erabiltzaileari erantzuten
Trump Admin to Incinerate 500 Tons of Emergency Food Meant for Children
The Trump administration has ordered 500 metric tons of emergency food aid—enough to feed 1.5 million malnourished children for a week—to be incinerated tomorrow rather than be distributed as part of its ongoing purge of USAID. The high-energy biscuits, intended for children under five living in war and disaster zones, are currently being stored in a warehouse in Dubai and were meant to be shipped out this year, but will instead go to waste due to cuts by the Department of Government Efficiency (DOGE) effectively halting nearly all forms of foreign aid. Current and former aid workers, speaking anonymously for fear of retaliation, told The Atlantic that the sheer scale of waste is unprecedented. Despite repeated assurances from the administration not to eliminate food aid, U.S. warehouses around the world currently house 60,000 tons of food, including peas and cereal originally bound for famine-stricken Sudan, which the administration is now unable to deliver even if it wanted to after gutting USAID and firing logistical experts. According to The Atlantic, the amount of food set to be incinerated tomorrow would be enough to feed every single child currently starving in Gaza.
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Esattamente ció che non é @wbmosler
come abbiamo scritto qui. La MMT é Mosler non Keen, tanto per essere chiari.
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The US trade deficit has been a real tax on the rest of world for decades. Reducing it benefits them at the real expense of the US.
Chapter 5
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Latest interview:
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Warren Mosler Discusses Modern Monetary Theory (MMT), Banking, and Taxing the Rich
(https://www.youtube.com/watch?v=m2rAkLIyBJg)
Class Unity speaks with Warren Mosler, a leading voice and theorist of Modern Monetary Theory. He spent much of his career in the business world as entrepreneur and investor, founding and operating a successful hedge fund. Later he became an author on economics and along with others founded a new school of economic thought that we now know as Modern Monetary Theory or MMT.
“Soft Currency Economics” https://moslereconomics.com/mandatory…
“The Seven Deadly Innocent Frauds of Economic Policy.” https://moslereconomics.com/wp-conten…
Transkripzioa:
0:00
So, look, the way I say it is this. I’m not against taxing the rich at all. I’m
0:06
not at all against it. What I do know is that historically it doesn’t work. Okay?
0:12
So, if you want the rich to have less money, which is not a bad thing considering today’s political system
0:19
where they have undue influence because of the money, cut off their income at source. Don’t let them make the money to
0:26
begin with rather than to allow all this institutional structure that’s going to continuously feed these guys and then
0:33
try and chase them to take some of it away. Okay? It’s like an exercise in futility. I said, “Is there anybody in
0:40
finance, anybody at the Fed, that anybody understand this?” He goes, “No, nobody. Nobody at the banking committee,
0:46
nobody at no Jamie Diamond at JP Morgan, none of the analysts, nobody on Wall Street. So, how well do these people
0:53
actually understand banking? How well do they understand finance? How well do they understand any of that stuff? They
0:59
don’t. And it’s like none of them. It’s like a big fat zero.
1:07
[Music]
1:13
[Music]
1:18
Hello everyone and welcome to another class unity discussion. Today we are very excited to speak to Warren Mosler
1:26
who is a leading voice and theorist of modern monetary theory. Warren Mosler
1:31
spent much of his career in the capital markets as a fund manager and investor founding and operating a successful
1:37
fixed income hedge fund. Later he became an author on economics and along with
1:43
others founded a new school of economic thought that we now know as modern monetary theory or MMT for short.
1:51
Uh Warren, thank you for joining us. Uh the paper you wrote in 1993 titled Soft
1:57
Currency Economics was the founding document of MMT. You’ve since expanded many of those ideas into a book titled
2:04
The Seven Deadly Innocent Frauds of Economic Policy. So just to start, could
2:09
you explain to us what are the main ideas of modern monetary theory MMT that you felt were missing in mainstream
2:15
economics and in US economic policy? Okay. So
2:22
mainstream economics has never modeled the currency itself as a public monopoly
2:29
uh with the government as the single supplier of that which it uh demands for payment of taxes.
2:36
And what that means is the money, the US dollars to pay taxes or to buy
2:41
government bonds, any US dollars going to the government come from the government. They don’t come from the
2:47
private sector first. They originate in in the government itself through one of its agents. Today that’s generally the
2:53
Federal Reserve Bank as an agent of Congress. Uh this has
2:59
serious policy ramifications. It overturns all the mainstream models that assume that uh the government has to get
3:07
money to be able to spend. It has to what it will tax to get money to spend
3:13
and if it wants to spend more than it taxes, it has to go out and borrow that money. MMT turns that around. It points
3:21
out what’s known by every central banker involved in monetary operations and that
3:27
is that the government has to spend first to provide the the dollars the
3:32
credit balances that are then used to pay taxes that are then used to buy government bonds. So once you understand
3:38
the sequence uh the rest follows from there and uh you know the consequences
3:45
are you know just profound. If you look at a ticket to a football game, you
3:51
know, it’s a thing. It comes from somewhere. People will pay thousands of dollars for it and
3:58
then they go to the game and the guy at the game takes their ticket and tears it up and throws it away. So why is he
4:05
tearing away something obviously worth thousands of dollars? They’ve been paying for it. Okay. And you know that’s
4:10
a direct analogy to the currency itself. So first there’s a tax liability in place. You better get what you need,
4:18
that tax credit, the dollar, the thing, or you’re going to lose your house and your car and go to jail or whatever
4:23
you’re going to do for non-compliance. And it’s got to be in, you know, um, there’s got to be enforcement. And so,
4:31
you go to work to get it and you actually get it. You get a credit to your account. You get points on the
4:36
scoreboard, you know, whatever it is. You might have a ticket to the game, but it’s virtual. It’s just information on
4:42
your cell phone, right? But you’ve got something a thing. It’s in that sense might be intangible, but it’s still, you
4:49
know, that kind of an object that can be bought and sold and everything else. And then when you use it to pay your taxes,
4:56
it’s deleted. If it’s paper money, they’ll throw it send it off to a shredder. If it’s electronic money, they
5:02
just change your balance downward. And so it is a real thing. And and these
5:07
people who go around saying it’s not from the MMT perspective and talk about information and it’s a measurement.
5:13
They’re they’re taking people off track, you know, it’s it’s really something that you it is something that you can
5:20
understand and you have direct experience with it every day when you use tickets or anything else like that.
5:26
And uh there’s lots of good historical examples that make it easy to understand. I’ve used Pompei with their
5:33
coins and I’ve used Africa with their tickets and I’ve set up three currencies at universities
5:39
UMKC with their buckaroos and these are like real things that you earn you need to get your grades you give them to the
5:46
school they throw them away. Okay. So, uh I I like to not talk about how
5:54
different it is. I like to talk about how similar it is, how identical it is to our normal everyday experiences.
6:00
That’s why I start off in soft currency economics with uh you know they say well
6:06
um the household analogy doesn’t hold. Well, it does hold. Soft currency economics starts with the household
6:12
analogy. The parents using coupons to get the kids to do chores. That’s the household analogy where the parents are
6:18
the issuer and they they put the tax on the kids. The kids now need the coupons
6:24
to not get whipped or whatever happens to them. And so they do chores.
6:29
Okay. So that’s the household analogy. So how do they start off these M MMT proponents? Well, you know, the
6:35
household analogy doesn’t hold. I tried to do the opposite to show how it does hold. You just have to look at it
6:41
through the right end of the telescope. Everybody’s got the telescope backwards. But the household analogy holds
6:47
perfectly. And in fact, it’s the easy if you use the household analogy and keep it as a model of the parents and the
6:53
children, you can you can explain everything down to what’s happening with the tariffs with with ease.
6:59
But they start off saying, “Oh, it’s, you know, the government’s not a household.” It’s like, “Yes, it is.”
7:05
They understand virtual tickets and airline tickets and everything’s on your cell phone and it’s not paper anymore.
7:11
They’ve gone to paperless everything now. So, we got plenty of analogies to show how it works. You don’t have to
7:17
have a hard paper ticket for an airline. You can use your cell phone information. You don’t have to have $20 bills. You
7:23
can use your bank account information. You can use a credit card that just subtracts and adds to your account, you
7:29
know. So, we’ve got all that now that people everybody can understand them. They use it every day and we, you know,
7:35
I I’m just suggesting we do that. It’s a path of least resistance to a understanding because it is analogous to
7:41
everything else instead of starting off like saying, well, money’s different from everything else, so you’re going to have to rethink everything you know. Not
7:48
true. It’s all right there like your hand in front of your face to see. And yet the proponents don’t seem to want to
7:54
go that way. Yeah. They’re overthinking it big time. And and it’s because all
8:00
their heroes like Canes and Marks and Minsky talked about money is a medium of
8:07
exchange and it’s this and it’s that and it’s it’s real and nap and it’s a token and all this stuff. And so they’re
8:12
trying to like bring this whole thing up through some history of thought instead of just describing what it is, letting
8:18
somebody else trace it backwards. You don’t have to trace it from the past to now. We know how it works. We know what
8:25
it is. It couldn’t be simpler. We know how a subway token works and a, you know, or airline frequent flyer mile or
8:31
whatever. Uh, if somebody wants to trace that back to Roman times, fine. But we don’t need to do that to understand
8:36
what’s going on today. So we read um a couple of uh readings
8:42
for today um soft currency economics and uh your book
8:48
the seven deadly innocent frauds of economic policy. Uh yes
8:54
u so we can open it up to questions. Uh if you have a question, just go ahead
9:00
and go on stack. Uh I can um I can start with one question.
9:08
Uh since we’re a Marxist organization, we’re just curious. Um what it seems
9:14
that many Marxists are really hostile towards MMT. Uh anybody who understands
9:19
double entry bookkeeping knows that one person’s asset is another person’s liability and public deficits are private credits.
9:27
Um, it’s more understandable why people on the right oppose MMT, but in your
9:33
opinion, why do why do we see so much opposition from the left?
9:39
Uh, that’s a good question. I I would agree to you with you and to the extent
9:46
that I think the left the head what I call the headline left is the number one reason that we don’t have a progressive
9:52
agenda as a society. And it’s because they put forth, let’s say, the same policy proposals,
10:00
but without the understanding of monetary operations, they lose the arguments. And uh I can understand um I
10:09
I can’t blame the right for that. They’re supporting the side that they’re on, the uh conservative side, but those
10:16
defending the progressive side just refuse to be properly armed with the understandings that would cause them to
10:22
succeed. And I’ve been watching that for 30, 35 years now. And it’s, you know, been a major disappointment and it
10:29
continues to be so right up to today.
10:38
Uh, would anybody else uh like to ask a question?
10:47
Uh, Martin. Sure. Hi. Um
10:52
so uh one speaking of progressive agendas and so on. One thing um that strikes me is that um often when um
11:00
people invoke MMT when I see people invoking MMT anyway often um you know to
11:06
to advance the idea that governments can fund things without having to you know
11:11
find the money somewhere first. They’re often doing doing that in support of
11:16
policies like full employment, right? Policies that we might think of as progressive policies. But at least at
11:22
first sight, it seems like you could appeal to MMT in very much the same way to support, for example, building an
11:28
even larger military or, you know, funding even more war, right? Um because
11:35
doesn’t need to find the money. And of course, in fact, governments do tend to find the money when they need to, quote
11:41
unquote, for for wars. And this is a common complaint, the austerity policies, but then nobody worries about
11:46
that when it’s time to go to war and so on. But you do see some people pushing back and saying,
11:51
well, you know, they we need to get out of Ukraine because all that money is going to it and we need the money to run
11:58
domestic programs, right? Or some peopleing pushing back against calls in the EU or Germany to um to to
12:06
build up a stronger military or to rearm. Some people are pushing back against that saying they can’t afford to do it and so on. And so it looks at
12:12
first sight like, you know, someone could draw an MMT and say, “Oh, no, it’s not a problem. We can we can fund it if
12:18
we want to.” So, I mean, if if appreciating this
12:23
means you can argue for bad things, that doesn’t necessarily that doesn’t mean MMT is wrong, right? But I’m just
12:29
wondering, is that the situation? Are there differences in like the constraints? Because of course you know MMT does
12:35
recognize constraints on on spending for for uh employment say. So are there
12:41
differences in the constraints uh from an MMT point of view on spending for war or the military versus spending for you
12:48
know infrastructure projects or whatever. Yeah. So when when people start with
12:53
that I you know again I’m disappointed with the framing but you can’t stop it.
12:59
People do that anyway. So um for example, I think one thing we’ve added
13:04
to the uh Marxist school of thought is that uh tax liabilities per se and by
13:12
design are the cause of unemployment. Okay? Without the tax liabilities, you
13:17
wouldn’t have anybody looking for paid work in that currency and we wouldn’t have unemployment as we define it. So
13:23
rather than be a consequence of some kind of social structure, uh it’s necessarily first um a
13:31
consequence of of um public policy to impose a coercive tax payable in a
13:37
currency nobody has thereby creating immediately from inception and by design
13:42
people looking for paid work for the further purpose of government being able to hire them. So when you look at it
13:49
from that way uh side which is the correct side I’d say I mean it’s how it’s been used for thousands of years of
13:56
recorded history there and it’s always it was always understood that way up until maybe 300 years ago. Um
14:03
you’ve got the cause of unemployment being government policy. So when someone
14:09
says like, you know, well, we could end unemployment by spending more or
14:14
something like that, it’s even that simple of a statement is kind of missing the point that um
14:22
you know, we you end unemployment by hiring the unemployed that the government tax liabilities cause to
14:29
become unemployed. If you don’t want those people to be unemployed in the first place, you would put that tax
14:34
liability in place in the first place. And so it’s like a more it’s a deeper more fundamental um let’s call it a
14:42
truth to the accounting truth than even what the MMT proponents do the way they
14:48
use it like yes government can spend for the military. Well the idea is well why
14:53
did government why is government putting on this coercive taxation? Why are they creating sellers of goods and services?
14:59
Is it to um use collective action to uh
15:05
make life better, so to speak? You know, build the Panama Canal so we have lower costs for everybody and more real wealth
15:12
or is it to uh build a military so we can blow up the Panama Canal just to use
15:18
the two extremes, right? And so you you got to look at the like what’s the purpose of putting the tax liability on
15:25
in the first place? uh and that leads to you know spending where spending becomes
15:31
kind of a derivative of the tax liability. It’s not an assumption that they’re going to be tax liabilities. Now the government has to decide what to do
15:37
with all these people it created to be unemployed all these goods and services it caused to be offered for sale in
15:43
exchange for the currency. You’ve got to have a good reason to put this tax liability on to begin with. And that’s
15:49
and when I talk like that it doesn’t get picked up by any to your original point.
15:54
it it’s it just keeps getting picked up the way that you’ve said and and pretty
16:00
much universally and I haven’t been able to like overcome that. I’m not sure why if it they don’t want to overcome it or
16:06
or what it is, but they just can’t get down to first principles and when they
16:11
talk about it and I’m always up against those every time I talk to somebody or answer questions. The same questions
16:17
keep coming up which and I keep have I have to keep going back to first principles and the arguments can never
16:24
start with the first principles apparently. I’m be 76 this year. I may not live to see this argument start with
16:30
first principles. uh what what do you feel is the the
16:37
biggest resistance you get or where what do you where do you think it comes from whether it’s you know in academia or in
16:45
on the policy level uh when you speak to people engaged in economic policy where do you think the
16:51
resistance comes from it’s it’s not so much resistance but their biggest issue is trying to
16:56
reconcile with what I say with what they thought they already knew
17:02
You know, so I’ll say something like this. They’ll say, “Well, what does that do for the dollar as a reserve currency?” And it’s like, “Oh, no. You
17:09
know what? You know, we haven’t gotten there yet.” Number one. Number two, what do you even mean by a reserve currency?
17:15
Usually, they have no idea. And uh and that type of thing. Um you know, well,
17:22
how does that what does that mean for UBI or something, you know? So I get this stuff that’s like trying to
17:28
reconcile other arguments uh without building up to them with an understanding of the fundament from the
17:34
understanding of the fundamentals. Yeah. So I just I wanted to follow up on the on on on what you said in response
17:41
to my earlier question. Um yeah. So I’ I’ve heard you um lay out that
17:46
that thought before and I I think I get it. you know the government the part about the government um creates
17:53
unemployment effectively by imposing a tax which so then people right
17:58
um so and I I think I’ve heard you talk about historical examples like you know the Rome the Romans going into somewhere
18:04
you know Gaul or somewhere telling everybody got to pay a tribute so you need some of our some of this money we
18:11
are issuing kind of thing and we well we well you can earn it by selling us grain right can buy grain
18:18
right for otherwise worthless coins. Yeah. Right. So, I think I get that story, but I’m just This is probably a naive
18:25
question, but hopefully I’m not the only person who’s confused about it, so it will be useful
18:30
to other people for you to answer it. Um uh I’m sort of not it’s not obvious to
18:35
me how to apply that to, you know, contemporary the contemporary United States, for example, just because Yeah.
18:41
because if you don’t have a job, you don’t pay income tax, right? So, you don’t Yeah. So the first thing I’ll say is
18:48
just you imagine a property tax because a simple income tax actually doesn’t drive the model. So you’re absolutely
18:54
correct. If the government just said there’s income taxes, well then nobody worked. They’d have no tax liability the
19:00
economy would not generate a tax liability and the government wouldn’t be able to buy anything and the money would be worthless. But people do work that
19:07
generates tax liabilities that have to be then paid to the government. And what they’ll do in a lot of cases is actually
19:13
impute an income when you’re not actually getting paid. So if you’re an airline employee and you take a free
19:19
flight, they’ll impute a $500 income from that flight and you have to pay a
19:24
tax on that because what they’re trying to do is generate tax liabilities, create a shortage of the thing that only
19:30
they have so that they can then spend it, right? And but that’s good in the in the transaction taxes is what you’re
19:37
talking about which only occur during transactions. Um add a dynamic
19:44
uh factor to uh taxation. If it’s just a tax on real estate, it’s static. It’s
19:50
fixed so many dollars. Unless we change the value of your property or change the tax, it’s never going to change. A head
19:56
tax, never going to change. But a sales tax, it’s changing all the time. and it
20:02
gets to be countercyclical, procyclical, you have all kinds of issues with uh
20:07
those taxes causing the economy to do things you might otherwise not want it to do. So, as um the economy expands and
20:14
we get to full employment, all kinds of taxes like income taxes go up because
20:20
there’s more jobs, more income, more everything. And that causes your tax liability goes up, but the
20:27
government’s it goes up even faster than the government can spend the money needed to pay the tax and you get a crash. Budget deficit goes down and we
20:33
crash. That’s what happened in ’08. Starting in ‘ 06, the budget deficit from the expansion actually fell to 1%
20:40
of GDP. Things started turning south and by 08 it just all crashed. Same thing uh
20:46
in 1998, 999, 2000. same thing, you know, you go
20:51
all the way back, it’s all it’s happened every time there’s been a crash. So, yes, those dynamic taxes are highly
20:58
problematic in terms of analysis and being able to forecast
21:03
what’s going on and they’re also make it more difficult for people to visualize,
21:09
you know, uh the um forces behind the currency. So, I always say just start
21:15
with the property tax. Once you understand that, I’ll go to an income tax for you and show you the dynamics of
21:20
it. But it’s the same thing, you know, just with different uh different outcomes, you know, that are dependent
21:27
on the business cycle. Thanks. And Sure. And there are different uh ways that
21:34
people make money. Uh some make money by um selling their uh labor for a wage or
21:39
a salary. other people invest their money. Uh maybe a property on a commercial,
21:46
sorry, a tax on a commercial property incentivizes investment and uh on a residential property uh
21:53
incentivizes u employment. Is it is it important that these are two different things and are they treated differently?
21:58
Yeah. Yeah. you know, by the politicians just counting the money that comes in, so to
22:04
speak, rather than who don’t have the sequence correctly, that that’s the way they see it, of course. That’s why Trump
22:10
sees the tariffs as money coming into the government as opposed to new tax liabilities that have to be paid out of
22:16
spending. But um uh to the larger point you were making,
22:21
if you could just start it again because I skipped my mind for a second. Just what just repeat what you just
22:27
so I pick it up again. If if some people make money by investment. Yeah. Yeah. Okay. Got it. So, what we’ve
22:33
done is we’ve we’ve set up an institutional structure that allows all that to happen. Without an institutional
22:39
structure that causes the Treasury to not have an overdraft at the Fed and need to sell Treasury securities, we
22:46
wouldn’t have them. And we wouldn’t have all those tens of thousands, maybe millions of people making money off of
22:51
trading Treasury securities. It’s a cottage industry created by this institutional structure based on a
22:57
misunderstanding. To give them the benefit of the doubt, either that or they’re just malicious, but based on a
23:02
misunderstanding of monetary operations. And we have that everywhere at all
23:07
levels of society. We can probably increase our real wealth by 50%, maybe
23:13
100% by eliminating these inefficiencies. is dead weight employment you might call it where pe if
23:20
you look closely probably 25% of the population is digging holes and the other 25 is filling it in and it’s only
23:28
the other half of the working population that’s providing for everybody else and maybe it’s worse than that today I don’t
23:34
know because it only takes 1% of the population to grow all the food and 7% to do all the manufacturing so the other
23:41
90% is all services it’s up for grabs some of them are valuable medical services and whatnot, teaching,
23:48
education, and public health. But all the accounting and everything else that
23:53
we have is which is just there for compliance with laws, institutional
23:58
structure that don’t need to be there that just create make work. It’s like
24:03
criminal. I call it a crime against humanity. And uh yeah, go ahead, get me
24:08
started on this. I’ll use up all your time, so I’ll let you go ahead. Well, I’m I’m finding the topic interesting uh
24:15
too, so maybe we’ll get back to it. But um Mark, yeah, Mark, you have a question?
24:22
Yeah. So, I live in Brazil, which although we have a sovereign currency,
24:28
Brazil has to import harder. Brazil needs dollars and
24:34
euros to import commodities and manufacture goods. Even richer countries
24:40
like the United Kingdom and Japan need to import oil which is priced in dollars. So given that few countries
24:48
have the monetary sovereignty that the United States does, how applicable is MMT outside the United States.
24:57
Okay. So and this is one of those things that comes from trying to reconcile what you’ve heard from everybody else with
25:03
what I’ve been saying. So every country impos you know is looking to government
25:08
is looking to provision itself with military legal system public health
25:14
whatever education and how does it get people off the streets to work for the
25:20
government. It imposes a tax in RII or whatever you have down there that only
25:25
that come from the government and therefore people need those and therefore the government can when it
25:31
imposes a tax it creates unemployment people looking to work for those things and it can then hire them to provision
25:37
the government with the services that it wants. Every country can do that. Every country can then be at full employment
25:45
keep everybody working that full-time and it will only and the extent of the
25:51
public sector employment will be some function of the t the level of tax liabilities it can reduce its tax
25:58
liabilities to create fewer unemployed or it can pay more to create fewer unemployed right it’s just arithmetic
26:05
and uh and you will not have unemployment in terms of re it doesn’t
26:10
mean you’ll be wealthy and you’ll have enough to eat or you’ll be able to build nuclear weapons or anything like that.
26:16
But it does mean you will not have unemployment. You can be at full employment tomorrow. And I So the first
26:24
thing I want to say is the lowhanging fruit
26:29
to increase the real wealth and real standard of living of any country is to
26:35
get to full employment. Okay? because it’s you you’ll be hardressed to find me
26:41
a country that’s emerging market that doesn’t have high unemployment and let
26:46
me submit that it’s one in the same thing. It’s it’s theoretically you could have full employment and have a
26:51
depressed impoverished country in today’s world but I’ve never seen it and I’d like to see that first before uh we
26:59
fully can see that they can we can make it happen if we forced it but I think the natural global market forces are
27:06
being as they are and the um what goes into your standard of living how much is
27:12
real goods and how much is services will mean that you can have an extremely nice place to live a good place with adequate
27:19
level of um material goods and services uh pretty much anywhere by taking the
27:27
first step and going to full employment with your fiscal policy. And yet nobody
27:32
does that. And um one of the first steps to do that, of course, is to lower your
27:40
interest rates to zero because as long as you’re paying high interest rates to people who already have money, you’re
27:46
now subsidizing you know, a whole demographic that doesn’t need to be subsidized. It’s all
27:52
dead weight. It’s working against your real wealth. So going to a zero rate policy is imperative. If you look at all
27:59
the emerging market countries, none of them have done that. The only country that’s done that permanently longer term
28:05
for decades is Japan. And it’s not a bad place to live. Okay? Nobody calls that
28:10
an emerging market country. It’s in fact a very nice place to live. They’ve had 2% unemployment, low unemployment. They
28:17
have no natural resources. They have to import all their own energy and everything else. And yeah, maybe the
28:23
Japanese can’t burn as much energy per capita as a US person can. But does
28:29
anyone consider them deficient and underprivileged because of that? They have to drive cars that get better miles
28:36
per gallon. They’re smaller than the Americans who get to drive big SUVs, you know, burn a lot more fuel. Does that
28:43
mean America is a more prosperous, more advanced place to live than Japan? I not
28:48
in my book. Okay. So, um I’m I’m diverging a little bit from what
28:54
you’re saying. So, let me because you you added several other dimensions of this thing about imports and exports.
29:02
Let me just say that when you go to a country like Brazil, the country itself,
29:08
the government doesn’t do the importing. Okay? It does some, but when you’re
29:13
talking about this, you’re talking about an individual. You’re talking about somebody going to the uh gas station to
29:18
fill up his car. He’s the one importing the fuel. He’s paying for it in local currency. There’s a price already in
29:26
local currency, anticipating his purchase, anticipating that the seller of that fuel is going to be selling that
29:32
currency for whatever currency the Saudis want to save in.
29:37
It’s not about what they want to get paid in, it’s what they want to save in. Okay. And I get to that in a minute. The
29:42
dollars to numer. But at the end of the day, if they then sell those dollars to buy euro or something like that because
29:47
they don’t like what President Trump’s doing, then ultimately that’s, you know, what the exchange rate is going to be
29:53
all about. It’ll be about reis for euros. It just got an intermediary in there. Um,
30:00
I don’t want to get too far off track here, but he’s doing it and he when he’s
30:06
pumping his car full of fuel, he’s competing with everybody else fueling up their cars around the world. And that
30:12
fuel is going to go to the highest bidder globally one way or another directly or indirectly short usually not
30:19
in the very short term but in the longer term and it means everybody in Brazil might
30:25
not be able to afford to do that compared to everybody in the United States. United States maybe 70% of the
30:32
population can do it in Brazil maybe only 40% can afford to do it or something like that. So you’re going to
30:38
get that distribution of imports based on price. It’ll they’ll be allocated by price. And again, does that make Brazil
30:49
poor country deficient? In some ways, yes. Same thing in Japan. That guy who’s
30:54
earning not all that much money in Japan who’s uh can’t afford to fill his car
31:00
the same way somebody in, you know, the States can fill his. Fine. In the
31:06
meantime, he’s got, you know, superior education. He’s got superior public health. He’s got safe neighborhoods.
31:12
He’s got, you know, great entertainment. He’s got a uh good community. He’s got all these other things that the United
31:18
States doesn’t have. uh which for me is
31:24
you know the much larger factor of standard of living rather than how much
31:29
gas you can compete with the other with the rest of the world for to put into your car which determines how large a
31:35
car you can have how many miles you can drive that week. So uh in the scheme of things I think services are probably 70
31:43
to 80% of our economies nowadays and once you take out all the
31:48
uh make work you know that things I’m talking about the compliance cost the institutional
31:54
demanded activities that are don’t need to be otherwise done and um you can by
32:03
you optimize your ability to provide public services by having everybody pitching in to provide them That’s
32:08
called full employment by having a community effort by having a you know a
32:14
public um what do you call it you know a public sector that you know
32:20
does that it’s what’s it called not community action it’s collective action okay collective action is what
32:27
determines uh it to me is the highest determinant of wealth in the world right now the
32:34
societies that can bring to bear the most collective action for the benefit of their population, not
32:40
to put them in jail and things like that, but to actually provide uh collective benefits is the society that
32:46
we consider the most welloff. So, by modern standards, looking at it through
32:51
my lens at least, uh you eliminate unemployment, you’ve gone a long way to
32:58
um bringing yourself up to first world standards and beyond. right now.
33:06
U on on that topic, um I I I wonder what your thoughts are on
33:12
the uh globalization of production and trade. Uh yeah, it it seems important
33:21
you know what are the ways in which production is distributed across the globe? Yeah.
33:26
How the supply chains um you know move. So yeah, before I forget, let me start.
33:32
I I was with Yan Krael, a economist friend of mine at Hungary, and they asked about this. They were talking
33:39
about global. They said to me, well, are you against globalization? Because I had said a few things,
33:45
and I said, “No, what I’m pointing out, what I pointed out to them is that in the comparative advantage model assumes
33:51
full employment.” Okay? and
33:57
and they they don’t it doesn’t assume the currency is a public monopoly. It doesn’t have money in it. It’s just a barter economy with full employment and
34:04
it absolutely holds. I’m totally in favor of that except that that’s not uh
34:10
the uh uh that doesn’t apply to the world today. We have coercive taxation
34:15
and so we have unemployment created by government who then doesn’t spend enough to employ the people it taxes cost to be
34:22
unemployed. And so when you have unemployment, the exact same model, comparative advantage, if you read page
34:28
two, tells you what you get is a race to the bottom in real wages. And that’s
34:33
exactly what we’ve seen. So globalization as we do it in the context of global unemployment and which is
34:40
extremely high in the nations that are the exporting nations compared to the
34:45
importing nations uh is um exactly what you’d expect out of
34:51
mainstream economic models. So it’s not that the globalization model where uh
34:56
free trade is a major benefit is wrong. It specifically assumes full employment
35:03
and it also specifically says that if you don’t have full employment and now they’ll go to blame a labor union or
35:08
something like that which is a obstruction of uh free markets what they
35:14
call free markets. Um of course coercive taxation is a massive obstruction of
35:19
free markets. It obiates free markets entirely. They don’t they haven’t gotten to that one yet. But if you tell them
35:25
about it, they’ll agree that yeah, okay, uh, we have to look at part B in the model here. What happens if we’re not at
35:31
full employment? What happens if we do have an obstruction? Then we get a race to the bottom of real wages. And that’s
35:37
exactly what we have. So globalization per se is an extreme benefit. Oops, I
35:43
hit the wrong button. for everyone. However, our form of globalization,
35:48
which is in the context of global unemployment, uh tragic global unemployment, is nothing more than a
35:54
race to the bottom of real wages and puts most of the world at subsistence
35:59
levels. So, I don’t know. Does that answer your question? Uh, it answers a lot of questions that I
36:06
haven’t even thought to ask. Okay, good. I I I appreciate that. Do I do I qualify
36:12
as a progressive economist yet? I I I think so. I think so. Okay.
36:18
Um I was wondering what you make of um a
36:24
lot of discussion we see um about industry industrialization.
36:30
uh specifically when people talk about it in the American political context, they see it
36:36
very competitively and and you see this um you know in in both parties and a lot
36:42
of people who see their jobs offshore um concern about um supply
36:50
so so production that used to employ uh American workers moved abroad and so the
36:56
the seeing it competitively in other ways Yeah. So look, it’s a dynamic world and
37:02
things move on. Things that are being produced this year weren’t produced. Most of it wasn’t produced 30 or 40
37:07
years ago anywhere, right? 50 years ago. So things move on. The question is not about your job, but what what jobs do
37:13
you want for your children? Do you want your children assembling cell phones or do you want your children, you know, as
37:18
a software engineer for Google or something like that? And uh and if you
37:24
look at the unemployment rate which is at 4% which yes could be lower but
37:30
nobody in government can make it any lower. So it’s at about as low as we can get it as a society right now because we
37:36
don’t understand monetary but it’s it’s we haven’t lost any jobs. If anything
37:42
the thing you get from interviews with businesses is there’s no they can’t find people to hire. So, you know, maybe
37:49
we’ve lost some jobs, but we’ve obviously created a demand for more jobs than we have people. Now, if you look at
37:55
pay, the US labor costs are among the highest in the world by large numbers.
38:00
There’s might be a few countries like Norway or something that have higher ones, but if you look at certainly the places we’re importing from are a
38:07
fraction of our labor costs. So where you know that question is just like
38:14
headline rhetoric that both parties play on. I just saw Schumer and Pelosi on
38:20
videos from a few years back demonizing China for unfair trade practices. All
38:25
this stuff that has you know but no none of them would ever do anything about it. Everybody agreed that was a problem of
38:31
course except me. And uh finally you know they get this guy Trump who’s doing something about it. So now he’s a big
38:37
hero for you know killing the goose head that’s laying our golden eggs. Okay. But um you know and ending our exploitation
38:45
of the uh emerging markets you know so if I give him credit for anything it’s for ending the exploitation of the
38:51
emerging markets. And of course nobody’s looking at him as that kind of hero right that’s the irony. It’s the
38:57
opposite because they don’t have a clue what’s going on. And so uh you know again everything’s misunderstood
39:04
happening for the wrong reasons. uh moving ahead nonetheless and uh here we
39:09
are. I do find that point very interesting because it’s true that um you see a lot
39:15
of headlines you know um you know uh with really inflammatory rhetoric about
39:20
um you know uh global competitors taking our jobs away. We we also read quite a
39:26
few um progressive or or Marxist economics that are very concerned with um de-industrialization.
39:32
And uh it seems very important to to to to many economic thinkers that industry
39:39
specifically and productive industry um uh are the foundation of of of any
39:46
healthy economic system. Um, and what I’m hearing from you is, uh, you can
39:53
correct me if I’m wrong. Um, you don’t need to worry about exactly what goods
39:58
you could produce and what kinds of goods you produce if you have full employment. And you have full employment
40:03
through public spending. Is that right? Yeah. Yeah. And look, 7% or something like that of the population works in,
40:11
you know, manufacturing. And if it went to 8%, this room would be so full of junk we couldn’t hold a meeting, right?
40:18
We don’t need more stuff anymore. It’s not what it’s about. It’s all about services. So yeah, and the last part
40:24
about what you said there, uh, um, question skip my mind when I start
40:29
answering part A, part B. Well, I don’t know if it’s a question, but I mean it seems important to you at least that, um, uh, less a focus on, you
40:37
know, what sort of things you make, things you sell, but more that
40:42
you have. Yeah, there’s still, look, we have to consider the strategic importance. You don’t want to be getting your
40:48
military equipment from the guy you’re going to be going to war with because you’re, you know, you’re gonna have a problem. You know, maybe you want to
40:54
keep uh strategic inventories of vaccines on hand if you’re not developing them yourself or maybe you
41:01
want to have that capacity in case you think, you know, somebody in, you know, Denmark’s going to develop a vaccine and
41:07
not give it to you. But if you’ve got a friendly cooperative world, then people develop something in Connecticut are
41:13
going to let people in Texas use it. People in Denmark are going to let people in Florida use it. So the more of
41:19
a uh friendly cooperative world we have, you know, construct that working constructively with each other, the more
41:26
we can comfortably depend on people who live a little bit farther away than just
41:31
our own 50 states to do things for us uh and specialize in things. and then we
41:36
can specialize in other things and we can all be ahead by that. Now, to the extent you can’t and you don’t trust
41:43
them, sure, you’ve got to do this stuff yourself. If you don’t trust the Saudis to send us oil when we need it, then we
41:50
should have a strategic reserve. But, interestingly, our strategic reserve can only uh flow 1 million barrels a day
41:57
outward to our refiners who need 15 million barrels a day. And a lot of what they need is not the stuff we have. not
42:05
the same sulfur content that we have. So there’s not much of a match. So you’d think that if we were truly worried
42:12
strategically about be cut off from oil, we’d have a strategic reserve that could flow to our refineries at the rate they
42:17
need to use it and have the right kinds of oil in it that they could use instead of oil that we then have to sell to the
42:24
rest of the world to get money to buy the oil that they need. I mean, that’s not much of a strategic uh hedge if you
42:30
ask me. Now, you know, not that we should be that dependent on oil to begin with, but you know, given that we are,
42:36
I’m just saying pretty much any level you look at of public policy and public
42:42
thinking is highly flawed. I mean, really flawed. And a lot of it is from
42:48
the seven deadly innocent frauds. And a lot of it is just political corruption, which, you know, and I’ve got answers
42:54
for that also, but it right now it’s not happening. And what we have now is a
42:59
very difficult situation that we create our own problems for the most part.
43:06
Uh I wanted to ask a question um from a member uh about um political issues.
43:17
Um uh although actually I’m going to call on on Anthony first. Anthony go ahead.
43:25
Hey, so I um you mentioned earlier um
43:30
that the progressives like don’t um like follow MMT, but I know um like Stephanie
43:37
Kelton was an adviser on the Bernie campaign and she is an MMT or so. Is is it the case that they just don’t get it
43:43
or that they like I noticed reading through your work that like you don’t
43:49
you don’t want to tax the rich um because you wouldn’t need to with this, right? But do they hate I’ve never Wait,
43:56
I’ve never said that. But I’ll clarify that. Let me clarify that after you’re done. Okay. Yeah. But so is it like But even so even
44:04
with her, you know, being the adviser when when when it comes to like paying for the Green New Deal, it’s all
44:09
through, you know, all these taxes. Um, so is it just not what’s not translating
44:15
there if you get an MMT in that kind of position? I guess I I I know like not
44:20
everybody’s going to agree, but and it’s a theory, but I just I I I don’t know. I
44:25
don’t know how to think through that one. Yeah. So, first of all, Stephanie’s very good and um
44:33
pretty much has the same answers at hand that you know that I would and uh um and
44:39
she’s been at it for 25 years, but uh she did not grow up in the capital markets. So there are aspects of capital
44:47
markets that um are she’s unfamiliar with and so are so is everybody else
44:53
that I’ve probably been involved in from a nuts and bolts trading levels analysis
45:00
creating. Look, I was one of the guys in the 80s that created all these derivatives. So when I hear people talking about derivative derivatives and
45:07
how they work, it’s like, you know, oh my god, that’s not it’s not what goes on there. So it’s just I I just have a
45:13
unique experience in capital markets which is something that has been separate from the academic world.
45:20
They’ve looked at it from the outside trying to understand it and some of them done a very good job and Stephanie
45:27
certainly done a good job and well as anyone. So but there there are things that come up that you know I can give
45:33
you the answer to immediately. I don’t have to learn it or look it up. I’ve been there done that. So I have an advant I have that advantage of having
45:40
you know 50 years of hands-on experience with it you know as opposed to um you
45:45
know studying uh different works of academic literature. I’ll I’ll defer to
45:51
them and like I will to you people for if I have any questions about what Mark said
45:56
or what Marks did. It’s not where I’ve spent my time. Okay. So uh now to to
46:02
your first part which you got to remind me about again of yours.
46:07
Well maybe you could clarify uh for us you never Yeah. The taxing thing, right? Yeah. So
46:12
look, the way I say it is this. I’m not against taxing the rich at all. I’m not
46:18
at all against it. What I do know is that historically it doesn’t work. Okay?
46:24
Okay. So, if you want the rich to have less money, which is not a bad thing considering today’s political situ
46:31
system where they have undue um uh influence because of the money. Um you
46:37
know, you have the president saying, well, this person’s well qualified because he’s a billionaire. It’s like, okay, so you know, that just says it
46:44
all, right, to be secretary or this or that because he’s a billionaire, so he’s qualified for that job. So that and
46:50
nobody argues with him. He’s even now he’s got 47% support of the population.
46:56
So when you’ve got that situation and I I’d like to see it. My emphasis is to
47:03
cut off their income at source. Okay? Don’t let them make the money to
47:08
begin with rather than to allow all this institutional structure that’s going to continuously feed these guys and then
47:15
try and chase them to take some of it away. Okay? It’s like an exercise of futility. not against it. It’s not
47:21
wrong, but it’s not my first choice of where to my efforts would go. So, I just wrote I did a presentation at leads on
47:28
um how to bin off, how to, you know, uh the financial sector, how to eliminate
47:35
the financial sector. I’ve got a whole presentation on my website about how to get rid of this and and that cuts off
47:42
large chunks of this uh income that we’re all trying to do something about.
47:49
Okay? So if you have a permanent zero rate policy, there are no more Treasury bond, Treasury bill traders. There are
47:54
no more dealers doing that. There’s no more, you know, people doing research on it, getting paid millions of dollars a
48:00
year. There’s no more tax uh cases and everything else where all these people
48:05
are getting paid millions of dollars a year. That whole cottage industry just goes away. I have a proposal for the
48:11
stock market which is probably not worth getting into where if a company becomes public at a price and these are just
48:18
arbitrary levels $10 a share. They agree that at they will also offer unlimited
48:25
shares at $20. So the price of the stock can never go above 20. If you at once it
48:31
hits 20 people just buying more shares of the same company. From an investment point of view it’s identical. from a
48:36
trading and speculative point of view, it it makes it not worthwhile to speculate in the stock market. So, it
48:42
takes away the whole speculative aspect and it changes the whole analysis of the stock market to uh which company’s going
48:49
to do well, which products are going to do well, uh who’s going to be able to earn profits, who’s going to be able to pay dividends, and not to is this price
48:56
going up or is the price going down? And that eliminates maybe 90% of the income being generated one way or another in
49:03
the global stock markets. Okay, so these are my kinds of proposals and uh there’s
49:09
several of them and they just take away this problematic income at source. So what
49:17
I’m saying is do that first and you know when the tide goes out we’ll see who’s
49:22
you know wearing a bathing suit type of thing and then on let’s see what the problem is after we’ve done this and I
49:29
think we’re going to be faced with a much much smaller problem one maybe nobody even cares about. I mean, if you
49:35
got people who win the lottery, is Bernie Sanders against the lottery? It creates all this inequality. I’ve never been able to get a straight answer out
49:41
of his supporters. I’ve never asked Bernie that, but I did meet him once. I forgot to ask him that question. But,
49:46
uh, you know, I’m like kind of categorically against the lottery because how it distorts people and how
49:53
it distorts the whole society. I had some people said, “Oh, you got to meet our new neighbors. They won the lottery.
49:59
They’re really interesting people.” It’s like, okay. So it’s you know it’s like
50:05
so anyway uh but I guess it’s way down on my list of what to be against. But uh
50:11
again that’s to me how you attack the the in the inequality issue that’s actually a problematic issue is to first
50:18
get rid of it at source then figure out what you want to do about what’s left.
50:23
It seems like uh not only would that uh
50:29
be uh a good way to correct inequality but also a way to promote productive
50:37
investment uh of actual absolutely absolutely so what we have is a problem when you come right down to it
50:44
is created by institutional structure. So let’s reverse that structure that’s creating it instead of adding new structure to try and take it away. Now,
50:50
does that mean I’m against taxing the rich? No. And this I’ve said this exactly over and over again. Yet, the
50:57
message has gotten through to you that I’m against taxing the rich. So, somehow
51:02
that’s out there, right? That’s what I mean by reconciling things you’ve already heard and it’s not your fault.
51:08
This is like how information gets disseminated and gets, you know, altered
51:14
for somebody else’s purpose. Question from Bradley. Yeah.
51:23
Thanks. Sorry, awkward unmuting. Um, so I I was just pulling up your uh um how
51:28
to deep sick/bin off the financial sector. And I’m I’m not going to ask a question about that because I only read
51:35
the uh the top few proposals, but it’s really interesting and I feel like uh if only if someone can read it really fast,
51:41
I bet we have a great opportunity to ask you questions about, you know, what what you would do. Ultimately, it all seems
51:47
like we’re just we’re trying to take money, you know, we’re we’re trying to move the money so that there’s less inequality in one way or another and
51:54
that even if um the goal, you know, the the like you said, the goal of taxing the rich is to, you know, or taxing
52:01
wealth, right, is to fix that problem, yours is going at the source and changing the financial structure. So,
52:07
really interesting. But um you mentioned before you talked about derivatives and uh yeah
52:12
um people explaining them to you which you said was kind of funny because you created them. So, uh I’m I bet you have
52:18
a lot of fun stories, but I was wondering when we see I mean if you want to go with the story then, uh maybe
52:25
that’s a better question, but um you know, we have movies like uh the big short I haven’t read the book, but um
52:32
where you know, popular cult we and we also had a um a course in class unity
52:38
about the two 2008 financial crisis and uh so we I I think we would like to
52:44
think we have a decent understanding of derivative ative markets and uh you know what was it cos and all that but are
52:50
there any uh misunderstandings not so much the general public but maybe maybe
52:55
so but that uh people like class unity who think we have a pretty good idea of what happened uh with derivatives and
53:02
all that that we might get wrong or or misunderstand okay so I can talk to you about a couple
53:09
of things from ’08 number one that the whole teaching moment was lost of what
53:15
caused it and how to prevent it from happening again. And so we’re back to
53:20
running into it again. And I can talk to you specifically about the TARP program,
53:26
how everybody got that wrong, including the people I talked to at the Fed and everywhere else. Uh they’re they’re five
53:33
minute type of stories. They’re kind of long. I don’t know if you want to Which one do you like first? I’ll give you the
53:39
general case first. Yeah. Okay. So, you know, um what what the
53:45
general misunderstanding of what caused 08 was lending standards, bank crisis,
53:51
um housing fraud, and all these things happened. There’s no question about it.
53:58
But in the middle of ’08, I was screaming, not that anybody’s listening,
54:03
we need a payroll tax holiday. I don’t know if anybody remembers that. He probably didn’t hear me at the time, but
54:08
maybe later would have heard about it. where uh every lemon had already happened and the others had happened and
54:16
um the average family uh husband and wife working making
54:22
$50,000 a year was paying $325 a month into FICA for social security. And I
54:29
said, “We need to suspend that, a full payroll tax holiday so that their take-home pay would go up by $650 a
54:36
month per family because if we do that and if we stop taking money from them to
54:42
use the uh marketing imagery, um, stop deducting it from their paychecks. First
54:49
of all, there’s no moral hazard because these are people who are actually doing the work and getting paid for real work.
54:54
Without them, we have nothing. They’re growing the food and building the cars and you know cleaning the streets and
55:00
doing everything we have and so uh and working in our hospitals and working in our schools. These are working people.
55:05
Nobody gets pays FICO who’s not working. That’s a working tax. And so we’re to
55:11
totally dependent on these people for absolutely everything. So for them to make more money is not like moral
55:16
hazard. It’s not like they’re going to go quit and retire because they’re getting $650 a month and so we’re going
55:22
to lose our workforce. All right. they would have been able to make their car payments and make their house payments
55:28
and there would have been no banking crisis. We would not have bailed out any car companies. Unemployment
55:33
uh car sales wouldn’t have gone from 17 million to 9 million in one month. Um
55:39
unemployment wouldn’t have gone up by five or 10 million in couple months. It all happened because people suddenly
55:45
were not were getting laid off, losing their jobs, not not able because the banks couldn’t lend anymore, which is
55:52
another story. It wasn’t the fact that they lost money, it’s that they could not continue to lend. So, uh, credit
55:58
drives a lot of spending and without that spending, people lose their jobs. So, we suddenly had 8 million unemployed
56:04
people, you know, out of nowhere and um and so we’re bailing out banks and we’re
56:09
bailing everybody else out. Okay. The real lesson here is that if we had done
56:14
this payroll tax holiday, it was a $1 trillion tax cut. It was the biggest tax
56:19
cut ever proposed, I think, by anybody. these people would have had enough money to pay this stuff and we wouldn’t have
56:26
had the unemployment rate go up. They and the economy would have recovered,
56:32
okay? And we wouldn’t have allowed a financial crisis to spill over into the real economy. We had a financial crisis.
56:39
We had debits and credits gone arry on balance sheets. You can always correct the debits and credits on balance
56:45
sheets, put people in jail, do whatever you want, you know, if they broke the law and eliminate and you don’t have and
56:52
you can do that without moral hazard, but you don’t have to make it so that you know people can’t go to work, build
56:59
cars and drive, go to work, grow food and eat it, go to work, teach school, and have smart kids. You don’t have to
57:04
interfere with with the real economy when you’re fixing up balance sheets. And you do that with a fiscal
57:10
adjustment. And that was the obvious fiscal adjustment. They did not do a single fiscal adjustment until the uh uh
57:18
sometime into ’09, the first quarter, maybe March, they just let it all go. Okay? And and once the economy fiscally
57:26
adjusted itself the ugly way, higher unemployment compensation and lower tax
57:32
collections because people are out of work, the budget deficit did get up to 9 or 10% of GDP. And the economy then
57:39
turned around from that fiscal adjustment. Long painful time it took for fiscal adjustment. And none of the
57:45
other stuff they did mattered. It was only the fiscal adjustment that turned things around. Okay. So what’s the
57:52
analogy? The analogy is we’re driving a car down the road and it’s a good car and it’s
57:59
really well aligned and it’s a good highway and so it stays in its lane pretty nicely. Okay. But the driver, you
58:07
know, falls asleep at the wheel and the car keeps going for a while. But even
58:13
the most perfect road we can build or the best car we can build, at some point the car will veer off to one side. Some
58:20
there’ll be some irregularity in the road and it’ll crash into the guardrails.
58:25
And the the analysts come afterwards and look and they say, “Oh, we see what happened. This car was doing real well,
58:30
but there was a low spot in the road. The engineers didn’t build it right. It caused the car to dip. It turned off to
58:36
the right and then it crashed. Okay. So, next time we’re going to build the road better so that it’ll keep going straight
58:42
down the road, you know, or and I’m looking at it say the driver fell asleep
58:48
at the wheel. He could have like if he was awake, yeah, there was an undulation. He could have moved to the side, but he could have kept that car on
58:54
the road. It didn’t have to crash. And yeah, it’s a great idea to fix the road. I’m all in favor of that. Okay. So what
59:00
we had was the economy crashed because Congress was asleep at the wheel. The
59:05
wheel is fiscal policy. They could have cut taxes, increased public spending, and avoided the crash. Okay? And they
59:13
didn’t do it. And instead, the lesson we learned is, oh well, we can fix the road
59:18
and make it better. We can change this banking regulation so that the banks when they crash don’t lose as much money
59:23
and the bailout’s smaller and we don’t have to bail out car companies. We’ll have banks with more capital. But, you know, they go on and on about how we’re
59:30
going to fix the roads and make the car steer better instead of, you know, telling Congress, you know, like you’re
59:36
sleeping at the wheel. Fiscal policy is your wheel. You’re on the steering wheel. That’s how you keep the car on the road. Okay. And so, they did do all
59:43
that stuff. And the car has been sort of on the road for a while. And then when COVID hit, they did use the steering
59:49
wheel. They went into massive fiscal adjustment, $5 trillion. And now we’re
59:55
crashing the car again off both sides of the road. And they’re arguing over taxes and spending as if they mi miss the
1:00:02
whole point of fiscal policy being the steering wheel to keep the car on the road. Now that should have been learned
1:00:07
could have been learned during ‘ 08, but it wasn’t. So that’s my story about the ma massive teaching moment that was
1:00:14
totally lost in ’08 and that we didn’t learn. We didn’t learn from that and instead we diverted attention away from
1:00:20
that to all these other reforms which are you know moving around the deck chairs in the Titanic type of thing
1:00:26
right it’s still going to hit the iceberg we’re not watching it okay so now the tarp I don’t know if you
1:00:31
remember that situation at all how old you guys are but um what happened was uh
1:00:39
city bank’s capital fell below regulatory requirements so let’s say
1:00:45
you’re supposed to have 10% capital, which means you have a trillion dollars in loans on the books. Oh, well, no,
1:00:51
assets. Yeah, loans on the books. And you have 900 billion of depositors money and 100red billion of your own
1:00:58
shareholders money. And uh suddenly you have a loss of uh
1:01:06
you know what I say? 900 million hundred million dollars. And so now you only have Did I get this wrong? 900 million.
1:01:14
Let me start over. I’ve lost them 76 this year. I’ve lost them my own numbers. You start off with let me let
1:01:21
me use smaller numbers so I can understand. You start off with $100 of bank capital
1:01:26
$90 is your loans. $10 is your own money. Then you lose a dollar. One of
1:01:31
your loans goes bad. So So that’s your own money you just lost. So you still have $90 in deposits,
1:01:38
but now you only have nine million $9 of your own money, which isn’t enough.
1:01:43
you’re supposed to have 10 million. So, you’re in violation because the value of
1:01:49
your loans went down. So, your net worth went down, your own money went down and
1:01:54
and so here you are. So, what do you do? Now, notice it doesn’t matter if you go from 10 to nine. I would say the
1:02:00
requirement was only eight and you had eight, then you go to seven. It’s the same thing. If you had three and it goes
1:02:06
to two, it’s the same thing. So build having banks require more capital doesn’t help you if things go bad
1:02:12
because all they have to do is get below it whatever it is and they’re they’re toast right so uh it might help the
1:02:18
government from not having to bail out as many depositors but it doesn’t help to keep the bank from going under you
1:02:23
know it still has to get below a threshold. All right so you had um 10 of
1:02:28
your own money now you only have nine and then and then the loss is actually larger. Now all of a sudden you only
1:02:35
have five of your own money. So now your capital ratio’s gone from 10% to 5%.
1:02:40
You’re you’re you’re in deep dudu. You’re like uh you’re you’re toast. And so Sheila Bayer, head of the FDI, fires
1:02:47
up the bulldozer. She’s driving down 6th Avenue, wherever the city bank building is. He’s about to bulldoze it. And
1:02:54
Paulson’s got the tarp money that he was supposed to use to buy troubled assets, which couldn’t work, which I said
1:03:00
couldn’t work before he did it, which is another story. Remind me to tell you why it couldn’t work. But he still had the
1:03:05
whole $750 million. Couldn’t spend it. And he says, “Wait a minute. I can buy
1:03:10
$50 million of uh City Bank cap, $50 billion of City Bank capital. I can get
1:03:17
you from 95 back up to 100. I can get your capital from five back up to 10. I
1:03:23
can buy $5. I’ll put buy $5 of new stock in City Bank. Now you’re whole. Now
1:03:28
you’re in compliance. And we’ll put on terms and conditions. no dividends, no increases for pay, you know, penalty
1:03:35
rates, and until you get your own money back, your your hands are tied under
1:03:41
these conditions. So, uh, Congress turns them down
1:03:47
at at night and stock market drops a thousand points, you know, million people lose their jobs, whatever. It was
1:03:53
crazy volatility. At 3 in the morning, somehow Congress passes it. I still
1:03:58
don’t have the answers. somebody told me they knew what happened and started to tell me I never I didn’t get a good idea
1:04:04
of it so I don’t even remember but anyway they passed it and so the next day city banks okay and you know we move
1:04:11
on so now what I’m telling you is the government did not put any money in city
1:04:17
bank that’s not at all what happened uh even though they said they did even
1:04:23
though those were the debits and credits at a functional level that’s not what happened because think of what would have happened if they just let City Bank
1:04:31
go with only $5 of its own money. It had
1:04:37
$10 of its own money, $90 of loans, and uh I’m sorry, $100 of loans, $10 of its
1:04:44
own money. Some of the loans went bad. Now it only had $50 of its own money.
1:04:51
All the losses are coming out of City Bank’s money, not the government, not the FDI. If City Bank lost more than its
1:04:58
remaining capital, more than the remaining $5, then the FDIC has to pay off the depositors and the loans
1:05:05
remaining loans aren’t worth enough. That’s why City Bank lost money and and they have to write the check. So, let’s
1:05:11
say City Bank had lost $6. The loans are only worth 89. There’s not enough money
1:05:16
to pay off the depositors. They’re owed 90. The government has to write a check for that last billion dollars or
1:05:22
whatever. Okay. After Paulson puts in his $5,
1:05:28
it’s five billion. If City Bank loses more than the five billion, they lose
1:05:34
six billion. Again, the government has to put up the last billion, but instead of coming from the FDIC, it comes out of
1:05:41
Pawson’s TARP money, five billion. So now out of the five, he’s lost a
1:05:46
billion, and he only has four. Okay? So before he came in, any bank losses that
1:05:51
exceeded their capital were going to come out of the FDIC. After he put money in, any losses that exceeded their
1:05:57
remaining capital come out of the Treasury. What’s the difference? The
1:06:02
FDIC gets all its money from the Treasury. That’s where its account is. Okay? Either way, if City Bank loses
1:06:09
more than its remaining capital, the Treasury, let’s say the taxpayer in their language again, pays. Okay? So
1:06:16
nothing changed. The government didn’t have five billion more at risk after
1:06:22
they put the money in than they did before. They still their risk was still only to the 90 billion of depositors
1:06:30
that they have to cover if the the loans aren’t, you know, value of the loans
1:06:35
isn’t there to cover it. That doesn’t change. Okay? So all they did was they gave City Bank regulatory forbearance.
1:06:42
What they were saying is, no matter what they actually did was, City Bank, we will let you run with only five billion
1:06:49
of your own money instead of 10 billion, but with terms and conditions, and as soon as you comply and get your
1:06:56
own money back to 10 billion, then we’ll um remove the terms and conditions.
1:07:02
Okay? So Paulson wasn’t using taxpayer money, wasn’t using, you know, and I I
1:07:08
cringe at that expression, but just for explanation here. And he wasn’t like
1:07:15
doing anything. All the only thing they were doing was giving City Bank regulatory forbearance, you know, at the
1:07:22
macro level to be able to continue running with the capital that it did have, the five instead of 10, until it
1:07:27
rebuilt it back up with terms and conditions. Okay. But nobody understood that.
1:07:34
Instead, they understood it as the 750 billion. 50 billion was going to City Bank to build their capital back up from
1:07:41
50 to 100 at a huge cost of political capital.
1:07:48
Massive meetings in Congress about spending this money. It’s our healthcare money. It’s this. It’s that. It’s we’re
1:07:53
going to have to do this for the deficit. you know, all kinds of crazy stuff when it was completely inapplicable to the situation,
1:08:01
you know, because they were already guaranteeing 900 billion of deposits. It didn’t change that. And City Bank only
1:08:09
had either way 50 billion to guarantee the 900. So once they lost that, the government’s on the hook for the rest
1:08:15
whatever isn’t covered by City Bank, period. No matter what Pollson did with his TAR money. All right. And so I was
1:08:22
with a guy named Jim Clauss at the Fed. really super guy, good guy, smart guy. He’s in monetary operations
1:08:28
explaining this. And he goes, “You’re right.” I said, “Is
1:08:35
there anybody in finance, anybody at the Fed? Did anybody understand this?” He goes, “No, nobody. Nobody at the banking
1:08:41
committee, nobody, no Jamie Diamond at JP Morgan, none of the analysts, nobody on Wall Street. There was absolutely no
1:08:49
discussion over the fact that look, you don’t have to do this. It’s just regulatory forbearance. We just let City
1:08:55
Bank go with five billion with terms and 50 billion with terms and condition of net worth. You know, it’s the same
1:09:01
thing. There was like no discussion about that. It’s not like they discussed it and decided people would understand it better the other way or something. It
1:09:07
was nothing anywhere. Completely absent from any discussion of So, how well do these people actually understand
1:09:14
banking? How well do they understand finance? How well do they understand any of that stuff? They don’t. And it’s like
1:09:20
none of them. It’s like a big fat zero. I can give you the same story about the uh credit um the swap lines, the central
1:09:28
bank swap lines where they didn’t understand any, you know, the essence of what they were doing and it’s just
1:09:35
happened time and time again. I’ve just seen this for 50 years now and it’s been a long time.
1:09:41
We have one maybe a rhetorical question from a member. So the numbers are all
1:09:47
just Kabuki theater. Well, they’re scorekeeping. The Fed is the scorekeeper for the dollar. Would
1:09:53
you say the points on a football game or Kabuki theater? No. They follow the rules and they were they are there as a
1:09:59
consequence of the rules. And we have rules, institutional structure that says
1:10:05
they’re tax liability of $500 on your house. And then we keep track of that.
1:10:10
We the scorekeeper will change the numbers in your account and if they don’t comply, you go to jail or lose
1:10:16
your house or something. So, it’s it’s real. It’s intangible, but it’s real.
1:10:21
And there’s a difference between tangible, intangible, real, unreal, you know, I think, depending on how we
1:10:27
define terms. But, uh, these are real tax credits. If you get a tax credit for putting solar in your house, it’s the
1:10:33
same as cash when it comes to paying your taxes, right? There’s no difference. It’s all real stuff. The
1:10:40
dollar is a tax credit, and it’s uh it’s transferable.
1:10:45
If you got transferable solar tax credits, they’d be worth the same amount. Uh that’s fair enough. U so we’re we’re
1:10:52
coming to the end. Um I there are a few questions we wanted to ask. Uh one related to
1:10:58
uh uh current administration with Trump and Musk and the other related to um
1:11:04
political aspects of of full employment. Just um let me know if if you if you need to hop off.
1:11:11
Go ahead. Uh um so let’s uh let’s go with a a couple question on on on Trump
1:11:19
and Musk. Uh maybe you could just you know answer them whichever you find more interesting. Um Elon Musk seems to have
1:11:26
recently discovered that MMT is an accurate description of the financial system in this country
1:11:31
with the quote unquote 14 magic money computers he says he discovered. Yeah. What should we what do you think
1:11:38
we should expect to come from uh from this if people like Musk no longer believe that the government has to ask
1:11:44
tax before it borrow before it spends? So we’ve seen this happen before. We’ve
1:11:49
seen it with a Bernanke interview uh on 60 Minutes. We’ve seen it with the
1:11:54
Greenspan interview and it just doesn’t get picked up by the news. just they
1:12:00
just let it die out there and the old message seems to like prevail and get repeated over and over again until
1:12:06
that’s forgotten. It’s already run, you know, the uh what do you call it? The news, it’s already fallen out of the news cycle and everybody’s forgotten it
1:12:13
already and everybody knows, yeah, you can print money that Zimbabwe, you know, that’s all he discovered. It’s a good
1:12:19
thing he discovered it so we can stop that from happening. They haven’t taken it any more than that. He certainly
1:12:24
hasn’t and I don’t expect him to. Uh, one question about a economic
1:12:31
thinker that this group is very fond of, Mihal Kitki. Um we want to ask a
1:12:37
question. We uh in his in his uh uh
1:12:42
article uh political aspects of full employment uh Kletki argues that uh the
1:12:48
capitalist class would rather get less profit than lose total political control over the economy and that’s why we have
1:12:56
less than full employment. Yeah. Uh so his argument is if you if you try to institute a program uh for
1:13:03
full employment uh business business owners would lose control and for that
1:13:08
reason uh there’s uh political resistance to uh full employment
1:13:16
and so the question is um you know we would like to see program for full
1:13:21
employment but sometimes it seems like there would all have to be a political revolution before that could happen. Um
1:13:28
yeah, so realistically what do you think it would take for the government to act as an employer of last resort?
1:13:34
So he was talking about different economy in a different context. I think we’re probably on gold standard
1:13:40
at the time then. I don’t know what year he wrote that uh or at least all the
1:13:45
everything was in the context in the gold standard. And uh unemployment
1:13:50
was reduced by what I would call top down aggregate demand. And under those circumstances he could be correct. And
1:13:59
then um they also had um uh
1:14:07
the idea of I had the thought I don’t know how to
1:14:13
say this but uh you had
1:14:19
you know a um theory that had like a Brentton Woods international aspect to
1:14:25
it where again these things created a race to the bottom of real
1:14:30
wages. Of course, you had a a context of unemployment and uh so where employers
1:14:37
had like adding to aggregate demand did not necessarily mean they were going to
1:14:43
directly benefit from that. So I I I like to say that I’ve said something
1:14:48
that maybe applied to his time. I don’t know. I mean it’s before I was born I think that uh today’s exporter is
1:14:56
Marxist capitalist in that today’s exporters have no
1:15:03
interest whatsoever in the domestic situation domestic market apart from they want costs to be at a minimum
1:15:09
that’s kind of what Kleski is talking about the business the capitalists want their cost to be at a minimum which is
1:15:15
true if you’re selling into another market and maybe they were for the most
1:15:21
part maybe they were selling mostly to government markets. I don’t know who they were selling to but
1:15:26
you know contrasted with Henry Ford’s flawed statement but it was still a statement that he wants people to earn
1:15:32
enough to be able to buy his cars. That’s what those are people who are dealing in the domestic market. So when
1:15:38
we had um the situation in the 70s uh
1:15:44
60s I’m sorry 1960s uh where the automakers would meet with
1:15:50
one union one automaker would meet with one union give them whatever raise they wanted pretend to go through these
1:15:56
negotiations everybody would give them the same raise then the uh all the automakers would raise their prices and
1:16:02
everybody was fine so they weren’t and and the you the wages in the auto industry were much higher you know,
1:16:08
multiples higher than the rest of the economy. And those employers were perfectly happy paying it because they
1:16:13
lived in an economy where they could sell their entire output. There was enough aggregate demand and they were happy to pass through the wage, go ahead
1:16:20
and sell it, get more profits that way. So, what Kleski said, I I’m sure it applied, he’s a very smart
1:16:28
guy, to his time and everything else. So what we’re talking about now is they’ve
1:16:35
been proposing through the uh what they call the job guarantee is basic is the
1:16:40
base case for analysis for any um economy where you impose a tax liability
1:16:48
and then um creates a certain number of unemployed and then you hire the people
1:16:54
uh who are looking for work who your tax liability caused to become unemployed. And if there’s still people looking for
1:17:00
work, it’s because you haven’t spent enough to cover the need to pay taxes and the desire to save because any money
1:17:07
earned by the economy of your money earned by the economy is either going to be used to pay taxes or not by the end
1:17:12
of the day. And if it’s not, we call that savings. And so that’s just an identity and that doesn’t have much to
1:17:20
do with employers. Okay? So, so Klesky’s employer that’s
1:17:25
involved in wages and everything else isn’t dealing with this. What he’s dealing with is the residual aggregate
1:17:33
demand that’s out there. The government wants to buy something else. It wants to, I don’t know, buy jet planes or
1:17:40
something. So now you’ve got an employer that’s selling jet planes to the government, marking them up, and he
1:17:46
knows his cost of labor because the government’s paying his wage to everybody. He can get his appropriate markup. the government can decide in its
1:17:53
contracting process whether to approve that markup or not and that transaction
1:17:59
will take place and the same thing will happen with all the subcontractors the same thing will happen with all the
1:18:05
farmers who are deciding do I want to work at this wage or do I want to grow food for some of these people and you’ll
1:18:12
have market forces resolving all these and if there’s a demand for production it has to be a
1:18:18
demand based on the alternative of working for the government at that wage which is limited. The government’s only
1:18:24
hiring so many people, just enough to cover its expenses. So I don’t see dynamically that um in that base case
1:18:34
with nothing else going on all else equal that Klesky’s concern would hold.
1:18:40
Now if you suddenly have the government not paying enough and having unemployment then suddenly what Kleski
1:18:45
is talking about could the math could lead to that. But um more important, we
1:18:50
have a new dynamic that’s taking place that I don’t think he was dealing with. And that is people prefer
1:18:58
unemployment over inflation and they think there’s a trade-off. And so, you know, uh Vice President
1:19:05
Harris lost the election because employment because inflation got to 3%.
1:19:11
So all these people who think oh if you know they understood the money in MMT inflation they’d spend all this money
1:19:17
inflation would run wild and here we have a regime change from whatever it was into whatever we got over 3%
1:19:23
inflation was just unacceptable throw this throw the bums out right and
1:19:29
that’s like a different dynamic that doesn’t lead to what Kleski was talking
1:19:35
about at all this leads to a political dynamic where you you get votes. If you
1:19:42
can bring unemployment up to six or 7% but bring inflation down to zero, you’d probably win the election. And
1:19:48
unfortunately, people like unemployment. It’s kind of human nature. And it’s partially because
1:19:55
of coercive tax liabilities, but I’ll get to that in a second. When there’s higher unemployment, you
1:20:01
can get a plumber right away to fix your house. You know, if you need somebody to cut the grass, there’s people lined up waiting to do it because there’s
1:20:06
unemployment. And so it empowers people who are still employed, which is 90 or 90 90%. The other 10% are working for
1:20:14
them. So you’ve got a 90% majority that kind of likes it the way it is. And they
1:20:20
get this inhuman attitude because taxation is an ongoing
1:20:29
drain, you know, on in everybody. It’s an ongoing hole in the economy’s pocket
1:20:35
that has to be fulfilled or else you there’s severe penalties and it creates this extreme anxiety, psychological
1:20:42
anxiety that affects everything from behavior to artwork to music and everything else whether you know it or
1:20:49
not. The difference cultural differences between monetary and non-monetary societies are extreme and it creates
1:20:56
this and these anxieties are like create all the greed and everything you’re talking about. Without the ongoing tax
1:21:02
liabilities, you wouldn’t have that. Okay. So, it’s all byproduct of that is uh that so why do we have them? Well,
1:21:10
that’s how you win the war. the the ones that can do this can better provision the military, better provision the army,
1:21:16
better motivate soldiers, and they tend to win the war over the the losers of the war who aren’t as good at doing this
1:21:23
ultimately. Otherwise, we wouldn’t have it. So, there’s like a Darwinian aspect to this monetary thing that’s embedded
1:21:31
itself, I don’t know, 5 10,000 years ago, and it’s been there ever since in
1:21:36
one form or another, dominating any society that it pops up in. in that
1:21:42
society tends to dominate people around it until it breaks down for some other reason. So that that’s my story and I’m
1:21:49
sticking to it right now. Maybe you guys can change my mind. Well, that yeah, that’s that’s really interesting. Uh maybe just uh a followup
1:21:58
when we say um I think I agree um uh these days people prefer to have low
1:22:04
inflation and they prefer to have unemployment but maybe the biggest groups of people that um prefer to avoid
1:22:11
inflation are people with fixed income uh namely the financial class or and the
1:22:17
people who want to uh keep unemployment are uh business employers. uh name. So
1:22:25
that would be the I guess you could say the capitalist class. Um and and those seem to be the the people that Kletki
1:22:32
had in mind when he thought you know this um this coalition of of the of the
1:22:40
capitalist class and the financial rontier class. Yeah. Coming to together to prevent um a full
1:22:46
employment policy. Yeah. So that that might be the case. Now I I don’t think it would be the case
1:22:55
with my base case for analysis the job guarantee or whatever. I think that changes our dynamics but I don’t know
1:23:02
how we get from here to there because nobody’s going to like take that chance you know you know there people are
1:23:07
conservative in that sense when it comes to change and we’ve got a strong like
1:23:13
bias towards thinking that this they’re better helped by you know what what
1:23:20
you’re just talking about. Yeah, he may he may be perfectly correct on that, right? And and your point was well taken
1:23:27
that he was advocating a certain policy in a certain political and monu uh economic monetary context and in and
1:23:33
you’re uh advocating for certain policy in another Yeah. that’s not that’s not understood
1:23:39
or experienced or felt. And it’s like you can’t expect people to like put
1:23:45
themselves in that situation and therefore agree to change things. You know, it’s a very difficult leap of
1:23:51
faith for them since there’s no examples to point to anywhere.
1:23:58
Uh well, thank you so much uh Warren for us. It was great discussion. Uh I
1:24:04
enjoyed it very much. Uh thanks everyone for being here and um uh yeah um we
1:24:12
Okay. Well, thank you. Thank you all for uh doing this. It’s been uh good for me. It helps me. Uh I definitely enjoy
1:24:18
putting these arguments out there now with somebody who obviously understands them and I look forward to getting the
1:24:24
link whenever and putting it out there on social media and get another 20 or 30,000 people involved and see what they
1:24:30
say. Yeah. And is there any way people can find you online? Oh, I’m on X at WB
1:24:37
Mosler, right? And um I’m on Blue Sky, same thing. WB
1:24:42
Mosler. And uh I’m on Facebook, but there’s not much there. And my website’s
1:24:48
moslereconomics.com. These are all written out in various papers, a lot of them published in
1:24:54
journals, actually. Right. Okay. Well, uh thanks a lot for for talking to us.
1:25:00
Good to talk to you. Heat. [Music]
1:25:18
Heat. [Music]
oooooo
