Randall Wray: Dirua hasiberrientzat

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today we are with Randall Ray an old

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friend of

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Lola books because we have just

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published the German version of money

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for beginners

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and we are also going to publish the

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Spanish version of money for beginners

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in German it’s called Guild food and

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finger in Spanish

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so we are with him and uh Randal thank

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you very much for for being with us

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thanks for having me on

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um so this is a great book I think that

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it is uh probably the best way to to

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start with modern monetary theory that I

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know because it goes direct to the point

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to to money money for for beginners so

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first maybe the first question would be

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what is money

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well so that’s uh actually the first

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question we try to answer in the book

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too

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um so what we want to do is get at the

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nature of money

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often in uh basic economics courses

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you’re you begin with the functions of

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money and so then money is sort of

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defined by what money does

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and um so I like to joke and say that

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that’s like describing what a human is

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uh

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as something that sits on the couch and

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munches potato chips while they watch TV

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okay that doesn’t really get us at the

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nature of a human being so uh By Nature

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money is always an IOU this has always

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been true there are no exceptions to

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this that is the nature of money it’s an

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IOU

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and as my professor Hyman Minsky used to

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say anybody can create money all you

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have to do is write I owe you five euros

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I owe you five dollars that’s an IOU you

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have created money but the second part

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of his statement was

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but you have to get it accepted okay so

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now if you will accept my IOU I have

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created money and you are holding my IOU

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so that’s the fundamental nature of

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money that’s what money is

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and what is the difference between the

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money that you or me can do or a private

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Enterprise can do and the money that the

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that the government creates or the state

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yeah well uh the difference is in that

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second part of the Minsky quote

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acceptance your IOU will be accepted by

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your close circle of friends your family

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but probably not much beyond that

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without further investigation into your

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credit worthiness so that’s what a bank

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will do maybe a bank will take your IOU

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they specialize in determining whether

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you are credit worthy are you good for

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the five dollars okay

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um in the case of the government its i o

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user the most widely accepted ious

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almost without exception uh in every

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nation and there’s a fundamental reason

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for this and that is that the government

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can put you into debt by proclamation in

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democracies or Congress or our

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Parliament will pass a tax law that puts

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you into debt and you can get yourself

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out of debt by using the government’s

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own ious and this is the second sort of

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fundamental thing fundamental nature of

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these money ious is they must be

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redeemed

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and when you return the currency to the

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government that issues it you have

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redeemed the currency and in English uh

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you know we’re very clear about what

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Redemption means and we know where the

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term comes from comes from uh religion

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uh getting yourself out of a different

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kind of debt right sin

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uh but in the case of tax debt uh you

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use the government’s money to redeem

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yourself you’re no longer in texted and

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the government is simultaneously

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redeemed it no longer owes you

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five dollars

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so you are saying that the taxes are not

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used by the government to finance public

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spending because the money is created by

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the government so what what uh what is

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the function of of uh of taxes why why

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do we need taxes yeah well the

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functional taxes is to put you into debt

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so that you will desire the government’s

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money and this is what allows the

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government to spend its money very

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widely it will be widely accepted within

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its own country let’s be clear it may

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not be accepted outside its country but

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we can be sure it is accepted within its

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country because we have to pay taxes to

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the government

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in the past uh fees and fines were more

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important than taxes but today tax is

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the main liability but of course if you

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drive your car too fast uh you can get a

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fine that also is payable in the

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government’s currency and the government

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can charge fees go to the National Park

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you got to pay a fee to get in so for

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all these reasons we want the

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government’s money

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uh to get uh to pay down our fees fines

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and taxes

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so that’s what gives uh Worth or uh

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makes the the money uh worth it no or

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yes value gives value to money

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and in the book let me let me just give

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one other example because this will uh

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be very clear to people

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um so we give an example of a uh Pizza

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Joint a pizza restaurant that uh mails

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out coupons for free pizza uh when the

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pizza joint first opens they want to

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build up business so they mail out

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coupons for free pizzas what is that

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coupon that coupon is an IOU now it’s

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not a money I owe you it’s a pizza I owe

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you so Joe’s Pizzeria owes a pizza to

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anyone who has that coupon when they

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bring it in

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uh Joe accepts the coupon

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Joe redeems the coupon by giving a pizza

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to whoever brings in the coupon and then

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what does Joe do with that coupon does

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he go try to spend it

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no he burns it okay and this is uh the

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third fundamental sort of law of money

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when the money is redeemed you burn it

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so you it’s not you do not spend tax

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revenue you burn tax revenue and the old

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days literally the government would burn

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the paper money that came back in

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payment of taxes it would melt the coins

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that came back in payment of taxes it

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would burn the tally sticks which was a

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all over Europe uh the way that most

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governments spent was using sticks they

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would burn the tally sticks and then

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finally today we don’t use tally sticks

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or we don’t pay taxes with coins and

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money

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we use uh bank accounts and our bank

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deposits are just debited so the modern

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equivalent of burning the tax revenue is

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just debiting accounts

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all right so the government cannot run

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out of its own money it’s like yo cannot

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get cannot run out of his own coupons

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for pizza right that’s right as long as

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there’s one one person at the treasury

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with one finger who can keystroke

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credits to bank accounts the government

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cannot run out of money

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so to our breeders in Germany and in

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Spain why do you think that this book uh

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is important and probably uh for

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different reasons if you are in Spain or

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in Germany right or or in Austria yeah

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well what it means is that uh as we said

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governments cannot run out of money this

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applies also in Europe to countries that

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use Euros however

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uh from the very beginning the so-called

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maastric criteria were trying to limit

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government’s ability to spend and

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although there’s been some relaxation

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there is still this bias toward what we

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call fiscal austerity

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which is to eliminate government

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spending as if it might run out of money

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when it really cannot

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so uh we are saying that this monetary

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sovereignty now is in the European

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Central Bank even though it doesn’t use

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it

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well it doesn’t it doesn’t use it up to

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uh what is necessary that’s true

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all right so

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um can you please uh tell us about

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um uh the um the depths that the

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government uh has you know many people

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are very worried that the uh the debt

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level is not going to be payable that

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the government is gonna go broke that we

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are gonna not being able to to uh to to

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pay our debt meetings is that possible

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when you have your own currency

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okay well so government i o use

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we can look at it from the other point

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of view from our point of view

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from our point of view those are

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government owes uses they owe us that’s

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a good thing

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from our perspective the more government

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debt the better it means the government

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owes us more it means our financial

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wealth is higher uh would you rather owe

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the government or would you rather the

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government owes you

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it’s pretty obvious I would rather the

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government owes me and the government

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promises to pay me interest uh on its

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ious so from the perspective of the

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non-government sector the government’s

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debt is our wealth the government’s

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liabilities are our assets

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um now the the great fear is someday the

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government won’t be able to pay the

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interest but how could that possibly be

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true all government payments in modern

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economies are done through keystrokes on

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computers

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and it’s literally impossible for the

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government to run out of keystrokes so

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the government can always make those

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payments and

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um they’re uh there there are sort of

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automatic

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stabilizing uh processes that go on in

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the economies

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so that as the economy grows as

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employment is created

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government

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deficits which just means the government

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spends more than tax revenue

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automatically go down and the government

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stops issuing debt as the economy grows

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rapidly

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when the economy slows down government

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tax revenues fall and so deficits get

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bigger and debt gets bigger

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um this is a cyclical nature of deficits

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and so when you look at a country that

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has a relatively big Derma deficits it

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is because the economy is doing poorly

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and those deficits are helping to turn

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the economy around

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so they are automatically limiting and

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so all this fear-mongering that says oh

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the deficits are exploding and they’ll

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get bigger and bigger and bigger and

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bigger it never happens that way the

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deficits always automatically turn

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around and get smaller and smaller as

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the economy recovers and grows

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and what about the fear that many people

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have uh in the sense that they think

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that a lot of deficit or uh deficit

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itself is always inflationary well again

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the uh the deficits are self-correcting

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so as they uh as an economy

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recovers and begins to grow faster which

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could possibly cause inflation as

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economies grow faster that inflation

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itself increases tax revenue quickly and

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that automatically reduces the size of

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the deficit now I know everybody’s

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worried about inflation right now clear

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okay inflation is a problem it’s at

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least a political problem you could

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argue it could possibly be an economic

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problem but the inflation that we’re

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facing now is not because spending is

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too high it is not because employment is

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too high it is not because the

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government spent too much money it’s

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because of covet it’s because of war in

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Ukraine it is all on the supply side

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it’s not the demand side and so blaming

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government spending for today’s

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inflation is just wrong

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so once we get rid of the problems that

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we are having because of uh of covet and

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the War uh is it possible to achieve

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full employment without inflation

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it’s possible

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um but you you really have to have

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targeted spending

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um you you have to have in place

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something like what’s called a job

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guarantee you have to have the

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government get involved in ensuring full

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employment

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um there’s a big difference between the

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so-called Keynesian approach

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of just government spending money it’s

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called priming the pump trying to

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increase anger demand and hoping the

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private sector will hire everybody who

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wants a job okay that method of trying

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to get full employment is very likely to

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cause inflation it’s also very likely to

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cause Financial instability that’s not

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what we recommend we recommend targeted

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spending the government should Target

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its spending toward job creation

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um so that doesn’t necessarily mean the

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government has to uh itself provide

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those jobs but it has to ensure the

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spending is creating jobs not just

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pumping up demand

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uh this is why

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mmt was blamed

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uh for the coveted inflation in the

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United States which supposedly resulted

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from mailing out checks to everybody

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so that was uh both president Trump and

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President Biden uh ramped up spending

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sending checks to every household in

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America

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and that was said to be an Mt policy

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well that’s not mmt policy because it’s

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not targeted and that kind of policy

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could possibly cause inflation but if

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the spending is targeted to job creation

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then it’s not going to be inflationary

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what about other social programs no not

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only the joke guarantee but what about

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for example

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uh Universal Health Care or Universal

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education or or um

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retirement money for the pensioners yeah

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well again I would say that uh spending

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on education and Health Care is targeted

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spending and uh it is like investing in

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your population

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Investments are not inflationary

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Investments increase the capacity of

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your economy to provide for itself

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so these are actually Investments That

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improve economic performance they’re not

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inflationary

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all right so from the point of view of

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uh

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um economic policy it could be possible

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to have enough uh public spending to

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have full employment and Welfare for

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everybody without creating inflation

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once we get rid of of the supply

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[Music]

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side problems like like the war

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yeah yeah and I think that um what

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covert has taught us

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is that the the way the global

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production system uh had been set up was

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very fragile and very easily disrupted

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uh by a virus by War it could be

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disrupted by an earthquake that hits

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Taiwan a tsunami uh they were very

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fragile Supply chains this was a mistake

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and I I think that uh that is one of the

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lessons we learned from coven that uh

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yeah we we need to boost our productive

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capacity

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um all over Europe in America we can’t

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rely on Supply chains

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um from Asia

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all right so well we can call this uh

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conversation or we can frame this

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conversation into the what is called

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modern monetary Theory we have published

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several of your books in German and uh

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and in Spanish uh what other books do

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you recommend or what other authors do

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you recommend

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if if some of our viewers would like to

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know more about modern monetary Theory

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yeah well uh so for much more on the job

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guarantee pavlina chernova has a book

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out um two years ago I think

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um with the same English press as money

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for beginners that is a great book

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Stephanie Kelton has a very good book on

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the deficit myth that was out two or

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three years ago that’s a basic

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introduction to mmt

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um and just recently

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um uh I was a co-editor of a book on

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Modern

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monetary Theory I I prefer modern money

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Theory but it has monetary in the title

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um with um uh the

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um Gower that uh has a a bunch of

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chapters written by

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um uh various authors that

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um presents uh mmt so that’s also a very

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good book

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yeah we have illola books we have

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published Pablo and Stephanie Kelton so

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it’s very good to have your your

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insights on that okay well I I thank you

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very much for your time I uh I hope that

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everybody reads your your book money for

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beginners in in Spanish and in German in

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German it’s called girl furan fenga and

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in Spanish it will be called dinero para

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principientes and I I thank you very

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much for your time

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okay thank you