The biggest fallacy that the critics of MMT make is saying that MMT supports endless government spending. MMT is quite clear that for governments that issue their own sovereign currency it is their responsibility to spend as much as it takes to keep our economy running at full capacity at all times, no more, no less. Spending more is inflationary, spending less leads to unemployment and recession. A government deficit is actually a surplus for someone in the private sector because it represents money spent in our economy and not taxed back. A government surplus is a deficit to the private sector because the government taxed back more than it added to our economy through spending. How more simple can this be? Now that you know this, listen to this presentation again.
Inflation is generally described by most macroeconomists including MMT macroeconomists as too much demand chasing too few goods. The problem with this is that in modern times governments try to bring down inflation by addressing the demand side through monetary fixes like raising interest rates. The MMT complaint to this approach is that it takes a long time for improvement, it disproportionately hurts the middle and lower earners, it leads to increased unemployment, and can result in recession. MMTers have a better solution by attacking the supply side. An example of that might be to increase supply through increased government spending to increase our own energy supply and become less dependent on foreign energy. The Green New Deal's proposal to increase our reliance on alternative energy sources like solar and wind is an example of that. This also creates a whole new industry where employment would rise.
I'm not aware of any critic of MMT who doesn't know that. The problem is that regardless of what MMT says, in practice, flesh and blood MMTers are constantly advocating for endless government spending. Just as the old Keynesians, in theory, were supposed to run surpluses between running deficits, this never ever occurred in history. Government cannot be controlled or trusted to do anything.
@@BanBb1 - Which types of energy would MMT proponents increase (the supply of) to become less dependent on foreign energy? Renewables have never supplied more than a small fraction of the total energy needs, and usually have large transmission losses due to large delivery distances. Neither the sun, wind, nor rain are reliable on a daily basis. Nuclear power can't be increased & decreased to meet the well-known variable demand on a monthly basis, much less the well-known 24-hour variable demand, because we haven't perfected batteries. (Nuclear power plants have always been designed to meet about 95% of the minimum demand.) If the Left is committed to reduced fossil fuel use, it is in the unfortunate position of NOT having the policy choices that you seem to think are available. The only viable "policy choices" are higher prices and prolonged recession. BTW, that disreputable combination is called stagflation.
@@neilanderson891 I see the problems that you describe. I don't know the answer to finding an alternative energy source. But I think Nationalizing our fossil fuel industry might help with pricing.
@@BanBb1 Nationalizing any industry results in "cancelling" it's private ownership. Why would it be better *to cancel private ownership of our Fossil Fuel Industry* ... rather than canceling the various constraints that Biden single-handedly levied upon the Fossil Fuel Industry on his 1st day in office, via Executive Order? Do you think the Biden Administration can run all of the huge Fossil Fuel Companies better than the private owners have run them? Do you know how many employees they have, and how many of these huge companies work together? There's an old metaphor that goes something like this: "Don't try to run the world until after you have (at least) cleaned-up your room" - I'll attribute that quote to Dr. Jordan Peterson, but feel free to correct any misquote.
At 2:13, speaking about being fair and accurate in discussing MMT, Paul Krugman is mentioned as criticizing a theory in Austrian Economics without fully understanding of it. I'd like to add that J.M.Keynes blasted Say's Law yet didn't fully understand it, nor did he describe it accurately.
One thing I have a continuing issue with is the correct use of words. In this lecture the professor talks about government "spending" whereby they create "money" and "put it our into the system through spending" - this is misleading at the very least, the professor knows but chooses to ignore the fact that governments actually "put money out" through two fundamental mechanism, "spending" through provisioning it's governing machine and "investment" into the economy. This is at the root of all misunderstandings on Government Monetary Policy - Yes, Governments "spend" but, the largest part of the Goverment's Monetary Policy rests in it's management of the economic base through "investment" into the Private and Trade sectors. For example - the Government "invested" into the economy over 100 years ago when they "invested" into the building of one of the countries largest distribution networks - the railway then, the public road was which were designed to further contribute to trade through this network of government maintained highways all the way down to the network of rural roads which are primarily used by farmers moving equipments, labour and products to and from the markets. All of this national network was paid through Government "investment" into the National economic machine and, all that "money" had to be "created" - it clearly could never have come from taxes! It is however seen as "spending" for the purpose of political rhetoric and used as a tool to sway votes like the wind through the trees of a forest. Yes, Governments "spend"to provision but they do much more "investing" in building public assets! There is a profound difference.
@@BanBb1 No government provision "spending" is one thing, public works and infrastructure investment is a completely different end game.Well, my issue is how the term "spend" is perceived by folks that vote and have no or little understanding of how broad the term is when used in the context of "Government" spending - it sounds like the government is simply "spending" like a household spends but, clearly we know that is not the case. I just think that the term "spending" could flush better. Case in point - When the Government decided to "spend" money on building a transcontinental railroad infrastructure - it was in reality an investment in infrastructure and once completed, a major continuing asset to the business of the country and the government. Farmers were able to transport their crops much cheaper and with more reliability, the public could travel widely, and it generated a tremendous employment return. So, when economists and Government say "spend" they know it has a major investment component attached to spending. Labeling the building of a major infrastructure project which has tremendous benefit to the citizens as "spending" degrades, benefits and value of the "investment". That's how I see it. Consequently, we have the citizenry crying about Government spending and not honestly understanding the benefit they receive from government investment.
@@WaxMeister I totally agree, all government spending should be related to positive returns. That is the MMT'ers point when they say that spending should be limited to what the available idle resources within our economy can support. I think a good example of that is the pros and cons of single payer health care. There is no doubt that this would increase demand for medical care. The question is do we have the appropriate resources to support it. Opponents often criticize Single Payer with what they believe will happen. They say that it will lead to waiting lines for services, not unlike what we hear about in Canada, where apparently, it often takes months to get an MRI. If that is true, it could be because demand is outweighing supple. It is an example of government spending without the necessary resources, MRI machines, to support it. In our country many experts who study this say that we do have those resources. They actually say that all of us would receive better service at a lower cost. MMT is nothing more that looking at our current Fiat system through a different lens. It does not say that it is better. It just says that it could be. M4All and a jobs guarantee is not MMT. They are both programs that Left wing proponents say can be done without fear of inflation within our current system. A right winger might have a different idea, such as tax cuts for the wealthy. I think that total acceptance of MMT would not solve the political disunity that we face. Both sides would offer their way of spending.
@@BanBb1 Oh, I agree that MMT will not solve political disunity. In my view the current divisions and political climate has been brewing for decades and the root of the issue may be the fact that the post Civil War social issues have never been fully and completely addressed and naturally, that's a tpic for another day - oh... there you go, I just did exactly what I was alluding too - putting off discussing residual social and political issues let from the Civil War for another day - how many decades has it been? Anyway, I'm getting off the topic. The issue with the Canadian Medical Plan is a lack of resources. There has been a continuous drain off Medical Professionals from Canada into the US - the US Dollar is a big lure flashing in their greedy faces. Statistically however, there are more Doctors per 1000 population in Canada than ever before so, that seems counter intuitive but, the population is aging and a larger geriatric population weighs heavily on the system. Now here some interesting new news on the Canadian Medical Care side, the Government has just announced (last week) a new Dental Care Plan that is going to cost $5B! What is interesting about the cost is that Canadians are not complaining about it which seem rather odd! Personally I would have thought $5 on a plan to attract more Medial Professionals into the Plan would have gone a long way to clearing up the "backlog" in the system. So, not all NEW Government "spending" is met with negative backlash as we can see with the Canadian Public Dental Plan is however, a very good system and like most things, it does need maintenance and restructuring as the system is deployed. One other noteworthy issue related to one payer system in Canada - the system allows for the Government to negotiate with Big Pharma better drug costs - this is one item the US Gov has not even attempted because the lobby is so powerful - often political agendas are derailed by lobby and so now you know where the real political power in the US is entrenched!.
@@WaxMeister Absolutely Wax. Our government is controlled by big money. MMT shows us that we can have more of the spoils of our economy, but that might mean less for the wealthy controllers. Austerity hurts everyone but not equally. There is a bill sitting on the shelf of Congress that guarantees health care to every citizen for less that we are currently paying insurance companies. It would cover all medical needs of the people including vision, mental, dental, hearing, and even long-term care. The bill specifically forbids insurance companies from offering coverage to any of the needs that the bill covers. That means of course the insurance companies are out of the healthcare business entirely. Being a single provider of healthcare also means that the government will insist on negotiating prices for drugs and anything else seeing they will be the one to pay the bills. There are certainly reasons for anti-single-payer people to keep the propaganda mill alive. MMT says that it is possible which is the reason that it has become a passion of mine to spread the word.
As is all too common in monetary/economic debates/discussions, the pre-requisite for any meaningful resolution of the current (and upcoming) financial catastrophes is not even mentioned. And that pre-requisite is the nationalization/public ownership of a country's central bank for the public good thereby eliminating the payment of interest. A public entity/bank can create money out of thin air just as well as any private source and has no need to pay interest to itself. Properly implemented and enforced financial industry regulation (ex. Glass/Steagall) is also an absolute must to restrict human greed and avarice. The common interests of the 99% must over ride those of the 1%. Call it what you will, but it is just plain common sense and its comeback is long overdue.
The money that is "created out of thin air" is temporary credit that must be paid back (or redeemed) after a specific time and with interest too. That means that there is no need for more money to be created once a certain amount is readily circulating. The banks can recredit it to the same person or someone else. Not even the interest needs re-creation because it provides the bank with greater lending ability. So, the MMT claim that there is a need and a positive use for a continuous money-making machine is false. When applied to the government's debt, when it takes in money for treasury bills and then spend it, does not create money in those bills, because they are continuously being redeemed too (presumably through taxation). Because the government spending on infrastructure makes the region more productive, it also raises the value of useful sites of land, and the circulation is different but at a similar rate. (This has unfair advantage for the landowner too.) But the point I am making here is that we should not consider the circulation of money by itself because it is intimately connected with the rest of the social system or the macroeconomy. And this also involves the speed of its circulation, which is associated with booms and busts and the Bank-Rate on the interest owed on its debts.
Government for the public good is completely gone,. And it is government for the monopolies good? Where the public no longer counts at all and the products become poison.
@@Macrocompassion The interest is never created to begin with only the principle is created, and that is the systemic flaw in the system. The other problem is the rich offshore accounts that take their currency out of the system.
I apologize for my verbosity here but I believe it is necessary. Government spending is not inflationary. When the government spends more that it takes in in taxes we incorrectly call that a deficit. We do this because we incorrectly compare government finance to our personal finance. The two should not be compared because we as people do not create currency, we are users of it. The government is the sole issuer of currency. The fiat system is much different from the gold standard system where the rules of supply and demand played a much bigger role. Inflation is not the result of excess fiat money circulating, as many of us believe. Under the Gold Standard, a commodity, gold, backed our currency. So the idea of keeping the amount of outstanding currency and the store of gold to back it up, balanced, was generally accepted by all economists. If the government spent more than its gold reserve, it had to either mine more gold, or increase taxes and/or borrow to obtain the money to purchase enough gold to bring it back to balance with the outstanding currency. This is where the tern deficit comes from. Under a fiat system, that term is no longer accurate. MMT sees no need to do this in our Fiat system. Inflation is a real complicated phenomenon. MMT'ers say that inflation has nothing to do with the amount of currency in circulation. The amount is irrelevant. What is relevant is how that money is used. If available resources do not support that spending, it could add inflationary pressure. That is why MMT recommends limited spending in areas where the resources to back it are weak. MMT looks at the fiat system differently from the traditional gold standard approach. Here is how I see it. MMT is not inflationary if done correctly. None of government spending adds to the money supply. MMT says that all of our tax money is deleted upon receipt. In other words deleted form the M2 money supply. Any additional spending beyond what is received from tax revenue; what many of us incorrectly call a deficit is covered through the government’s sale of treasuries, bonds. The money received for these bonds is also deleted from M2 because bonds are not considered liquid enough to be considered part of it. Therefore, none of the money spent by the government is actually added to the money supply, so how can it be blamed for inflation. The bond sale system redistributes money from people who are more likely to save it than spend it, (wealthy people), to people that are more likely to spend it, (most of us) which benefits the economy. However, that could still add inflationary pressure if the available resources are not strong enough to support it. MMT is a description of how government finance is really performed. Many detractors understand this process but believe that it is not practical in today’s form of governance. They say that it is hard to believe that our government has the where with all to predict what spending is useful and what is hurtful. I say that argument can be made against any system. We just have to make the necessary changes to make it work. Instead of balancing the budget, our government should concentrate on balancing the economy.
The gov is a currency issuer, it does not borrow a penny. Reserves that are created thru gov deficit spending are saved in gov bonds. Gov bonds are just a distraction to maintain the illusion of gov dependency on private sector financing. They should be replaced by normal central bank accounts.
The job guarantee is meant to be a better solution than sending unemployment checks. Local governments can find something for them to do temporarily while they search for a permanent job. Its better than unemployment checks because the private sector looks at employed people more favorably than unemployed people. It’s not a jobs program like public works. It’s not a jobs training program. Those are separate things but they can be done in conjunction.
To your third point, who are these people in the private sector who look favorably on employed people more so on the unemployed? To your second point, for most people the government job that they have now received is now their “permanent” job. To your first point, what is “meant” often ends up differently than “ to it’s conclusions”. Your fourth point sounds like mere semantics dressed up as an argument.
@@thereisnospoon277 You're right about the first point. No argument here. Implementation will vary. As I understand it, JG jobs are NOT meant as an expansion of the public sector. JG jobs shouldn't replace or supplement government employees. If government need more public sector employees, then they should just hire them as such. In practice, without proper guidelines and enforcement, local governments will be tempted to save money by relying on Federally funded JG employees. This is a fair criticism of JG, haven't read anything on how to prevent it. On the 3rd point, here's this paper. The social stigma of unemployment: "This research consistently shows that even if they had the same qualifications and competences as employed applicants, the unemployed and especially the long-term unemployed have significantly lower chances of getting hired." labourmarketresearch.springeropen.com/articles/10.1186/s12651-019-0261-4 My fourth point is relaying ideas from Job Guarantee and MMT advocates. Not my own original thoughts. Public works programs pays construction companies to hire people and make stuff. Job training programs are meant to train people and give them new skills.
@@thereisnospoon277 For your first point of contention, if you have ever sent in a cv or know someone who has that has been unemployed or had gaps then you would know employers don't look favourably upon people that don't have smooth transitions between jobs. It looks off to them if there's missing time. This is often why people lie or stretch dates on their resume if they've had a gap. Secondly I don't know how you would find it hard to agree that requiring someone to work for money is better than mailing them a check.
What would the govt have them actually do? Their labour would conceivably, and probably inefficiently, take over some contracting, sanitation, logistical jobs. Congrats you added to unemployment and are probably getting worse service for yohr bucks. So more misallocated resources, and adding to the problem that they are trying to solve. Not to mention that having a ahitty but reliable job is for at least some people a disincentive to getting a real job. The government creates most unemployment, and then taxes those who CAN still work (whose order of value still allows them to choose work over govt benefit) to patch shit up. Don't let them create serfs out of them too man, that's just mean
11:11 " they don't want me to send in $20 bills " It doesn't matter how you pay your taxes, whether it's a bank transfer or cash, the Government doesn't care.
Actually it’s pretty much every world currency which ever existed or exist which has a tie back to gold or silver either directly or indirectly. Let’s say a new currency is introduced today, it normally will be tied to or backed by one of the 10 major currencies mentioned as an anchor of stability and to instill confidence.
13:29 It's not just historical, If you were to spend the time and research exactly what is happening in stead of telling a story about the need to borrow. MMT explains first how the system works, it's not philosophy or ideology, it is how in reality the currency moves.
"Price/Value" Price is objective while Value is subjective. For a transaction to complete the two components must come together. However, there is a "social/subjective" differential which can result in the same article being transacted at different prices ergo - 'money is (also) a social unit of the measurement of value" - I would like to spend less for something to get more value.
This lecture doesn’t actually answer the main question: Why can’t the government print money as they see fit, as long as they don’t cause excessive demand and thus inflation? As a neo-classical economist I instinctively mistrust money printing. But if we cut out the more dirigiste ideas coming from MMT proponents (job guarantee, direct interventions, outcompeting the private sector): Where is the economic logic that prevents a government from printing money for, eg, clean energy (or carbon energy, whatever your preference) or health care or new parks or even wars? So far I’ve heard o lot of ridicule and ideological condemnation, usually based on the morals “thou shallst pay your debt”. But even neo-classicists learn during their first year that a state is not a household. Qualified references welcome.
You are wrong and it is evidenced in your statement "But even neo-classicists learn during their first year that a state is not a household. ". What your thinking is and MMT are doing is notionally dividing the economy into two sectors, private and government and then wrongly assuming that the money government (politicians) spends has so innate ability to be judged in it's effectiveness as being somehow different and superior in effect from the money the private sector spends. The reality is it is only an MMT fantasy belief devoid of any substance or evidence and which relies on completely ignoring the demand supply price mechanism that operates as a method of judgement of effectiveness in judging the relative demands of people in every economy in the world.
@@Rob-fx2dw Hi, Rob. I'm no MMT-ler and instinctively reject the idea of just giving out money. Economics is about scarcity. I'm looking for the logical flaw in MMT and haven't found it, even after reading a number of papers. Most papers come down to two points: 1. Inflation is complex to measure and manage - true, but true for all theories 2. Politicians wouldn't raise taxes as required - we all agree, but then politics is the problem, not economics Let's leave out the job guarantees, that is nonsense (what jobs, what wages, what regions, ...) and focus on financing spending through money creation. Your argument about the distinction between public and private spending does not, in my opinion, solve the conundrum, since the last two US governments have easily turned public into private money ("stimulus checks"), causing inflation via excess demand (plus further supply issues). Now the Fed has to reduce demand through interest rates - a very broad and untargeted instrument compared to potentially targeted tax increases (politics aside). Where is the flaw in the economic thinking of MMT?
@@martinhagedorn8832 The logical flaws of MMT :- 1st. The MMT claim that taxes do not fund government spending. Totally wrong because eventually they fund all of government spending. The 2nd - The MMT claim that the government must spend first before taxes can be paid. Totally wrong because most taxes are paid out of the 90% of money that has been created by private banks whe they lend. The 3rd - The MMT claim (Mosler) that the private banks are government agents. Totally wrong because an agent is an intermediary which does not produce the goods or services they are involved with in sales transactions between two or more parties which would be the reserve bank and the customer of the private bank. The reality is the reserve bank is not involved in the transaction of creating the money private bank customers borrow. The bank and customer are the two parties in this transaction. The bank takes the risk and profits or losses where as the reserve bank does not take any profit or loss from this transaction because they are not a party to the lending. 4th. The presentation of sectoral balance that MMT presents to show their claim of government deficits are a surplus for the private sector is devoid of reality because it ignores the debt obligation that the private sector is obliged to pay when the treasuries sold to fund the deficit mature. 5th The MMT idea that barter never existed because authority money of some type existed is utter rubbish simply for the reason that mutual exchange (barter ) existed since forever between people in the same family and between people in the same tribes who for thousands of years never had authority money. Not only that barter exists today between people when mutually agreed exchange takes place without money being exchanged. The MMT idea that there is no physical evidence that has been found begs the question what would they accept as evidence in view of there being no physical evidence during mutually agreed exchanges without an intermediary object such as money being involved. 6th . The MMT claim of taxes putting value into money is just absurd and dismissive of the fact that in all of the countries where inflation totally destroyed the value of money making it worthless there were taxes that were in existence and collected until the governments themselves dumped their own designated currency because it was utterly valueless. -So there were taxes and worthless money. MMT's claim - false.
26:00 Here's an idea I just had about Value. Objects don't have intrinsic value, the value comes from the subject aka a human being. OK. So that means when we say, in a spiritual/self-esteem context that "you are valuable" and "you can not give what you do not have", etc etc....what that's really describing is all the same concept. We *ARE* value itself. The value we impose onto an object COMES from us. We are literally THE value in the transaction...we're only projecting it onto the object. Neat.
Occam's Razor would inform you that they're all missing something fundamental. The Structure of Scientific Revolution likewise identifies elaborate, incomprehensibly complex explanations as inherently suspect.
True. Read my SSRN 2864471 "Einstein's Criterion Applied to Logical Macroeconomics Modelling" and discover exactly how simple it should be, yet still be fully comprehensive.
True. Read my SSRN 2864471 "Einstein's Criterion Applied to Logical Macroeconomics Modelling" and discover exactly how simple it should be, yet still be fully comprehensive.
Just cos the job is guaranteed doesn’t mean you have to take it. Since the pay is minimal only an abusive employer would be disadvantaged by the competition. That’s a good thing for society. Oh and no capitalists appear too worried about government involvement in the economy when they are bailing out banks or otherwise handing out free stuff like most of the research that went into technology (wifi Bluetooth touch screen the internet etc) or scientific research done in universities. But providing an alternative to being screwed by Starbucks or Amazon is suddenly a problem
This credit definition of money is so disgustingly self-serving on the part of the government. Of course the government would chose the one definition that gives them the right to print any amount of money they want, without concerning themselves with the effects of their reckless debasing of the currency.
@@henrygustav7948 Actually, if you look at reality (instead of the weird fantasy land of MMT) that's _exactly_ how that works. Supply and demand, if you increase supply while demand remains constant, the value on the free market goes down. And when the value of a currency goes down enough, demand starts going down, leading to a downward spiral known as hyperinflation.
@@Nukestarmaster That in no way answered my question. Judging by how you answered with "weird fantasy land of MMT" shows that you automatically jump to strawman arguments. No details, no new information, just supply and demand! Weak, weak explanation.
@@henrygustav7948 Supply and demand might be "no new information", but it's also the answer to your question. You debase a fiat currency by increasing the supply, therefor decreasing the value (the literal definition of "debase")
@@Nukestarmaster which is it? MMT is fantasy or the government has the ability to issue as much currency as it wants and potentially cause inflation? You can’t have it both ways. You can’t agree with MMT and then say it’s fantasy. Btw, you talk about supply and demand. The demand part is also important. When there are more goods and services demanding that currency, it’s value increases - deflation. On the other hand, if goods and services are more scarce (like oil), that can cause inflation with no change in money supply.
Modern Monetary Theory is not a theory at all it is just a way of looking at the reality of a fiat currency system through a different lens, i.e. not looking at money as a commodity like we did under the Gold Standard. By the way, this speaker never once said the word currency throughout his entire diatribe. Without defining the difference between Credit and Currency, the rest is meaningless. Governments create money by increasing currency through their spending, and banks and other lenders create money by lending out already issued currency in the form of credit. There is much more Credit money in the money supply than currency money. Both contribute to the total money supply, but neither would exist without government spending in our Modern Fiat Monetary System.
I agree with you that there's usually a lot more credit-money than fiat-money, due to fractional reserve lending. In fact, prior to the 2008 Financial Crisis, credit money was nearly 90% of the money supply, but a few years into the Great Recession, that 90% fell to about 60% ... which helps explain why QE didn't result in any significant inflation, in fact, inflation was actually less than the Fed wanted. But, I fundamentally disagree with you just about everywhere else, so before I ask my big question, let me review a few things to set the stage: The science of Economics started with Adam Smith in 1776 with "The Wealth of Nations", and the Invisible Hand Of The Market. But, throughout the 1700s, no one could explain why water was so valuable yet cheap, and diamonds were so useless yet expensive, until a hundred years later, when Alfred Marshall discovered the Law of Demand & Supply. Ironically, that "Law" also explains the problem with the Gold Standard, as well as the (theoretical) superiority of fiat money, and Bitcoin: Like any other asset, the value of gold depends on the interaction of Demand-for-gold, and the Supply-of-gold, in the economy. And if the dollar is pegged to the price of gold, then the value of the dollar is not stable. And if the price of gold is fixed (at $20.67/oz until 1934, and then $35.00/oz), well, the real market price of gold can be quite different, which causes economic problems. Likewise, the value of any fiat currency (including Bitcoin) is backed by scarcity, because the value of money (like the value of any asset) is determined again by Supply & Demand. As a nation's population and productivity grow, so must the nation's money-supply closely (i.e., in lock-step, or close to it), or it's currency will become more valuable (which is deflation). To grow the money supply, one needs a safe method to reduce the money supply, in case the money supply is increased too quickly, which usually results in inflation. You said, "Governments create money by increasing currency through their spending", which seems rather vague. Didn't you mean this, "According to MMT, newly-printed money is spent by government to pay for all its programs" and doesn't that create unseen problems?
@@neilanderson891 MMT does NOT support endless spending. It does however support spending where adequate idle resources are available. The fiat dollar is worthless until it is spent. If for example, the government decided to spend $1 million on a new highway that is badly needed. The value of that road, which was zero, non-existent before it was built, now has value to the economy and that value can now be compared to the money spent. If the value of the highway is more than the government spending investment it adds to GDP more that was spent and will not cause inflation, if it is less, then it probably was not needed in the first place and would be an example of wasteful spending. Of course, this expenditure did infuse a million dollars into the economy which multiplies with every turnover by people. So even if the highway may not be as valuable as was thought, inflation is still questionable. The whole idea is that our government should invest, (Spend) whatever amount that resources are available for, no more no less. If unemployment of people who want to work exists the government should put them to work on needed projects.
@Neil Anderson Neil, I see from your comment that you are well-read in Macroeconomics. I think you understand that a big part of the Fiat system is faith and trust. I know that seems like a weak endorsement, but compared to other well-tested economic forms, I think that it is as good or better than any. Fiat Money requires acceptance of new rules. Our currency has value because our government says it does. We back that with a promise to never be insolvent. That seems to be good enough for most people to continue to trust that promise. There is never a 100% guarantee but when compared to other investments today it seems like a good bet. I think as long as we maintain our economic status good things follow. I said that newly created money appears when the government spends. The reality is that all government spending is with newly created money. Money received by the government in tax revenue is digitally destroyed from M2. There is quite a difference from what most people believe on this issue. Many of the issues that cause people to dispute MMT stem from how we looked at the same issues under the Gold Standard. MMT states that the rules are different under a Fiat system than they are under a gold standard system, sometimes they are the opposite of gold standard rules. I think principally because the law of supply and demand does not hold true for Fiat money the same way it might have when our currency was backed by gold. I have said on many occasions that our biggest problem occurred when Nixon took us off the gold standard and we never changed anything else, i.e. any of the rules. We are still calculating National Debt, which means nothing seeing that we can never go insolvent. We call it debt when we can as easily call it all the money that our government has created and invested into our economy and not taxes back. Our so-called national Debt is actually still sitting in the pockets of the private sector and foreign investors. I think to have a true appreciation of MMT, one needs to understand that our government finance is quite different from our personal finance because we cannot create money to get us out of jams. Another is that because we issue our own sovereign currency we cannot go insolvent unless we choose to. We have to understand that although there are legitimate reasons for taxation, collecting tax revenue to cover government spending is not one of them. In addition, perhaps most importantly MMT believes that the government should spend as much as is necessary to keep our economy running at full capacity at all times, no more, no less.
Here is where I agree and so do MMT supporters (like the Federal Governments), simply printing money and pushing it into the economy which has limited "resources" will only create inflation. If the Government suddenly needed 25% more of the countries crop of wheat to support a new program and the wheat industry has limits of production (land, machinery, transportation, human resources etc.) to assure the government their additional 25%, the wheat industry would divert product from the public sector to the government sector thus creating and artificial increased demand from the public which is always met with inflationary pressures - very simple! So, even though a Government can, they must be careful to not over tax (yes, it's a pun) the system by making demands on resources that may be be met without diverting from one sector to the other by simply creating the money to do it - it's a far more complicated dance than just "poof! more money".
28m in i can agree with mmt on 1 extra point. Some things are more 'money' than others, in fhe colloquial sense of 'dope', 'tits', 'slappin'. Sadly I must still conclude that MMT 'aint very cash money'
Under a Gold Standard, central banks create more liquidity for the economy by buying gold with newly-printed money. The newly-printed money is deposited by the gold-sellers into their banks, which instantly recognize it as "Excessive Reserves", which allows the banks to make more loans. The gold is held by the central bank in it's portfolio, and can be used to "redeem" paper money (which the Bank of England was famous for doing) or sold in the gold market to retrieve large sums of money from the economy, to fight inflation. One problem with the Gold Standard is that gold is a commodity whose price is supposed to be stable (unchanging) as a means of exchange. Unfortunately, the "real value" of gold is constantly changing due to increases & decreases in gold's supply & demand. Demand for gold comes from a lot of industries (art, electronics, dentistry, aero-space, high tech, etc) but under any kind of Gold Standard, the biggest demand is the need for gold in monetary system. So, going 'on' the Gold Standard should result in raising gold's value, and going 'off' the Gold Standard should result in lowering gold's value. Arbitrage was the reason France sent a warship to New York's harbor to transport gold to France (which was owed to France) in the 1970s. Under a Fiat Monetary System, central banks create more liquidity for the economy by buying "high quality" bonds with newly-printed money. The bonds are held by the central bank in its portfolio, and can be sold back to the bond market to retrieve money from circulating in the economy, to fight inflation. The newly-printed money is deposited by the bond-sellers into their banks, which recognize it as "Excessive Reserves", which allows the banks to make more loans. There's two problems with the Fiat Currency System: (1.) Most folks don't realize that fiat currencies are backed by the scarcity of the currency, and therefore they get scared easily, and (2.) Most monetary and government officials don't seem to realize that the scarcity of fiat money needs to be carefully maintained. During the Bretton Woods System, the US government expected the Federal Reserve to keep printing more dollars than they should have, which, after a few decades, resulted in France sending the warship into New York harbor. Many economists jokingly blame one man, Benjamin Strong, for the 1929 Great Depression ... because Strong died in 1928. Strong was one of the only people who truly understood how the fiat monetary system works and would never have allowed the mistakes that were made in 1929-1930, and which were publicly admitted by Fed Chair Benjamin Bernanke around 2010 or so. The few other people who were knowledgeable, like Strong was, were not in positions of power, nor influence, and could not successfully oppose the cries of *Moral Hazard* that literally paralyzed the Fed from fulfilling its promise to be the Lender of Last Resort, in 1929. There are several problems with MMT, and chief among them is the fact that it's proponents don't seem to realize that MMT is incompatible with a central bank. Or, perhaps they do recognize this as a problem, but chose not to mention it to the public. Evidence: (1.) MMT promises to "spend money into existence", which means MMT would literally use "newly printed dollars" to pay for all the programs Congress authorizes, which means that the Fed's Bond portfolio would never be filled with bonds that could be resold to retrieve money from circulation to fight inflation, and (2.) MMT Proponents have long-touted two "new" ways to retrieve money from circulation whenever inflation threatens to ruin the party: (a.) Tax the "excess money" out of the people's pockets and purses, or (b.) Borrow the "excess money" out of the people's pockets and purses. Unfortunately, MMT proponents have apparently failed to dissect the causes of the inexplicable stagflation that hit the US three times, from 1970 to 1981, which no mainstream (i.e., Keynesian) economists were ever able to explain. However, it was easily dissected by Noble Laureate Robert Mundell, when his mere "classical theories" labeled him and his ilk as mere "fringe" economists. According to Dr.Mundell: Keynesian theory of the 1970s mistakenly held that the economy could be stimulated with an easy-money fiscal policy, and inflation could be prevented with higher marginal-taxes. Easy-money did lead to inflation as expected, but higher-marginal taxes reduced incentives to increase Aggregate Supply. Anyone with a high income (Doctors, Lawyers, Celebrities and such) would prefer spending more time with family than paying the highest tax rates. So, although high-earners had less money to spend, low interest rates encouraged investment (i.e., spending). The US economy stagnated, which reduced Aggregate Supply, which helped inflation continue, leaving the mainstream Keynesian policy-makers so mystified that they doubled-down on their prescription. Sad but true.
@@BanBb1 So I guess you think that the Oil Embargo, where oil prices rose for no economic reason, plagued the US with stagflation alone, with no other causes. *And you're ready to argue against the Canadian, Noble Prize winning economist, Robert Mundell, that your argument can best his, eh?* Come on, man - the Oil Embargo immediately backfired on OPEC because the US economy dragged the world into recession. The US suffered 3 episodes of stagflation from 1970 to 1981, not just the first episode that you seem cognizant of. And oil prices did rise for *an economic reason* that known as called Supply&Demand, whereas the Oil Supply is flexible, but the Oil Demand is inflexible. So, even *artificial supply cuts* will have real economic repercussions. Hello? You're watching a video on MMT, so I'm sure you're aware that MMT agrees that *excess money* is a cause of inflation. What does MMT view as a cause of deflation? Why doesn't MMT respect a reduction of the money supply as a cure for inflation?
@@neilanderson891 Yes the stagflation was due to an unexplained rise in oil prices. That affected all goods that relied on oil either for production purposes or transit. Keynesians say that inflation can not occur during a recession. That belief takes for granted that markets are honest. This was a dishonest maneuver of market forces. And those who opposed the New Deal took advantage of that. MMT does accept the general reason for inflation. Too much demand chasing too few goods. That is not what happened during the seventies and eighties. MMT does not support unlimited spending. It does however support as much spending as the country;s resources can handle. Simply put MMT says that our government should spend as much as it takes to keep our economy running at full capacity at all times, no more, no less. MMT agrees with the traditional monetary fixes to lower inflation once it occurs. Raising taxes and interest rates are ways to remove currency and slow down an economy but do not work in cases of stagflation, because it is not inflation in the true sense. If too much currency caused inflation how do you explain Japan's situation with the highest national debt to GDP in the world? They have actually been trying to have inflation. Our own so-called national debt grew exponentially because of the bail-outs of 2009, tax cuts passed by a Republican Congress, and the money spent to recover from the pandemic. Yet we experienced very little inflation from any of these events. There is no doubt in my mind that neoliberal ideology has brought us back to a point very much like the years just before the 1929 crash. Since Reagan, we have been steadily traveling down the wrong track.
@@neilanderson891 Economics is an everchanging science because it relies on human behavior, which includes greed. Because of this economists tend to look at economics with jaded eyes. You cited Mundell as proof that Keynesian economics is flawed. That may be true but it is just an opinion, a theory, by a man who grew up in an environment that believed that. His Neoliberal philosophy has resulted in 60% of the wealth attained since Reagan going to the top 1% wealthiest people. You can support that if you please, but I can't see why unless your own environment supports it. He is credited for his supply-side views many of which have been disproven by history. He is also known as the father of the Euro. A system that the jury is still out on, and one that I predict will fail because of the nature of nationalism in Europe. We have seen many examples where the wealthy countries have been reluctant to help the poorer countries in Europe. If I am to trust Mundell, because he won the Nobel Prize for his work in supply-side economics, I have to ask you if you trust two other Nobel Prize winners Paul Krugman and Joseph Stiglitz for their economic theories, many of whom, counter Mundel's views. Seeing that Keynes' views brought our country's greatest movement forward for average people, I have to look at our history since FDR as proof enough of who was correct.
@@BanBb1 You said, “Simply put MMT says that our government should spend as much as it takes to keep our economy running at full capacity at all times, no more, no less.” Yes sir, I’m well-aware of the specious claims that MMT is based on. You should already know that MMT advocates the utilization of a new *source of funds* for all government spending, yet, they don’t admit that that using that new source would render a central bank incompatible with the MMT regime. You said, “MMT agrees with the traditional monetary fixes to lower inflation once it occurs.” No sir, you’ve mixed up. The traditional monetary fix is for the central bank to sell part of its bond portfolio, to retrieve dollars from circulation, which reduces the money supply. MMT can’t claim any ability to do that, and even MMT proponents have forgotten their own precepts and talked as though a Central Bank can exist within a MMT monetary regime. No sir, if you truly understood MMT, you’d realize that MMT is incompatible with a central bank. Here’s a clue: Why would MMT advertise new methods to fight inflation, as you’ve already mentioned, i.e., raising taxes and borrowing?
All this "criticisms" like "money is never defined" are irrelevant semantics at worst, and misunderstanding of MMT at best. My response to "what is the definition of money?" is the same as Newton's answer to the natural philosophers about gravity: "I described all it does and exactly how it works, what more could you want?". Money is a system that includes these institutions, processes, etc., and MMT describes how it works. As for "what is being ultimately measured by the value of a dollar?", if you missed Mosler's answer, you should still be able to figure out the answer if you actually engaged with the theory: It's whatever the government wants it to be. If the government demands $1 in taxes per year, and offers $1 to anyone to dig a 6-foot hole, then that necessarily is the value of a dollar. If the government changes it's mind and says it's only paying 50 cents for a hole, then the dollar is now worth twice as much (it's worth two holes dug), and twice as many holes WILL be dug (assuming the population can physically dig that many holes in a year), because the taxpayers have no choice but to dig the holes or go to jail. The government sets the value of a dollar. It is in complete control of the currency, ultimately
Am not sure that your explanation of the causes of stagflation in the 1970s is correct. Oil price rises are more relevant here. Idle resources refers particularly to idle human resources. Not sure that you have really debunked MMT.
Was COVID the reason we have inflation today? The answer is both Yess and No but, there is an imbalance. When COVID restriction were put in place, the automotive sector (a prime example) lost a signifiant portion of its critical resources - human resources. Correspondingly, production was stifled but the supply chain which also relied upon human resources plus 'just-in-time provisioning, was dramatically interrupted. Combined with human resource interruptions, there was a dramatic imbalance placed upon the supply chain as countries like China, Japan and India all had different responses to COVID and this also added to Supply Chain instability. All coupled together, the global economic machine was not running on all cylinders ad therefore, the Automotive industry suffered dramatic losses. Once the Supply Chain began to stabilize it couldn't return to 100% pre-COVID levels so, the automotive industry responded by increasing prices and limiting discounting to make the best of what they had in the pipe - presto, Inflation all rooted in the differing results, responses and recoveries of supply chain markets due to COVID! Inflation also continues because the Public Sector is desperate to catchup and return to profitability where they can ergo, tip expectation in restaurants are up over 25% from pre-COVID expectations, some Restaurants now blatantly add Kitchen Service charges to checks and arbitrarily redistribute tip revenues to supplement all their employees and yes - their own profits too!
Entertaining talk. Lucas reminds me a lot of an English comedian, Michael McIntyre. Check him out. I could take issue with several things but I will content myself with pointing out that bank money cannot be used in final settlement of a tax liability. If you 'pay' your tax bill with a cheque the bank loses a liability and pays your bill by reducing a corresponding asset (bank reserves). Taxes can only be paid via a reserve drain. A private individual has no direct access to bank reserves and so requires the bank to act as its agent, as described.
I went to my bank and withdrew a dollar. It was clean and crisp. My bank's reserves fell $1.00. I deposited 2 dollars in a new Bank account. My new bank's reserves increased $2.00. I'd say I clearly established direct access to bank reserves, that is, if there really is any such thing after the Fed dropped the reserve ratio from 10% to -0%-.
This guy and most all other Libertarian critics typically start their presentations with a brief history of money. This is a waste of time because over the centuries times have changed. This fact is one of the reasons they lose credibility with me. He speaks of barter and of tally sticks, barter was never used universally, and tally sticks, which may have sufficed at the time and in a much smaller world, but today the world has grown and the need for a better idea has grown with it.
I agree. And let's not forget that the original people of the lands we now live in, lived as a community and worked and did everything for the community's sake, and money was never used. If anything, they traded food/goods with other communities. Jeez, wonder how they managed to survive for years and years without money or economics, lol. Yet everyone wants to stick to the narrative that money is so very needed to feed and care for a country. Why? Because its a way for there to be a controlling ruling class. How did the new deal not lead to inflation, when money was flushed into the economy? I feel there is a link to MMT there, possibly.
@@marleybot9848 You said, "Yet everyone wants to stick to the narrative that money is so very needed to feed and care for a country. Why? Because its a way for there to be a controlling ruling class." >>--> No, m'am, under a barter economy, people couldn't efficiently or effectively conduct trade, and without trade, life is much harder. The "economy" was created by the invention of "markets" and "money". China starved roughly 50 million of their own people due to an inability to understand what markets and money do for the economy, hence the welfare of its people. The "controlling ruling class" was just a relic of feudalism that was cast aside by the founders of America. Unfortunately, there is a political party today in the United States that is trying to create a new ruling class, and has been surprisingly successful. Until recently in the US, your wealth and success in life largely depended on your drive, intellect, and some luck, such as "who you know". In other nations, its more driven by just "who you know". By the way, the Indians used shells, feathers and other things as "money" before the europeans arrived. Some tribes even had a custom of remembering favors done by one member for another, and repaying with a favor, being the basis of harmony within such communities. However, native communities often waged savage warfare on other native communities, and took prisoners for slaves, or sacrifice. Even today, China has 1.5 million slaves, Chinese Uyghur Muslims who face involuntary organ donations, and a process leading to extinct. By the way, the reason there was no inflation during the New Deal is because that was the Great Depression (1929 to 1941). And the Fed's flush of money into the economy was limited by the amount of gold they were able to confiscate, after FDR's Executive Order #6102, which required Americans to deliver gold coins and bullion to the federal Reserve (and be paid $20.67 per oz of gold, which was the official price of gold). Finally, like 2008, one can surmise that money created by the Fed has no spending associated with it, whereas Bank loans are taken by folks with plans to spend the loan proceeds. In summary, Fed-created money is sterile, and bank created money is fertile. When banks aren't lending, there's less demand in the economy, thus there's usually less inflation.
Times haven't changed at all, there's nothing new under the sun. The reason they start the discussion there it's because that's the very first mistake most other economic theories make. You'll never have a non-inflationary economy without a (stable) commodity money, no amount of badly written articles saying "and that's a good thing" will change that.
@@joaorobalo7594 Your statement, "You'll never have a non-inflationary economy without a (stable) commodity money" boils down to this: "You'll never have a stable currency without a (stable) commodity money". --> Unfortunately, the US economy from 1992 to 1998, and from 1998 to 2007 refutes that claim. One might also be tempted to include 2007 to 2014, during which the big mystery has always been, "Why hasn't QE (i.e., the Fed's Quantitative Easing program) produced any significant inflation?" The answer is that during the 2007 to 2014 era, the fiat money supply was, indeed. much more stable than most folks realize, despite the Fed's injections of roughly $6 Trillion of (fiat) liquidity into circulation. That's because banks were making few loans, which meant that banks weren't creating as much new-money (credit money) as they usually did. The problem with the Gold Standard (i.e., commodity money) is that there was an "official price" of gold that was kept stable, and there was a (black-)market price of Gold that was rising. Like any other commodity, the price of gold was subject to increasing demand, and increasing supply that, unfortunately, usually didn't keep-up with with the *growing industrial demand for gold* of a growing world population.
@@neilanderson891 ahahaha, "it was stable for 7 years, so that refutes your claim that it is not stable" AHAHAHAHAHA, I'm sorry mate but I just can't, lmaaaao
The mocking giggle this professor seems unable to control, erodes the perceived value of what he is representing - if he could see it, he may actually discover more power in what he is saying may be derived through a professional delivery than his need to giggle at his own presentation - is this improv?
15:27 At this point I have given up, you misrepresent most MMT views and then go on to "show" how ridiculous the misrepresentations are. This is not an intellectual argument, Put this guy at a table with any MMT leader and this sort of BS would by easily set straight.
@@LarsAndersenFrihed I doubt he knew my mom. She's been dead for several years now. If he was a fan of my mom, he had good taste for a man with multiple voices.
Half way through the talk and the speaker believes he was some sort of advocate of MMT? With those flat half jokes that only made him harder to follow? He didn't explain anything. Maybe he is best economist in the world but half way through he didn't explain shit. He only picked some points of MMT and made some jokes around them. I don't think a MMT advocate (not me)could even respond to anything he said in first half as is just... nothing. disapointed edit... one minute later and the a haa moment came. "It's hard to find an idea that is all bad... ok Marxism..." :D :D :D now it's clearer...
what exactly did you expect? he explained that MMT is a synthesis of two theories, what those theories are, how MMT combines them, what it informs govt. policy to be, and how it counters criticism about inflation, and he explained it all pretty succinctly. i know marxists have low mental ability so maybe you missed this part?
You can equate MMT to relativism, the obvious problem with MMT is that there is no absolute foundation. There is a reason why in biblical times the shekel was tied to either silver or gold. Meaning the silver or gold were fixed or equal to absolute foundation.
The core foundations are: 1) Demand for the money created through taxation 2) Accounting. Silver and gold are also an "agreement". Gold is a particularly useless metal . If you were in a deser island tally sticks would be as good as gold. The availability of resources and supply chains is what allows gold to have any meaningful value.
@@adelatorremothelet Were you on a desert island, hundred dollar bills would be worthless too. No one is forced to hold dollars to pay taxes. Try this: buy gold bullion today and hold it until April 14. Then sell it, take the dollars and pay your tax on April 15. See. Demand for dollars to pay taxes is a laughably ridiculous concept. Gold is a particularly useful metal. It looks nice, doesn't rust or tarnish, and is very malleable.
@@crimony3054 that's the point of taxes: They are compulsory. Specially value added taxes, which are local in the US, but federal in many countries. And it is not only taxes , but public services... same desert island, assume only one spring with fresh water. You pay it with green bills or gold, now there is a source of demand for the currency.
@@adelatorremothelet Nope, you don't know what the spring-tenders on the desert island will want in exchange. So you can't conclude there is demand for anything. And it means nothing that there is government demand for dollars. You can hold bitcoin until tax day, buy some dollars, and pay then. It literally has no impact on anything. Your MMT is a weird religion.
Let’s just print $1 million per person, and give EVERYONE $1 million and we will all be millionaires and poverty will be solved !!!! Hold on, Zimbabwe is on the other line . . .
MMT just does the accounting of fiat money. Correct spending still matters. Spending must increase production and production will generate tax revenue which will pay for the money issued. It is a closed loop.
@@adelatorremothelet That isn't right either. How can spending increase production that generates tax revenue that pays for the money issued? That doesn't make sense. The Government issues US dollars when it spends each and every time. Tax revenue is destroyed by the Federal government like all IOU's are destroyed once they return to the original issuer. The Fed govt collects taxes but they don't need it for revenue purposes, they collect it to limit the collective purchasing power of the economy ie inflation, they collect taxes as way to control behaviors with things like a cigarette or alcohol tax, to reduce consumption of those things, they tax to give value to these otherwise worthless pieces of green paper. They tax to create unemployment, to make people need the Governments US dollars so that they can then buy up real resources to provision the Government with whatever it needs to function. They don't tax because they need the money, what they need is labor, or tanks and bombs, education dept and so on.
@@henrygustav7948 spending can increase Production if goods and services are producen locally. If instead of local goods you import goods, you get a devaluation ,which will increase Inflation, specially if your importa are Food and energy. I have another view on taxes. They are to create a sources of demand fot the currency , to decrease inequality and to avoid asset bubbles. As far as reducing inflation, I can't see how. Tax policy is set on a yearly basis... try changing tax policy passing through congress at the middle of the year... good luck with that. No, it has to be done before spending and planning upon capacity is the only way.
Right, think the national highway system we created. It was productive and flooded the economy with money but caused no inflation. It produced more revenue than it cost in currency. The infrastructure bill is and will do the same.
David Bowles can't provide a shred of reproducible evidence for the claim that Mises people can't provide a shred of reproducible evidence for a single claim they make.
The biggest fallacy that the critics of MMT make is saying that MMT supports endless government spending. MMT is quite clear that for governments that issue their own sovereign currency it is their responsibility to spend as much as it takes to keep our economy running at full capacity at all times, no more, no less. Spending more is inflationary, spending less leads to unemployment and recession. A government deficit is actually a surplus for someone in the private sector because it represents money spent in our economy and not taxed back. A government surplus is a deficit to the private sector because the government taxed back more than it added to our economy through spending. How more simple can this be? Now that you know this, listen to this presentation again.
Inflation is generally described by most macroeconomists including MMT macroeconomists as too much demand chasing too few goods. The problem with this is that in modern times governments try to bring down inflation by addressing the demand side through monetary fixes like raising interest rates. The MMT complaint to this approach is that it takes a long time for improvement, it disproportionately hurts the middle and lower earners, it leads to increased unemployment, and can result in recession. MMTers have a better solution by attacking the supply side. An example of that might be to increase supply through increased government spending to increase our own energy supply and become less dependent on foreign energy. The Green New Deal's proposal to increase our reliance on alternative energy sources like solar and wind is an example of that. This also creates a whole new industry where employment would rise.
I'm not aware of any critic of MMT who doesn't know that. The problem is that regardless of what MMT says, in practice, flesh and blood MMTers are constantly advocating for endless government spending. Just as the old Keynesians, in theory, were supposed to run surpluses between running deficits, this never ever occurred in history. Government cannot be controlled or trusted to do anything.
@@BanBb1 - Which types of energy would MMT proponents increase (the supply of) to become less dependent on foreign energy? Renewables have never supplied more than a small fraction of the total energy needs, and usually have large transmission losses due to large delivery distances. Neither the sun, wind, nor rain are reliable on a daily basis.
Nuclear power can't be increased & decreased to meet the well-known variable demand on a monthly basis, much less the well-known 24-hour variable demand, because we haven't perfected batteries. (Nuclear power plants have always been designed to meet about 95% of the minimum demand.)
If the Left is committed to reduced fossil fuel use, it is in the unfortunate position of NOT having the policy choices that you seem to think are available. The only viable "policy choices" are higher prices and prolonged recession. BTW, that disreputable combination is called stagflation.
@@neilanderson891 I see the problems that you describe. I don't know the answer to finding an alternative energy source. But I think Nationalizing our fossil
fuel industry might help with pricing.
@@BanBb1 Nationalizing any industry results in "cancelling" it's private ownership. Why would it be better *to cancel private ownership of our Fossil Fuel Industry* ... rather than canceling the various constraints that Biden single-handedly levied upon the Fossil Fuel Industry on his 1st day in office, via Executive Order?
Do you think the Biden Administration can run all of the huge Fossil Fuel Companies better than the private owners have run them? Do you know how many employees they have, and how many of these huge companies work together? There's an old metaphor that goes something like this: "Don't try to run the world until after you have (at least) cleaned-up your room" - I'll attribute that quote to Dr. Jordan Peterson, but feel free to correct any misquote.
At 2:13, speaking about being fair and accurate in discussing MMT, Paul Krugman is mentioned as criticizing a theory in Austrian Economics without fully understanding of it. I'd like to add that J.M.Keynes blasted Say's Law yet didn't fully understand it, nor did he describe it accurately.
MMT does not deny barter, it denies barter economies existed not small instances of barter where money was difficult to come by..
And history verifies that barter economies never were a real thing.
Gold is money, everything else is credit. I look at it as my claim on my work or at its base energy use (entropy)
One thing I have a continuing issue with is the correct use of words. In this lecture the professor talks about government "spending" whereby they create "money" and "put it our into the system through spending" - this is misleading at the very least, the professor knows but chooses to ignore the fact that governments actually "put money out" through two fundamental mechanism, "spending" through provisioning it's governing machine and "investment" into the economy. This is at the root of all misunderstandings on Government Monetary Policy - Yes, Governments "spend" but, the largest part of the Goverment's Monetary Policy rests in it's management of the economic base through "investment" into the Private and Trade sectors. For example - the Government "invested" into the economy over 100 years ago when they "invested" into the building of one of the countries largest distribution networks - the railway then, the public road was which were designed to further contribute to trade through this network of government maintained highways all the way down to the network of rural roads which are primarily used by farmers moving equipments, labour and products to and from the markets. All of this national network was paid through Government "investment" into the National economic machine and, all that "money" had to be "created" - it clearly could never have come from taxes! It is however seen as "spending" for the purpose of political rhetoric and used as a tool to sway votes like the wind through the trees of a forest. Yes, Governments "spend"to provision but they do much more "investing" in building public assets! There is a profound difference.
I think the problem here is that the investment and spending are one in the same. What's in a name, anyway.
@@BanBb1 No government provision "spending" is one thing, public works and infrastructure investment is a completely different end game.Well, my issue is how the term "spend" is perceived by folks that vote and have no or little understanding of how broad the term is when used in the context of "Government" spending - it sounds like the government is simply "spending" like a household spends but, clearly we know that is not the case. I just think that the term "spending" could flush better. Case in point - When the Government decided to "spend" money on building a transcontinental railroad infrastructure - it was in reality an investment in infrastructure and once completed, a major continuing asset to the business of the country and the government. Farmers were able to transport their crops much cheaper and with more reliability, the public could travel widely, and it generated a tremendous employment return. So, when economists and Government say "spend" they know it has a major investment component attached to spending. Labeling the building of a major infrastructure project which has tremendous benefit to the citizens as "spending" degrades, benefits and value of the "investment". That's how I see it. Consequently, we have the citizenry crying about Government spending and not honestly understanding the benefit they receive from government investment.
@@WaxMeister I totally agree, all government spending should be related to positive returns. That is the MMT'ers point when they say that spending should be limited to what the available idle resources within our economy can support. I think a good example of that is the pros and cons of single payer health care. There is no doubt that this would increase demand for medical care. The question is do we have the appropriate resources to support it. Opponents often criticize Single Payer with what they believe will happen. They say that it will lead to waiting lines for services, not unlike what we hear about in Canada, where apparently, it often takes months to get an MRI. If that is true, it could be because demand is outweighing supple. It is an example of government spending without the necessary resources, MRI machines, to support it. In our country many experts who study this say that we do have those resources. They actually say that all of us would receive better service at a lower cost. MMT is nothing more that looking at our current Fiat system through a different lens. It does not say that it is better. It just says that it could be. M4All and a jobs guarantee is not MMT. They are both programs that Left wing proponents say can be done without fear of inflation within our current system. A right winger might have a different idea, such as tax cuts for the wealthy. I think that total acceptance of MMT would not solve the political disunity that we face. Both sides would offer their way of spending.
@@BanBb1 Oh, I agree that MMT will not solve political disunity. In my view the current divisions and political climate has been brewing for decades and the root of the issue may be the fact that the post Civil War social issues have never been fully and completely addressed and naturally, that's a tpic for another day - oh... there you go, I just did exactly what I was alluding too - putting off discussing residual social and political issues let from the Civil War for another day - how many decades has it been? Anyway, I'm getting off the topic. The issue with the Canadian Medical Plan is a lack of resources. There has been a continuous drain off Medical Professionals from Canada into the US - the US Dollar is a big lure flashing in their greedy faces. Statistically however, there are more Doctors per 1000 population in Canada than ever before so, that seems counter intuitive but, the population is aging and a larger geriatric population weighs heavily on the system. Now here some interesting new news on the Canadian Medical Care side, the Government has just announced (last week) a new Dental Care Plan that is going to cost $5B! What is interesting about the cost is that Canadians are not complaining about it which seem rather odd! Personally I would have thought $5 on a plan to attract more Medial Professionals into the Plan would have gone a long way to clearing up the "backlog" in the system. So, not all NEW Government "spending" is met with negative backlash as we can see with the Canadian Public Dental Plan is however, a very good system and like most things, it does need maintenance and restructuring as the system is deployed. One other noteworthy issue related to one payer system in Canada - the system allows for the Government to negotiate with Big Pharma better drug costs - this is one item the US Gov has not even attempted because the lobby is so powerful - often political agendas are derailed by lobby and so now you know where the real political power in the US is entrenched!.
@@WaxMeister Absolutely Wax. Our government is controlled by big money. MMT shows us that we can have more of the spoils of our economy, but that might mean less for the wealthy controllers. Austerity hurts everyone but not equally. There is a bill sitting on the shelf of Congress that guarantees health care to every citizen for less that we are currently paying insurance companies. It would cover all medical needs of the people including vision, mental, dental, hearing, and even long-term care. The bill specifically forbids insurance companies from offering coverage to any of the needs that the bill covers. That means of course the insurance companies are out of the healthcare business entirely. Being a single provider of healthcare also means that the government will insist on negotiating prices for drugs and anything else seeing they will be the one to pay the bills. There are certainly reasons for anti-single-payer people to keep the propaganda mill alive. MMT says that it is possible which is the reason that it has become a passion of mine to spread the word.
As is all too common in monetary/economic debates/discussions, the pre-requisite for any meaningful resolution of the current (and upcoming) financial catastrophes is not even mentioned. And that pre-requisite is the nationalization/public ownership of a country's central bank for the public good thereby eliminating the payment of interest. A public entity/bank can create money out of thin air just as well as any private source and has no need to pay interest to itself. Properly implemented and enforced financial industry regulation (ex. Glass/Steagall) is also an absolute must to restrict human greed and avarice. The common interests of the 99% must over ride those of the 1%. Call it what you will, but it is just plain common sense and its comeback is long overdue.
The money that is "created out of thin air" is temporary credit that must be paid back (or redeemed) after a specific time and with interest too. That means that there is no need for more money to be created once a certain amount is readily circulating. The banks can recredit it to the same person or someone else. Not even the interest needs re-creation because it provides the bank with greater lending ability. So, the MMT claim that there is a need and a positive use for a continuous money-making machine is false. When applied to the government's debt, when it takes in money for treasury bills and then spend it, does not create money in those bills, because they are continuously being redeemed too (presumably through taxation). Because the government spending on infrastructure makes the region more productive, it also raises the value of useful sites of land, and the circulation is different but at a similar rate. (This has unfair advantage for the landowner too.) But the point I am making here is that we should not consider the circulation of money by itself because it is intimately connected with the rest of the social system or the macroeconomy. And this also involves the speed of its circulation, which is associated with booms and busts and the Bank-Rate on the interest owed on its debts.
Government for the public good is completely gone,. And it is government for the monopolies good?
Where the public no longer counts at all and the products become poison.
Never
Going
to
Happen.
What an absolute dystopian fairy tale.
@@Macrocompassion The interest is never created to begin with only the principle is created, and that is the systemic flaw in the system.
The other problem is the rich offshore accounts that take their currency out of the system.
I apologize for my verbosity here but I believe it is necessary. Government spending is not inflationary. When the government spends more that it takes in in taxes we incorrectly call that a deficit. We do this because we incorrectly compare government finance to our personal finance. The two should not be compared because we as people do not create currency, we are users of it. The government is the sole issuer of currency. The fiat system is much different from the gold standard system where the rules of supply and demand played a much bigger role.
Inflation is not the result of excess fiat money circulating, as many of us believe. Under the Gold Standard, a commodity, gold, backed our currency. So the idea of keeping the amount of outstanding currency and the store of gold to back it up, balanced, was generally accepted by all economists. If the government spent more than its gold reserve, it had to either mine more gold, or increase taxes and/or borrow to obtain the money to purchase enough gold to bring it back to balance with the outstanding currency. This is where the tern deficit comes from. Under a fiat system, that term is no longer accurate.
MMT sees no need to do this in our Fiat system. Inflation is a real complicated phenomenon. MMT'ers say that inflation has nothing to do with the amount of currency in circulation. The amount is irrelevant. What is relevant is how that money is used. If available resources do not support that spending, it could add inflationary pressure. That is why MMT recommends limited spending in areas where the resources to back it are weak.
MMT looks at the fiat system differently from the traditional gold standard approach.
Here is how I see it.
MMT is not inflationary if done correctly. None of government spending adds to the money supply. MMT says that all of our tax money is deleted upon receipt. In other words deleted form the M2 money supply.
Any additional spending beyond what is received from tax revenue; what many of us incorrectly call a deficit is covered through the government’s sale of treasuries, bonds. The money received for these bonds is also deleted from M2 because bonds are not considered liquid enough to be considered part of it.
Therefore, none of the money spent by the government is actually added to the money supply, so how can it be blamed for inflation. The bond sale system redistributes money from people who are more likely to save it than spend it, (wealthy people), to people that are more likely to spend it, (most of us) which benefits the economy. However, that could still add inflationary pressure if the available resources are not strong enough to support it.
MMT is a description of how government finance is really performed. Many detractors understand this process but believe that it is not practical in today’s form of governance. They say that it is hard to believe that our government has the where with all to predict what spending is useful and what is hurtful. I say that argument can be made against any system. We just have to make the necessary changes to make it work. Instead of balancing the budget, our government should concentrate on balancing the economy.
The gov is a currency issuer, it does not borrow a penny. Reserves that are created thru gov deficit spending are saved in gov bonds. Gov bonds are just a distraction to maintain the illusion of gov dependency on private sector financing. They should be replaced by normal central bank accounts.
Do I see Ryan Turnipseed in the audience there on the right?
This lecture seemed more like an exercise in semantics than making any actual points.
The job guarantee is meant to be a better solution than sending unemployment checks.
Local governments can find something for them to do temporarily while they search for a permanent job.
Its better than unemployment checks because the private sector looks at employed people more favorably than unemployed people.
It’s not a jobs program like public works. It’s not a jobs training program. Those are separate things but they can be done in conjunction.
To your third point, who are these people in the private sector who look favorably on employed people more so on the unemployed? To your second point, for most people the government job that they have now received is now their “permanent” job. To your first point, what is “meant” often ends up differently than “ to it’s conclusions”. Your fourth point sounds like mere semantics dressed up as an argument.
@@thereisnospoon277 You're right about the first point. No argument here. Implementation will vary.
As I understand it, JG jobs are NOT meant as an expansion of the public sector. JG jobs shouldn't replace or supplement government employees. If government need more public sector employees, then they should just hire them as such.
In practice, without proper guidelines and enforcement, local governments will be tempted to save money by relying on Federally funded JG employees.
This is a fair criticism of JG, haven't read anything on how to prevent it.
On the 3rd point, here's this paper.
The social stigma of unemployment:
"This research consistently shows that even if they had the same qualifications and competences as employed applicants, the unemployed and especially the long-term unemployed have significantly lower chances of getting hired."
labourmarketresearch.springeropen.com/articles/10.1186/s12651-019-0261-4
My fourth point is relaying ideas from Job Guarantee and MMT advocates. Not my own original thoughts. Public works programs pays construction companies to hire people and make stuff. Job training programs are meant to train people and give them new skills.
@@thereisnospoon277 For your first point of contention, if you have ever sent in a cv or know someone who has that has been unemployed or had gaps then you would know employers don't look favourably upon people that don't have smooth transitions between jobs. It looks off to them if there's missing time. This is often why people lie or stretch dates on their resume if they've had a gap.
Secondly I don't know how you would find it hard to agree that requiring someone to work for money is better than mailing them a check.
Unfortunately, sending checks is much more popular than finding some work to do. Unemployment was certainly a bribe in the time of Covid
What would the govt have them actually do? Their labour would conceivably, and probably inefficiently, take over some contracting, sanitation, logistical jobs. Congrats you added to unemployment and are probably getting worse service for yohr bucks.
So more misallocated resources, and adding to the problem that they are trying to solve.
Not to mention that having a ahitty but reliable job is for at least some people a disincentive to getting a real job.
The government creates most unemployment, and then taxes those who CAN still work (whose order of value still allows them to choose work over govt benefit) to patch shit up.
Don't let them create serfs out of them too man, that's just mean
11:11 " they don't want me to send in $20 bills "
It doesn't matter how you pay your taxes, whether it's a bank transfer or cash, the Government doesn't care.
Actually it’s pretty much every world currency which ever existed or exist which has a tie back to gold or silver either directly or indirectly.
Let’s say a new currency is introduced today, it normally will be tied to or backed by one of the 10 major currencies mentioned as an anchor of stability and to instill confidence.
13:29 It's not just historical, If you were to spend the time and research exactly what is happening in stead of telling a story about the need to borrow.
MMT explains first how the system works, it's not philosophy or ideology, it is how in reality the currency moves.
Every time I try to understand MMT I keep coming up with the question-do the Laws of the Universe really not apply in the United States Economy.
"Price/Value" Price is objective while Value is subjective. For a transaction to complete the two components must come together. However, there is a "social/subjective" differential which can result in the same article being transacted at different prices ergo - 'money is (also) a social unit of the measurement of value" - I would like to spend less for something to get more value.
This lecture doesn’t actually answer the main question: Why can’t the government print money as they see fit, as long as they don’t cause excessive demand and thus inflation?
As a neo-classical economist I instinctively mistrust money printing. But if we cut out the more dirigiste ideas coming from MMT proponents (job guarantee, direct interventions, outcompeting the private sector): Where is the economic logic that prevents a government from printing money for, eg, clean energy (or carbon energy, whatever your preference) or health care or new parks or even wars?
So far I’ve heard o lot of ridicule and ideological condemnation, usually based on the morals “thou shallst pay your debt”. But even neo-classicists learn during their first year that a state is not a household.
Qualified references welcome.
You are wrong and it is evidenced in your statement "But even neo-classicists learn during their first year that a state is not a household. ". What your thinking is and MMT are doing is notionally dividing the economy into two sectors, private and government and then wrongly assuming that the money government (politicians) spends has so innate ability to be judged in it's effectiveness as being somehow different and superior in effect from the money the private sector spends.
The reality is it is only an MMT fantasy belief devoid of any substance or evidence and which relies on completely ignoring the demand supply price mechanism that operates as a method of judgement of effectiveness in judging the relative demands of people in every economy in the world.
@@Rob-fx2dw Hi, Rob. I'm no MMT-ler and instinctively reject the idea of just giving out money. Economics is about scarcity.
I'm looking for the logical flaw in MMT and haven't found it, even after reading a number of papers.
Most papers come down to two points:
1. Inflation is complex to measure and manage - true, but true for all theories
2. Politicians wouldn't raise taxes as required - we all agree, but then politics is the problem, not economics
Let's leave out the job guarantees, that is nonsense (what jobs, what wages, what regions, ...) and focus on financing spending through money creation.
Your argument about the distinction between public and private spending does not, in my opinion, solve the conundrum, since the last two US governments have easily turned public into private money ("stimulus checks"), causing inflation via excess demand (plus further supply issues).
Now the Fed has to reduce demand through interest rates - a very broad and untargeted instrument compared to potentially targeted tax increases (politics aside).
Where is the flaw in the economic thinking of MMT?
@@martinhagedorn8832 The logical flaws of MMT :- 1st. The MMT claim that taxes do not fund government spending. Totally wrong because eventually they fund all of government spending.
The 2nd - The MMT claim that the government must spend first before taxes can be paid. Totally wrong because most taxes are paid out of the 90% of money that has been created by private banks whe they lend.
The 3rd - The MMT claim (Mosler) that the private banks are government agents. Totally wrong because an agent is an intermediary which does not produce the goods or services they are involved with in sales transactions between two or more parties which would be the reserve bank and the customer of the private bank. The reality is the reserve bank is not involved in the transaction of creating the money private bank customers borrow. The bank and customer are the two parties in this transaction. The bank takes the risk and profits or losses where as the reserve bank does not take any profit or loss from this transaction because they are not a party to the lending.
4th. The presentation of sectoral balance that MMT presents to show their claim of government deficits are a surplus for the private sector is devoid of reality because it ignores the debt obligation that the private sector is obliged to pay when the treasuries sold to fund the deficit mature.
5th The MMT idea that barter never existed because authority money of some type existed is utter rubbish simply for the reason that mutual exchange (barter ) existed since forever between people in the same family and between people in the same tribes who for thousands of years never had authority money. Not only that barter exists today between people when mutually agreed exchange takes place without money being exchanged. The MMT idea that there is no physical evidence that has been found begs the question what would they accept as evidence in view of there being no physical evidence during mutually agreed exchanges without an intermediary object such as money being involved.
6th . The MMT claim of taxes putting value into money is just absurd and dismissive of the fact that in all of the countries where inflation totally destroyed the value of money making it worthless there were taxes that were in existence and collected until the governments themselves dumped their own designated currency because it was utterly valueless. -So there were taxes and worthless money. MMT's claim - false.
26:00 Here's an idea I just had about Value. Objects don't have intrinsic value, the value comes from the subject aka a human being. OK. So that means when we say, in a spiritual/self-esteem context that "you are valuable" and "you can not give what you do not have", etc etc....what that's really describing is all the same concept. We *ARE* value itself. The value we impose onto an object COMES from us. We are literally THE value in the transaction...we're only projecting it onto the object. Neat.
Cigarets in a prison camp are not an example of fiat currency
Occam's Razor would inform you that they're all missing something fundamental. The Structure of Scientific Revolution likewise identifies elaborate, incomprehensibly complex explanations as inherently suspect.
True. Read my SSRN 2864471 "Einstein's Criterion Applied to Logical Macroeconomics Modelling" and discover exactly how simple it should be, yet still be fully comprehensive.
True. Read my SSRN 2864471 "Einstein's Criterion Applied to Logical Macroeconomics Modelling" and discover exactly how simple it should be, yet still be fully comprehensive.
Just cos the job is guaranteed doesn’t mean you have to take it. Since the pay is minimal only an abusive employer would be disadvantaged by the competition. That’s a good thing for society. Oh and no capitalists appear too worried about government involvement in the economy when they are bailing out banks or otherwise handing out free stuff like most of the research that went into technology (wifi Bluetooth touch screen the internet etc) or scientific research done in universities. But providing an alternative to being screwed by Starbucks or Amazon is suddenly a problem
This credit definition of money is so disgustingly self-serving on the part of the government. Of course the government would chose the one definition that gives them the right to print any amount of money they want, without concerning themselves with the effects of their reckless debasing of the currency.
How do you "debase" credit? How do you debase Fiat money? That is not how it works.
@@henrygustav7948 Actually, if you look at reality (instead of the weird fantasy land of MMT) that's _exactly_ how that works. Supply and demand, if you increase supply while demand remains constant, the value on the free market goes down.
And when the value of a currency goes down enough, demand starts going down, leading to a downward spiral known as hyperinflation.
@@Nukestarmaster That in no way answered my question. Judging by how you answered with "weird fantasy land of MMT" shows that you automatically jump to strawman arguments. No details, no new information, just supply and demand!
Weak, weak explanation.
@@henrygustav7948 Supply and demand might be "no new information", but it's also the answer to your question. You debase a fiat currency by increasing the supply, therefor decreasing the value (the literal definition of "debase")
@@Nukestarmaster which is it? MMT is fantasy or the government has the ability to issue as much currency as it wants and potentially cause inflation?
You can’t have it both ways. You can’t agree with MMT and then say it’s fantasy.
Btw, you talk about supply and demand. The demand part is also important. When there are more goods and services demanding that currency, it’s value increases - deflation. On the other hand, if goods and services are more scarce (like oil), that can cause inflation with no change in money supply.
Modern Monetary Theory is not a theory at all it is just a way of looking at the reality of a fiat currency system through a different lens, i.e. not looking at money as a commodity like we did under the Gold Standard. By the way, this speaker never once said the word currency throughout his entire diatribe. Without defining the difference between Credit and Currency, the rest is meaningless. Governments create money by increasing currency through their spending, and banks and other lenders create money by lending out already issued currency in the form of credit. There is much more Credit money in the money supply than currency money. Both contribute to the total money supply, but neither would exist without government spending in our Modern Fiat Monetary System.
I agree with you that there's usually a lot more credit-money than fiat-money, due to fractional reserve lending. In fact, prior to the 2008 Financial Crisis, credit money was nearly 90% of the money supply, but a few years into the Great Recession, that 90% fell to about 60% ... which helps explain why QE didn't result in any significant inflation, in fact, inflation was actually less than the Fed wanted. But, I fundamentally disagree with you just about everywhere else, so before I ask my big question, let me review a few things to set the stage:
The science of Economics started with Adam Smith in 1776 with "The Wealth of Nations", and the Invisible Hand Of The Market. But, throughout the 1700s, no one could explain why water was so valuable yet cheap, and diamonds were so useless yet expensive, until a hundred years later, when Alfred Marshall discovered the Law of Demand & Supply. Ironically, that "Law" also explains the problem with the Gold Standard, as well as the (theoretical) superiority of fiat money, and Bitcoin: Like any other asset, the value of gold depends on the interaction of Demand-for-gold, and the Supply-of-gold, in the economy. And if the dollar is pegged to the price of gold, then the value of the dollar is not stable. And if the price of gold is fixed (at $20.67/oz until 1934, and then $35.00/oz), well, the real market price of gold can be quite different, which causes economic problems.
Likewise, the value of any fiat currency (including Bitcoin) is backed by scarcity, because the value of money (like the value of any asset) is determined again by Supply & Demand. As a nation's population and productivity grow, so must the nation's money-supply closely (i.e., in lock-step, or close to it), or it's currency will become more valuable (which is deflation). To grow the money supply, one needs a safe method to reduce the money supply, in case the money supply is increased too quickly, which usually results in inflation.
You said, "Governments create money by increasing currency through their spending", which seems rather vague. Didn't you mean this, "According to MMT, newly-printed money is spent by government to pay for all its programs" and doesn't that create unseen problems?
@@neilanderson891 MMT does NOT support endless spending. It does however support spending where adequate idle resources are available. The fiat dollar is worthless until it is spent. If for example, the government decided to spend $1 million on a new highway that is badly needed. The value of that road, which was zero, non-existent before it was built, now has value to the economy and that value can now be compared to the money spent. If the value of the highway is more than the government spending investment it adds to GDP more that was spent and will not cause inflation, if it is less, then it probably was not needed in the first place and would be an example of wasteful spending. Of course, this expenditure did infuse a million dollars into the economy which multiplies with every turnover by people. So even if the highway may not be as valuable as was thought, inflation is still questionable. The whole idea is that our government should invest, (Spend) whatever amount that resources are available for, no more no less. If unemployment of people who want to work exists the government should put them to work on needed projects.
@Neil Anderson Neil, I see from your comment that you are well-read in Macroeconomics. I think you understand that a big part of the Fiat system is faith and trust. I know that seems like a weak endorsement, but compared to other well-tested economic forms, I think that it is as good or better than any. Fiat Money requires acceptance of new rules. Our currency has value because our government says it does. We back that with a promise to never be insolvent. That seems to be good enough for most people to continue to trust that promise. There is never a 100% guarantee but when compared to other investments today it seems like a good bet. I think as long as we maintain our economic status good things follow.
I said that newly created money appears when the government spends. The reality is that all government spending is with newly created money. Money received by the government in tax revenue is digitally destroyed from M2. There is quite a difference from what most people believe on this issue. Many of the issues that cause people to dispute MMT stem from how we looked at the same issues under the Gold Standard. MMT states that the rules are different under a Fiat system than they are under a gold standard system, sometimes they are the opposite of gold standard rules. I think principally because the law of supply and demand does not hold true for Fiat money the same way it might have when our currency was backed by gold.
I have said on many occasions that our biggest problem occurred when Nixon took us off the gold standard and we never changed anything else, i.e. any of the rules. We are still calculating National Debt, which means nothing seeing that we can never go insolvent. We call it debt when we can as easily call it all the money that our government has created and invested into our economy and not taxes back. Our so-called national Debt is actually still sitting in the pockets of the private sector and foreign investors.
I think to have a true appreciation of MMT, one needs to understand that our government finance is quite different from our personal finance because we cannot create money to get us out of jams. Another is that because we issue our own sovereign currency we cannot go insolvent unless we choose to. We have to understand that although there are legitimate reasons for taxation, collecting tax revenue to cover government spending is not one of them. In addition, perhaps most importantly MMT believes that the government should spend as much as is necessary to keep our economy running at full capacity at all times, no more, no less.
Here is where I agree and so do MMT supporters (like the Federal Governments), simply printing money and pushing it into the economy which has limited "resources" will only create inflation. If the Government suddenly needed 25% more of the countries crop of wheat to support a new program and the wheat industry has limits of production (land, machinery, transportation, human resources etc.) to assure the government their additional 25%, the wheat industry would divert product from the public sector to the government sector thus creating and artificial increased demand from the public which is always met with inflationary pressures - very simple! So, even though a Government can, they must be careful to not over tax (yes, it's a pun) the system by making demands on resources that may be be met without diverting from one sector to the other by simply creating the money to do it - it's a far more complicated dance than just "poof! more money".
A dance no small group of individuals is qualified to do. Expertise is diffuse amongst ALL individuals. Decentralization is the way.
28m in i can agree with mmt on 1 extra point. Some things are more 'money' than others, in fhe colloquial sense of 'dope', 'tits', 'slappin'. Sadly I must still conclude that MMT 'aint very cash money'
Under a Gold Standard, central banks create more liquidity for the economy by buying gold with newly-printed money. The newly-printed money is deposited by the gold-sellers into their banks, which instantly recognize it as "Excessive Reserves", which allows the banks to make more loans. The gold is held by the central bank in it's portfolio, and can be used to "redeem" paper money (which the Bank of England was famous for doing) or sold in the gold market to retrieve large sums of money from the economy, to fight inflation.
One problem with the Gold Standard is that gold is a commodity whose price is supposed to be stable (unchanging) as a means of exchange. Unfortunately, the "real value" of gold is constantly changing due to increases & decreases in gold's supply & demand. Demand for gold comes from a lot of industries (art, electronics, dentistry, aero-space, high tech, etc) but under any kind of Gold Standard, the biggest demand is the need for gold in monetary system. So, going 'on' the Gold Standard should result in raising gold's value, and going 'off' the Gold Standard should result in lowering gold's value. Arbitrage was the reason France sent a warship to New York's harbor to transport gold to France (which was owed to France) in the 1970s.
Under a Fiat Monetary System, central banks create more liquidity for the economy by buying "high quality" bonds with newly-printed money. The bonds are held by the central bank in its portfolio, and can be sold back to the bond market to retrieve money from circulating in the economy, to fight inflation. The newly-printed money is deposited by the bond-sellers into their banks, which recognize it as "Excessive Reserves", which allows the banks to make more loans. There's two problems with the Fiat Currency System: (1.) Most folks don't realize that fiat currencies are backed by the scarcity of the currency, and therefore they get scared easily, and (2.) Most monetary and government officials don't seem to realize that the scarcity of fiat money needs to be carefully maintained. During the Bretton Woods System, the US government expected the Federal Reserve to keep printing more dollars than they should have, which, after a few decades, resulted in France sending the warship into New York harbor. Many economists jokingly blame one man, Benjamin Strong, for the 1929 Great Depression ... because Strong died in 1928. Strong was one of the only people who truly understood how the fiat monetary system works and would never have allowed the mistakes that were made in 1929-1930, and which were publicly admitted by Fed Chair Benjamin Bernanke around 2010 or so. The few other people who were knowledgeable, like Strong was, were not in positions of power, nor influence, and could not successfully oppose the cries of *Moral Hazard* that literally paralyzed the Fed from fulfilling its promise to be the Lender of Last Resort, in 1929.
There are several problems with MMT, and chief among them is the fact that it's proponents don't seem to realize that MMT is incompatible with a central bank. Or, perhaps they do recognize this as a problem, but chose not to mention it to the public. Evidence: (1.) MMT promises to "spend money into existence", which means MMT would literally use "newly printed dollars" to pay for all the programs Congress authorizes, which means that the Fed's Bond portfolio would never be filled with bonds that could be resold to retrieve money from circulation to fight inflation, and (2.) MMT Proponents have long-touted two "new" ways to retrieve money from circulation whenever inflation threatens to ruin the party: (a.) Tax the "excess money" out of the people's pockets and purses, or (b.) Borrow the "excess money" out of the people's pockets and purses.
Unfortunately, MMT proponents have apparently failed to dissect the causes of the inexplicable stagflation that hit the US three times, from 1970 to 1981, which no mainstream (i.e., Keynesian) economists were ever able to explain. However, it was easily dissected by Noble Laureate Robert Mundell, when his mere "classical theories" labeled him and his ilk as mere "fringe" economists. According to Dr.Mundell: Keynesian theory of the 1970s mistakenly held that the economy could be stimulated with an easy-money fiscal policy, and inflation could be prevented with higher marginal-taxes. Easy-money did lead to inflation as expected, but higher-marginal taxes reduced incentives to increase Aggregate Supply. Anyone with a high income (Doctors, Lawyers, Celebrities and such) would prefer spending more time with family than paying the highest tax rates. So, although high-earners had less money to spend, low interest rates encouraged investment (i.e., spending). The US economy stagnated, which reduced Aggregate Supply, which helped inflation continue, leaving the mainstream Keynesian policy-makers so mystified that they doubled-down on their prescription. Sad but true.
So I guess you think that the oil embargo; where oil prices rose for no economic reason, played no role in stagflation.
@@BanBb1 So I guess you think that the Oil Embargo, where oil prices rose for no economic reason, plagued the US with stagflation alone, with no other causes. *And you're ready to argue against the Canadian, Noble Prize winning economist, Robert Mundell, that your argument can best his, eh?*
Come on, man - the Oil Embargo immediately backfired on OPEC because the US economy dragged the world into recession. The US suffered 3 episodes of stagflation from 1970 to 1981, not just the first episode that you seem cognizant of. And oil prices did rise for *an economic reason* that known as called Supply&Demand, whereas the Oil Supply is flexible, but the Oil Demand is inflexible. So, even *artificial supply cuts* will have real economic repercussions. Hello?
You're watching a video on MMT, so I'm sure you're aware that MMT agrees that *excess money* is a cause of inflation. What does MMT view as a cause of deflation? Why doesn't MMT respect a reduction of the money supply as a cure for inflation?
@@neilanderson891 Yes the stagflation was due to an unexplained rise in oil prices. That affected all goods that relied on oil either for production purposes or transit. Keynesians say that inflation can not occur during a recession. That belief takes for granted that markets are honest. This was a dishonest maneuver of market forces. And those who opposed the New Deal took advantage of that. MMT does accept the general reason for inflation. Too much demand chasing too few goods. That is not what happened during the seventies and eighties. MMT does not support unlimited spending. It does however support as much spending as the country;s resources can handle. Simply put MMT says that our government should spend as much as it takes to keep our economy running at full capacity at all times, no more, no less. MMT agrees with the traditional monetary fixes to lower inflation once it occurs. Raising taxes and interest rates are ways to remove currency and slow down an economy but do not work in cases of stagflation, because it is not inflation in the true sense. If too much currency caused inflation how do you explain Japan's situation with the highest national debt to GDP in the world? They have actually been trying to have inflation. Our own so-called national debt grew exponentially because of the bail-outs of 2009, tax cuts passed by a Republican Congress, and the money spent to recover from the pandemic. Yet we experienced very little inflation from any of these events. There is no doubt in my mind that neoliberal ideology has brought us back to a point very much like the years just before the 1929 crash. Since Reagan, we have been steadily traveling down the wrong track.
@@neilanderson891 Economics is an everchanging science because it relies on human behavior, which includes greed. Because of this economists tend to look at economics with jaded eyes. You cited Mundell as proof that Keynesian economics is flawed. That may be true but it is just an opinion, a theory, by a man who grew up in an environment that believed that. His Neoliberal philosophy has resulted in 60% of the wealth attained since Reagan going to the top 1% wealthiest people. You can support that if you please, but I can't see why unless your own environment supports it. He is credited for his supply-side views many of which have been disproven by history. He is also known as the father of the Euro. A system that the jury is still out on, and one that I predict will fail because of the nature of nationalism in Europe. We have seen many examples where the wealthy countries have been reluctant to help the poorer countries in Europe. If I am to trust Mundell, because he won the Nobel Prize for his work in supply-side economics, I have to ask you if you trust two other Nobel Prize winners Paul Krugman and Joseph Stiglitz for their economic theories, many of whom, counter Mundel's views. Seeing that Keynes' views brought our country's greatest movement forward for average people, I have to look at our history since FDR as proof enough of who was correct.
@@BanBb1 You said, “Simply put MMT says that our government should spend as much as it takes to keep our economy running at full capacity at all times, no more, no less.” Yes sir, I’m well-aware of the specious claims that MMT is based on. You should already know that MMT advocates the utilization of a new *source of funds* for all government spending, yet, they don’t admit that that using that new source would render a central bank incompatible with the MMT regime.
You said, “MMT agrees with the traditional monetary fixes to lower inflation once it occurs.” No sir, you’ve mixed up. The traditional monetary fix is for the central bank to sell part of its bond portfolio, to retrieve dollars from circulation, which reduces the money supply. MMT can’t claim any ability to do that, and even MMT proponents have forgotten their own precepts and talked as though a Central Bank can exist within a MMT monetary regime. No sir, if you truly understood MMT, you’d realize that MMT is incompatible with a central bank. Here’s a clue: Why would MMT advertise new methods to fight inflation, as you’ve already mentioned, i.e., raising taxes and borrowing?
8:50 If you don't believe, where is your evidence that the barter system did exist before debt exchanges ?
All this "criticisms" like "money is never defined" are irrelevant semantics at worst, and misunderstanding of MMT at best. My response to "what is the definition of money?" is the same as Newton's answer to the natural philosophers about gravity: "I described all it does and exactly how it works, what more could you want?". Money is a system that includes these institutions, processes, etc., and MMT describes how it works.
As for "what is being ultimately measured by the value of a dollar?", if you missed Mosler's answer, you should still be able to figure out the answer if you actually engaged with the theory: It's whatever the government wants it to be. If the government demands $1 in taxes per year, and offers $1 to anyone to dig a 6-foot hole, then that necessarily is the value of a dollar. If the government changes it's mind and says it's only paying 50 cents for a hole, then the dollar is now worth twice as much (it's worth two holes dug), and twice as many holes WILL be dug (assuming the population can physically dig that many holes in a year), because the taxpayers have no choice but to dig the holes or go to jail. The government sets the value of a dollar. It is in complete control of the currency, ultimately
Am not sure that your explanation of the causes of stagflation in the 1970s is correct. Oil price rises are more relevant here. Idle resources refers particularly to idle human resources. Not sure that you have really debunked MMT.
Was COVID the reason we have inflation today? The answer is both Yess and No but, there is an imbalance. When COVID restriction were put in place, the automotive sector (a prime example) lost a signifiant portion of its critical resources - human resources. Correspondingly, production was stifled but the supply chain which also relied upon human resources plus 'just-in-time provisioning, was dramatically interrupted. Combined with human resource interruptions, there was a dramatic imbalance placed upon the supply chain as countries like China, Japan and India all had different responses to COVID and this also added to Supply Chain instability. All coupled together, the global economic machine was not running on all cylinders ad therefore, the Automotive industry suffered dramatic losses. Once the Supply Chain began to stabilize it couldn't return to 100% pre-COVID levels so, the automotive industry responded by increasing prices and limiting discounting to make the best of what they had in the pipe - presto, Inflation all rooted in the differing results, responses and recoveries of supply chain markets due to COVID! Inflation also continues because the Public Sector is desperate to catchup and return to profitability where they can ergo, tip expectation in restaurants are up over 25% from pre-COVID expectations, some Restaurants now blatantly add Kitchen Service charges to checks and arbitrarily redistribute tip revenues to supplement all their employees and yes - their own profits too!
Love me some Engelhardt - what a gem!
The hierarchy of money sounds Platonic, especially the term 'moneyness'.
Ha 'moneyness' does sound kinda Platonic lmao.
never heard so much absolute bollocks . MMT explains monetary operations . You cannot have a reserve deai without a reserve add.
Amazing talk
Modern money is a government tax credit.
This ptof is still ignorant about MMT's definition of money and the source of the value of money. MMT destroys Austrians as to both.
MMT's definition of money and value is what ? How is it judged to be value?
Entertaining talk. Lucas reminds me a lot of an English comedian, Michael McIntyre. Check him out. I could take issue with several things but I will content myself with pointing out that bank money cannot be used in final settlement of a tax liability. If you 'pay' your tax bill with a cheque the bank loses a liability and pays your bill by reducing a corresponding asset (bank reserves). Taxes can only be paid via a reserve drain. A private individual has no direct access to bank reserves and so requires the bank to act as its agent, as described.
I went to my bank and withdrew a dollar. It was clean and crisp. My bank's reserves fell $1.00.
I deposited 2 dollars in a new Bank account. My new bank's reserves increased $2.00.
I'd say I clearly established direct access to bank reserves, that is, if there really is any such thing after the Fed dropped the reserve ratio from 10% to -0%-.
This guy is the best
This guy and most all other Libertarian critics typically start their presentations with a brief history of money. This is a waste of time because over the centuries times have changed. This fact is one of the reasons they lose credibility with me. He speaks of barter and of tally sticks, barter was never used universally, and tally sticks, which may have sufficed at the time and in a much smaller world, but today the world has grown and the need for a better idea has grown with it.
I agree.
And let's not forget that the original people of the lands we now live in, lived as a community and worked and did everything for the community's sake, and money was never used. If anything, they traded food/goods with other communities.
Jeez, wonder how they managed to survive for years and years without money or economics, lol. Yet everyone wants to stick to the narrative that money is so very needed to feed and care for a country. Why? Because its a way for there to be a controlling ruling class.
How did the new deal not lead to inflation, when money was flushed into the economy? I feel there is a link to MMT there, possibly.
@@marleybot9848 You said, "Yet everyone wants to stick to the narrative that money is so very needed to feed and care for a country. Why? Because its a way for there to be a controlling ruling class." >>--> No, m'am, under a barter economy, people couldn't efficiently or effectively conduct trade, and without trade, life is much harder. The "economy" was created by the invention of "markets" and "money". China starved roughly 50 million of their own people due to an inability to understand what markets and money do for the economy, hence the welfare of its people.
The "controlling ruling class" was just a relic of feudalism that was cast aside by the founders of America. Unfortunately, there is a political party today in the United States that is trying to create a new ruling class, and has been surprisingly successful. Until recently in the US, your wealth and success in life largely depended on your drive, intellect, and some luck, such as "who you know". In other nations, its more driven by just "who you know".
By the way, the Indians used shells, feathers and other things as "money" before the europeans arrived. Some tribes even had a custom of remembering favors done by one member for another, and repaying with a favor, being the basis of harmony within such communities. However, native communities often waged savage warfare on other native communities, and took prisoners for slaves, or sacrifice. Even today, China has 1.5 million slaves, Chinese Uyghur Muslims who face involuntary organ donations, and a process leading to extinct.
By the way, the reason there was no inflation during the New Deal is because that was the Great Depression (1929 to 1941). And the Fed's flush of money into the economy was limited by the amount of gold they were able to confiscate, after FDR's Executive Order #6102, which required Americans to deliver gold coins and bullion to the federal Reserve (and be paid $20.67 per oz of gold, which was the official price of gold). Finally, like 2008, one can surmise that money created by the Fed has no spending associated with it, whereas Bank loans are taken by folks with plans to spend the loan proceeds. In summary, Fed-created money is sterile, and bank created money is fertile. When banks aren't lending, there's less demand in the economy, thus there's usually less inflation.
Times haven't changed at all, there's nothing new under the sun. The reason they start the discussion there it's because that's the very first mistake most other economic theories make. You'll never have a non-inflationary economy without a (stable) commodity money, no amount of badly written articles saying "and that's a good thing" will change that.
@@joaorobalo7594 Your statement, "You'll never have a non-inflationary economy without a (stable) commodity money" boils down to this:
"You'll never have a stable currency without a (stable) commodity money". --> Unfortunately, the US economy from 1992 to 1998, and from 1998 to 2007 refutes that claim.
One might also be tempted to include 2007 to 2014, during which the big mystery has always been, "Why hasn't QE (i.e., the Fed's Quantitative Easing program) produced any significant inflation?" The answer is that during the 2007 to 2014 era, the fiat money supply was, indeed. much more stable than most folks realize, despite the Fed's injections of roughly $6 Trillion of (fiat) liquidity into circulation. That's because banks were making few loans, which meant that banks weren't creating as much new-money (credit money) as they usually did.
The problem with the Gold Standard (i.e., commodity money) is that there was an "official price" of gold that was kept stable, and there was a (black-)market price of Gold that was rising. Like any other commodity, the price of gold was subject to increasing demand, and increasing supply that, unfortunately, usually didn't keep-up with with the *growing industrial demand for gold* of a growing world population.
@@neilanderson891 ahahaha, "it was stable for 7 years, so that refutes your claim that it is not stable" AHAHAHAHAHA, I'm sorry mate but I just can't, lmaaaao
The mocking giggle this professor seems unable to control, erodes the perceived value of what he is representing - if he could see it, he may actually discover more power in what he is saying may be derived through a professional delivery than his need to giggle at his own presentation - is this improv?
I like MMT. It is relatively open and straight-forward with the idea that fiat money is slavery with extra steps.
I'd really like it if you might take the time to flush that statement out.
Correct
15:27 At this point I have given up, you misrepresent most MMT views and then go on to "show" how ridiculous the misrepresentations are.
This is not an intellectual argument, Put this guy at a table with any MMT leader and this sort of BS would by easily set straight.
What's with this guy's voice(s)? Is he a fan of pee wee Herman?
He's a fan of your mom.
@@LarsAndersenFrihed I doubt he knew my mom. She's been dead for several years now. If he was a fan of my mom, he had good taste for a man with multiple voices.
Cut him some slack. He’s probably just nervous.
@@thereisnospoon277 You're a nice guy, but I'm pretty sure that Dr. Engelhardt can handle some ribbing from the likes of me.
Who knew an econ professor would be a nerd?
So MMT destroys wealth. Got it.
Half way through the talk and the speaker believes he was some sort of advocate of MMT? With those flat half jokes that only made him harder to follow? He didn't explain anything. Maybe he is best economist in the world but half way through he didn't explain shit. He only picked some points of MMT and made some jokes around them. I don't think a MMT advocate (not me)could even respond to anything he said in first half as is just... nothing.
disapointed
edit... one minute later and the a haa moment came.
"It's hard to find an idea that is all bad... ok Marxism..." :D :D :D
now it's clearer...
what exactly did you expect? he explained that MMT is a synthesis of two theories, what those theories are, how MMT combines them, what it informs govt. policy to be, and how it counters criticism about inflation, and he explained it all pretty succinctly. i know marxists have low mental ability so maybe you missed this part?
@@CPubi lol
If Engelhardt was so hard for you to follow then how do you know he was advocating Modern Monetary Theory?
@@thereisnospoon277 Hesus... he said himself he will try to in the first part.
You can equate MMT to relativism, the obvious problem with MMT is that there is no absolute foundation. There is a reason why in biblical times the shekel was tied to either silver or gold. Meaning the silver or gold were fixed or equal to absolute foundation.
The core foundations are:
1) Demand for the money created through taxation
2) Accounting.
Silver and gold are also an "agreement". Gold is a particularly useless metal .
If you were in a deser island tally sticks would be as good as gold. The availability of resources and supply chains is what allows gold to have any meaningful value.
@@adelatorremothelet Were you on a desert island, hundred dollar bills would be worthless too. No one is forced to hold dollars to pay taxes. Try this: buy gold bullion today and hold it until April 14. Then sell it, take the dollars and pay your tax on April 15. See. Demand for dollars to pay taxes is a laughably ridiculous concept. Gold is a particularly useful metal. It looks nice, doesn't rust or tarnish, and is very malleable.
@@crimony3054 that's the point of taxes: They are compulsory. Specially value added taxes, which are local in the US, but federal in many countries. And it is not only taxes , but public services... same desert island, assume only one spring with fresh water. You pay it with green bills or gold, now there is a source of demand for the currency.
@@adelatorremothelet Nope, you don't know what the spring-tenders on the desert island will want in exchange. So you can't conclude there is demand for anything. And it means nothing that there is government demand for dollars. You can hold bitcoin until tax day, buy some dollars, and pay then. It literally has no impact on anything. Your MMT is a weird religion.
@@crimony3054 I did mention the spring water as a public service... not as privately held. Read carefully.
Let’s just print $1 million per person, and give EVERYONE $1 million and we will all be millionaires and poverty will be solved !!!!
Hold on, Zimbabwe is on the other line . . .
That would not be a proposal made by ANY MMT advocate. Hold on got a scarecrow and his strawmen friends on the other line.
MMT just does the accounting of fiat money.
Correct spending still matters. Spending must increase production and production will generate tax revenue which will pay for the money issued.
It is a closed loop.
@@adelatorremothelet That isn't right either. How can spending increase production that generates tax revenue that pays for the money issued? That doesn't make sense. The Government issues US dollars when it spends each and every time. Tax revenue is destroyed by the Federal government like all IOU's are destroyed once they return to the original issuer. The Fed govt collects taxes but they don't need it for revenue purposes, they collect it to limit the collective purchasing power of the economy ie inflation, they collect taxes as way to control behaviors with things like a cigarette or alcohol tax, to reduce consumption of those things, they tax to give value to these otherwise worthless pieces of green paper. They tax to create unemployment, to make people need the Governments US dollars so that they can then buy up real resources to provision the Government with whatever it needs to function. They don't tax because they need the money, what they need is labor, or tanks and bombs, education dept and so on.
@@henrygustav7948 spending can increase Production if goods and services are producen locally. If instead of local goods you import goods, you get a devaluation ,which will increase Inflation, specially if your importa are Food and energy.
I have another view on taxes. They are to create a sources of demand fot the currency , to decrease inequality and to avoid asset bubbles.
As far as reducing inflation, I can't see how. Tax policy is set on a yearly basis... try changing tax policy passing through congress at the middle of the year... good luck with that. No, it has to be done before spending and planning upon capacity is the only way.
Right, think the national highway system we created. It was productive and flooded the economy with money but caused no inflation. It produced more revenue than it cost in currency. The infrastructure bill is and will do the same.
Mises people can't provide a shred of reproducible evidence for a single claim they make.
David Bowles can't provide a shred of reproducible evidence for the claim that Mises people can't provide a shred of reproducible evidence for a single claim they make.
Not worth q watching. Steve Keen is a much better explainer of money.