Warren Mosler eta MTM (2025)

@tobararbulu # mmt@tobararbulu

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Discussing MMT with Warren Mosler

(https://www.youtube.com/watch?v=afWDtvv6h98)

In this discussion we did not get to most of the Marx-oriented questions i raised at the beginning. However we laid the groundwork to dive in deeper in a future discussion.

Transkripzioa:

0:00

today I’m here with Daniel of platypus and Warren Mosler one of the chief architects of the modern monetary Theory

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to talk about uh economics and whether or not there’s any compatibility or contradictions between the two theories

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Warren why don’t you introduce yourself yeah okay my name’s Warren Mosler and I live in St Croy now in the

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US Virgin Islands I’ve um grew up in the financial markets but I’ve uh

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turned over my business uh to my partners at the end of 1998 my money management after running it for 16 years

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I had a fixed income zero duration Market neutral fund I think I invented to space actually back then had about

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three and a half billion in capital the end of 19 that’s say 98 the end of 1997

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when I turned it over to my partners which you know was a fair amount of money back then back when that

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was a lot of money as I said and uh since then I moved here in

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2003 and I’ve been devoting most of my um time to um uh my correspondents to uh

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modern monetary Theory keeping up with uh events in the capital markets and uh

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keeping a running discussion going on Twitter which is now X and going to

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various conferences and organized events and uh you know over the last 25 years

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or so so so I guess I’m in semi retirement you might say down here along the way I uh had a car company and came

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up with a concept for car where I used Advanced composite monot construction to build a car that was substantially

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lighter than any other car so it outran every other car by a wide margin and got

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30 miles a gallon back when that was unheard of and I thought that’d be enough for people to want to buy it but

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it wasn’t so I been out of the car I business since 2013 just due to lack of

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sales but the cars were very successful and won races and didn’t burn a lot of

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fuel doing it uh for a very long time I uh got involved when I moved down here

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to St Croy in uh boats I noticed people get seasick a lot going on on boats went

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out and worked out what I thought was why and how what could be done about it

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and built a ferry that uh has four holes instead of

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too with a big space in between so I call it my long wheelbase boat and

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people don’t get seasick it doesn’t mean somebody won’t throw up they a meal and go up and down in the waves but they

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don’t get that seasickness which is you know violent ill actually violent illness and so that’s

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been I’ve enjoyed doing that and that’s been very successful it’s been out there for the last eight or 10 years and I

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built a couple of smaller ones for myself to use personally uh my time currently is um we

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have a small Yak Club here they call it uh it’s a $900 year membership so it’s

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not particularly high end or anything but I’ve been named The Commodore so I looking at it as a stepping stone to

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secretary of the Navy and I uh been spending my time doing that also I uh

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the tennis courts near me were closed for covid they didn’t want to reopen them so they let me run them so I’m the

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manager of the local tennis court so nice so most of my days either either at the tennis courts or at the yach club

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and been a little bit of Correspondence on Modern monetary theory in between I mean I don’t know how to follow that I

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have a much less interesting life of course like I actually just had a question of um you’re designed for a

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boat can that get as large as like a cruise ship yeah absolutely absolutely yeah because I you know yeah because

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because I remember seeing people on cruise ships walk around with the thing kind of near their ear I guess right

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right right they would not need it if they just Chang whole design to what I have okay which would get over the thing

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uh my life is way less interesting I’m while I’m a member of platypus have been a member of platypus Affiliated Society

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for uh about 12 years but I’ve probably been around them for about 15 years um I

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don’t know if now is a good time to also say my autobiographical relation to Warren

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which is that probably before I read Marx or Smith or Ricardo I read Warren

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Moser as an undergrad I about that where was that where was that I studied at

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Temple University so I studied math and economics there yeah okay was was that something to whole class study that was

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that was me that was kind of me going down and I guess the reason I bring that up is that my first encounter uh with

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mmt you know was in the wake of things like not just the 2008 crash but also

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the Tea Party protests yes and so I was visiting a variety of blogs uh there was

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one written anonymous called social democracy in the 21st century the guy writes under the

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pseudonym Lord KES but we kind of don’t know who he is and you’ve seen it and so

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I encountered your seven deadly in innocent frauds yes and I think I read

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it about the same time that I read kan’s general theory but this was on my own this was just my own curiosity of being

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a uh I don’t know rambunctious young person wanting to argue with these tea

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party people and you know certainly looking for the ammunition so I thought that would be an interesting way of kind

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of setting things did you see did you see my addresses to the Tea Party online uh I probably have yeah there a couple

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of YouTubes they they you know liked everything I said you know it’s is interesting it’s very very uh

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nonpartisan where uh Jamie G I don’t know if you know the name you know one

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week he’s got me in Paris talking to his like people who are left of Mark somewhere and then the next week I’m at

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the Dallas tea party telling the exact same story and both sides thought this was yeah this the way to go so I always

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felt good about that yes I’m wondering if I’ve met I don’t know if I’ve met Jamie goldb and person I have met

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somebody who you would also be familiar with from another side of things in person Peter Schiff so again this is

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kind of in the this is this is my my young college days of being like okay

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these people and going and seeing them and asking them questions and you know I’ve become pretty good friends with

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Peter’s portfolio managers who came to me and said don’t say anything but if it wasn’t for you we’d have gone out of

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business a long time yeah because they still they still invested in normal stocks they didn’t do

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yeah of course yeah yeah yeah yeah they’re very good by the way oh yeah is it his brother did his brother no no no

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these are some portfolio managers that he hired they know exact they know exactly how things work and they they do

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very well to get into the discussion I’m just going to set the table here a bit with some of my overall thoughts on the

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two perspectives both of which I greatly value one of the things I think we’re going to talk about might be value

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itself so today is the the third mmt discussion I’ve hosted on this channel I might keep doing so as long as there

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appears to be some contradiction to unpack or to resolve between these

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perspectives my perspective is that while I think mmt is more or less accurate as far as I can tell in it

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describes the capacities and constraints of modern currency Sovereign economies its prescriptions may not be ultimately

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able to resolve the problems of the falling rate of profit and the breakdown tendency of capitalism and that if

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capitalism is interminably abolishing its own source of surplus value human

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labor through Automation and competition all of the public spending in the world can’t really ultimately prevent that

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breakdown or or can it maybe MOS well be able to answer that you still run into the problem of decreasing rates of

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profit and the over accumulation of capital going unv valorized even with an

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mmt conscious state or Society doesn’t understanding of mmt make capitalist

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equilibrium possible that’s another question you and Bill allude to in your your newest book mmt from my thinking is

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is kind of like a theory of a modern bonapartism which is a Marxist term which is really to say that it’s a

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theory of how the state sitting a top of society could or should mitigate

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capitalism’s undesirable externalities like inflation and unemployment and its cyclical crisis in the post Breton Woods

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world this might also be seen as a way to dampen the class struggle as well on

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the other hand I’ve read Marx’s Capital like four or five times and I don’t see

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any major problems with the labor theory of value either but Marx’s uh barter Theory account of the history of money

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doesn’t appear correct uh either way we no longer live in a fixed exchange gold standard system and while prices seem to

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continue to obey the labor theory of value the character of money itself has changed such that the the currency

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issuer is no longer constrained like it was in Marx’s time so do these two

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theories complement or contradict each other is either Theory flawed or incomplete I asked chat GPT actually

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here’s what it said even under a Fiat system value production as explained by labor theory of value can still occur

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Commodities continue to be produced through Labor and profits continued to be extracted from Surplus value money

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under Fiat systems acts as a token of value rather than a commodity itself it facilitates the distribution of the

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value created by labor but no longer represents value in the same direct way it did under goldb systems and finally

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from this perspective mmt can be seen as describing the circulation of money and how its Supply impacts demand and

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employment while the labor the value describes how value is generated in the first place so seems to think these

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these two ideas are complimentary anyway you can pick up or or leave anything I just said now have have you seen my

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general theory of value It’s relatively new right yeah yeah yeah but you should probably say it

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to the yeah yeah I I’m not sure if to how to work all these in you have so much to uh what they call unpack here

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take your time how about I’ll ask the question then I now I have to moderate just kidding uh like talk about value

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because I I’ve read the article the general theory of value that you have so maybe you can say what you have two

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views of value actually right at the FR yeah yeah well importantly um value isn’t defined when somebody says a

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general theory of value so you have to Define it because it could be anything you know whether oranges or good value relative to grapes or something it’s not

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about that so what I’ve said is um I’m looking at it in terms of the monetary system and you have the value of having

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a monetary system and then you have value within the monetary system which are two different things entirely so

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doesn’t do us any good to have a monetary system what does it accomplish uh should we have a monetary system you

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know what is the value of having a monetary system what are the costs and benefits of a monetary system so that’s

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one um so when you talk about a general theory of value that’s the starting

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point now if you decide there is value to a monetary system because countries

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that have monetary systems win the wars and if you’re not going to win the war it’s all mood anyway so let’s say there

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is value to a monetary system because decided you want to have a chance at winning a war or you

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um you know for whatever reason and you decide there’s value in a monetary system then we can get down to how you

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know what is value within that monetary system where do it come from what is it how does it work and uh of course

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getting so that’s that’s what that paper was about now that blends into um what

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I’ve been talking about with mmt from the beginning that uh the in the first

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instance the monetary system is there to provision the government okay we have a

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government we have a population and we want Collective action so how do we make

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that happen how do we get a military how do we get a a education uh public

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education how do we get a public health department how do we get a legal system how do how do we provision Collective

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action and the way we are doing it now and we can argue whether it’s right

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or wrong or whatever but the way we’re doing it is um through uh tax d currency

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what the Romans used to call tribute money okay so they conquered Gaul and

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they tax them in Roman coin and the only way they could earn these Roman coin to avoid you know getting burned down again

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by the Roman army was to sell grain to Rome who would pay for them with their

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you know whatever the coin was called and those they called that tribute money and uh they understood exactly what they

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were doing when you conquer somebody we want them to send us real things here’s how we’re going to get that done so uh

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the Roman government used the monetary system to provision itself with Soldiers

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with food from conquered enemies with everything else and and the way it did it was in the first instance the first

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thing that that drives the whole thing is the tax liability the tax requirement

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and so the whole story the whole money Story begins with a tax requirement you don’t have a modern

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money story modern monetary story you don’t have a fiat currency

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story um you have a barter story of some type if you’re using gold it’s a barter

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story if you’re using Warehouse receipts it’s a barter story but when you’re using tax credits that’s the um floating

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exchange raid modern monetary story I don’t like to use the word sovereign government because it’s anyone who has

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taxing Authority can do this if it happens to be a government that has the

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U mandate from the people that we met PA makes it Sovereign that has the taxing

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Authority that’s fine and it’s yeah it’s generally Associated but that’s kind of a special case not a general

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case Okay so every tax requirement specifies the

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tax credit the thing that can

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be Beach it’s not you’re not going to get anywhere you put a tax requirement of grains of sand on the beach you’re

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going to get a treasury filled up with beach sand and that’s about it or desert

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sand else way

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done us could be in Japan it’s the Japanese hand so the tax requirements

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name tax dollars as US dollars as the thing you need to be able to pay your taxes so number one a tax is levied

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there’s a tax liability put in place payable in US Dollars the US dollar is designated as a tax

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credit once that’s in place now the system’s in operation now things start to happen and it has to be enforcable

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people just laugh at you you do oh dollar so what oh well you’re gonna get your house taken away You’re Gonna

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Lose something bad’s going to happen if you don’t pay your taxes so it’s a coercive system from the start so we

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have a system of uh Collective action that’s coercive now

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it may be established through a democratic process or representative process but the the uh collectively it’s

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agreed that this is coercive we’ve agreed to subject ourselves to a coercive system to provision our

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government and uh and so now that there’s a tax requirement with penalty

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you now have people looking for paid work to earn what they need to pay the

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tax looking to sell goods and services to get the money to pay the tax the dollars the tax credits to pay the tax

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okay and what do we call people looking for paid work we we call them unemployed

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that’s our definition now you could come up with another definition and that’s fine but right now the working

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definition when somebody says what’s the rate of unemployment we’re looking at people looking for paid work when Marx

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was talking about unemployment it was Boards of people mass unemployment looking for paid work they weren’t

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looking to volunteer for the American Cancer Society they wanted money because things were for sale with money right

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because it was needed to pay the tax so so tax

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liabilities by Design create unemployment for the further purpose of

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the government then hiring those unemployed to uh provision to government hire soldiers to hire legal system

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judges and lawyers and uh to hire to buy food for whatever they want from the

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farmers but it so so that’s the Dynamics that’s

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behind the currency it’s all about public provisioning the you know Collective action as determined by the

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people as determined by the dictator but somebody who’s got the taxing Authority is trying to get collection Collective

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action going and that’s where it starts it doesn’t start Marx’s story about

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class and struggles it’s fine and maybe out of that struggle came a class that decided

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to use a course of monetary system for its own ends or to win a war or to do

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something you know and originally it was what it was historically almost doesn’t matter anymore it’s what what it is

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today who’s got the taxing Authority today what what are they doing with it how is it controlled but you know you go

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back to to thousands of years it was the temples who had the taxing Authority you had to tithe 10% of your grain or

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something like that and they had the authority to do that there were penalties you wouldn’t go to heaven or you’d be cast out from the tribe and die

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in the wilderness I don’t know what they would do to if you didn’t pay and they could then use

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tokens that represented bushels of grain that that they could then go spend

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in the marketplace that people could use to pay their taxes if they didn’t have the actual grain and and that was the same monetary

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system that we have today fundamentally okay there’s a tax liability what you need to pay the tax you grain or you

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need tokens that represent this grain and only the temple can issue these grain tokens for example um you know the

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story of tally sticks in England they used them for know hundreds and hundreds of years uh you have to to pay your

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taxes you have to turn in this piece this stick this piece of wood that they had broken off of another stick and they

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knew you were turning in the correct stick they could they could take a stick called a tally stick had a stock in a

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stub and that’s where things like the stock market came from they’d break off a piece of wood and they could spend

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that the government could to provision itself in the marketplace because people needed that to pay taxes fines and fees

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back to the king or whoever it was and they’d have these uh fairs all those Medi fairs where had

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a big table which was the ex where the chancellor or the ex cheer would be there and people would come with their

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sticks and they come with their stubs or whatever and they piece them together and then give tell them okay you’re

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paid and give them a release and that’s what those medieval fairs were apparently originally all about was

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reconciling all these you know broken sticks and it was used until maybe 1820

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or something and they were kept in Parliament caught fire and nearly burned the city down then they stopped using them so it’s lots of good history on

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this stuff um but again that’s the government trying to provision itself it

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doesn’t have anything to say about social relations now what I can say is

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that when you have taxation like that that’s not just this year but it’s

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ongoing it’s like having a pair of pants with with pockets with holes in them you got to keep filling them up because you

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know the keep leaking out okay this thing about taxation it induces like

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enormous anxiety into the population when you talk about people having greed

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and that it’s something wrong with them it I think it stems from Cove taxation that’s ongoing in Forever you can never

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have enough because it’s always running out and no matter how big your pile is It’s never enough because in your mind

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it’s running out and uh you know somebody said I’d rather be uh you know you know a th000 miles away

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from heck and going away from it then 10,000 miles away and going towards it

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right so uh you know you’re always like going towards it you always got to fight

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this thing and it’s it’s 247 and it just poisons the mind and causes people to

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dedicate their lives to trying to overcome this insecurity and anxiety

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introduced by the monetary system but it’s powerful they will do everything

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for money they will sacrifice their lives for money they’ll sacrifice their mothers for money okay and that

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Provisions the government ultimately and that gives them what they need to go out and win the war and that’s the country

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that survives when the other one gets defeated yeah and so it’s kind of a darwinian thing where it’s a race to the

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bottom so if you’re going to ban the monetary system because taxation because of what it does psychologically to human

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beings you’ve got to do it to everybody in the world because if leave out anyone they’re going to conquer the

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rest yeah can I just add off the taxation question because I just saw a local left group yeah is

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protesting it’s like oh we’re out to protest the tax cuts for the rich but

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actually if I’m kind of following your view it’s like well it’s not really there’s kind of no point in protesting

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the tax cuts for the rich unless you thought we were right on the edge of inflation and somehow they’re going to

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push us over that but to me I’m like that what does that have to do do with anything that still has that yeah yeah

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well I could see a point I don’t know if it’s their point which is you have once you have a certain amount of money then

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um you are then use it for influence and so you can argue that if youan musk had

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been T had been able to make that kind of money he wouldn’t be able to do what he’s doing and so you want to keep

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people from the kind of money that allows them to influence politics for example so that would be a reason to tax

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the rich that has nothing to do with inflation or anything but it’s something to do for like social now for me I’ve

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got a couple of problems with that uh number one uh it’s like one of those

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things that sounds good in theory but in practice every attempt I’ve seen in my

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50 years has not taken away the influence of a small group of people with a lot of money it just doesn’t work

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at a practical level right so uh they manag to find a way around it doesn’t mean you could close all those loopholes

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yeah in theory you can but in practice nobody does somebody gets paid off somebody gets bribed somebody goes offshore something

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happens who knows but seems like it just doesn’t work but what does work is to

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take away that money as a source so instead of giving them the money and then trying to claw it back don’t give

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it to them to begin with that does work but I’ve been saying that for a long

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time and giving examples and what else and it never even enters into the discussion just to add in what I think

23:55

you’re saying yeah because are you talking about for example the government giving treasuries to say weal it’s

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usually going to be people let’s say paying interest on treasuries yeah paying interest on the public debt okay

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we’re paying out $1.2 trillion dollar a year now it only goes to people that have money who have already have money

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nobody else has its interest and it’s in proportion to how much you already have right right nothing nothing could be

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more obscenely regressive and nothing is there’s no push back on that at all I’m

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like the only one I think you know who talks about that enough recently I’ve had I got 30 something thousand

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followers on Twitter so there been a few people picked up on it but not many and certainly that’s not the argument for

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low rates from the fed or anybody of any consequence and there’s nobody in Congress saying what the heck are we

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doing here paying out twice what we paid in stimulus checks but only to people who already have money fight inflation

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you know how much sense does this make it’s not even disgust so I feel guilty because I’ve I’ve benefited from the one

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to three month in the last year just kind of compounding it when it was like 5% so yeah so this is Warren and I’s

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first disagreement is that I actually kind of enjoyed it over the last year but otherwise I agree you’re right yeah

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yeah um I’m not saying you know there’s winners and losers right okay and you

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know you were one of the winners that’s fine you know people like to win you know I agree with that but you can’t say

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it’s a progressive policy right oh yeah you can’t even you can’t even say it’s neutral you can’t even say it’s mildly

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regressive this is obscenely regressive this the biggest expense in the budget and it’s

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cash stimulus checks going only to people with money like who would have imagine trying to get a bill in Congress

25:39

to do that and yet it’s happened in reality okay so

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um so I I forgot what question we’re answering oh I I mean I was it’s pretty easy to set me off on this yeah yeah no

25:51

I I was I was trying to just kind of because in other words one of the ways in which mmt seems to approach tax is

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that rather than thinking yeah yeah taxes so so let’s go back to so um I’ve

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talked about um pretty much eliminating the financial sector in various ways

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number one a zero rate policy number two not selling any treasury debt number three the stock market just uh having a

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price at which the companies will sell on limited shares of stock so it eliminates all the trading in the stock

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market but leaves the investment function and once you’ve eliminated all the uh those aspects of the financial

26:32

sector then you’ve got millions and millions of people who are out of work

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and will be redeployed into something of real value and will add to our real

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wealth okay enormously and you’ve eliminated a big source of this income

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distribution problem when I’ve done that you probably eliminated 50 or 60% of that issue and uh again it gets no

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traction at all no discussion nothing but it’s about taking the funds away at source if you take away the bonds you

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take the bond Traders have nothing to do anymore they have to do something else it’s that type of thing um If you

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eliminate income tax the the 10 or 15% of the population

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tied up in income tax compliance has to go do something else you’ve taken away

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the thing that’s um you know causing the uh the source of this wealth okay

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uh and then you go to a what I’ve called a a property tax which has no compliance

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costs you’re not like doing anything to the income you’re not you know you’re

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not exacerbating the income distribution so something like in the financial sector going to a property tax from an

27:46

income tax these things eliminate you know vast uh sources of extraord you

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know disproportionate income that question about that understanding is

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it’s shrink it’s not literally eliminating the the financial sector because you still have well 95 95% of it

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right so that it’s like overhead and also it would shrink and I’m also a fan of this uh like the SEC in other words

28:11

do they have to sit around regulating things all day uh maybe the IRS I mean do we have to have all these complicated

28:18

no they’d be they’d be gone also and all the all the legal that goes with it how many lawyers are making tens of millions

28:24

of dollars you know on tax this is what exploded after DOD Frank like if you’re G to have DOD Frank you’re going to have

28:30

all these lawyers who have to right now how how much of that is contributing to the to the income distribution issue

28:36

like a lot of it that’s the source of all this stuff so you want to cut it off its source you don’t want to have an

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Institutional structure that requires lawyers to make tens of billions of dollars a year and then try and figure

28:47

out how to tax it away you change the structure so they don’t make the money to begin with that’s how you have to do

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it and and um nothing wrong with trying to tax it away I’m not criticizing anybody on a moral level for that but on

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a practical level I don’t think it’s going to happen I mean on a practical level it also promotes bureaucracy

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because as soon as you have all this taxation aspect then you know the IRS can start to act like a racket yeah yeah

29:14

yeah they’ve done yeah I mean i’ I’ve got hard evidence of extortion from the IRS you know when I had my company it’s

29:20

just Shameless extortion and The Regulators okay and you know that when I had a small bank I own a bank they just

29:28

said flat out yeah you’re allowed to do that but we’re not going to let you if you do we’re going to do this it’s like

29:33

okay what is the um I sorry my headphone keeps trapping out what is the statistic about when the IRS audits it tends to

29:40

audit people who are lower income distribution anyways as it is I oh I

29:46

don’t know I don’t know because they can’t fight back they don’t have the resources to fight back yeah well they

29:51

they told us they did an audit when I had my Securities firm 30 or 40 years

29:57

ago uh you know there no action they found no nothing wrong they investigated

30:02

but it was going to cost us like $5 million in court if they pursued it and

30:08

they wanted us to pay $5 million to settle and I didn’t really want to do it but my partners did and so we went and

30:14

did it so I think that’s just pure extortion yeah you know and because there was nothing they had like looked

30:20

for something on um non-economic residuals that we weren’t doing uh but one of the firms we dealt

30:27

with like Payne Weber or somebody had been doing it we weren’t and they trying to get information from us as to what

30:33

they were doing we had no idea so they dropped it but then said okay we’re going to leave you as part of the lawsuit unless you but we will settle

30:41

and drop you for $5 million so that’s just pure extortion somebody in there is gets rewarded for bringing in money

30:47

right you know it’s like a judge who gets rewarded for sending somebody to prison you can’t can’t have that kind of thing well this is this is a lot of how

30:54

tax collecting emerged originally right there was tax

30:59

they would pass people along and say they would literally bid on the tax contracts like in Rome then kind of go

31:06

around and go oh we’ll deliver this for you and um yeah also even in terms of

31:11

medieval England kind of Jers spur in spread as people would look for more examples by which they could have legal

31:18

cases and be the the mediator right there tax collectors were always the lowest on the social totem pole because

31:25

of that they were just despised by everybody because of what they did and what they were incentivized to do yeah

31:33

so I guess an example that this is in like maybe two books that I know by you

31:40

uh the soft currency economics and the seven deadly innocent frauds I always mess up

31:46

that name I apologize Warren what is the what is the name of the book it’s called

31:52

the seven deadly innocent frauds of Economic Policy there you go please everybody check it out I I highly

31:58

recommended right there it’s uh it’s free online mosa economics.com under

32:03

mandatory readings my daughter came up with that there you go and it’s mandatory for everyone listening so

32:09

everyone listening has to go and read that then I I wanted to bring up an example that I know I’ve heard you I’ve

32:15

both seen you write it and I’ve also heard you say this say in debates you’ve done with Robert Murphy or just in other

32:22

yeah you know this is now me saying I’ve listened to you for quite some time I remember back when I was a kid there you

32:29

go yes as as a prodigy waren mler debated Robert Murphy there um it’s the

32:35

game example it’s the the point the you know the scorekeeper example in that

32:40

case yeah and so I was wondering if you could talk about that and then I kind of have some questions about the model

32:46

right there in terms of budget deficits yeah right there so yeah so the

32:53

point of those examples was how does to talk about how government

32:58

spends and if you look at your online banking you can see how government spends I have $2,000 in my checking

33:06

account I see it on the screen I’m watching it and my social security check $33,000 hits what does that mean instead

33:14

of 2,000 it says 5,000 so what did the government do they

33:19

just turned the two into a five that’s it they didn’t Hammer a gold coin into

33:25

the computer they didn’t take somebody’s cash and bring it into a room and dump it into another place or something and

33:32

in fact the person who changed the number it’s probably just a computer from a two to a five doesn’t even have

33:39

any Communications with the entity that’s doing the taxing which is changing higher numbers into lower

33:44

numbers right if I had 5,000 and I paid a tax for 2,000 all they do is change the five into a three they don’t get

33:51

anything yeah there’s no pile of cash that jumps out at their end your computer anything and we see this happen

33:57

every when you kick a field goal you see your score go from seven to 10 nobody says

34:03

well where the football stadium get those three points okay they know it’s just it’s scorekeeping they don’t say

34:09

wow the score is 20 56 to 53 we better not award any more points we might run out and won’t be able to play tomorrow

34:16

you know there isn’t anything like that but that but when you don’t understand that those are the kind of things that

34:23

are driving policy today fiscal policy monitor they’re all being driven by that kind of inapplicable nonsense it’s just

34:30

not applicable to how the system works the Federal Reserve Congress has set them up as the scorekeeper for the

34:36

dollar they have a spreadsheet which is just everybody who’s run an Excel spreadsheet or anything else it’s just a

34:42

ledger and uh they enter numbers into accounts and when they enter numbers

34:49

into account that’s called crediting the account and that’s how the government spends they have an account for a bank

34:54

like JP Morgan or City Bank that has an account for you and when they pay you money they change

35:00

the number in JP mortgage account they change the number in City bank’s account the same way the stadium changes the

35:07

number the FED doesn’t have any dollars it doesn’t not have any dollars it spends by changing numbers higher on its

35:14

own books and it taxes by changing numbers lower and anybody who’s played cards with a scorekeeper knows how it

35:21

works if you have a good hand and you get 100 points does a scorekeeper have fewer points now no and if if you have a

35:28

bad hand and you give him back points does he have more no he doesn’t have any points he just keeps track of your

35:33

points yeah so like almost it’s like a law of physics when I pay my taxes uh

35:39

you know coming up because I’ve been following this this this week you know in other words it’s just going to be destroying money but it’s not like

35:45

they’re gaining money and putting it in the treasury somewhere right right so um the word tax

35:52

is when you pay that’s called a tax return why because you’re returning

35:57

those dollars to the government they came from the government you’re returning them yeah so if you co have a

36:04

$10,000 ticket to the football game and you sell it to the next guy for 20,000

36:09

and he goes to the game and gives it to the guy at the gate walks in what does the guy at the gate do he tears it up

36:15

and throws it away like why does he tear up a $10,000 ticket $20,000 ticket and

36:21

throw it away what sense does that make okay but everybody understands that there’s no mystery there okay if you pay

36:27

your dollar your taxes with actual cash this is how I start to book out you’re a

36:33

waiter and you’ve got paid an old $20 bills and you go into the IRS and pay with your $20 bills they’ll give you a

36:40

receipt and thank you for helping to uh rearm the israelies or whatever we do with the money and then uh as soon as

36:46

you leave the room we have unlimited money so we don’t have to yeah you know as soon as you but as soon as they thank you for helping do that but as soon as

36:52

you leave the room they send that money off to be shredded you can buy shredded money in Washington okay well how do

36:59

they need your money if they’re sending it off to the shredder there’s something else going on with government right the

37:05

state football stadium is not the same as you or I you and I do not throw tickets in the shredder they do okay and

37:12

can I run on that analogy just sure and let’s actually finish your point and then I just wanted to follow up on the

37:17

analogy sorry yeah so look the government spends uh puts a tax liability in place it pays us with its

37:24

dollars it could be used cash if it wanted to we would then have that cash when we get paid uh well it puts a tax

37:31

liability on which causes us to need those dollars so now we go to work for the government we earn dollars that can

37:37

only come from the government signed by the treasury secretary in case you’re wondering okay we then buy things or

37:43

whatever they get used by the waiter to pay taxes they give him a receipt thank you very much and they throw it away

37:49

it’s the government’s ticket it sells it first what does it buy with it it buys our labor there’s your labor theory of

37:56

value okay it buys goods and services after the tickets have been spent

38:01

they’re used to pay taxes they get thrown away just like tickets to the movie theater or took it to the football

38:07

stadium no mystery here so following this analogy we’re going to stay with

38:12

football because the Philadelphia Eagles just won so that’s why we’re staying with football uh in your analogy I’m

38:20

understanding this as it’s the analogy for the monetary system the treasury can’t run out of money at least it’s it

38:27

is the the point dealer in this case yeah the idea the idea of running out

38:34

doesn’t apply doesn’t apply can’t it’s not applicable yeah it applies to me like me I’m the currency user I’m not an

38:41

ISS that’s yeah right and I was going to say just for people listening what

38:46

Warren was saying is this is the kind of fallacy that is done regularly that people kind of uh have a kind of fallacy

38:53

of composition of assuming that their household is how the government operates war and I were talking about the Tea

38:59

Party earlier and of course that used to be a popular kind of Common Sense analogy of oh I have to balance my

39:04

budget why can’t the government as as well this was a kind of common thing the

39:10

reason however that I bring this up is that I you know if I was to ask in the

39:15

football game something like do the football players have rights against the

39:23

scorekeeper like rights you know what I mean like rights it probably be a kind of odd question it would be like what do

39:29

you mean to say that the offensive line have rights against the scorekeeper the scorekeeper is it’s God basically in the

39:36

game it’s kind of is the terminology um and yet I guess I bring that up because in this beautiful

39:44

country that you and I are citizens of I know our Northern neighbor is is Eman in

39:50

this case um you know our country was kind of famously founded on the player

40:00

pressing their rights against the scorekeeper actually and saying in fact so I guess I was sort of wondering how

40:06

you would think of that in terms of your analogy because there is an analogy yeah go ahead so the

40:13

Constitution is the instructions for the government and it comes from the 13

40:19

states right so they didn’t have a constitution they had Articles of Confederation which was a lot like the

40:24

European Union was originally we had the same problem problems of course it didn’t work out particularly well so we

40:30

wound up with this Constitution which is instructions from the states on what the

40:36

central government the new score you know can do and one of it was they appointed him scorekeeper with the idea

40:42

that they can uh there’s a Bill of Rights attached to it and that they can

40:48

change the rules for the scorekeeper through the amendment process and all powers of the federal

40:53

government are derived from the states now it’s interesting is I live in a US

40:58

Territory and so while the federal government is owned by the states the federal government owns the Virgin

41:05

Islands in Puerto Rico for example yeah yeah so it’s a very different relationship okay uh of the direction of

41:12

causation of the law and the rights our rights come from the federal government the federal government’s rights and

41:18

obligations or whatever you want to call them instructions come from the states and the states get theirs presumably

41:25

from the people in the states but not necessarily right those 13 states doesn’t say they need to be

41:32

representative government anywhere I think oh it says the federal part of it does not not the state governments I’m

41:39

not sure there’s any like specification on that there it’s on a practical level that hasn’t come up don’t tell anybody

41:45

by the way I want to cause trouble but I I guess to to this is why it’s nice to have a dialogue because we

41:52

kind of jump back and forth and uh no but you do have the benefit of a good tax uh situation if I if I remember

41:59

correctly in terms of Virgin Islands is probably preferable to I don’t know Massachusetts or something like that not

42:05

not really we pay same we have the same forms we pay the same federal income taxes our local tax yeah yeah so I I you

42:15

know when they Chang the federal tax rates and everything I I’m filling out the same Federal forms that you would in

42:20

Massachusetts paying the taxes it’s just that the vi government gets the money instead of Washington I see but the tax

42:27

is identical now they have um local taxes which you may not have if we have a 5% um a grocery seeds tax which is

42:36

really worse than a sales tax but uh you’ve but we don’t have a separate income tax here you do but some states

42:43

like Florida don’t have a separate income tax Texas I used to live in Texas didn’t have one Texas yeah yeah so we’re

42:50

you know it’s different we have what’s called The Organic Act is our instructions from the federal government

42:56

as to how we can operate for tax purposes maybe just to to return to the point the reason I was kind of jumping

43:02

on rights is that in that case the the 13 colonies you know right before the

43:08

war breaks out Thomas Jefferson writes you know summary of the rights of British America and you know he says

43:16

look the property that we have is a loyal it’s not that that was claimed in the Norman Conquest like of course the

43:22

Normans come over they conquer you said tribute earlier so we’ll we’ll run with that

43:27

that they were saying look here peasants you have to pay us this tribute now and then and that you know Jefferson is

43:35

making a a claim that actually was debated at the time you know like someone like Samuel Johnson is saying

43:41

know the taxation is right but they’re saying taxation without representation they’re making some kind of claim right

43:46

right right and I guess I’m saying that because in that context you know there’s the scorekeeper

43:53

and there’s the scorekeeper there’s the scorekeeper that it was example he gave earlier that the Romans are Conquering

44:00

the guls which was a term basically for anybody who wasn’t Roman so it was like Iberian or anything and then there are

44:07

people saying we’re willing to accept taxes but it has to be on the basis of these rights that do not originate from

44:14

the state and so I’m saying that because I’m trying to figure out where the kind of

44:20

distinction between the state and Civil Society plays out in the kind of analogy

44:26

you gave with the sports game right well yeah you know

44:32

scorekeeping has its role in football but it the Scorpion here doesn’t make the rules or anything like that right

44:38

okay they’re they’re made by the sanctioning body and one of their jobs is scorekeeping to make so that people

44:45

can come and see the game in an orderly basis or whatever and so that’s that’s what they do but they’ve got a whole

44:52

other system for determining like how many yards for Touchdown or whatever sure you know how long you played the

44:59

game that’s got nothing to do that’s a separate operation of the sports team

45:04

but I guess the reason I I bring the reason I bring that up is that for me uh

45:11

you know it it’s of kind of essential importance the kind

45:16

of relationship between the state and society and that that relationship has changed enormously over time meaning if

45:24

I was to go back to suia which is Michael Hudson so this is someone I

45:29

think you’re familiar with at least you’ve been I I just saw something so what we’re separating is provisioning

45:34

the government with ruling the society they’re two different things I agree

45:41

they they come together many ways there’s a lot of overlap but the monetary system in the

45:48

first instance is about provisioning you know Society provisioning the government and

45:54

then and yet the government also has this authority to make laws you know

46:00

that have nothing to do with provisioning but but even then like if we were to think about I think you you

46:06

called gold earlier barter but I was thinking about trade between sovereigns

46:12

historically like people have used gold because they were kind of like you’re in another in German there’s a distinction

46:19

between gin shaft and gazel shaft community and Society meaning you’re part of another Community you’re a

46:25

Spartan and I’m like a I don’t know I’m just Athenian this is probably not historically right we’re totally

46:30

different communities and not only that between our communities there are these wandering tribes some of them are Jewish

46:36

tribes some of them are these other groups as well that kind of go in the inter ises and none of them you know

46:44

that trade kind of doesn’t fall under the Dominion of any Sovereign and like in other words those people don’t have a

46:50

direct obligation all of those people to any state and yet there is trade

46:56

happening not only is there trade happening there’s like mediated trade this would be the classic story of

47:01

people saying oh we need money because there’s like a double coincidence of wants that we don’t simply rely on

47:08

barter but people might go oh I’m going to purchase this because I know I can get the Arbitrage selling this over here

47:14

and that that has existed for thousands and thousands of years I mean I guess people still do it my dad trades

47:20

baseball cards yeah you know this is what he does when he’s retired you make boats he does baseball cards uh you know

47:27

so I guess I’m wondering isn’t that certainly a money form or is money here being kind of narrowed to the kind of

47:35

Fiat explanation well let’s say let’s not use the word money okay because I

47:40

don’t I I tend to not do that except casually you know we’re going to the restaurant did you bring any money but

47:46

that I don’t use it other than that casually uh so you know is there a you

47:54

know would trade have still happened even without gold from we I think they would have figured something El so I’m

48:00

sure it happened it did happen gold yeah right right yeah so so there’s you know

48:05

people figure out ways to trade if they can if there’s some incentive in it for them so that it’s you know human nature

48:11

to try to do that so uh so you know but when you want to

48:17

provision a community and you do it through uh a currency like the US dollar

48:24

then that’s what you do right and so so if you suck about and then if you want

48:29

to call that tax credit US dollar if that happens to fit in with your casual definition of money fine oh it’s

48:37

functioning as what I would generally call money oh wait a minute now it’s not functioning as money what happened you

48:42

know people still need it to pay taxes but they’re not buying other things with it what happened oh it causes cancer so

48:49

nobody wants to touch it you know something right so uh you’re talking about two different things here and uh

48:57

I’m not sure that you know we don’t have to decide whether if people traded baseball cards is that money or not it’s

49:04

just like an academic discussion but I don’t think it’s actually an academic discussion because in other words if the

49:10

there’s a question of where is the authority of the state coming from which we just talked about in other

49:16

words yeah a lot of authority of the state did just happen through might makes right but even then not always the

49:22

case meaning they had to kind of represent different different states it’s come from different sources the

49:28

United States it came from the 13 colonies giving that power that they had

49:34

over to the central government other places it was the king who took over in a war you know and he had the army

49:39

military control you know we’ve had military takeovers all over the world where that’s where the authority comes

49:46

from the taxing Authority comes from so it could it could come from a variety of places I I agree in terms of the

49:53

authority part but I guess my point is I’m trying to say the authority can change content in other words there has been

49:59

like the Roman Authority that you gave at the beginning but we to say it’s only good as your next trade

50:06

right that’s right that would be a nice way but yeah I guess coming back to it I’m still trying to say that the

50:14

authority like you you brought up representative government earlier for example so to quote our friend Adam

50:20

Smith I I think he’s our our friend we’re both friends of Adam Smith you quote him several times in your text

50:26

Adam I’ve got I got those quotes from others by the way I’ve never actually sat down and read and you you’ll enjoy

50:32

him he’s like a nice reader and he’s like a fun person fun person that yeah pins pins or something now I feel bad

50:38

because I was gonna quote Adam Smith and I’m not trying to like you know it’s okay it’s okay it’s okay I was gonna say

50:44

that that in book four when he’s talking about uh he’s writing right before the American Revolution he says look the

50:52

representative government was unknown in ancient Rome and it was unknown because it was kind of not feasible meaning

51:00

ancient kind of communities uh political power was a lot stronger in a lot of

51:06

ways because that’s kind of how people found their freedom deciding War it would have been directly even deciding

51:12

like the coins and the Insignia on the coins in a way that I have I don’t know I guess we can petition to put somebody

51:18

on the $100 bill I guess Trump tried this whatever two weeks ago or something but um the reason I bring that up is

51:25

that the necessity of representative government as Adam Smith is saying in

51:31

his famous book for and then was behind both kind of the American and French revolutions is that in practice it’s

51:38

become necessary because kind of the main activity of people is becoming more

51:44

and more they would say commercial or based on Monetary Exchange in a way that was like not the case in Rome right like

51:51

really you had slaves and peasants working on lat fundia you people who

51:57

didn’t work to work was like bad right it was a Mark that you had been conquered and you were other people

52:05

were working so that other people could go into the polus and make these political decisions this is the realm of

52:10

kind of what it means to be human and so I I say that because I’m still

52:16

like in that reading and obviously we can challenge it but just in that reading the necessity of breaking with

52:23

the British government was out of actually having an appropriate political

52:29

representation of what was going on in civil society and so I say that because even then the content of the kind of

52:36

money that would then be S you know I don’t know declared this is like George

52:42

knp it’s like declared this is he calls it like a lric debt or something um that

52:47

the content of what it’s supposed to captured had changed and so for me it’s

52:53

not like just simply two different things it’s actually what is relationship between the change in

52:58

society and how then that would be registered in the state and that’s why I kind of went to the analogy of the

53:05

scorekeeper and I know maybe you can say the scorekeeper go ahead yeah well the currency is either tax credit or it’s

53:11

not right and so we’re we’re we’re explaining systems now where it’s a tax

53:17

credit now there could be other systems where it’s not a tax credit that’s fun I understand that and I don’t know enough

53:23

of history or trust enough of what I read about history to know whether what actually happened anyway you know um

53:31

with AI and all that maybe none of that ever happened I don’t know so it might just

53:37

be a chip in my brain that makes me think it happened but uh I know what a tax credit is and what is what isn’t

53:43

yeah and I can tell you how it’s going to work with a tax credit and I can tell you the US dollar works as a tax credit

53:49

nothing more as just the Y the pound and all the other uh currencies in the world

53:55

yeah can yeah go ahead no a follow-up question I was gonna I should have asked

54:01

this earlier I was actually curious about how you like thought up mmt even

54:07

like how it came to you even like the the kind of thought process because in my understanding well go ahead I I don’t

54:13

even want to depends on what depends on what mmt is I can talk I can talk about

54:18

how I came to get started on this Mission which is now come as mmt yeah

54:24

that would that would be better I didn’t know how to pose the question Phil Armstrong is writing a book you know he’s doing I have a biographer so that’s

54:30

why my head Point look a little bigger than normal oh I I do know Phil Armstrong because did you co-author

54:36

something with him as well yeah yeah yeah yep okay so he’s writing a biography that’s very interesting

54:41

anyways a draft done he out for comment so uh so a lot of things have come up in

54:48

doing that talking to people I knew he interviewed people from the past and all that so he’d be interested in that so uh

54:54

back in 1977 I was a Bankers Trust and I was there from 76 to 78 so I’m only

55:00

guessing it was in 77 and I came from a small Savings Bank and Alan Rogers was the trading manager

55:08

and he he he didn’t move his mouth when he talked he talked like this that’s me usually sorry yeah yeah and he he says

55:16

two billion two-year notes are going to be auctioned he says where’s all the money going to come from to buy those two-year notes because this was a record

55:22

high number of two-year notes and I remember saying Allen it’s the same money that the treasury deficit spends

55:29

they spend money it adds to Accounts at the reserve Accounts at the fed and then those Reserve accounts by treasury

55:36

Securities and that’s that’s you know it just goes you know it’s back where we started from it’s just a round what we

55:43

call round robin trade you know you debit to treasury’s account you credit to fed’s account you debit to fed’s

55:49

account you credit to Treasures account all at the same time there’s nothing actually changing it’s just a pair off

55:56

you know and he just looks at me like there’s something wrong with me and then he asks the same question to the next

56:02

Guy where do you think the money come from well I think Pension funds might do it now they were all worried about

56:07

whether there was enough money out there to buy this stuff and I’m saying at the macro level it’s just a you know the

56:12

spending is the credit and then when we buy it it’s the debit and it all happens at the same time and and every morning

56:17

when we got into work everybody be pouring over the numbers from the bank of England about how many treasury bonds

56:23

they bought overnight and they bought so many two-year notes and so many five-year notes and so many 10 year notes oh what if they don’t buy our debt

56:29

what’s going to happen Okay then it was the Japanese and the Chinese and it’s always been somebody and it’s never

56:35

mattered and I’ve always had the same answer now how did I know them I don’t

56:40

know I didn’t read it somewhere nobody told it to me it’s just like uh how it’s

56:45

not you can say it’s intuitive but it’s not particularly insightful like how else right but

56:52

somehow and that’s 1977 so I was 28 years old so I wasn’t a kid anymore i’

56:58

worked for a year there with customers watching the FED watching treasury

57:04

balances go up and down watching accounts go up and down and I watched it with an eye out to okay how does this

57:10

work when the when they spend they credit this account debit that account okay I mean then if that doesn’t tie in

57:18

if the accounts don’t add up somebody’s made a mistake can I ask a question about about your colleagues which is

57:24

that your colleagues were very interested in like oh are they buying our debt are they buying our debt I know

57:30

this is a point that it seems like Stephanie Kelton your your your friend makes which is that people continue to

57:36

have a at the very least a Britain Woods if not earlier concept of

57:42

monetary system were they still kind of like stuck on a kind of would you say

57:47

anachronistic or obsolete way of thinking about it in other words they were thinking are we gonna have yeah go ahead it’s it’s at least incomplete yeah

57:55

because uh they’re thinking that you know the treasury has to get funded which is

58:02

true but they’re not looking at recognizing that the government as a whole doesn’t get funded the treasury

58:09

gets funded from the FED which is another agent of government so the government sets up two agents one that

58:15

does the funding just credits the account the other that needs it’s account credited or it’s not allowed to

58:20

spend by policy it doesn’t if it wasn’t a policy the treasury would need to have its account credited right the FED could

58:26

just credit JP Morgan’s account account for that by debiting Treasury and treasury would have an overdraft so what

58:33

okay but they don’t they have a policy that tells them not to do that now whoever put that policy in place is probably somebody who doesn’t have any

58:40

idea what they’re doing only because I’ve talked to a lot of people who might have been the ones to do that and they don’t have any idea what to do I mean I

58:46

know they don’t and I’ve never met treasury secretary or anybody else who did know

58:51

what they were doing you know if I had met one it would have been encouraging but I’d never but was it pla at one time

58:57

I mean I’m thinking of there’s an article uh by Beardsley rumel I think it’s from the 40s right where in that he

59:04

says something similar he’s like a he’s a he was a Fed Governor I believe yeah and but he says only for domestic

59:12

policies can the government kind of spend as much as it wants we still have an international position so the reason

59:18

I guess right the yeah go ahead yeah in theory the international position was

59:24

convertible into gold right but was it actually okay well this 1934

59:30

they said internationally it’s convertible domestically it’s not okay but it was never tested until 1971 when

59:37

France said okay we want the gold and Nixon said yeah no that was he said no and so uh well what if

59:46

they’ asked five years before you know would Johnson have said no probably Kennedy have said no probably I don’t

59:52

know would anybody have said yes we don’t know so were we ever ever was it ever convertible if it was never tested

59:59

did we act as if it was convertible no the Federal Reserve was crediting

1:00:04

Reserve accounts you know by the time France asked for that there was like 4 to one

1:00:11

convertible currency to Gold so they were they Federal Reserve

1:00:16

had since brenon wood started whenever that was in the 40 in the euro dollar shortage was just a kind of fluke like

1:00:22

it there wasn’t anything there’s no never been a short there’s been a there been an interest rate that they might

1:00:28

have thought was too high but there’s never been a shortage it’s not possible just a debit and a credit on a non um

1:00:36

regulated uh entity such as City Bank London or JP Morgan London they have a a

1:00:41

book in London a book by meeting a spreadsheet you know they just get a computer with a copy of Excel or

1:00:47

something on it or Google those before Google Docs and uh and they put loans and deposits on

1:00:54

that spreadsheet they weren’t insured but why would they do that and they called them Euro dollars if you have a

1:00:59

customer because they didn’t have to pay FDIC Insurance on right so they could give you a rate that’s a little bit

1:01:05

higher if you’re a saver a little bit lower if you’re a borrower and so there’s an enormous amount of money to be saved by keeping these debits and

1:01:13

credits on a separate set of books that was outside of fed regulation fed you know taxation you know and that’s what

1:01:20

it was it had nothing to do with the Euro or EUR or money leaving the country or anything like that it was just a

1:01:26

separate set of books outside of tax us taxation it wasn’t outside of any

1:01:32

geography well I guess people thought it could be a shortage if they were to convert but you’re saying nobody ever

1:01:37

tested that well your dollars were not convertible currency but wouldn’t it get traced back to the Britain wood system

1:01:44

like this is why well City Bank agreed to give you um you know to make those have those

1:01:51

convertible fine I don’t know that they did that no no I I know that I know the Soviets were involved in in having uh

1:01:58

this is why I brought it up just to be a little silly about it that they were holding basically dollars even though they were claiming to be on a socialist

1:02:06

economy or something yeah yeah sorry keep going but they were just holding

1:02:11

balances in a bank right dollar balances in a bank account Barkley or city or JP

1:02:16

Morgan or the Federal Reserve Bank or the bank of England they just had dollars in a bank account that’s all

1:02:21

they had they not like nothing ever leaves the country there’s no such his Capital flight with fix floating

1:02:28

exchange rate right you know that’s only that’s only when reserves physical reserves

1:02:34

move yeah now not and even then it just moved from one room at Fort Knox to another it never even left the country

1:02:41

so there’s no uh you know if uh if dollars are leaving Mexico or something

1:02:47

all that means is somebody in Mexico who had dollars an accounted City Bank that account now has a different name on it

1:02:52

it’s gone from Jose to Joe and so dollars left Mexico but they just stayed at City back the whole time so going

1:02:59

back going back in the story this is the the reason why I we’ll also come back I want to hear more about how I really

1:03:05

liked enjoying your your thought process and and coming to that as well but I wanted to go back to the so then before

1:03:11

Breton Woods when we were on a gold standard so at like I guess what I’m trying to get at

1:03:18

is to the degree that we were on a gold standard then it was plausible that you would care about these things I think

1:03:24

you write about it in I want to say soft currency economics anend multier yeah

1:03:30

yeah yeah there’s an appendix at the back where with a fixed exch and that was the whole thing about the Murphy

1:03:35

debate with the austrians right what they say is entirely applicable to floating to fixed exchange rate regimes

1:03:42

so they’re not wrong but they’re only correct in Hong Kong and Bulgaria wherever we have fixed exchange rates

1:03:48

now they’re not correct for they’re not applicable it’s not that they’re wrong they’re not applicable for the US or for

1:03:54

Russia Russia or anywhere else and at times when a central bank intervenes

1:03:59

which is a fixation of central of the bank R then Austrian analysis applies there too so uh you know so that’s the

1:04:08

distinction it’s not right or wrong so there’s no debate between mmt and Austrian economics in the formal sense

1:04:15

there’s a debate between me and maybe an Austrian Economist who doesn’t recognize that his theory applies to or his

1:04:23

understanding applies to fixed exchange rate but once you understand what they are there’s no it’s all reconciled

1:04:28

there’s no problem there at all right no so the I think I had mentioned at the

1:04:33

beginning because as a as a young uh young Lefty fighter that I wanted to

1:04:38

debate all of these austrians I I spent a whole summer reading like Hayek and and I read Human Action you know because

1:04:45

I’m like I’m GNA take on these people and I I always feel like when I’m listening to them uh their view of

1:04:52

society is one of like it begins in the 17th Century right they like talking about lock a lot and then kind of also

1:04:59

Richard calion and and these type of people and then basically since then it’s been some disaster of just the

1:05:06

state intervening or something like that well and they also say others just said

1:05:12

that if anybody ever understood if the population understood how it actually worked it would collapse you know that

1:05:18

type of thing and that’s and there’s plenty of evidence that’s not true either oh so yeah you know they say

1:05:25

they’d be they just vote unlimited spending and benefits and we’d have hyperinflation and so they really you

1:05:32

know inflation fear mongers more than anything else because people don’t do that we just had we just lost an

1:05:39

election to a fascist was taking away all our actual rights you saw what they

1:05:44

just do with that law firm stuff’s nuts okay Perry Perry co I forget yeah the

1:05:50

Clinton one the Clinton linked one no yeah well you know Perkins koi I

1:05:56

don’t know why I was blanking on that yeah isn’t that it yeah go ahead just yesterday anyway because they had they

1:06:02

had they had gotten involved in the January 6 defense or something and so they pulled all their government

1:06:07

contracts from them even though they’ve been out of it for five years or whatever so but anyway

1:06:14

um just dropped the point oh I guess what I was I was I was kind of I I

1:06:20

didn’t want this to be like a Q&A and kind of like a dialogue or something like that a nice fun dialogue which was

1:06:25

but one thing that I I feel like they raised an interesting question about is that they seem to be sensitive again

1:06:32

back to this earlier point about like Society now they have their own way of

1:06:37

putting it like they kind of just put the no I I remember I remember what it was yeah go ahead go we we’d have

1:06:43

hyperinflation if everybody understood monetary operations and so we just had

1:06:48

this regime which you know I’m not not saying they had any merits but certainly I can’t say they’re the Lesser

1:06:55

two evil because the new one has systemic risk that I don’t think was there before but anyway um and and why

1:07:01

did they lose because inflation was 3% and people would rather have unemployment than 3% inflation so that

1:07:07

kind of puts to rest the idea that if people understand the trade-off they’re going to vote for inflation over

1:07:12

unemployment they’re not they’re not going to vote they’re voting for somebody to cut all their own benefits to cut Social Security to cut you know

1:07:19

everything else because inflation was 3% okay so where’s this idea come from that

1:07:25

oh if they ever knew how it worked you know we get all these benefits and inflation would rip because that’s what people would want they don’t it’s the

1:07:32

opposite I think I know why yeah good it’s be because if you’ve got 10%

1:07:37

unemployment you have 90% who are employed and those people like it because if they need a plumber or they need their lawn cut they’ve got

1:07:43

qualified people begging to do it you know in a bidding war for little bits of money so they like having that feeling

1:07:50

of power over the unemployed and so when unemployment gets too low they get nervous they don’t like it I called the

1:07:56

guy and it’s going to take two weeks before I get my air conditioning they don’t like them even though they’re doing well and everybody’s doing well

1:08:03

you know and ah he didn’t you know well we had a hard discussion he just told me he wouldn’t work he went somewhere else

1:08:08

people don’t like that they like to have that control now that’s just my social theory I don’t know how that fit in line

1:08:15

with with Mar but you know you can have all all of the please have all your I mean also if you have 10% unemployment

1:08:21

you might not have plumbers because you just have unemployed people meaning you don’t have anybody 90% UT yeah no of

1:08:28

course I mean I like again I I I’ll even do an autobiographical thing one of the

1:08:33

reasons I was I was attracted to mmt when I was a young person is look I was getting out of college went to college

1:08:39

on a scholarship multiple scholarships math economics do you know where I worked Bed Bath and Beyond I worked all

1:08:47

you know I could have totally forone a college education and then my job out of

1:08:53

that as well was you know totally to any college degree and I would hear

1:08:59

people tell me they would say oh the government is spending too much right if

1:09:04

you remember about right the the the coercive taxation is why there’s even

1:09:10

this defensiveness about going to school for vocational purposes or going for

1:09:15

educational purposes right what’s the big defensiveness because it’s this ongoing need to pay taxes and so you

1:09:22

feel like I have to explain that type of thing you know and what would be wrong

1:09:28

with just having a purely educational education you know non-vocational

1:09:33

education would we have a better you know would you rather live in a world where people making change at the

1:09:39

counter had a full Classic Education I would you know that would be my

1:09:45

preference for a world to live in uh and not so you know but everybody says oh yeah well how much money are you going

1:09:50

to make doing that well that I don’t measure that in money right I measure

1:09:55

that in you know how it feels when you go to the Post Office and you’re chatting with the guy who’s you know

1:10:01

giving you making change for you giving you your letter and you can talk about something else you know interesting

1:10:06

right just so I understand you’re not are you saying that people work because of the threat of taxes because certainly

1:10:12

if you’re unemployed you’re not paying any taxes at least in the US right now yeah but when you talk about I went to school and I could have had the same job

1:10:19

without going to school where do that whole why would that even be a discussion point because of the whole

1:10:25

tax it stems from the coercive taxation that whole discussion Point without coercive taxation that discussion point

1:10:32

doesn’t come in nobody would think about going to school to make money to learn something to make money if it wasn’t for

1:10:39

coercive taxation do you do you think money could exist without tax of cor of

1:10:45

like Ian can a tax credit exist without a tax well that’s not how I’m defining money in that case so yes if you put it

1:10:52

in a tonology that it could a tax credit exist but well yeah so you’d have to

1:10:57

Define it some way before you ask me the question well I think of is at the very least like expressing you know like the

1:11:05

the convenience in other words it’s meeting the double coincidence of wants what’s it though what’s the thing

1:11:11

that’s meeting is it a tax trade trade no trade’s not a thing you know what’s

1:11:16

the actual token that’s meeting the oh it could be gold it could be cow hides it could be okay so so that thing would

1:11:23

have intrinsic value so now you’re back to barter otherwise there’s no value okay so this is this is why it seems like there’s no

1:11:29

way of valuing it when you use money it’s different than how when I yeah when

1:11:34

you when I talked about value system one the value of the monetary system you say it has no value let’s go to what I’d

1:11:41

call barter where things have intrinsic value or you can go to tax credits where they have value because they’re needed

1:11:47

to pay tax and now the monopolist decides to value by what it makes you do

1:11:53

to get the thing you need to pay the tax and so those are two different systems

1:11:58

and that’s the one we have right now where the currency monopolist I’ll call them from issue or whatever you want to

1:12:04

call it the the one with the taxing Authority is telling you what you have to do to get the tax credit that’s where

1:12:11

the value is coming from I I I understand that point but if I understood correctly but it could be the

1:12:16

case in other words one could say okay this thing usually has taken x amount of

1:12:22

time and it it seems to be something that is common to groups of people trading well you can go to non-monetary

1:12:28

societies and look at how they operate you know you go to American Indians before they were monetized first of all

1:12:35

they didn’t own any much anyway and how did they exchange things with each other you know and you can look at how things

1:12:41

were exchanged and how far they got in terms of trade and everything else with the other tribes of course they were

1:12:47

entirely Fierce you know major uh was big military situation right I me they

1:12:53

were always raiding each other killing each other not to the extent we do but it was continuous Warfare uh it was also

1:12:59

a gift economy too though and there was gifts economy and there was obligation somebody to help you out so you help

1:13:05

them when uh people came to the US you know started a new town you know 50

1:13:12

people would build a guy’s house and then they’d build the next guy’s house and everybody would help out trade there was the sil some world

1:13:20

trade but it works to an extent right but nothing like it works works now you

1:13:27

nothing it works when you’re monetized so yes you can do it without you can do it without it but doesn’t develop the

1:13:33

same way no I I get that point I I’m not arguing about whether or not I have to

1:13:38

pay taxes on April 15th or before I’m going to do that no matter what I don’t want to be in jail of course absolutely

1:13:45

uh you know that my money’s going towards that the reason I guess I asked that is because let me just say look

1:13:50

having that dollar as a tax credit then drives World Trade

1:13:56

the way it wouldn’t be driven if it was just barter of some type historically or right now

1:14:02

anytime they can’t be anytime well if you could trade before

1:14:08

without some kind of tax credit currency it was you know I’m sure it was far less

1:14:15

than when there was a tax credit type currency but that that’s fine I mean I

1:14:20

just the the mere reason I’m asking is because it’s like do you need all that trade do you need all that trade now

1:14:27

particularly I mean it’s nice it’s enriching and everything but you can certainly live without it no I’m all for

1:14:32

trade I’m a free I’m a free Trader here the free Trader Eman did you want to say something I thought you came off mute or

1:14:39

not uh I just I just mentioned the uh gift economy that was okay I’m done with

1:14:44

that yeah and there’s a whole literature on that how that worked you know if you accidentally killed somebody from

1:14:49

another tribe what you have to pay them to compensate or give them or do for them those things became tokens that

1:14:55

were traded so yeah it’s kind of like a tax type of thing it’s a moral obligation rather than there were there

1:15:01

were obligations in communities versus interc commun no I guess again the the reason I was just bringing that up is

1:15:08

because uh when I think of again back to my Thomas Jefferson version the claim

1:15:14

that they’re making against the state like the right they’re saying look there’s a world outside the nation yes

1:15:20

we are citizens of this nation but if I go to another country if I go to China

1:15:26

if I go to South Africa if I go to Scandinavia I’m just choosing places around the world I’m not a citizen of

1:15:32

that country but I have rights in that country they might violate only if the country gives it HS

1:15:39

those rights how can they give you rights though well I mean if you go to some

1:15:44

place where drugs are the death penalty and they’re not here you know it’s just had six people get killed somewhere

1:15:51

because they’ve got the death penalty that’s a political ass in other words when I’m saying rights there’s the law

1:15:56

and there’s rights right it’s all political though right it is a death

1:16:02

penalty yeah I mean what you’re talking about is political this rights thing no rights would come from society that’s

1:16:08

why I had this why I went up to the yeah isn’t that political no there’s there should be do

1:16:14

you think there’s a distinction between the state and Society right I think there’s a distinction but I think that

1:16:21

uh things flowing from society it’s like a political flow you

1:16:27

know say more just as opposed to an operational type of flow you know

1:16:33

there’s flow that’s done through personally is I tend to consider political flow it’s a determination by a

1:16:40

person as to what should be done or not rather than a compelling thing like if you don’t put gas in the car it won’t go

1:16:47

you’ve got something like if you can’t get somebody to drive you and you don’t know how to drive it’s not you know it’s not going to happen so you got the

1:16:53

political aspect then you have the operational aspect so maybe I’m being too General with my word

1:17:00

political like for example I don’t mean necessarily representative right I mean usually this

1:17:07

distinction it’s in like the Napoleonic Code that there was a distinction between your citizen rights and your human rights so in other words you had a

1:17:14

right to property but you don’t have a right that’s what I mean like but those those those are all the flow of those

1:17:20

rights is through a political process how do you how do you see property as flowing from political

1:17:26

rights well I mean the flow is that you know it’s enfor property rights enforcement right

1:17:32

enforcement yeah so right though well does a right exist independent of

1:17:39

enforcement how else could someone say it’s violated or not

1:17:45

enforced yeah but if you have the right to something but there’s no enforcement do you have the

1:17:51

right I mean I I I think so in other words one I mean if Trump is not if Trump is not allowed to invade Canada

1:17:58

but there’s no way for us to enforce it and the arm is loyal to him that you know you know he might not

1:18:06

have the right to do that under whatever but he does it it like this it’s moot the whole

1:18:12

thing’s kind of moot right no not it doesn’t make it moot this is you know King George 3 didn’t enforce the rights

1:18:18

of the colonists and so they overthrew them that was their kind of justification yeah because he he bent he

1:18:25

contradicted their will you know it’s like you know that Monty Pyon sketch about I have a right

1:18:31

to be a woman I have a right to have babies the man have you seen that yeah

1:18:37

oh yes of course okay so does he have does he have a right to have children he’s as a man you know it’s the same

1:18:44

kind of question it’s not it’s kind of not the same question politically you could give him the right to have

1:18:50

children but for all practical purposes it’s kind of moved and other words do

1:18:55

you find that the state is just might makes right it’s whoever is Conquering I I think uh there is that

1:19:02

level of understanding that’s not that’s not a misread of how things

1:19:08

work do I think that it the sword comes in it should be that’s a whole different

1:19:14

thing but is do I recognize that as the case in many cases yes I recognize M

1:19:20

makes right lots of time all over the place I see the mother beating up her kids in Kmart it’s might makes right

1:19:26

these kids don’t have any rights at that point in time so um and then if somebody calls

1:19:34

child welfare and they come in well now they have rights you know now did they always have rights existentially somehow

1:19:41

okay potentially yeah probably yes I don’t disagree with that I mean I

1:19:46

understand where all these things come from and what they do but I personally add always add a practical level to

1:19:53

what’s happening whether it’s it’s it’s just like moot or not you know

1:19:59

I don’t I think moot is too strong because I don’t disagree that the US state is violating our rights or

1:20:05

anything like that obviously I don’t want them to violate any of your rights Warren uh at all but it it’s just one of

1:20:11

these things that the on what basis can one even say it if it’s all just moot then it really just

1:20:17

is you know I I actually think I can’t even explain history just kind of Might

1:20:22

makes right because the second someone becomes weak enough they could just be overthrown and then in a sense there was

1:20:29

nothing ever happened in history yeah yeah so it’s like one of my other

1:20:35

statements that I like you know like what if what if there were no hypotheticals you

1:20:41

know that’s good that’s a it’s like a self-destroying one like that anyways we

1:20:47

got off but how about tell us more about how you came up with mmt as well you were telling us the bank story and then

1:20:53

yeah so is that Bankers Trust I was in sales at the time so how did I know that in 1977 I don’t know you know and I I’d

1:21:01

come up with things like the FED raised their um reserve requirement and Allen

1:21:07

chimes in just a couple months later well I hope they don’t just give the banks the money this time the reserves

1:21:13

money supply is too high they should make make them reduce the money supply I say Allan you can’t do that there’s no

1:21:19

such thing uh you know it’s just a debit and a credit on the spreadsheet if you rais this once side you can’t you got to

1:21:26

add the other side and uh he’s there well there’s 300 billion Euro dollars

1:21:31

flashing around say it’s the same thing there just a debit and a credit he goes well you know I so anyway that’s when I

1:21:38

my partner to be Cliff finder who I had known was at Phoenix Mutual in Hartford

1:21:43

and he calls me because that was in the Wall Street Journal Eric hman was Morgan Stanley’s Chief Economist famous guy at

1:21:48

the time kind of like Paul Krugman might be famous today but he was Morgan Stanley’s guy and he wrote In The Wall

1:21:55

Street Journal editorial that he hopes the FED doesn’t just give them the money when they raise reserve requirements like they always do and maybe that’s

1:22:02

where Allan got it I don’t so I said I explained it to Cliff and said it’s nonsense and why and he called Morgan

1:22:10

Stanley and they he comes back to me with their answer which was a bunch of double talk which I straightened out and

1:22:16

he went back to them and he call calls me back and he says Morgan Stanley retracted their position they agree the

1:22:23

FED has to add the money you know so again I’m 28 years old or

1:22:28

something like how did I know that when the chief Economist world famous guy from Morgan Stanley just gets it flat

1:22:35

out wrong something that simple but I think it’s that simple you know I don’t know so where did this stuff come from

1:22:42

where did mmt come from I don’t know but as I as more of these things came on

1:22:47

that I recognized were wrong or backwards uh you know it that body of

1:22:53

knowledge continued to expand and none of it ever got corrected what I saw as

1:23:01

wrong in 1977 about where’s the money going to come from is still there yeah it’s not

1:23:06

like it’s not like it’s been a rolling thing where I come up with something everybody sees it and I come up the next thing everybody sees it it’s just been

1:23:13

compounding yeah where today after how many years is that 50 years or something

1:23:18

45 years I can go through you know 10 different things we had the seven deadly

1:23:24

innocent frauds things they have completely backwards they’ve had backwards all along and they’re

1:23:30

undermining our standard of living yeah and they’re like trying to kill the geese that are weighing the golden eggs

1:23:36

over and over again and the other side’s fighting back from it’s just as ridiculous of a position it’s the same

1:23:43

society that builds a cell phone you know how hard that is oh yeah oh yeah absolutely how can they get the money

1:23:49

backwards how can they get trade backwards how can they get you know spending backwards how can they do all

1:23:54

this stuff how can they get the interest rate thing backwards there’s a whole Federal Reserve with 200 phds I don’t

1:24:00

know how many billion in research don’t any of them know this is it possible that it’s is it possible that it’s in

1:24:06

their interest to get it backwards you know I used to I used to think so and try and discover that and I’ve never

1:24:12

been able to the ones I’ve met you know it’s just like oh no yeah I I I personally even though I

1:24:19

guess I’m supposed to represent the Marxist I’m usually very skeptical of in the interest like if as if it’s a

1:24:25

conspiracy I just I think people can think wrong I don’t think they’re like how do we you know confuse the plees or

1:24:31

something like that but one one question I wanted to ask is that in the account

1:24:37

that I’m gonna have to put it as mmt I know there’s different people and people have different accounts but it seems

1:24:42

like it’s something that truly becomes at least conceptually possible

1:24:47

post Britain Woods because all right so look so here’s the thing it’s a framework for analysis it’s not about

1:24:54

anything being conceptually possible so what mmt has is what I have and how I

1:25:00

started the whole thing I call it the base case for purposes of analysis so I

1:25:05

build a model a simple model which I call the base case so I start with a model I start with a tax

1:25:13

liability I start with that tax liability causes unemployment and excess Capac you know capacity things for sale

1:25:20

it causes sellers of goods and services that we happen to Define as unemployed they come to work for the government

1:25:27

they get paid and they pay the tax now what if they come and work and earn more

1:25:33

than they need to pay the tax in my base case for analysis they might come and work anybody the government offers a job

1:25:40

to anyone who wants one they show up for work they earn the money they pay the tax and if there’s any left over they’ve

1:25:46

got leftover money leftover tax credits leftover US dollars for whatever reason

1:25:51

they miscalculated they want to save in case for rainy day they want to keep the souvenirs it doesn’t matter okay so in

1:25:59

this base case for analysis I have to at least I will at least spend enough to

1:26:04

cover the need to pay taxes otherwise the taxes don’t get paid somebody gets their house burned down okay I’ll also

1:26:11

most likely well I will cover any desires to save now how desires how do

1:26:16

you define desires to save people willing to work to get those extra dollars so I cover those okay not

1:26:24

paying any interest on those dollars so my base case for analysis is a zero rate policy does that mean mmt Advocates a

1:26:33

zero rate policy no it means in my base case that’s what I have and you can run

1:26:39

you can start an economy which I did three of them you know those buckaroos and the other school currencies with the

1:26:45

base case for analysis nobody gets interest on their savings now if you wanted Japan for 30 years did exactly

1:26:52

that nobody got interest on their savings you can look at it and say it was horrible they should have paid interest it’s fine or you can look at it

1:26:59

and say oh it was wonderful no inflation no unemployment they didn’t pay any interest let’s leave it alone this base

1:27:05

case for analysis is okay so it’s a base case for analysis I put the burden of proof on somebody who wants to change my

1:27:13

base case so if you think a positive interest rate is good the burden of proof is on you I’ll present the base

1:27:18

case my base case is I offered a job to anyone who want one full employment by definition

1:27:24

okay and the UMKC Buckaroo does the same thing and our other currencies do and it’s never caused any kind of problem of

1:27:31

anything it never cause inflation or anything else which I get into later but if you decide you want to

1:27:38

limit how government’s going to spend their money based on how many people subsequently pay their tax which is kind

1:27:44

of weird but if you want to do that you’re will try it out but so you’re but

1:27:50

the burden of proof is on you that that’s going to be better than my base case which is anybody wants a job has

1:27:55

one is that mmt trying to impose a full employment JG no I’m just making the

1:28:03

statement my base case I’ve got a JG that if you ask me to set up a new currency in Gaza that’s how I do it if

1:28:09

you want to argue that that’s idea you’re better off causing unemployment go ahead and argue it and we’ll you know

1:28:15

we’ll see who prevails but Meanwhile my base case starts with this so they’re

1:28:21

not proposals of what to do in your country they are my base case for setting up a currency but that’s where

1:28:29

mmt proponents go AR they start presenting this as well mmt means

1:28:34

everybody gets a job no I I go ahead no I the reason I’m

1:28:40

being annoying about this I sorry I’m sorry if I’m annoying War about this no it’s good it’s good because I hear this all the time yeah the the reason I keep

1:28:47

bringing this up is that number one we we were saying earlier that in your base case when say the US was under a gold

1:28:54

standard it doesn’t quite work right because it’s we know the gold standard we know the gold standard didn’t work we

1:29:01

went to go okay no do you see my my point I’m saying is that like your base case is

1:29:07

then beginning afterwards no no my base case is exactly what I said now if you

1:29:13

want to say oh I’ve got an idea let’s have the government buy and sell gold at a fixed price so that we can fix the

1:29:18

value of the money to Gold I’d say good luck because I can give you a lot of reasons not to do it but you’re willing to try it which the US did and everybody

1:29:26

else did and it utterly collapsed now we’re back closer to the base case than we were when we were on a gold standard

1:29:32

so the gold standard is not a base case I didn’t say the gold standard was a base case I said it’s a derivative it’s

1:29:37

a derivative yeah yeah but and I guess the only argument I’m

1:29:43

making is I’m trying to say when was it maybe it was plausible the the gold

1:29:48

standard for I mean in other words it existed for quite some time that people really did trade on this and and I guess

1:29:54

the easy answer is they’re a bunch of silly stupid people in the end I don’t know why we did this like thing for

1:30:00

several centuries and now why have why have we been doing our budgeting and having five and 10% unemployment you

1:30:06

know in terms of real unemployment and giving up more real wealth than we’ve lost in every war combined in the

1:30:11

history of the world why are we doing that because we don’t understand the monetary system we don’t understand the base case for analysis we don’t

1:30:18

understand that it actually fun functions that way but apparently it might have been more right when we were on the gold state standard I’m not not

1:30:25

saying the gold standard was good I’m just saying yeah you’d have to you’d have to prove that to me I’m not going to try and prove that I thought you

1:30:30

already proved that to me when you said that the austrians are right in terms of the gold standard analysis no their

1:30:35

analysis is correct yeah it doesn’t mean we should do it I’m not saying should I’m not there’s

1:30:42

no should here there’s no if you show me a country with a you show me a country with a gold standard or fixed exchange rate I’ll say oh there’s a natural rate

1:30:50

of interest that’s determined by savings investment in that Society just like the austrians say if you say you’re on a

1:30:55

floating exchange rate I say okay there’s no natural rate of interest that’s fixed exchange rate thing with a

1:31:01

floating exchange rate if you want to have a natural interest discussion you’re talking about a zero rate policy

1:31:06

that would be the natural interest rate of interest so yeah so Warren are you

1:31:11

suggesting that say 150 200 years ago the United States or uh yeah the United States or or Britain could have could

1:31:17

have been on a floating exchange system and uh and your base case could have

1:31:23

applied without a doubt and they can go back on it tomorrow in any country in the world can

1:31:29

go back on it tomorrow be at full employment you know add enormously to the real wealth and not have any of the

1:31:36

negative consequences they presume will happen right so in a sense we’ve we’ve been history has been waiting to

1:31:43

consummate until

1:31:49

1971 if yeah you could say that but it was a self-imposed thing because

1:31:54

the Fed was doing a its own version of fractional res you know you sort of you sort of

1:32:00

mentioned earlier that like uh you know there were payments in kind Deb one time and that we have a monetary system

1:32:06

meaning most of human civilization was not based on people working for a wage right no but if you look at the

1:32:12

Medieval Times there was enormous amount of floating exchange rate Alfred de Great’s whole thing was floating

1:32:18

exchange rates you know yeah but there was also an enormous amount of not working on money at all like most you

1:32:24

know yeah mean once you have to think about this but only when you got outside

1:32:29

of the capital where there wasn’t any tax enforc right the massive massive

1:32:34

people in other words what was happening in the cities were the burgers there was the yeah of course this makes sense but

1:32:40

the reason I bring this up is that of course you mentioned Rome earlier Rome did try to introduce payment and taxes in terms of

1:32:47

money at least twice that fell through same with Louis the 14th because they

1:32:53

were trying to tax people who in a sense didn’t live by money they lived you know

1:32:58

mainly by AG excuse me excuse me one second

1:33:06

yeah go ahead the authority and know

1:33:11

just yeah I’m sure lots of people have attempted things that have failed for different reasons but we have the system

1:33:17

in place I I I I feel like what I’m trying to say is that I not disagreeing

1:33:24

that this has been the case I’m trying to say how did this come about meaning it’s one thing yeah I’ll leave that I’ll

1:33:30

leave that to you well the reason I bring this up is because it how it came

1:33:35

about might actually explain a lot about what is and not just simply you can start with what is but I I’m listen I’m

1:33:43

listening well okay like in in the example that you give I mean when you say taxation if you were to just tax

1:33:50

people and say you’re going to give me warn bucks and you know they’re like okay I’m a peasant who just works on

1:33:56

like Agriculture and I never trade then you’re causing an enormous change in society as opposed to if you’re taxing

1:34:03

people today who live by that everything they do and so what I’m trying to say is that change in history was not slightly

1:34:11

different like we’re not slightly different than ancient Sumeria it was qualitatively different and that’s

1:34:17

actually back to the American Revolution I haven’t even mentioned marks at all I’m like pure patriotic American

1:34:22

Revolution today waiting I’m waiting for marks I even get to it we might not even

1:34:28

get to it I’m learn something yeah I came to learn something about marks well

1:34:35

yeah it it’s a more difficult thing I guess there but it’s like I’m just trying to say that you know the 18th

1:34:41

century recognized that okay people are living very different than they did in the past and actually it’s allowing us

1:34:47

to even tax people in terms of money in a way that had failed numerous times

1:34:53

so I guess the reason I bring that up is that again it seems like okay the modern

1:34:59

monetary system actually does presuppose something about Society about how people live in order to even function in any

1:35:07

real way that you have a monetary economy yeah it’s it’s a conditional situation yeah where not that you have a

1:35:13

monetary economy but if you have taxing Authority and you can make it work you know well you could create a

1:35:19

gigantic disaster if you just T again we have examples from Rome France where they just tried to introduce money and

1:35:26

it just led to a disaster and they had to go back to payments in kind yeah I don’t know I don’t know the

1:35:32

details of what happened so okay anyways keep going I I usually usually every

1:35:37

deta every time I’ve got into the details of those things it’s because their collection process failed they they didn’t have they didn’t

1:35:44

have enforceability well you know some at some level doesn’t that actually go into the enforcement processes it has to

1:35:52

be the case that people can can even live in some way to be able to pay these

1:35:57

taxes sure otherwise you get a revolution yeah yeah anyways keep I’m also enjoying your story like I don’t I

1:36:04

know I’m supposed to play this other role but I’m like also having fun listening to these stories okay yeah so

1:36:09

keep going with this about so then 70s it’s going into the 80s do you start to conceptualize things how is this

1:36:17

happening yeah so um you know it’s interesting I started a

1:36:23

Fund in 1982 it was fairly small $10 million of investor am and

1:36:30

uh ran it for 15 years fixed income or any third M fixed income yeah yeah um

1:36:37

Market neutral which means we didn’t care if the interest rates went up or down we didn’t take credit risk it’s

1:36:43

mostly what you call conversion trades it involve all kinds of derivatives and things like that and we didn’t have that

1:36:51

I can recall a losing trade in 15 years but nobody ever liked my trade ideas my

1:36:58

Arbitrage ideas so you know after 14 years of all winning trades and we our

1:37:04

Alpha was like we make an extra six% over the risk-free rate which was you know good

1:37:09

for the risk rate yeah yeah so if the risk If the Fed funds rate averaged eight during that period of time we made

1:37:16

14 were you benching to like the a or anything or was it fed funds fed funds

1:37:21

oh the FED funds I didn’t not like a bar please like I don’t know okay yeah no we were index to Fed fronts it was a pure

1:37:28

Alpha type thing and I don’t even know if they called it Alpha back then and so we got investors who just wanted to earn

1:37:34

an incremental return over the bank so to speak they had money for that it

1:37:39

might be 1% or two% of their Assets in their Ma and uh so I’d like be long cash and

1:37:46

short Futures because I thought that cash was at a discount to the Future long bonds and Short Bond futures or

1:37:52

something like that but it would also involve the delivery process and things like that that gave

1:37:59

me insight into what I thought the valuations were that I could realize would be what the realize

1:38:05

valuation and so after 14 years I say you know we can do this and that with rates and caps and options and whatever

1:38:14

and everybody would go no that’s not going to work it’s like you think that after 14

1:38:20

years of every trade working they might say man really you know I like this I know

1:38:26

it’s going to work but could you explain it to me no they said no it’s never going to work you didn’t have competitor funds start to like I know if you look

1:38:33

at the Morning Star data you can see kind of well whatever we’re supposed competitors we always were way ahead of

1:38:39

them yeah and uh one of our clients was Harvard management and and they were

1:38:45

doing the same thing because I liked it and they would take our positions and put them on their own books and pay us a

1:38:50

commission for executing the trades for them and uh they would cherry pick all my

1:38:56

positions which were in the fund and at the end of the year our fund after taking subtracting 20% fees or

1:39:03

whatever would report our return for the money let’s say they had $50 million in our fund and it was a 10% return so

1:39:11

they’d get $5 million return they had $55 million and then they’ look at their returns they made on their own

1:39:17

Investments the one they Cherry Picked and it was always less than 10% so they were they were never even able to like

1:39:23

pick our best trade successfully you didn’t want to just like put him out of business like you just dipped the

1:39:29

expense ratio and just kind of knock out yeah well they weren’t in the same business they had this is the endowment

1:39:36

they had about 15 billion endowment at the time one2 billion in fixed income

1:39:41

and the manager there it was uh the head guy was Dave midman who was a friend of mine and he was he he died a few years

1:39:46

ago brain cancer some horrible thing but but yeah but anyway he he was very good and so he’d laugh he said you know as

1:39:53

soon as I can do better than you’re doing with my money I’m going to pull my money out of your fund you know and just

1:40:01

do all the trades you know because he wanted to he’s it’s just a friendly rivalry where he’s trying to beat his

1:40:06

own investment right and uh and he never did do you think it was I’m going back

1:40:11

to something you said earlier is it even something that could have been beatable I know you’ve said that a lot of the

1:40:17

financial system can it’s just like overhead by now here I’ll use a Mark’s phrase since I haven’t this is this was

1:40:24

this was without overhead no no no I I I mean that you said that a lot it what I understood

1:40:30

earlier that you were saying is that a lot of the financial system is kind of dead weight and we could do without is

1:40:36

oh yeah we didn’t need this this serve no this serve no you know further purpose for it there’s a great complete

1:40:42

waste complete waste of human endeavor here here’s the one Mark thing said today he has a French for faux phrase

1:40:48

which is overhead so that’s why I was kind of using them there’s a lot of like overhead but what do you you gave a kind

1:40:55

of vision if maybe you could talk about about how the entire Financial system could just be turned into like one thing

1:41:01

I didn’t quite understand that and I was wondering if that was related to your Peter Lynch like success it sounds like

1:41:09

with the getting Alpha for you know 15 years compound yeah I guess I don’t understand the question oh what is your

1:41:15

vision for the like Financial system and I was wondering if that was related to working it would be it would be today’s

1:41:23

terms it would be gutted it would be about 5% of what it is right now there’d be no stock trading so all these

1:41:29

teachers retirement funds that have these tens of thousands of highly paid Equity guys who just not have jobs but

1:41:35

we should do Doge to the financial industry right right I can cut that two

1:41:41

trillion in spending in no time go to zero rates it’s 1.2 trillion per year

1:41:46

okay longer term not the first year but longer term so they probably scored as 20 trillion doar cut and then

1:41:53

eliminating all the uh excess stuff in the financial system uh you know all the

1:41:58

stock trading and the bond Traders and all these people it be at least that much a year and then

1:42:04

um you you know the list is is long about how you just get rid of these things that have like but you had you

1:42:10

had this no real value they’re all people digging holes and filling them in so I guess the reason I was trying to

1:42:18

link it to your oh look if we go to Medicare for all we save you know 500 B

1:42:23

ion dollar a year in in in total waste of human endeavor five five million people are out of work looking for jobs

1:42:30

when you when unemployment goes up by five million do you raise taxes no right

1:42:36

okay that’s called the recession so if we go to Medicare for all and there’s five million former people in advertising and marketing and Health

1:42:42

Care types those types out of work and now we need an economy with enough demand to reabsorb them you don’t raise

1:42:48

taxes but Bernie Sanders says we have to raise taxes $2 trillion do to have Medicare for all and Hillary Clinton

1:42:53

says see we can’t afford that we have to have Obamacare so it’s a disaster and the headline left is our is a reason we

1:43:00

don’t have it because they don’t understand monetary operations and what they’re doing they’re just they’re just

1:43:07

horrible okay I mean and but nonetheless the rights the

1:43:12

rights even worse I mean I’m just trying to get the it’s all bad it’s all

1:43:17

thoroughly bad in terms of outcomes yeah I well the first thing I

1:43:24

was trying to ask was you said something about unlimited shares I was trying to understand that oh yeah yeah yeah yeah

1:43:30

yeah so if you have a company that comes to public at $10 a share so many shares but they’re

1:43:36

required to offer unlimited shares at $20 a share nobody will ever buy those ships right unless the stock price moves

1:43:44

such that it goes over 20 it’ll never go over 20 because once it gets to 20 who would pay 21 when you could buy all the

1:43:50

stock you want from the company at 20 NE money would go to the company who would be doing investment presumably people

1:43:56

would be buying it because there’s a high return in that investment would give them a good dividend you know you

1:44:02

know compounded or whatever you know compounded real value of that company and so it wouldn’t affect hurt the

1:44:08

company or anything but there’d be no more stock trading anybody who wants a larger investment in that company would

1:44:14

just buy more stock at $20 a share from that company and they’d buy it because there’s good value at that price in

1:44:19

terms of what the company’s returns are you know profitability and so it eliminates you know 95% of all stock

1:44:28

market which includes the Traders all the technical analysts and all that nonsense and all you have is fundamental

1:44:34

analysts to decide they make their investment decisions based on whether I’m going to

1:44:39

get a 6% or an 8% or 10% real return from these shares if I own them not not whether I can find somebody to buy them

1:44:46

from me at a higher so I get that that would stop speculative act I mean yeah in other words it’s still a

1:44:54

big deal like you know trying to decide if you’re going to invest in Lyndon basil or Nvidia or something like that I

1:45:00

mean I understand the yeah but the decision would would be a very different decision and the and Banks would still

1:45:07

be able to make that decision right or you know or not not commercial Banks you know Shadow Bank types but yeah you’d

1:45:14

have investment funds that would make that those decisions but with the activity drying drying up that’s where

1:45:20

most of the GDP is coming from most of the extreme wealth is coming from it’s

1:45:26

coming from the speculative activity around the market activity around the stock market not from the just investing

1:45:33

if you look at the private Equity Market where somebody just invests privately in things you don’t get anywhere near the

1:45:39

number of people involved you would be able to buy and sell you’d be able to buy and sell on the same day I know if

1:45:45

someone yeah can you still have all sorts of crazy volatility of people buying and selling between different we

1:45:52

have stock is worth 20 on an earnings basis it’s not going to go up over that you’re not going to it goes to 19 and a

1:45:59

half or something you’d buy it at 19 and a half because you think you’re going to get a good return of dividends not because you think it’s going to go to 21

1:46:06

if you think it’s going to go up you think it’s going to go up half a point right now people are buying and selling stocks because they’re going to double

1:46:11

in value and triple in value they can sell next week it’s not going to happen it’ be more like the housing market yeah

1:46:17

how much of that kind of activity do you get in the housing market well you get a fair amount of realt speculation but nothing like you get in the stock market

1:46:24

or any of the financial it would kill all the growth strategies everything would be div you’d still invest through that

1:46:31

because you would compound and you get your money in 10 years fine that’s what it’s supposed to be that’s the whole

1:46:37

market theory that you learn in school that’s the dividend discounting model you make it the dividend yeah yeah and

1:46:43

that’s that’s what drives capitalism in theory anyway not the speculation speculation is what takes it down can I

1:46:50

be a Marxist that defends speculation just for fun well let me ask you a question what does the marxists think about the lottery I don’t think there’s

1:46:56

any specific view on the lottery yeah I mean you think it’s right that somebody can become a billionaire because everybody buys something for a dollar I

1:47:03

so the whole the whole myth is that Marxism has any condemnation about inequality that’s why I brought up the

1:47:08

the tax part earlier like in other words marks thought that was just a silly thing yeah but is it some is it

1:47:14

exploitation to have people each other billionaires no no I don’t yeah the the

1:47:19

exploitation that this why I’ve tried to avoid the Mark’s point is it’s a more difficult category it’s not a really

1:47:25

moral one and yeah that’s why I’m here like I said I’m here to learn about that but I know the uh people like the Bernie

1:47:31

Sanders types you know they’re all trying to tax a richk on the equality basis are they against the lottery so

1:47:37

you’re not against billionaires by the lottery I don’t have any spef think they’re over too much influence in the

1:47:42

political economy or anything no I think that the state already begets that kind of influence as it is okay yeah that

1:47:50

that’s why when I went back to the IRS thing it’s like even if I I think we can eliminate at source the categories by

1:47:56

not having lotteries by not having financial markets that are like lotteries in that sense take a lot of

1:48:02

small money from a lot of people and give it to a few people because of institutional structure not because there’s anything beneficial going on

1:48:10

something beneficial in the process coming back to the question of society I’m most concerned about freedom and I

1:48:15

just am very skeptical of the state stepping in to regulate things in ways

1:48:21

so what about the football game where if you stand up you can see better but then nobody can see should you have your

1:48:26

freedom to stand up or should you be regulation where you can only stand up for 15 seconds I mean I guess the qu I

1:48:33

guess the question is always well number one the football game is you’re agreeing to the private property you’ve come in

1:48:39

nobody’s forced you inside the football game right right in other words if these are the rules of the football stadium

1:48:45

and you voluntarily agree to it then if you stand up you know I I you know I’ve

1:48:51

been to sports games as a kid and I did stupid things and was warned by the people like look you voluntarily came in

1:48:56

here kind of thing like that it’s not like they were going to chop my head off or something like that but um where was

1:49:02

I going with this I I don’t have any personal issue really with inequality I think it is a kind of wrong Target in

1:49:09

that sense going well the problem is it’s created by institutional structure it’s created by politicians making laws

1:49:16

they create the inequality and can you say more following that yeah yeah well

1:49:21

if you didn’t have if they decided to have zero rate policy in just

1:49:26

three-month bills there’d be no treasury Securities there’d be no firms making tens of billions of dollars a years of

1:49:32

government securities and so you wouldn’t have that distribution of income from that Source just it’s there

1:49:37

only because the government’s created this stupid game and pays people billions of dollars to play and

1:49:43

certainly you could have inequality without that I I I can understand yes yes yeah but you’re adding to it okay

1:49:49

you’re adding to it with a national lottery you’re adding to inequality so you’ve got institutional structure

1:49:54

that’s causing these things everywhere all the all the laws are pushing n that

1:49:59

don’t have our institutional structure don’t have the inequality I can understand the treasury bill thing in

1:50:04

other words compounding you get the G or the stock market screen the government gives companies you know limited

1:50:11

liability it’s a huge gift yeah with that comes responsibility as to what it causes and it caus these huge

1:50:17

concentrations tax L harvesting there you go all right well thanks Warren um thanks so much

1:50:23

time it’s been great and very interesting and Illuminating okay thank you

oooooo