay well I I thank you
very much for your time I uh I hope that
everybody reads your your book money for
beginners in in Spanish and in German in
German it’s called girl furan fenga and
in Spanish it will be called dinero para
principientes and I I thank you very
much for your time
okay thank you
Super important we all understand these basics about money. #MMT
Bideoa, hemen: https://youtu.be/boHE_dR159k
MMT: What Is Money And What Gives It Value?
What gives fiat money its value? Professor L. Randall Wray explains the Modern Money Theory view that “taxes drive money.” If the issuing authority is able t…
What gives fiat money its value? Professor L. Randall Wray explains the Modern Money Theory view that “taxes drive money.” If the issuing authority is able to impose an obligation on some portion of the population, then it will create a demand for that currency.
So, what is money?
It’s a social unit of account and in fact it is almost always
a state money of account. In the United States it’s the dollar and
— Speak up? Really? I sounded loud to myself! —
It’s a record of a debit or credit. The dollar, our money unit, is like an inch
or a foot or a pound,
okay, or a litre. It’s a measuring unit.
We then have money things that are denominated in our money unit.
It’s a little bit confusing in the United States
because we use the word dollar to indicate both the measuring unit
and the thing that’s being measured,
a little piece of paper that’s green, okay?
That has not always been the case in monetary history but in the United States it is true.
We then have a hierarchy of these money things. My professor, Hyman Minsky, used to always say,
“You know, anybody can create money”, and he meant money things.
Then he would add, “The problem lies in getting it accepted”.
The government’s money things are widely accepted.
My money things are much less widely accepted. There is a hierarchy of these money things.
The important thing is, almost always the money things will be denominated in the state’s money of account, dollars!
I could issue money things denominated in Rays.
Okay? But it’s much more common to denominate them in the state’s money of account.
What backs up our money?
When I started teaching in the early eighties, I would ask my students
and probably three-quarters of economics students would say, “Gold!”.
Well it wasn’t true even then, okay?
Today almost nobody is confused about this
because we have Ron Paul running around saying, “We need to back our money with gold!”, right?
So now they know that it’s not.
I like to read what it says on the paper currencies.
US dollar, “This note is legal tender for all debts, public and private”.
So more sophisticated students would say, “Ah, it’s legal tender”.
And it’s true. Many currencies have a statement like that.
Canadian dollar, Australian dollar, UK pound.
Get out the pound and look at it.
It says, picture of the Queen…
“I promise to pay the bearer on demand, the sum of five pounds”
on a five pound note.
So in other words if you take that five pound note to the Queen,
she promises to pay you another five pound note.
That’s all she promises.
No gold, no legal tender.
She promises to give you another one in exchange.
Okay? So, and in Europe no legal tender laws
So what backs these things up?
So some even more sophisticated students say, “Fiat”.
The government just says it’s worth a dollar.
That’s gets a little bit closer to the truth but it sounds like there’s nothing
that backs up the currency.
You don’t want to look behind the dollar bill. There’s nothing there, right?
Okay. the alternative view. The Modern Money view.
Use of the currency and value of money are based on the power of the issuing authority, not on intrinsic value.
That should be fairly obvious now.
Okay, where most of our money things are just electronic entries on balance sheets.
Even in the case of the government that’s the way that it mostly spends
not by issuing green paper money but through an electronic entry.
The state played the central role in the evolution of money — I think that Michael will talk about this
— and from the beginning used, and in fact purposely
created the monetary system to move resources to the public sector.
That was the purpose of creating a monetary system.
We find, as Charles Gerhardt says,
that in almost every case we have one nation, one currency.
Euroland is the first major experiment
in breaking this link between nations and their currencies.
It’s not going so well for them if you’re paying attention to what’s going on in Euroland.
So separate currencies is not a coincidence.
It’s tied up with sovereign power, political independence and fiscal authority.
As a shorthand what we say is…
Taxes drive money.
Taxes are denominated in the state’s unit of account.
The state spends its currency into existence.
When you got that tally stick from the Crown,
why on Earth would you sell your sheep to the Crown for a stick?
Because you could use your half of the stick to pay your taxes.
Now taxes are just one example of an obligation that the authority can put on you.
In the old days fees and fines were much more important than taxes.
But today it’s mostly taxes that drive money but any form of an obligation
that you owe the authorities will work to drive a currency.
L. Randall Wray — MODERN MONEY: the way a sovereign currency “works” https://youtu.be/i35uBVeNp6c Honen bidez:
L. Randall Wray — MODERN MONEY: the way a sovereign currency “works”
Economics Professor Randy Wray answers the questions:What is Money?Why is at accepted?What
What is Money?
Why is at accepted?
What is the relationship between money & government?
What backs up our money?
Can the US government run out of money?