Warren Mosler eta MTM (2024)

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Varn Vlog: Warren Mosler on Modern Monetary Theory and Its Implications

(https://www.youtube.com/watch?v=Ef7pqmV4ylA)

Warren Mosler is a former American hedge fund manager and entrepreneur. He is a co-founder of the Center for Full Employment And Price Stability at University of Missouri-Kansas City and the founder of Mosler Automotive. Mosler is a proponent and research financier of post-Keynesian Modern Monetary Theory.

You can find his work at Mosler Economics ( https://moslereconomics.com/ ).

Transkripzioa:

Introduction

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[Music]

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[Laughter]

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is

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[Music]

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hello and welcome to V blog and today I’m here with entrepreneur hedge fund

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manager author and Scholar Warren Mosler

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um co-founder of uh the center for Full Employment and price

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stability and founder of the mo U MOS automotive

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and um we’re here to talk today about modern monetary Theory particularly as

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reflected in the mo in the Contemporary US economy and um one thing I wanted to

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ask you is uh the Federal Reserve has seemed a

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little bit hard to predict even from the standards that I normally hold it to which is not very high um and yet

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despite seeming to want to cause an unemployment crisis it seems to be unable to do so um what do you make of

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the federal service policy the last three years yeah uh let let me just say

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um I turned over my fund management to my partners back in 19 1998 so I haven’t

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done that in 26 years now just in fact I’ve been out of it a lot longer than I was in it but um yeah so it’s about it

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was 2022 early when the feds decided to start increasing interest rates and it

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was at that time that I pointed out that this was going to have the opposite effect of what they intended instead of

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causing unemployment to go up it would go down and instead of a weak economy it would be a strong economy and it would

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ultim Ely support higher levels of um you know inflation I like to call them

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the inflation indicators they’re not actual inflation but what they use for inflation indicators and uh it’s pretty

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much what happened what what they overlooked is the debt to GDP ratio in

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the United States uh and it just use debt held by the public the things like Social

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Security Holdings don’t matter for the economy so the the relevant debt to GDP ratio went from 35% back before the OA

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crisis to um around 100% currently and that’s not a bad thing it

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doesn’t mean the government is going to go brok or and solvent or anything like that but what it does mean is when they raise rates the government um as always

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has to pay more interest on the public debt and when the public debts that much

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larger three times larger in relation to the economy the effect of that those rate hikes uh is three times larger the

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fiscal effec of them they increase government spending on interest three times as much as they used to increase

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government spending on interest so uh with the zero rate policy the government spending on interest eventually goes

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toward zero and we went up to a five and a half percent on what’s now 34 trillion

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or so of total debt uh not all held by the public but and so you get over time

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roughly a billion a trillion and a half dollars of interest payments because of the higher rates now it doesn’t go there

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right away not all some of the debts short term that goes there pretty quickly part of it balances at the FED

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it goes there overnight but some of it’s longer term you have to wait for it to mature and then they pay more interest

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on the on the new debt that replaces it however the important point is that

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deficit spending for interest payments just skyrocketed as a Fed raise rates

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because the only thing that happens from the government’s point of view when they raise rates other than making an

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announcement is they pay more interest on the public debt that’s operationally that’s the only change for government is

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they have 34 trillion in public debt they have to pay more interest on it when they raise rates and that interest

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they don’t there’s no tax to pay for that that’s all new deficit spending and so right now the deficit is approaching

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two2 trillion doll this coming year depending on what the economy does and uh more than half of that going to be

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interest expense and so the uh interest the higher interest rates are contributing to the deficit spending and

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that’s what ultimately supports uh a modern economy it’s your deficit spending it supports uh incomes it

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supports uh sales growth employment everything in the economies are

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supported by the government spending uh and not to say that it’s good or bad but

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that is a support for Better or For Worse and uh do too much of it you’ll get inflation for sure but it’s still

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what supporting the growth um and that’s what we’ve seen in the last three years we’ve seen their forecast go from

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uh recession to a worse recession as the FED kept raising rates and I’m saying no

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they’ve got a backwards and you saw the real GDP numbers getting stronger and stronger and instead of unemployment

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going up to you know four four and a half 5% as they were forecasting way back it was gone down to 50-year lows of

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3.7% where at all-time lows in unemployment because they’re flooding the economy with money to pay the

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interest on the debt and that’s is just no way around that you throw kerosene on

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the fire the fire burns stronger it doesn’t go out now I think what the feds got deep in their model somewhere is the

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idea that nobody ever spends interest income or very few very little of it ever gets

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spent and so that it’s no matter how much interest income they pay they they don’t count that as you know they don’t

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see that as going to have an effect on the economy and they could have been right they could have raised rates and

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the economy could have gotten worse because nobody ever spent any of the interest income they earn but if you assume a normal rate of spending

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whatever that might be historically just by going back looking at the data uh you get what we’ve got and so it should be

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no surprise to anybody correctly anticipating how much interest of the interest expense get spent that the

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economy would be this

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strong this this actually does kind of make sense and it it talk it brings something

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that isn’t often spoken about when we talk about uh government debt are interest rates because everything’s

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assumed as payments into Banks from the cost of the interest rate for the cost of debt but no one’s thinking about well

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someone’s making money off of that interest um yet you know it does seem like a kind

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of regressive way to inject money into the economy yeah I call obscenely regressive

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okay it only goes to people who already have money in proportion to how much they have so it’s it’s basic income payments just

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like the stimulus checks but only to people who already have money in proportion to how much they already have

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in order to fight inflation I mean this is just Madness if if the uh people looked at it for what it was and see the

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FED as an agent of government like the military or anybody else can decide on

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its own to pay over a trillion dollars out of interest income only to people

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who already have money in proportion to how much they have and claim that they’re doing this to fight inflation I

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mean they get laughed out of the room right but that’s what’s been going on and it’s got being supported by

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democrats Republicans everyone it’s like you know the FED has to tighten up now

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if you can explain to me how that’s tightening up fine but it’s not and the the numbers coming out show that it’s

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not tightening up it’s drunken sail or levels of defit spending we’re at 7% of GDP it’s it’s boom time this is the

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strongest economy we’ve ever had outside of a war or you know immediately after a crash you get a Little Bit Stronger but

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in terms of a midcycle or late cycle recovery this is as strongest we’ve ever had and uh they have no explanation for

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it except oh the consumer is resilient well yeah you’re flooding them with money it’s going to be

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resilient why do you think there’s there’s such a sense of economic Malay uh amongst certain um let’s say middle

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clashes people right now because I agree I look at the economic indicators everything looks good I mean you’re

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looking at like GDP growth we we don’t we haven’t seen this consistently in a

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in a long time and yet I also agree that it does feel like um things are are

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rougher than those numbers should indicate and you know my my my working theory is what you’re saying that it’s

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because this this stimulus is aggressive but but um what other reasons might there be

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well there’s a couple of reasons you know one is I’ve been looking at some of the surveys lately like consumer confidence and now they’re starting to

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break them up between Democrat and Republican and the Democrats say the economy is you know good and the

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Republicans say it’s terrible and when they divide it among different income groups and everything else they don’t

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find that Divergence only when they do it politically so it’s a little bit it’s just tribal you know one team wants

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economy to be good to help them in the election and the other team doesn’t to help them in the election so there there’s some of that going on uh there’s

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a lot of the um uh the Federal Reserve believes that

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things are going to get worse if you look at their forecast they’ve got unemployment up to 4.1 or 4.2% by the

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end of the year in a deteriorating economy and it’s broadcast all over the news and so it causes people to believe

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it so you get surveys where um people’s current conditions are good but they believe the future is going to be Bleak

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and it’s because of all this talk and all the all the professional economists for the businesses the large businesses

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small businesses they’re all forecasting weakness because of the high interest rates they’ve all look everybody’s got

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it backwards so they’re all they all see this meteor about to crash into the Earth and it’s all doom and gloom when

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the sky is not falling there is no meteor the opposite and so what you’re seeing is an economy that’s doing well

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in spite of extreme negative sentiment which means if the sentiment just goes to normal it’s gonna the the expansion

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is going to be that much stronger lot

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stronger this leads me to uh a kind of let me add one more thing to that you

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have people who are very upset that the price of orange juice went up or

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something like that and it has and selective prices have gone up and they

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blame if they’re on the other team that you know if they’re on the Republican team they blame the Democrats if they’re on the Democrat team they blame the

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Republicans and it says yeah I’m making more money I yeah I’m doing well I just

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bought a second car and uh but you know the price of orange jues off this is really bad so they focus on these

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headline price increases and it’s just human nature to do that and there have been a lot of them that are pretty ugly

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you know that affect their that they see when they go shopping and it scares people because when you see prices going

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up you’re worried about whether that’s going to continue and if it does you’re not going to be able to afford to eat

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and so it’s got It’s a very worrisome thing to see these prices going up even though right now you’re okay all

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government employees just got a 5.2% raise they’ve got enough money to cover it all but it’s still a a an anxiety

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that builds up inside of you when you see prices going up all the time and it makes you feel like you’re on the edge

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of you know Extinction if if you ever fell behind you know one false move prices go up and you can’t afford

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anything so it’s a very anxious time for people and it’s very uneven of course

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you’ve got a lot of people even though overall the economy is helped by the high interest rates a lot of individuals are not and even if it’s only four or

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five% you’re talking about millions and millions of people who are hurt so there’s a lot of winners and losers it’s

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a very disruptive economy when they raise rates like that the overall economy has done better it’s highly

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regressive and there are a lot of winners and losers out there well one thing that you bring up

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that that I find interesting to talk about is that many people who support the raise and interest rates even from a

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kind of standard neoclassical theory of Economics which you you and I both think is wrong but but even inapplicable not

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wrong yeah okay inapplicable yeah okay um interesting um

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but what I would uh what I would what I find interesting

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about that is for the current political cycle deficit Hawk which we always see

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and we see it from both parties I think people kind of yes yeah uh ignore that um no one talks

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about that every time that the FED raises the the debt rate that the government has to pay more for for that

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it’s just not ever factored in at all um yeah the only way it’s factored in as

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they say it’s unsustainable and it means we’re going to have to cut Social Security to pay for it or something

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something they don’t look at it as new money hitting the economy and supporting it they come up with some nonsense that

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doesn’t apply that’s inapplicable like cutting Social Security and that’s the direction the conversation goes it’s you

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know very misleading if if some of these

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um Social Services Cuts you know actually do happen um how do you see

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that skewing e e the the economic trajectory considering that I don’t see

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interest rates going down anytime real soon so so the the main thing is this

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the size of the public uh deficit of the annual deficit spending uh minus the inflation rate

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okay so with the CPI growth down to maybe 3% and deficit spending at seven

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we’ve got real what they call real deficit spending adjusted for inflation growing at 4% which is very very strong

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and that’s very supportive if they cut that by reducing social programs then that support for the economy starts

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going away the economy becomes vulnerable that’s kind of think of that as the

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equity supporting the credit structure think of of your income that supports your ability to make all your payments

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your house payments your car payments you start cutting into the person’s income now he’s his payments are at risk

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his credit is at risk and so for the economy as a whole we’ve got 40 50 60

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trillion of debt and 30 trillion of equity which is the um public debt

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that’s that’s um that’s our net Financial assets that support everything

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that’s a our net wealth for the economy if you start cutting into that it starts cutting into our ability to support the

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rest of the credit structure and things can grind to a halt and go backwards and that’s exactly what happened at the end

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of uh 2000 and that’s what happened in in 2008 all the crashes we’ve had were

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preceded by the public debt the deficit getting too small not growing enough to

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support the credit structure which then ultimately collapsed and you go back 200 years in American history and it just

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happens every time

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so um this gives me to a kind of theoretical construct of of modern

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monetary theory that you’ve been kind of uh influential in writing about I

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think the first paper I saw by you on this topic was probably around 2005 2006 somewhere in there um and that is the

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argument that um the natural rate of interest is probably zero um what do you

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mean by a natural rate of interest and why would that be the case well the there’s

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um in the sense that if there there is no government interference in the

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financial markets then the rate of interest is zero to a positive rate of interest requires government

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interference they have to pay more interest on the public debt otherwise the rate doesn’t go up this is the

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risk-free rate we’re talking about now the FED funds rate okay and there there’s different ways for them to pay

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it they can pay interest on excess Reserve balances at the fed or they can sell treasury Securities that type of

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thing there if you thought enough about it those are two ways they support the interest rate but that those are forms

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of government interference is to pay interest on reserves and they have what’s called an RRP account which is

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another way of paying interest on reserves and they pay interest on the public debt they offer treasury

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Securities and those two things um work to those two pieces of government

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interference that’s the active government policy to pay interest into self Securities is what supports the

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rate today the overnight rate at 5 and a half percent what supports to 10-year treasury rate at 4.3% Etc so without

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government interference the overnight rate would go to zero and these other rates would gravitate down to zero over

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time and we that’s exactly how they operate when we did have a zero rate policy when the rate was Zero the

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government was paying zero on excess reserves they weren’t paying anything so they were not interfering and the rate

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went to zero Japan’s had a zero rate policy for 30 years by not interfering in the marketplace so the natural rate

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in the sense that the where interest rates go if the government doesn’t interfere is zero and all the man money

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in banking textbooks understand that they show the fed’s job is to offset operating factors which is to take an

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active part to support the target rate set by policy and um when you hear the

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term Financial repression they’re saying that’s assuming there’s some kind of natural

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rate like five and the government’s taking action to push it down to zero or

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push it lower than that and they call that Financial repression it’s completely inapplicable to today’s

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floating exchange rate system that would be true under a gold standard where there’s a limited supply of gold people

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compete for it and bid for it bid to borrow the gold and their desire might

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drive the rate to borrow gold up to 5% and if the government wanted it lower it would have to come in and suppress that

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rate by uh taking action you know that’s been gone since 1934 and and you’ll still see media

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talking about financial repression keeping rates below some kind of natural rate which is a fixed exchange rate um

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phenomenon it’s got nothing to do with today’s floating exchange rate policies of almost every country in the world the

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only the only place that would be true would be like Hong Kong and Bulgaria maybe or something like that some very small places that have fixed exchange

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rates or dollarized maybe Panama’s dollarized I think so it might be applicable there but the rest of the

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world it’s entirely in applicable and it’s a disgrace that these economists would even say that I mean how can they

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not know that it’s basic you know economics 101 stuff it’s pretty bad that

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that that stuff is in the in the main mainstream

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narrative this uh this does lead me to some some larger questions about the

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global economy there’s been a lot of talk uh both on the on the mid to far

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left and on the far right although for different reasons about

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dollarization uh on the far right and you see this in a weird plank I saw in the whole project uh 2025 that the

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Heritage Foundation was putting together for the TRU Administration where they are um trying to pick back up something

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I thought that even the weird grifting Libertarians gave up on which is uh because of dollarization wanting the

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United stat that’s their justification um it just seems to be this weird pet theory that I have that we should go

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back to a gold standard I I’m not sure if they’re talking about the pseudo gold standard of Breton Woods are an actual

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gold standard of you know before 1934 but nonetheless that seems to be back on

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their political Horizon um uh and let’s just say that’s out of

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ignorance of monetary operations okay you know people come up with these things that you know I a car company and

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I used to have people come in once a month with some kind of perpetual motion machine you know just just doesn’t work

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that way and on the mid the far left there’s been a lot of predictions of US dollar

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collapse because uh it not being uh as much of a Forex currency which a the

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latter has been kind of greatly overstated how the replacement of the of the of the US dollar as a a foreign

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exchange currency but B um you seem to think that’s not as important

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is is they do um yeah I mean I’ve been hearing it for 50 years you know along

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with you know Reagan saying if the deficit ever gets to 90 billion we’re all doomed you know stuff’s been going

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on for a long time that’s part of the fearmongering over nothing that just gets dusted off and re revved up and

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revised you know every three or four years it seems why do you think that it’s both a

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left and a right-wing phenomenon right now that’s a good

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question you have to blame mainstream economics for not teaching this stuff properly in

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school and uh you know just having just a PA pathetic level of Economics

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education so I have to give you a quick anecdote uh I went to University of Connecticut I got a call years later

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from the donor Department whatever that is the GU looking for money to support the school and I said well you know

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they’re teaching my money in banking wrong and uh you know if they’ agree to teach it correctly I’d be happy to make

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a donation he goes really no he he’s just a he wasn’t a academic so he sets

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me up with the head of the economics department and the three of us sit down and I say you know you’re teaching that Banks take in uh deposits so they have

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the money to make loans and in fact loans create deposits and then the banks have to take it money to replace those

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deposits if they leave but the money comes from the any Bank purchase creates a deposit the bank credit

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account and the the guy says it was a woman actually but whatever says you

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know yes you’re absolutely right that’s how it is that’s how it does work and yes we are teaching it wrong you know

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and so the the guy the guy who’s looking for my donation says uh what would you be willing to change it and teach it to

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the correct correct way and he says no we’re not going to do that and he was just looked the Gass at this person like

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what you know I don’t think he’ believed me when I told him that that was the reason I didn’t want to donate he’s just

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like be he was just bewildered you know we left the meeting he goes like sorry to bring in he didn’t know what he got

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himself into and I think that’s indicative of what’s going on everywhere

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from what I’ve seen I haven’t seen a single mainstream academic and uh

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probably very few of the postans who get any of this stuff right and uh occasionally some of them will get bits

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and pieces correct but it’s the basic level of education is just incorrect now when I go into the fed and talk to their

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operations people monetary Affairs they know all this cold it’s what they do every day they know what accounts get

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debited and credited because that’s what they do they know how to offset offset operating factors and do all the other things it takes to sustain a monetary

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system but you go to the academics they’re just it’s just abject ignorance of

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what’s going on yeah that leads me to

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um you know a couple of of things that have kind of bothered

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me about the the way the discussion of of economics has

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gone um one of the one of the things I have noticed

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um is a lot of the the post canian including ones

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that I was always a little suspect of but I I thought were closer to right

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such as Paul Krugman uh really regressing he’s a new keian by way yeah

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new kyian yes um but new Keynesian I to explain what

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we mean by that is they took out the stuff about Taxation and replaced it with

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monorisu you’re being kind so but that’s okay um but I’ve also notice like as see

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let me think of an actual post Kan in like uh Steve Keane and whatnot also being

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uh not as up on this as I would expect them to be from what they said I don’t

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know um 10 years ago um so what what do you think about the

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state of quote heterodox economics right now and then it’s like more mainstream

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I’m putting all those in quotes uh sisters uh in like new chanism and more

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academically respectable postan ISM why does it also seem to not be as much of a help as maybe it was a decade

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ago so at the highest levels you’re new kanes and and your um you know that’s

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what the Federal Reserve is it’s it’s been modified a little bit but that’s where it all started the idea was that

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the reason we don’t have markets don’t find equilibrium is because of sticky prices which is absolutely not what Kane

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said Kane’s pointed to effect lack of effective to man had nothing to do with sticky prices but anyway that that was

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their thing and they have all their mathematical models surrounding it none of which have money in them and the the

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core problem is it’s going to get a little bit technical they don’t have any understanding of the source of the

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price level they started with this thing called the fiscal theory of the price level but they couldn’t get the math to

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work on it so they’ve kind of abandoned it these are top guys you know very a student academics like Michael Woodford

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and you know that whole group and they they just couldn’t get it to work and so they’ve kind of abandoned it and

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sometimes they fall back on it they were getting pretty close so what and so what they’ve left out and what Kane’s also

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left out and marks and the rest of them is the understanding that the currency

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itself is a case of Monopoly the government’s a single supplier of that which it demands to pay taxes for

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payment of taxes and to buy its bonds okay you can’t go out and print your own

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money to to buy to pay taxes that’s called counterfeiting okay so all the dollars to pay taxes come from the

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government through its agents and then people start arguing with me like I won’t mention names there’s too many of

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them well that’s not true it all comes from the banks it’s like the banks are agents of the government you know and

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and they’re registered their licensed they have a Accounts at the FED that are used to pay taxes you can’t use their

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regular accounts on their Banks they have to use their fed account and

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um they’re they’re regulated strict very strictly by the government they

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regulates their it’s called camel cels you know the capital their assets they

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there’s a book there’s a big thick book on loans they’re allowed to make and not allowed to make and they get regulated

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and supervised to make sure they’re only lending money you know that they’re in compliance with all the federal rules

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which are changing all the time with every crisis telling the banks what to do if they can change Bank management

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anytime they want if they don’t like the bank’s earnings they can shut them down if they don’t like their liquidity they

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can shut them down if they think they’re taking interest rate risk The Regulators can shut them down I I was a owner of a

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bank small Bank very small bank for about 20 years and I I knew I was an agent of government that those guys were

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in on us all the time watching everything we’re doing classifying loans which means if they didn’t like it

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something you did it didn’t count they they counted as if if you’d lost all the money for regulatory purposes and always

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on a verge of trying to put you out of business so you had to you know if they said uh jump you know you said how high

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and and and so the banks are for me from my working knowledge is that they are

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agents of the government the same way the military is an agent of the government yes if you’re a platoon

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leader you have discretion on where you can March or where you can point your guns or how many shots you can take but

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you’re not independent of the military you are an agent of the military you’re an agent of the government and so all

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the dollars to pay ta that can be used to pay taxes come from the government through its agents Congressman don’t

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spend directly they have agents out there like the fed and the treasury and post office whatever so uh it’s a it’s a

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case of Monopoly there’s a single supplier and everyone knows from micro 101 that single suppliers are price

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Setters you get to set the price if you got the electricity Monopoly in the city you set the price 15 cents a kilowatt

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now it may have terrible consequences but that price will stay there till your committee gets together and changes it

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doesn’t come from the market bidding for electricity or anything they’ve tried to implement things like that and they’ve

30:39

had I won’t comment on the results I’ve been absolutely horrendous and they they don’t deep down they’re

30:46

they’re you know they’re better off just setting the price but anyway um it you

30:52

know they’re trying to break up the monopolies and make them competitive but unless but when you have a monopoly well

30:57

you’ve got a single supplier you’ve got a price Setter to to not have a price Setter you’ve got to bring in competition and everything else well the

31:03

government is the single supplier of the funds to pay taxes there’s no competition there and uh and that is the

31:10

source of the price level now markets can can sort out what’s called relative value uh how many ounces of gold uh does

31:18

it how many ounces of silver does it exchanges for one ounce of gold or how many gallons of gasoline exchanges for

31:24

Bushell of corn that’s what our markets do all day long they uh show you relative value you know

31:29

the Peaches die so the price of peaches goes up which means uh you know that’s that’s the Market’s allocating by Price

31:36

you know determining that the relative value of peaches has increased because Peaches died or something like that but

31:43

uh to put a price tag on those things you know if there was um if I

31:50

came up with the new currency in a new country and we’d say okay how many

31:56

peaches what’s what’s the price of peaches what’s the price of Labor what’s the price like there’s no way to determine that you know you’ve got kids

32:03

in Turkey you go to buy a rug and they’ll tell they’ll tell you in every currency in the world how much it costs but if you’ve got a new currency that

32:09

they don’t know about they don’t have any way to figure this out okay there has to be some information in those

32:14

markets about that currency so they can get started they have to have some price to get started with and that’s called

32:20

the source of the price level it’s called absolute value and so

32:26

um that comes only from the monopolist he has to tell you so when the

32:32

government’s uh hiring soldiers at for $50,000 a year they’re saying you have

32:37

to work a year as a soldier to get $50,000 of our currency that you need to pay the tax if you work as a Supreme

32:43

Court judge you get $200,000 a year if you work in the post office you get $40,000 what whatever it is the the

32:49

government has to like let us know what we have to do to get their money so we then have that information to know what

32:55

everything else should cost and the the markets can’t get that information from anywhere else except

33:02

the government if the government stops giving that information the market stopped trading in that currency which

33:08

happens when a government fails or goes away or whatever just ceases to do it

33:13

and when you get a new government starting you don’t get any nobody knew what a Euro was going to be worth five

33:19

years before there was a Euro so um how did they know when the Euro started how

33:24

any would be worth because they announced that they were going to buy the existing currencies at a fixed

33:29

exchange rate they announced the exchange rate so everybody knew could could put their finger on how many lur

33:35

you needed to get a Euro how many um marks you needed to get a Euro how many Franks you needed to get a Euro and so

33:41

that translated into all the other prices the the new government the new Central Bank the European Central Bank

33:46

bought the existing what’s call money supply at announced prices and that got

33:53

price level started well the mainstream doesn’t understand that they don’t know where the price level comes from what

34:00

they do is they when they assume a price level in their models they just take yesterday’s closing

34:06

prices and then they can start to tell you how they think they’re going to change oh there’s we’re doing this and

34:13

that we think those prices will go up or we think those prices will go sideways or go down but they don’t know where they came from except they were

34:18

yesterday’s prices if you ask them where did those come from they say well from the day before where’ those come from the day before it’s an infinite

34:25

regression all the way back and they’ll tell you we don’t have a source of the price level the best we can do is use

34:30

yesterday’s close as a starting point and anytime you interview a mainstream Economist ask them about the source of

34:36

the price level they’ll tell you that okay once you understand that it comes from the government because they’re the

34:42

single supplier then all this other stuff that they’ve struggle with is easy

34:49

and falls into place and so they have yet to model the currency the dollar as

34:54

a US Government monopoly the euro is a monopoly of the European Central Bank and European Parliament the yen is a

35:01

monopoly of the Japanese government they have yet to do that now interestingly KES described the currency the way you

35:08

would describe a monopoly but he didn’t call it that and I’ll say he never realized that he was describing a

35:14

monopoly so he was right in his description uh you know doesn’t grow on trees you know he can have shortages

35:21

because the government’s not spending enough he he surrounded it and got all that stuff right but

35:27

he never called it a monopoly and when he was arguing with uh mainstream economists at the time they called him

35:33

neoclassicals now I don’t know what they call him that they would tell canes no you you in

35:39

the absence of a Monopoly without a monopoly you know unless there’s monopolies you’re not going to have unemployment unemployment is caused by a

35:45

monopoly kanes would say no you can have unemployment because of what’s going on in the monetary system and he was

35:51

correct but what was going on in a monetary system was a monopoly now if he knew that’s what it was specifically

35:56

Ally he would have said to he would have answered that way but he didn’t and I don’t want to get too far out in the

36:02

weeds here with your questions but once it’s clear that currency is a monopoly

36:07

then you realize the source of a price level and then uh you realize that the

36:13

sequence which is the big contribution from MNT that the mainstream economists

36:18

have is backwards they all assume the government has to get money to be able to spend the US government has to get

36:24

dollars to be able to spend it has to tax are borrowed to be able to spend that’s not true at all it’s the economy

36:31

has to get the government’s money to be able to pay taxes and buy bonds it’s not the other way around the dollars come

36:37

from the government and when they believe the opposite it

36:43

leads to all this all this nonsense that’s going on Jamie Diamond talking about how the public debt at 34 trillion

36:49

is unsustainable just a matter of time Jerome Powell same thing moan same thing you know your top three Bankers in the

36:55

world really all got this like pathetically wrong and they’re public

37:01

about it and you know they’re getting publicity about it and the people in fed

37:07

monetary operations know this is like this is absurd you know it’s completely unapplicable to our system it’s like and

37:14

they’re watching these people do it and and uh here it’s been going on you know

37:20

for my 50 years that I’ve been watching it well there’s an in you know

37:27

chartalism and neoch chartalism both uh have some interesting implications about tax policy um and you I think you’ve

37:34

kind of explored this in a different way than even some other modern monetary theorists like your ideas on taxes seem

37:39

to be a little bit different from like say Stephanie kelton’s uh I wanted to I wasn’t actually planning to bring this

37:45

up but I might as well uh what would you think would be an optimal tax structure

37:51

to Anchor the currency in the United States that would not be like super regressive and and has your thought on

37:56

this changed over the last 20 years uh you know it’s right back in soft

38:02

currency economics from 1993 it’s three years before this was introduced to the academics and I think just a property

38:08

tax real estate tax like we have at the local level now if that was a single federal tax might be high like 10% or

38:15

something and uh combined with a job guarantee so if you lose your job you

38:20

can always get paid in a job guarantee so you’re not going to get thrown out of your house you know out in the streets

38:25

because you lose your job I understand that there are a lot of people who can’t

38:32

work or disabled and that all has to be taken care of of course the same way we do now

38:38

um then that would enhance the uh standard of living of the

38:46

lowest income groups let’s say the 50% the lower 50% of income groups by

38:52

probably 100% the real standard of living would go up by probably 100 100% and without

38:58

connecting all the dots and this I can if you want but uh it’s answers your question of why I’m behind it and so to

39:05

me the outcome is as Progressive as you could imagine where uh the real wealth

39:12

would go there and you wouldn’t be taking anything away from the higher income groups You’ just be enhancing the

39:18

real GDP which would go go up by 25 or 30% and most of that would if it was in

39:26

the correct Public Services uh public education Public Health um infrastructure would U benefit

39:34

disproportionately benefit the lowest lower income groups because the higher income groups have have their own

39:40

infrastructure right and uh and so that that’s how I would do

39:46

that that you know that that’s how my proposals all aim to do that and at the same time it gets rid of vast swaths of

39:52

the financial sector um and one of the channels that I really hadn’t talked

39:58

about but I should is that when you go to a property tax and you eliminate

40:04

income tax you’ve eliminated massive incentives to save to

40:09

not spend your income the incentive to put money in your 401k instead of to have it to to not do that and to not

40:17

spend it is because it’s pre-tax well if that tax is gone then that incentive is

40:22

gone the incentive to put in a pension fund is is there because it’s all pre-tax all the reserves that insurance

40:28

companies and banks will pile up when they can is all because it’s pre-tax if you don’t have those taxes there’s no

40:34

incentive to do that and so the pool of funds that would be managed out there which is I don’t know 40 or 50 trillion

40:41

would be way down you know maybe down 90% so you’re eliminating like 90% of

40:47

the financial sector by doing this and which is a you know massive ancillary

40:53

benefit all those people are the brightest and best they’d be out curing cancer and educating and doing research

41:00

into who knows what you know or you know software and everything else and improving Our Lives instead of uh

41:06

digging holes and filling them in which is what the financial sector is it’s just largely predatory that lives off

41:12

the uh institutional structure set up by Congress which includes all these

41:18

savings desires so it’s I’m not blaming these people are demonizing it’s not their fault Congress has set up this

41:23

structure that rewards them dramatically for compliance you know for being part

41:28

of it so just predicting a counterargument

41:36

that you normally get would would not that decrease investment in productive

41:41

Capital quote unquote sector I don’t know how you

41:48

connect those T because um and it’s chapter six of my seven deadly iners and frauds which is free online just click

41:54

on it mostos Rec economics.com or on my Twitter account WB Mosler but um savings

42:02

is the accounting record of investment it’s not stuff that gets invested and all the old mainstream textbooks had

42:09

that and it’s and now it’s become counterintuitive and somehow all these congressmen are convinced that you need

42:14

savings have money for investment and it’s completely backwards and all that does is feed the financial sector uh and

42:21

so it’s uh surprise surprise that’s what they’re pushing right and every and it’s

42:26

intuitive for people to understand oh you need savings to have money for investment so let’s do this we need this huge financial sector to have invest

42:33

it’s completely not true in fact it’s the reverse the financial sector uses up real resources that would otherwise be

42:40

contributing to to real investment and not you know nothing so that’s where the

42:46

financial side is actually interfering with the real

42:52

economy um I guess this this is kind of hearkening back to something we

42:57

mentioned almost 20 minutes ago but you were talking about the economies that do

43:03

have actual um monetary constraints because they’re explicitly legally pegged to the dollar um yeah where this

43:12

has seemed to be the most you know to put it I mean just directly the most

43:18

unstable Fiasco uh is Argentina and currently the

43:24

rightwing government seems to be big on another dollarization scam to uh to cut

43:31

down in their inflation Etc uh what do you think is likely to

43:36

happen I don’t know you know you know when the guy with the chainsaw talks you listen

43:41

right he actually campaigned change that’s how bad things got you know or

43:47

how unhappy people were didn’t and um with with the current system and that’s

43:52

what happens now the easiest way to understand that is let’s say you were going to start a bus company and you

43:58

were going to charge $2 for a ride and you could you going to use bus tokens so people could buy tokens and then use

44:04

them to ride the bus and uh so you had two choices you

44:09

could either make up your own bus tokens which might cost you a penny a piece right because they’re cheap metal

44:16

whatever and uh maybe they cost you a nickel or you could go to the other to the bus company in Europe that’s already

44:22

has a is operating and selling ticket bus tokens for $2 and buy their tokens for $2 each to use at your bus

44:31

company okay so let’s say you had two bus companies one on the east coast and one on the west coast no it’s I don’t

44:37

want to polarize myself that way hypo two hypothetical bus companies one in

44:43

country a one in country B so I don’t alienate anybody and come you know one

44:49

buys one bus company buys their own tokens for $2 a piece from some other

44:54

bus company to another you know another country the other one just makes their own you know which one’s going to do

45:01

better financially like it’s a burden to have to take your profits and buy these

45:07

tokens for $2 right versus the other bus company that’s just making them out of copper or something tin or zinc I don’t

45:15

know what’s cheap nowadays lithium and um using them as their bus tokens you

45:20

know creating them for 5 cents each and using them as bus tokens why would you go out and buy bus tokens from somewhere

45:26

else say well that way the bus token has intrinsic value and people you know will

45:32

buy them you know don’t have to worry if they buy them to ride the bus because they’ll be uh they could always sell

45:37

them for them use them in another country or I don’t know you it’s like a ridiculous argument nobody would ever do

45:44

that yet that’s what Argentina’s doing they can create their own pesos or they

45:49

can buy them from the US for a dollar a piece and they have to use real exports to get those dollars so they have to use

45:54

their real output There’s real labor you know sweat off their back

46:00

to export to the US to buy our dollars to get our dollars just to have their money supply their money in Pension

46:07

funds their money in the banks their net Financial assets have to come from net exports why would you do that when you

46:12

can get your net Financial assets for free so uh but that’s what they’re doing and every time anybody does it their

46:19

real wealth is being diminished by the cost of those net Financial assets

46:24

whether they know it or not and uh they never measure success by that and and there’s a guy named Steve

46:31

hanky at Johns Hopkins I think who’s been advocating currency boards I talked to him about 10 or 15 years ago about

46:38

this because he was advocating a currency board where they accumulate reserves you know it’s kind of like

46:43

dollarization I said yeah you get price stability but you’re Los you know it’s the co it’s costing you like five% of

46:50

your real wealth every year to fund your net Financial assets he goes yeah I know he says but I think it’s worth it to

46:55

have price stability it’s like okay didn’t disagree with this he just think it’s a good

47:02

tradeoff but why would you trade off even 1% it’s like Madness I think you

47:08

know and it and it caters to a misunderstanding or an illusion or something and Nostalgia I don’t know it

47:15

works politically but it’s it’s just a heavy cost on the economy so it’s not

47:20

that it can’t work it’s just that it’s always a heavy cost on the real standard of living

47:28

which always makes it interesting to me when non-rich countries try it because okay let’s

47:34

say you know you’re Hong Kong or even the US would never do it but let’s say

47:39

you’re the US uh we have the real wealth that we could we could theoretically eat

47:45

some of that for Price stability right but but Argentina

47:51

doesn’t why would anybody do that you know it’s not that once you understand you know how a convertible

47:59

non-convertible currency Works price stability is no more difficult it’s just as easy Once you want to St in the source in the price level and the whole

48:05

thing you know you you can sustain full employment you can sustain you look your

48:10

real wealth is your domestic output plus whatever you import minus what you export and most of it’s domestic so you

48:16

can sustain full employment to get you maximize your domestic you know real wealth and um

48:23

work your real terms to trade so you Max ize those it’s not hard to do once you understand what you’re doing and what

48:29

the target is but they don’t they just don’t do it the country that are the poor countries are the ones that don’t

48:35

have full employment it’s pretty hard to pick a country that’s not you know not a

48:40

top tier country that has high levels of employment they don’t the reason they’re

48:46

they’re you know emerging or developing or whatever polite name you want to give

48:51

them is because they’ve got staggering levels of unemployment for the most part

48:59

um so it seems like you know what you’re arguing is also the refrain that I I

49:07

might see to this argument as well argentinians have to buy things outside of Argentina and you’re arguing yeah

49:15

yeah you realize that but you need to get your domestic economy up to Tip Top

49:20

production first and then you’ll actually you say you say can’t buy things outside of Argentina to they need

49:26

to buy things outside of ARA if you look at every one of these countries and you look at what problems been identified by

49:33

the IMF or anybody else oh they’re importing too much so they’re importing too much and

49:41

then then you say what’s the problem with this well you know we won’t be able to import well your pro you don’t have that problem you’re telling me your

49:47

problems you’re importing too much and you want to do this because what are you talking about any country running a trade they’re all

49:54

running trade deficits right you know so and they’re all trying to get to balance trade which is to import

50:00

less and and it’s not not that I’m saying they should do that of course but they’re all they’re just talking out of

50:06

both sides of their mouths when they even when they ask these questions they don’t realize what they’re saying it’s

50:12

just it’s all contradictory it has to if you’re fundamentally wrong right yeah well I mean it is interesting to me when

50:19

when you’re talking about a a country pegging its its uh M its money to the

50:24

dollar which would only make sense if you need to buy things from the United States to also decrease your trade

50:31

deficit but but they’re already doing that even with 200% inflation right they’re already importing all they

50:37

wanted from anywhere and they were trying to like reduce it as a policy because the United States and everybody

50:43

else wanted to sell and was selling them more than they wanted to more than the government wanted people to buy so

50:49

they’re working to reduce that as a policy then you’re saying well the problem here is uh you would do this if

50:54

you only if you want to buy from the US you see how you’re like they’re like talking out of both sides of their mouths when they’re making statements

51:02

yeah they’re just empty headline rhetoric and that’s what rules the day and gets you elected I guess because it

51:08

makes sense that that that in any economy even in a highly globalized one still the majority of financial

51:14

transactions with the country are within the country um and so that even if

51:20

they’re not you can go to the poorest country in Africa and buy gas for your

51:25

car and you pay for it in local currency that’s true how does that happen because

51:31

the markets figure that out okay you don’t need the government for that okay there’s an exchange rate and it figures

51:37

it out maybe the price is more than most people can afford but whatever it’s not that you can’t use your currency to buy

51:43

imports every Import in the world is available for sale in every country you know at a price then maybe the price

51:50

goes up in local currency every day like Argentina was but it’s there and

51:55

somebody’s buying them in very large quantities you got huge boats bringing them in every

52:01

day so and the government’s trying to like reduce it not increase it it’s not

52:09

like H you know we haven’t been able to import because of the inflation let’s dollarize so we can import more they’re

52:14

not that’s not what they’re thinking this does lead me to uh a

52:19

different but related problem another country that seems to be dead set undestroyed internal domestic econ uh

52:25

economy and um I might get to a third one but here I’m talking about Britain

52:32

um yeah which has seen dramatic economic declines recently um yeah in fact that

52:40

was I make a bitter joke that it really wants to be Argentina but yeah um it it

52:48

is not dollariz so so what’s going on there from your

52:53

perspective well the bu deficit is too small right so the real deficit after

52:58

inflation is pretty close to zero last I checked I haven’t looked at it recently I don’t I don’t follow them you know

53:04

like a day-to-day basis or anything uh

53:10

and that’s pretty much it they’ve got this idea that um I guess going back to

53:17

Thatcher is who popularized at least and it started before that about

53:22

um uh you know you eventually run out of other people’s money you have to they

53:27

don’t understand they’ve got the sequence backwards and there’s no telling them about it and uh until they

53:35

understand that right way around and until they understand the source of the price level and so they can make decisions on the price level on

53:42

inflation you know based on how what actually causes it to go up and

53:49

down you know you know after which they might decide they want a 5% inflation rate but at least they’ll know what it

53:54

is and won’t be afraid afid of it and won’t be fighting it with austerity uh until they gain that understanding

54:01

they’re just going to wallow you know in the in the mud over there I think I don’t I don’t see much of a way out if

54:08

they’re going to keep themselves in a fiscal straight jacket I guess this also leads me to the

54:14

last question which is um I I actually having under trouble understanding exactly what kind of financial

54:20

Shenanigans are going on in turkia uh turkey so yeah what do you think is

54:26

happening there so it depends on um Let Me Take A View that somebody might

54:32

consider cynical or practical or something when you have high rates of

54:39

inflation and you’ve got L high levels of output and relatively low levels of

54:47

unemployment so who gets the real wealth now in the US we’re paying interest so

54:53

it’s going to the higher income earners right so in Turkey what they do is they

54:59

have their wages of the lowest income earners are indexed government sets the

55:05

minimum wage that affects most you know like 50% of the workers or something

55:10

Workforce and they continually increase that to make sure that 50% of the workforce is doing reasonably well no

55:17

matter what the value of the currency is they just give them more of it and if that causes more inflation they’ll give

55:22

them more of it all right and that keeps 50% of the people relatively pleased

55:28

with what’s going on relatively secure the other 50% have to scramble to stay

55:33

where they are but they’re you know doing better anyway and those 50% support the leadership who is taking

55:41

care of them so that’s a constituent see that supports the leadership now I don’t can’t I haven’t taken any surveys or

55:48

looked to it I’m just reading the headlines I don’t follow turkey at all and but I’m just tossing that out as

55:54

something to look look for you’ve got lots of state-owned Enterprises you’ve got lots of uh foreign companies that

56:00

are uh U you know exporters right and

56:07

um the inflation is not getting in the way of any of that it’s making it easier for them to do that it’s making easier

56:15

to have real wages uh not run away so that the foreign this exporters can do

56:22

well with their exports keeps their cost down at the same time the wages are high enough for that group of people working

56:29

there to keep them happy and to keep them ahead of the curve in terms of the uh inflation that’s going on and it

56:37

seems to be working and it’s kept the leadership in power for quite a while and it’s kept them reasonably popular in

56:43

spite of everything else that you see all the headline things that people talk about that you would think would make

56:49

them unpopular but keeping that 50% whole uh

56:56

is like wielding political power and it’s uh supporting you know their longevity in

57:04

office now in Argentina it obviously ran out and they got it you know turned over

57:09

so they were not keeping that a constituency happy enough to keep them getting

57:17

reelected yeah that makes sense um well we’re coming into election near

57:25

and this would be my final question but uh I think we’re going to see a lot of economic claim Shenanigans um

57:32

and uh do we see a lot of fiscal changes

57:39

from the government on the horizon are monetary changes are both like what do you think might happen I know we talked

57:46

about the the the project 2025 thing I I tend to believe that uh when conservatives talk about the gold

57:52

standard they will quickly be corrected and not do anything about it because that’s always what’s happened in the past but um are there other possible big

58:00

changes you see on the horizon um I I don’t I don’t see I see interest rates

58:05

staying up and I see the deficit staying at what I call Drunken sale or levels of

58:10

spending to keep the economy going and some effort to talk about lowering it

58:16

but not nobody actually doing anything and um what’s happened is as the uh

58:24

inflation indicators have come down from the covid highs postco highs the FED has

58:30

been concerned that that means their five and a half% Fed funds rate is it’s a higher real re what they call real

58:36

rate it’s above the inflation rate so if it’s the inflation rate is three and they’re at five and a half they’re

58:42

they’re two and a half over the inflation rate which they think is highly restrictive but what they haven’t taken into account is that 7% budget

58:50

deficit it is also much higher in real terms as the inflation indicators come

58:56

down so if it’s at three and the deficits at seven we have a 4% deficit

59:01

after inflation which is very high and never it’s record high for this point in

59:07

the business cycle over our history as a Nations we our strongest business cycle has never had this much fiscal support

59:13

so it’s um uh I think it keeps going if anything it fed starts looking at

59:19

raising rates like they have been uh now that this um pause you know to see if

59:27

inflation would come down seems to be reversing now I could be wrong you know

59:32

if price of oil suddenly drops and the CPI numbers come down then the FED might

59:37

decide to lower rat or something uh on the other hand if it goes up and they start shooting up then they could start

59:43

to raise rates more quickly more more often than not at these this point in the cycle it’s things like that that

59:48

cause the next move and you can have somebody forecasting Things based on all these models but the models can’t tell

59:54

you whether whether oil’s going to go to 200 or or to 20 that’s the Sai of price

59:59

Setters and they’re deciding what to do on that it’s just a couple of people so you know we’re we’re all our forecasts

1:00:06

are risking that but things staying the way they are now I just see this economy getting stronger and stronger

1:00:11

unemployment staying at 3.7 or maybe even going down to 36 35 34 and um the

1:00:18

FED keep revising their forecast for the second half of this year high ever

1:00:24

higher as they did in December in March there’s another meeting they’ll revise them higher the rate Cuts were there as

1:00:31

a consequence of the rest of the forecast the rest of the fed’s forecast showed unemployment going to maybe 4.2%

1:00:39

growth going to 1% or less you know jobs growth down to under

1:00:45

100,000 as those get revised up like they did last time now the unemployment

1:00:50

number may be only 4.1 and um uh then you

1:00:56

see the their forecast for the interest rate are a little bit higher than they

1:01:01

were before so with a very negative forecast their forecast for the interest rate were maybe coming down to three and

1:01:07

a half percent and now with a stronger forecast their interest their forecast for the interest rate is maybe four and

1:01:12

a half and the market shows that as fewer Cuts you know the market had anticipated six Cuts now it’s

1:01:18

anticipating maybe two or three Cuts or something like that and so as the FED forecast gets revised higher the

1:01:24

interest rate forecast for that period of time will get revised higher I believe and so I think we just see and

1:01:31

then once the it’s strong enough then they they’ll be looking at whether or not rates need to go higher because

1:01:36

that’s all they know they’ve got it backwards they’re not going to change that I I don’t think I if they do it’ be

1:01:42

wonderful if we suddenly had some kind of serendipity thing and all of a sudden chairman Paul says we’ve realized we’ve

1:01:48

been backwards on interest rates this whole time raising rates has been inflationary because we’re pumping in all this deficit spend spending it’s

1:01:55

it’s obscenely regressive we’re immediately reversing policy going to a 0% rate like Japan and we expect

1:02:01

inflation to come down wonderful I stand up and cheer but I I don’t expect

1:02:06

that I’m guessing you’re also not seeing any um like other Progressive economic

1:02:12

policies coming out of Congress either so I don’t think they can get any policy out they can’t even get a border policy

1:02:18

the Republican border policy pass that the Democrats agree on because of the divisiveness over the election it’s just

1:02:24

pure tribalism and their people vote for their want their team to win and the uh

1:02:30

means justify the ends and it’s just you know race to the bottom so how low they

1:02:36

will go to get there I mean for me this has been an

1:02:41

irony for a while that people talk about American Decline and I’m like well in one sense I I think that’s

1:02:48

almost there’s a lot of things declining because we don’t invest in infrastructure like that’s all very real

1:02:55

um but it’s not because we don’t even we don’t have the material wealth to do so I’m not even talking about paper wealth I’m just talking about like we have land

1:03:02

we have materials we have Farmland Etc um we’re in a remarkably good geographic

1:03:08

area with with good trade Partners to the north and to the south of us um we

1:03:13

should not be having the problems that we do and if we have problems in the United States is because our political

1:03:20

system has just cracked um for whatever reason

1:03:26

um I have my my theories but it it does seem like our real crisis is

1:03:31

not well in some ways all economic crisis are political crisis but in a very real sense it seems that are even

1:03:39

beyond what that would normally mean our crisis is a political crisis we can’t get pretty much anything through our own

1:03:45

government even even even when it’s backed by the party and aaina ow

1:03:51

although there’s not one right now um and look don’t forget things are heating

1:03:57

up in real terms you know the climate and forget about who caus it or why

1:04:03

nothing’s going to be done about it except trying to deal with it you know better air conditioning and walls around

1:04:09

Miami or something you know so uh you know it’s going to be interesting to watch how we deal with all this change

1:04:14

in the in the real world yeah it’s uh massive migrations

1:04:21

all that stuff’s it’s all going to happen We’re not gonna we’re not do anything to prevent it we’re just going to have to deal with it yeah absolutely

1:04:29

um I’ve been thinking about uh you know the the weirdness of our border policy when also we have a declining population

1:04:37

right and it seems to be like uh both sides have decided that

1:04:42

we’re not particularly open to immigration and I I get it but I’m like you’re about to be hit by a wall of you

1:04:49

know people from this from the equator cuz well equator getting real hot hot um

1:04:56

uh also just interest I mean yeah we’ll be we’ll be we’ll be we’ll be raiding

1:05:03

raiding we’ll have military raids on Mexico to bring back workers yeah it’s just uh just

1:05:11

around um okay very good I’ve got a 12 thank you so

1:05:16

much and uh yeah just send me a link whenever you can I will do I’ll spread

1:05:22

it around for you all right great great not talking to you anytime let me know all right thank you and I’ll

1:05:29

send you the link thanks yeah bye [Music]

1:05:47

[Applause] [Music]

1:05:53

bye

1:05:59

[Music]

1:06:07

[Music] [Applause] [Music]

oooooo