AskProfWolff: What is Modern Monetary Theory?
HTML-код
- Опубликовано: 26 сен 2024
- Submit your own question for Prof. Wolff on Patreon: / economicupdate
Help us reach 50,000 subscribers! Please hit the red SUBSCRIBE button above.
Support the show Economic Update with Richard D. Wolff. Become a part of the growing Patreon community and gain access to exclusive patron-only content, along the ability to ask Prof. Wolff questions like this one!
Professor Wolff's Website: www.rdwolff.com
---Permission to reprint Professor Wolff's writing and videos is granted on an individual basis. Please contact info@democracyatwork.info to request permission. We reserve the right to refuse or rescind permission at any time.
Ultimately MMT basically shows that governments are able to choose who they want to give money too. Fiscal constraints are mostly just arguments about who should get more than others.
Exactly!
Nefarious is what jumped out at me. Socialism always introduces itself as a benefit and than its not what you know... It's who you know. This is right out of Tavistock and other NWO think tanks.
Kropotkin's, "There is no government system of socialism," is a good warning that this doesn't work out so awesome.
@@wesfax1
It's been a month. Go take a shower. You stink.
@@Chris-xc1tm
I don't understand. Socialism doesn't have a government?
I thought that was Anarchy.
Please , I honestly didn't understand but what you meant .
Cheers.
Stephanie Kelton made a great point when she said that we shouldn't ask "can we afford the money?": it's really a question of whether we can afford the resources and labour needed to get stuff done. Another way is to say that the only limit to government spending is the productive capacity of the nation.
@Tyler Hopkins who are "MMT laypeople"? the people who matter are economists who advise politicians... but they have a way to go...
@Tyler Hopkins my understanding is that MMT is more concerned with government public fiscal policy (how to spend money to enact programs), whereas monetary policy is the purview of the central bank, which is still (in some sense?) regulated by the government
Bethany, that's a great way of explaining it.
I believe the profs' point was that if a culture's economic system has the fluidity of changing the Value of the Currency/money almost instantly for the benefit of the Collective, meaning "We the People" exemplar versus the "usual suspects" of non equality capitalistas that is a beneficial possibility into a more stable future with each other, never mind Nature at large.
It's true except to the extent that we import more than we export. For some reason MMT seems to ignore imports. So we export $900 billion in cash and it comes back to us as investments i.e. foreign purchases of US stocks and real estate, and since this doesn't drive up employment, we do it even more the next year.
actually, Richard Werner explained (and proved by experiment) that money is created by commercial banks when they create credit; it is generally NOT the central bank, but the central bank can also create money, as in QE
The fact that modern bank money is created / distributed on an electronic platform is not that important.
The point is that money is an accounting phenomenon that exists according to rules of double entry bookkeeping.
Money is created as a positive asset and a negative liability on respective accounts, which then get distributed as the costs of production. Whether those entries are transcribed on paper ledgers and then issued as coins & paper or digital ledgers and issued as electronic deposits is a secondary concern.
It's incorrect to say that governments can create money without incurring debts. That betrays a misunderstanding of the rules of double entry. What MMT emphasizes is that sovereign governments can issue money as central bank liabilities.
Can you rephrase to make it digestible for an idiot like me ?
Basically, your last paragraph challenges what the professor told at 04:30 [i.e. that debt does not have to incurred for MMT to work]?? Is that right?
@@Sidtube10 Yeah, IMO Wolff's phrasing here isn't accurate when he says "you don't need deficits". Deficits are just an accounting expression of the funds the government is creating (spending) but not destroying (taxing). But I think we both mean the same thing. MMT is observing that at an operational level the financing is happening by the central bank crediting accounts at member banks, who then credit the relevant private accounts. The point being that you don't need private creditors to purchase government bonds for this to happen. Matching deficits with bond sales is a convention left over from the gold standard era.
See Stephanie Kelton's paper "Can Taxes and Bonds Finance Government Spending?" (1998). Nathan Tankus is also a great authority on the accounting details.
@@OgallalaKnowhow Thank you. Krugman says MMT and the Keynesianism are not very different - do you agree with that too? What is really modern about MMT? Is it a realization born out of constant deficit financing in the US in the fiat money era that deficits do not really matter as long as inflation is in control?
@@Sidtube10 The term "modern monetary theory" started as an inside joke from Randal Wray's 1998 book. It's referencing Keynes's remark at the beginning of Treatise on Money that nominal money (money as an accounting system) has existed since ancient Babylon. I prefer the terms 'monetary theory' or 'monetary political economy' or just old fashioned 'macroeconomics' for this reason.
Almost every MMT economist began as a Post Keynesian. It's a development of Keynes's own thinking that was incomplete and infamously bastardized in the neoclassical synthesis after his death. Krugman is a New Keynesian in this tradition. So he's not wrong, but the history makes such statements tricky to decipher. Chartalism and Abba Lerner's functional finance are also core components. And a lot of MMTers argue that the Job Guarantee is central to what defines the approach.
If countries can print money to get out of fiscal downturns then explain why throughout history every country that tried it failed.
I'm pretty sure that this guy is wrong about the significance of electronic money. MMT is a true descriptive theory when a government has a simple monopoly over its own currency, regardless of the prevalence of electronic money.
Nope, he's right. It doesn't make any difference if the government uses a printer or a computer. Modern Monetary Theory talks about electronic currency because that's what the government uses today.
we salute red salute to Comrade Richard✊✊✊✊. India
lal salam comrade from Germany as well! ✊ ☭
Red salute from India ✊✊✊
To our Maoist friends on the subcontinent, big ups from us here in Australia. No bourgy imperialists allowed!
Brofist to my lefties in Kerala and elsewhere in India from Texas.
i dunno man, "special red salutes" it historically doesent go well, I like his critique of capitalism but going strait to red salute mode? really? Maybe read some Orwell or Gulag Archipelago before you get too excited
Thumbs up for Richard Wolf as Bernie's Treasury Secretary.
Lol bernie would never hire even a revisionist marxist like wolff
@@benjaminheim735 can you explain how he's revisionist, and can you point to what you feel is a better explanation?
Superbly concise and easy to understand explanation. Thanks!
You have nearly got it now , except Sovereign governments do not need to create debt to create money. They can spend it directly into the economy.
The whole process of first creating Government bonds and exchanging these with a central bank for money, is all smoke and mirrors, that serves only to enrich the elites and the banking sector.It can and should be eliminated.
Sovereign governments can create debt free money by spending it directly into the economy.
On the other hand , you have still not quite got it regarding commercial banks.
You implied that they still use a fractional reserve system when creating money from debt,
They do not, and have not for at least 50 years.
Their only consideration is whether they can balance their books at the end of each day, basically their liquidity.
The English Bank Charter Act of 1844 took the first step to preventing banks from issuing their own currency (Bank Notes). The Federal Reserve act 0f 1913 did the same for US Banks.
But commercial banks got around this by creating ledger money as debt, firstly as checking Accounts (sometimes referred to 'Check Money') and later as electronic money.
Today, as much as 97& of new money is created by this process. How much is created and how it
is allocated is almost solely decided by private individuals for their personal profit.
Once again governments need legislation to stop this practice and to take back full control of a nations money supply and to some degree its allocation.
Think I need an infographic to follow this one 😐
MTT is refuted by the performance of Singapore. They had a budget surplus of 3.84% GDP in 2009 and has no net debt when assets and liabilities are booked. According to MTT they should have a lot of slack, with high unemployment and low productivity. The opposite is true, they have low unemployment and high productivity.
a good thing to keep in mind...
"figures never lie - liars always figure"
I don't understand "Modern", your honour. I was taught 50 years ago already that primary banks could "create" money through loans based on a lever between deposited money and lent money. The idea of the bank's liquidity (reserve) was part of that lesson in secondary school. At that time, computers started to appear, but the principle must be older, so the idea that creation of money is linked to bits and bytes makes no sense.
Again, I don't understand why "modern".
"Modern" in this sense means "post-Keynesian." MMT was developed by William Mitchell and Warren Mosler in the late 20th century. It's also "modern" in that it stands against the older, classical academic models of economics.
Mmt seems to have the same problem that most economic theories have. When you focus on the ABSTRACT money, you almost always forget that REALITY on this planet is about REAL RESOURCES including breathable air, water ,plants, animals, minerals, etc. We only live VERY INDIRECTLY by money, but ultimately money cannot give us food water and air, if we have not USED OUR MONETARY SYSTEM TO MAINTAIN THE LIVING EARTH BIOSPHERE !!! Money is NOT primary, or even secondary, it is really tertiary !! It AT BEST is a TOOL that we can use to FOCUS on THE LIVING EARTH ( which we are killing) and on how we can be stewards of life !!
Money is like the placebo effect, if you explain it to people, it may stop working
Wow, that is awesome! You should print that on t-shirts!
@Rabble Repository I think you misunderstand the comment. Money is a trap. It's like the picture of an old woman or a duck, depending on how you look and focus.
they might figure out 12 people can do whatever they see fit with federal reserve notes
How is money like a placebo effect?
@Rabble Repository 1. Money is a store of value that acts as a means of exchange. 2. Using religious text to evidence an economic point is silly at best.
This is one reason why gold is seen as a very durable money. It holds value, is divisible, and has a high value to weight ratio making it easy to carry around.
When an employer pays you for services, are you indebted to that employer? NO, the money, or currency, is the balancing of the debt the employer has for services rendered by the employee.
Gold is Money ,.
Silver is money ,
Paper is a unicorn's and rainbows mystery
@@TheTazzietiger I would have thought that there IS a difference: fiat money can be printed endlessly. Gold and silver can not be printed endlessly.
Does the video continue?
The ending appears to be mid-sentence
2:30 talk about leaving out the history of money.
Last 30 seconds sums it up nicely. Thank you, Professor.
Yes, MMT doesn't talk about revolution, Marxism does, so MMT is irrelevant - something like that.
False conclusion, D Bruce. MMT really is a Post Keynesian school of thought that centers around demand and growth. It breathes new life into a dead horse. The something new that Prof. Wolff talks about is Marxian, of course, but doesn't need to be. There are other big thinkers out there: the 2 that are fantastic for me are Henry George and Silvio Gesell. Prof. Wolff is right to point out the shortcomings of MMT. Social engineering thru monetization is killing the country and the planet.
@@peternyc Wolff has misrepresented MMT - MMT is a description not a proscription.
Ref Henry George - yes, the Single Tax is the silver bullet ;-)
@@smartiepancake not a flat tax
@@wtfhah No - THE flat tax (which we are all already paying anyway so why not make it governemnt's only source of income, on top of which allow me to remind you of the main feature of the single tax - ALL other taxes are abolished)
Thanks professor, very cool! But still, are there any concrete theories within MMT? Because what you're saying sounds like pumping the economy with money to resolve peoples' problems and somehow that won't lead to inflation.
MMT recognizes that spending is limited by resources. Over spending can lead to inflation, but only if spending exceeds resources.
Creat credit ONLY for productive purposes, and mostly small banks will do this , big Bank will create consumption inflation and Asset bubble
MMT is an empirical description of how a monetary system with a fiat currency works. It IS a theory. It doesn't DO anything.
The way i understand it, is pumping money into the economy is good as long as it doesn’t cause inflation.
There are special times when it doesn’t like when we have high unemployment and can spend the money to increase our production capacity.
Correct?
I wonder what this theory would say about stagflation in the 70s?
You kick ass Mr Wolff, thanks.
Richard looks like he smoked a big ole doobie here. Rock on, brother! Keep telling the truth!
Great channel
Richard is so much fun to listen to. I want to hear him have a conversation with Asher Edleman. To see where they might agree and disagree.
He had an amazing conversation with Micheal Brooks from the Micheal Brooks show.
MMT allows us to pay for reforms under capitalism and while those reforms do help as I’m sure we all know we need to go further than that and get ride of capitalism entirely.
I think MMT has a lot of potential for transforming the economy through creating more democratic workplaces. Given the current political reality of the US, it's something of a pipedream, but imagine this: A Federal Cooperative Investment Bureau, empowered by the flexibility allowed under MMT to fund and fuel new cooperative startups, in order to grow the democratic sector of the economy. The tools enabled by this macroeconomic understanding could allow us to grow the nascent microeconomic reality of worker cooperatives into a full-blown socialism.
I can't like this comment enough
MMT doesn't fund things. It describes the monetary system.
The wealthy understand how to manipulate the system to benefit themselves very well. Ordinary people need to learn MMT in order to understand the monetary system they live in.
You can watch The Rogue Scholar, Macro'n'Cheese, or MMT Mondays to learn it.
@@susanmercurio1060 I suppose I should specifically say, it describes the monetary system in such a way that federal funding of important initiatives becomes more politically viable.
@@ErikratKhandnalie : Oh, absolutely. The MMT economists have been saying for years that the only thing preventing the government from funding the very things that the people need is *lack of political will*
Our government practices hate, not only towards the many people overseas that they are bombing or sanctioning, but for the majority of American citizens as well.
We really need to get rid of it and replace it with a more humane version. If you read the Declaration of Independence, it's not only our right, it is our DUTY.
but if then that then why and how anyway @@ErikratKhandnalie
WELL SAID !! THANK YOU
This is an explanation of the modern system works. It is not a proposed solution or antidote to the immorality of the current system just an explanation. Dr Wolff explains that at the end
Finally, someone says that taxation is just a monetary policy management technique.
Except, he didn't say that...
@Nathan Prescott
"Finally, someone says that taxation is just a monetary policy management technique."
The quote you pulled doesn't say that...
Word lawyering is a serious problem in the world today. It really gums up conversation, at a time when conversion is needed most. It is very important not to allow word lawyers to drag you into the weeds. This is a favorite trick of internet "debaters."
You're calling the wrong game - this one's called "spot the logical fallacy" and the answer is 'equivocation'; look it up, you're knee-deep in it...
@Nathan Prescott
If you can't spot an obvious logical fallacy, I can't help you...
Whether it's electronic or paper, creating more of it too fast makes it worth less...until it's worthless.
Joel Rodely no
It sounds like MMT is great for keeping an economy stable, so long as governments act fairly in their power to create and distribute new currency accounts and tax/pull back that currency as required. What happens when they decide that people making a certain widget are more deserving of new wealth or people of a certain race are less deserving? What’s the best wait to fairly implement this policy so there are not individuals who gain or lose too much over time?
MMT doesn't *do* anything. It is an empirical description of how the monetary system in a fiat currency works.
The $ is a unit of account. Per our Constitution Article one section 8 states that only Congress can Mandate spending and taxation.
The federal Reserve was created by Congress in 1913.
Congress can pass a bill and it will be paid.
"How you going to pay for it? "
Congress passes a bill and funds it.......
Federal Government does not need revenue.
Individual States Need revenue. ..
#LearnMMT Look up Dr Stephanie Kelton
Prof Wolff is indeed one of the living great educators in economics today! Thank you.
thanks so much for explaining MMT to us, Dr. Wolff, i have heard others explain it, but never got it until you explained it 😊
lol, money has always only been an "accounting mechanism". That is literally the purpose of it.
I have studied MMT for 4 years. I agree with 99% of MMT, but the idea that higher rates are stimulus is RIGHT ceteris peribus, but it is WRONG in reality. After 40 years of Fed puts and multiple expansion in the stock market, if interest rates are raised, APPL would be trading at 12 times earnings at 5% interest rates rather than 35 times earnings at 0% rates and QE. Imagine if everyone woke up and there stock portfolios were down 50%! Higher interest rates would also tank real estate and yes, money would flow from the gov to the private sector thru bonds, but net worth would crater and this would be restrictive, not strimulative. Someone please tell me why I am wrong
I admit, I do not understand this. What exactly happens in the bank when someone makes a deposit?
If you hold 10k in cash currency and want to deposit it with a commercial bank, you take that 10k in notes/coins to the bank and say as much. They will then create a deposit account for you and credit that account with 10k (literally just enter 10k in a database entry and press enter and save). The bank then will likely keep this cash in a vault or ATM ready for when you or other people make withdrawals. The central bank could also take this cash off your bank and credit your bank's reserve account with them instead.
Before: you had 10k in assets (your cash) and no liabilities, the central bank had 10k in liabilities (your cash), and your bank had no liabilities and no assets (for simplicities sake).
After: you still have 10k in assets (your demand deposit account with your bank) and still no liabilities, your bank has 10k in liabilities (your deposits that they owe you should you wish to withdraw) and 10k in assets (the cash in their vault or ATMs or reserves created for them by the central bank), and the central bank still has 10k in liabilities (the cash or newly created reserves)
money is only as good as the value it represents
That goes for everything, you dipshit.
US has $210 trillion in speculative derivatives money right now out of $710 global trillion speculative derivatives "market." - It's all gonna crash soon.
_"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."_
- *Henry* *Ford*
_"Physical slavery requires people to be housed and fed. Economic slavery requires people to feed and house themselves."_
- Zeitgeist: Addendum.
ruclips.net/video/HbvCxMfcKv4/видео.html
_"Slavery is likely to be abolished...and chattel slavery destroyed. This I and my European friends are in favor of, for slavery is but the owning of labor and carries with it the care of the laborer, while the European plan...is capital control of labor by controlling wages."_
- Hazard Circular, 1862
99% of people do not understand our banking or monetary system. For a introduction to modern banking & monetary theory, see the introductory educational series MONEY AS DEBT.
ruclips.net/video/2nBPN-MKefA/видео.html
Exactly. He's talking about money while ignoring value.
Zimbabwe printed lots of money and they all became trillionaires.
Venezuela is giving it a shot as well.
Money is stored energy. The energy that goes into mining gold, for example, is what gives it value. The materials and effort that go into baking a loaf of bread gives it value. The US dollar does not store anything. We just think it's a store of value.
Don't get me wrong. If someone wants to toss a bunch of dollars my way, I'll gladly convert them into assets. But the dollar itself is not an asset.
It caused the great inflation of 2021-2023, that is its contribution, just like Richard Wolff's economics caused a minimum of 100 million deaths, with at least 50 million of that from starvation
What would this theory say about stagflation in the 70s?
The accounting mechanism is a big part of the economy. Professor, you are right because I have mortgage from the bank.
Perhaps I'm not understanding it. If MMT is correct, in order to control inflation and pull money out of the economy, politicians will need to proactively raise taxes.
They will, optimally, do this BEFORE, the inflationary pressure is really being felt by the average voter. In which case it will almost certainly be seen as as unnecessary.
Alternatively, politicians raising taxes AFTER the inflationary pressure is felt by voters, will leave them feeling like the government adding to the voters' pain.
So even if I trust MMT theory, I'm reluctant to trust people.
Prof. Wolff, I'll give you credit for sounding more intelligent and plausible that Warren Mosler, but, that being said, MMT is a pretty dangerous ideology passed off as an economic theory. A few thoughts ... It stands to reason that prices go up when there is more money chasing the same quantity of goods and services. So, theoretically, if printed money were use to, say, build a railroad, university, or telecommunications network, which increases productivity, efficiency, and production levels, then there could be more money in the system but also more goods and services, so prices overall could remain stable or even fall. However, this is pretty theoretical and the spending would need to be carefully targeted and considered on a case by case basis. Prof. Wolff, you seem to suggest that unemployment can be eliminated by simply printing and spending. Some people are unemployed because they produce nothing of value for other people, and so guaranteeing them a job would be inflationary, i.e. by paying them money there would be more money in the system chasing the same amount of stuff. Inflation means the currency is worth less than before, so, for one thing, this would make it more expensive for a country to buy goods and services from other countries. The assumption that taxes can be used to reduce inflation is pretty dubious, since collecting taxes does not reduce the money supply. Taxes and typically collected and then spent. At some point, there would be so much money in the system that it would either (1) lead to hyperinflation like in Zimbabwe or the Weimar Republic, (2) create speculative asset bubbles like the housing bubble of the early 2000s or the bubble in the bond markets that we're currently seeing (high bond prices correspond with negative interest rates), or (3) a bit of both. Hyperinflation and speculative asset bubbles are both highly unproductive situations that in the best case scenario lead to a very small number of winners (as in any casino) and a large number of people who lose everything. Negative rates in the bond markets are currently reeking havoc for pension funds, which is going to impoverish a lot of people entering retirement.
It's true - MMT doesn't have a great deal to say about transforming a capitalist economy to something else. (The idea of a "jobs guarantee" creating a "buffer stock" of labor as a _commodity_ to be shifted in and out of private, capitalist enterprises as the _market_ demands says more about the underlying neoliberal premises of MMT than anything.) But the _real_ question that I wish had been answered-and might be in a future video-is what does a _Marxian_ view say about the underlying insights of MMT? How does MMT change a Marian analysis, if at all?
The Rogue Scholar has a video about the intersection between Marxism and MMT.
All MMT is saying is that any sovereign govt can create all the currency necessary to account for the productivity of its nation.
What people seem to be missing is the fact that it is the creative and productive aspirations and abilities of a nation's people that is the TRUE CREATOR of any currency that can ever, or will ever, exist. And govt printing/creation of the actual accounting unit (currency) is merely the recognition of the value of the creativity and productivity occurring within the nation.
Currency is created by people wanting to produce things for society - not the other way round.
The ability of people to actually produce goods and services totally depends on the resources available to them.
No one can simply create currency without it accounting for the actual value of a productive effort and the product or service that was produced.
All due respect sir, I think you mix it up a little bit : in MMT, banks don't create money. When they originate loans, no money is added to the non-government sector's balance sheet : the deposit on the borrower's balance sheet assets column account is matched by the debt on their liabilities column. Only the gvt can increase (via deficits) or decrease (via surpluses) the non-government sector's net worth.
It is precisely because of this that the gvt's balance (notice that there is no need to call it gvt debt) is actually VERY important! MMT economists actually argue that the GFC was in part caused by an insufficient fiscal deficit, compensated by the non-bank private sector's running increasingly into debt to keep the economy growing (aided in no small part by the orthodox view held at the Fed that, as you seem to imply, growing the "money supply" through private debt is harmless...).
This is a very important insight : relying too much on private debt creation to finance the private sector's consumption and investment needs is simply unsustainable. That's why it is very important to have a fiscal balance (generally deficit, but if for some reason the private sector decide to run down their savings, you might need a surplus) that keeps the private debt stock in check, while pursuing whatever democratically agreed upon objective for the community (for instance full employment, but that's another story)
But you correctly point out that MMT per se does not propose a different economic system. Its proponents would say it is rather a more accurate description of the workings of the monetary / economic system and its limitations, from which you can better devise an economic / monetary policy.
Yeah great...corrupt agenda driven politicians being given more power than they already have.
I guess people better hope their cause and concerns are shared with David politicians or you are out in the cold.
If you think corporations and lobbyists are powerful now just wait til dystopian MMT becomes the norm.
Unless Jesus or Ghandi is in charge you can forget about people and their plight being the top concern of controlled politician's. It's actually how it works now only it will be much worse...
@@northeastbirdsmore2281 : Sadly, "dystopian MMT" is already the norm, since MMT describes the system we are currently using.
Fascinating
Thanks Kyle
Solidarité
Banks can only create money out of loans. So if money is created out of loans. Then how can society ever become debt free? It cannot. And that’s the point. Also proving that money is an illusion. It’s bullshit. Money is debt. Debt is money. And what do people do when they’re in debt? They submit to employment to make enough off of the money supply to help pay off their debts. The more new money that is printed and added to the existing money supply. Currency devaluation follows. Resulting in inflation and more debt topped by interests. According to MMT. If all debt was eliminated today. There wouldn’t be $1 left in circulation.
Excellent!
you can make an argument that fighting austerity is a necessary precondition for socializing production, or to put it another way that the evolution of "advanced capitalism" into "socialism" described by historical materialism requires the facilitation of easy capital - and, no, we're not there, not even close. we've reverted since 1970. so, i would rather suggest that the reversal of austerity is a necessary but not sufficient condition for socialism than completely disassociate the ideas from each other. but, wolff doesn't seem to like historical materialism, which he seems to see as a kind of retarding force against proletarian insurrection. and, that really reduces the question to whether you're focusing on marx' economic theory or his political ideas.
it's a good way to frame the differences between a marxist like wolff and an anarchist like myself, though.
wolff seems to think you want a proletarian revolution, and keynesian economics is just getting in the way - they're saving capitalism, not tearing it down. ach! but, this is actually kind of nineteenth century thinking, which is not surprising, because marx lived in the nineteenth century. marx famously declared himself not a marxist (albeit sarcastically), but if you take historical materialism seriously, you'd have to conclude that marx would see ourselves at a different historical stage, and consequently produce a different prescription - worker revolts may have made sense in an industrializing economy, but how much sense do they make in what is actually a post-industrial society? regardless, this is what wolff seems to want: an insurrection to take over the factories, as though there are factories to take over. you'd end up moving from what he sees as a primitive type of capitalism directly to socialism. so, of course the liberals are just getting in the way.
but, i'm less interested in marx' political ideas and more interested in the political ideas of a bakunin, which have evolved in a different direction. marx is important to me, but only as a critic of classical economics; i like his economic critique, but find his political theory lacking. anarchists always argued that you want to get right to communism. in an agrarian economy, that meant radical land reform, in an industrial economy it meant storming the factories and kicking the workers out along with the managers and in a post-industrial or technocratic economy it means finding a way to take control of the servers and commandeering the supply chains and distribution networks, almost like some kind of hacker utopia. to get to a revolution the way i want to have it, we still need quite a bit of state investment in network infrastructure - the machines have to exist before we can steal them, and a worker society is more likely to sabotage them than actually build them. we need to rely on the short-term, self-interested greed of capitalism for a little bit longer, still, before it makes sense to launch a technocratic utopia.
he's not wrong in pointing out that mmt is not a revolutionary theory, because it really isn't. but, i think he's being a little too dismissive in ignoring it's ramifications. again, though - it depends on how you're looking at it, and what you want out of it.
in the past i've articulated what i'm getting at like this.
1) classical liberalism was the way to maximize freedom in an agrarian society.
2) socialism was the way to maximize freedom in an industrial economy.
3) but, what is the way to maximize freedom in an automated society?
the intuitive answer is something like full communism, but i think we need an updated theory in a fuller generality, from first principles. and, as socialism was always a critique of liberalism, i would expect a good economic theory for an automated economy will come in the form of a critique of socialism.
@@jessicavlogger You need to read Gramsci!! His war of position is an answer to this. But summary you give is not historical materialism... we do not live in an 'automated society', we still live in capitalist societies, they have changed a lot since Marx which is why Gramsci and others are so important but capitalism has not gone.
i don't think you understood what i typed. please try again. read it slowly, if you have to.
and, no - gramsci did not address the question i'm presenting. at all.
stated a little more simply: wolf seems to think that if you enforce austerity from the top, you'll stimulate a revolt. but, this is not really marxist in a classical sense - it's more in the stinky mlm type of tradition. marx would have actually argued that austerity is just going to stifle the capital development that you require to get to socialism, and keep capitalism stuck in a kind of retarded state of arrested development, which is what has actually happened.
it's easy enough to acknowledge wolff's frustration with a liberalism designed to prop up a failing system, and pseudo-leftists arguing in favour of continuing the charade. but, i think he's delusional in thinking that a worker revolt in 1920s america would have ended up much differently than the ones in europe. hitler was never really unpopular in an america that was actually majoritarian german at the time, and america has it's own very scary history of racism to project forward - hitler was, indeed, clear enough that he modelled his eugenics programs on the ones put forward earlier by american "progressives", mostly in california.
this aged well keynesian economic model which says government monetary policy doesn’t have an effect on the economy relying mainly on the philips curve got disapproved in the 1970s after the stagflation and once milton friedman came in with his free market, tax cuts, low regulations approach inflation subsided and that led to a 20 year boom. Looks like the same thing will most likely happen again
This guy can explain everything very easy, i would like to hear him talking about the messy russian civil war
You seem to be asily fooled.
Private banks create “bank credits” denominated in US dollars. Only federally created dollars (because the federal government is the monopoly issuer of the currency) are “new assets” added to the economy.
I love learning MMT ❤️
Money is created when banks lend out more than they receive in deposits. Ultimately criticisms of endogenous money supply theory have been hilariously bad, that's MMT's main weakness.
@@jackjak392 MMT is a description of how currency functions. It has neither weaknesses or strengths. It’s simply a description….and banks don’t ever create currency. Their deposits or lack thereof have nothing to do with that fact. They only create bank credits denominated in US dollars.
@@lyni50 Lmao Marc Lavoie and other Post-Keynesians have flat out debunked your talking points, also we're referring to money, not currency.
@@lyni50 Also any theory can have strengths and weaknesses. For example, I already pointed out one of the weaknesses, which just so happens to be an outdated understanding of liquidity adopted by idiots. What exactly is your point by this?
@@lyni50 If economic theories were only descriptions and didn't pertain to any weakness or strength than I'm pretty sure economics wouldn't be as dogmatic as it currently is, dear.
By lending the bank is creating an asset, a claim on future earnings of the borrower in the form of repaid principal and interest. If the loan goes into default, the value of the asset is greatly diminished. It's not liquid like currency. Yes, banks introduce new "money" into the economy through lending and that is not a new revelation. That money comes with a price, however, and the price is that it must be returned and with interest. Loans made to finance unproductive enterprises, writ large, are exactly what precipitate depressions.
Money is a human invention that can be as limited or limitless as we need it to be. The fact that humans and the resources we depend on for survival are organic and change in nature automatically lays to rest this notion of money needing to be this limited resource that a few people (central bankers) should control in order to maintain overall sustainability. Once we tie a monetary system's infrastructure to the organic nature of the natural world, using the global water table as the valuing mechanism, therein lies the incentives to do what needs to be done to combat Climate Change, create more jobs, and be more responsible for our planet's natural resources but still put the needs of all people over the pursuit of profit.
Vast omission on the matter of inflation. As the production and supply side is indeed real and if you just followed what MMT wanted you would just cause inflation and worse case scenario cause levels of inflation that would bring an end to reliability of the fed. You have to have a way to negate the inflation if you are going to just lend out new money for all sorts of non production based spending. On the other hand if you used mmt to increase money supply to increase supply side production. You can have more foods and more money and then you dont have inflation. Keynesian economics is essentially MMT its not really new. Its just a new lable for keynesian economics. As we have deindustrialized and have less of a manufacturing sector until these sectors return we wont be able to do a MMT strategy because you do have to increase the supply side alongside the money side.
Dollar is world reserve currency. USA is expected to pay the principle of the debt like any other countries.
In order to gain wealth you have to sell something instead of just spending, but USA just kept stretching the world credit card. MMT would work if dollar wasn't world reserve currency like Venezuela peso.
I agree with the view point. Thanks Professor. You are a good teacher.
Thanks Professor Wolff. I was trying to understand MMT and this helps a lot
Professor Wolff provides us with a good explanation of the assertion of MMT ecnonmists that banks create new money when a loan is made. As a former banking officer with a degree in accounting who managed a loan department for a commercial bank, I have never seen any evidence that this assertion is true. If it was true, banks would never become insolvent, never be forced to close their door. who managed a loan department for a commercial bank, I have never seen any evidence that this assertion. Banks continue to compete with one another for our deposits. Why would this be necessary? Banks continue to issue and sell bonds. Why would this be necessary? Banks continue to raise funds by selling shares of stock. Why would this be necessary?
To get back to the basic problem as Professor Wolff describes, the Federal Reserve System is the only entity in the financial system authorized under law to create purchasing power out of thin air, to essentially self-create credit. The impact is somewhat mitigated by the fact that most of the Federal Reserve's profits are returned to the U.S. Treasury.
What would a sound money system look like? We should at least have a serious discussion about how to resurrect and strengthen the full reserve of precious metal coinage as existed with the Bank of Amsterdam in the early decades of the 17th century.
Wolff provides an inadequate explanation of the process.
Nobody can create something out of nothing. You can't pull a positive asset out of the void. Money is always a double-entry accounting phenomenon. For every positive asset saved somewhere there is a negative liability for somebody else.
So, of course a licensed bank can't create assets out of thin air. It's only as good as the loans on it's balance sheet.
But the deposits created when bank loans get financed are still incomes to the respective costs of production. If banks don't create purchasing power against their liabilities, where exactly do you think the additional funds come from? As a former bank employee, you of all people should know there is no such thing as a static money supply. Modern credit-money is elastic.
That doesn't mean banks don't need to compete for the deposits they have created. Bank A can finance a project, entering debts on its ledger equal to the financed costs of production, resulting in a deposit in an employee's account at Bank B. There is then a market for that deposit for market reasons separate from the creation of positive / negative values in the initial financing.
Why on earth should the owners of an arbitrary commodity hold an advantage over everybody else in provisioning a monetary value system? It places one function of money - store of value - over and above it's equally important role as a unit of account and system of payment - a means of creating a numerical value container to measure material production-consumption.
@@OgallalaKnowhow Perhaps I was insufficiently clear. I argue that the problem with our monetary and banking system is systemic. Individual bankers often make unwise business decisions that erode profits and erode the bank's capital. The individual bank cannot create digital monetary balances out of thin air. Only the Federal Reserve has this power.
I then put forward one option for reform: creating a system of deposit banks separate and distinct from lending institutions. To get some understanding of how this system worked in the early 17th century, I encourage you to pull down a copy of "The Wealth of Nations" by Adam Smith. It may be that a new version of "receipt money" should be backed by something other than precious metal coinage. There are valid reasons for moving away from gold and or silver coinage in favor of a basket of commodities (as is today utilized within local currency networks, as developed by the economist Ralph Borsodi decades ago). One economist put forward what I believe is a very rational idea of establishing curency redeemable in construction bricks, which have many of the positive characteristics of precious metals and none of the negative.
@@nthperson - You argued that banks cannot create new money. I.e., that loans are made by transferring existing deposits.
But they DO in fact create money. When banks finance a project they transform the cost schedule into incomes in various accounts. These balances are not transferred from already existing deposits from one account to another. This isn't creating something out of nothing, spinning gold out of straw. Because this process of creating positive balances simultaneously creates negative balances.
The central bank acts as the gatekeeper. It allows these private bank debts (only from Tier 1 licensed banks) to enter the world as public money. Yes, only the central bank can issue public money balances out of thin air. But we live in a hybrid private-public monetary system that only works when private bank money is understood as synonymous with a common unit of account.
From my understanding, Adam Smith took a view similar to this known as the law of reflux.
It does not matter what substance it is. Binding the means of payment to a static quantum of units forgoes the entire advantage of a capitalist monetary system - its dynamism. If you were only able to spend with money that was somehow backed by previously produced commodity values then, by definition, you have a static system where no new values can be added!
@@OgallalaKnowhow What you describe above ("When banks finance a project...") involves the reallocation of cash on hand to make a loan to someone or some entity. Of course, no particular depositor's account is affected. The aggregate amount owed to depositors is because of loans made offset by receivables. Regulations require that the bank cannot lend out all of its cash; some must be held in reserve to satisfy depositors who wish to withdraw their cash. My point is that no new money is created by this process.
As to the role of the central bank, part of its responsibility to to serve as a lender of last resort to member banks who -- temporarily -- might experience an unexpected demand on its cash reserves.
Adam Smith had no problem with the banking model established by the Bank of Amsterdam, anticipating that the supply of precious metals that could be coined to back the bank's "receipt money" was reasonably elastic. Now, today, we take into consideration the environmental damage caused by the mining of gold and silver ores and the huge cost of security to protect these precious metals. So, what tangible goods might work as the fixed value of receipt money? Local currency networks issue script denominated in local good (e.g., a quantity of fire wood or a basket of commodities). For a digital currency that potentially circulates globally, one economist has suggested construction bricks, which have many of the positive characteristics of precious metals and none of the negative ones.
@@nthperson - Sorry. But you're incorrect. I'm more familiar with the Canadian system which is more centralised. But the basic principles remain the same in the more competitive American banking system. Yes, there are secondary markets for deposits. Yes, financial institutions act as intermediaries between borrowers and lenders of already existing funds. But the primary role of banks is t0 monetise the costs of production. As the Banking School put it "loans create deposits."
Before the Federal Reserve, banks issued their own bank notes. New notes were written to finance a loan against the bank's own ledger. The value of these notes was equal to the costs of whatever was being financed, handed out as banknotes to workers and suppliers. Same principle happens when electronic deposits are created.
“In the real world banks extend credit, creating deposits in the process, and look for the reserves later.” Alan Holmes, Vice President NY Federal Reserve 1969.
In the systems you are describing, the hippy script and what not, there is no way to add value in the system! People are forced to work within the existing quanta of units. In order for new investments to be made, new people hired, new suppliers paid, etc., there has to be an additional sum of units created somewhere to count the costs and monetise production.
I thought of MMT when I was 5 years old. I should get a novel price
Pride and Prejudice is $12.99
The world has always reverted to commodity money after fiat money inflates to zero. The dollar lost 97% percent of its purchasing power after 1971 when Nixon announced that the US dollar would no longer be redeemable for gold. MMT was invented to avert going back to commodity money a little bit longer. But people will not be free without commodity money. This does not mean that we should carry silver or gold in our pockets again. But it does mean that our money tokens (physical or electronically) should come into circulation as 'hatchecks' or tokens of ownership of commodity and should at any point be redeemable for that commodity.
For the algorithm!
Wolff needs to target Intellectual property rights and how it prevents innovation and protects the rich
cool!
Are you actually taking about currency ? Not money.
any recommendations for books on MMT?
no books but, stephanie kelton's vids on here are very easy to understand. also search for a lecture by steven hail called 'budget emergency'
“Reclaiming the State” by William Mitchell & Thomas Fazi is a brilliant book and a good overall intro to the main ideas and insights. “Soft Currency Economics” by Warren Mosler is a good basic intro too. Some of the Facebook groups have it available for free as a pdf. There are some brilliant videos on RUclips tho. Fwiw: ruclips.net/p/PLdwMYgwshZ0U5IXTF9ofMbJ7yLfi-uKP4
If you want the more in depth stuff theres “Modern Monetary Theory and Practice “ by William Mitchell, Randall Wray, Martin Watts but thats like a college text book.
Yes. Start with this:
THE SEVEN DEADLY INNOCENT FRAUDS OF ECONOMIC POLICY
moslereconomics.com/wp-content/powerpoints/7DIF.pdf
"killing the Host" by economics professor Michael Hudson
Seven deadly innocent frauds if economy policy by Warren Mosler.
please talk more about fiscal policy - congressional appropriation is the key to end suffering.
"Money has always been a big problem in economics." Where is my phd?
Richard Wolf, your comment section is very educated and seem to understand mmt well
Can you go back to Jimmy Dore and this time explain mmt in simple terms, his comment section is lost after a debate between snake oil and an mmt guy
You need captioning
So there could never be inflation or a collapse of currency. And its not necessary to back currency with gold because it can be manipulated with taxes or fines.
what i miss in this story is that money is printed, and is actually borrowed from the future, creating future money devalutation.
Hyper Inflation, here we come!
Did you not hear the part about withdrawing money from the economy when it's in excess?
@@danielsmith8530 So how is what he's describing any different than regular monetary policy?
@@danielsmith8530 did you miss the part of using taxes to do that? What happens to people who spent or invested that money and cannot afford to pay a huge tax boost to repay it?
Wrong. It’s never happened simply because more money was spent
audio set too low; cannot hear what he is saying
Debate Lawrence Summers
Money is weird.
The problem MMT can't answer is one Marx can: In capitalist environment capital is not just money, it is assets that can turn themselves into more assets. What this means is that as long as the capitalist control production, they can force inflation.
Goverment printing money to say pay wages and build a road doesn't create inflation itself: capitalists who produce food for those workers building the road however can do so, as they need to raise wages to buy labour - else their workers would go build the roads. The other option is supply shortage: capitalists deside to not invest in fear of inflation, they shut the factory down and make less bread and sit on more money. This again creates inflation. If we want to print the road workers enough money to buy bread, we need to deal with this capital strike. The goverment needs to either produce the bread, give workers who don't expect capital growth the tools to make the bread, or kick down the can and cure the capital strike by for example paying part of the cost of labour capital buys.
So if we just do MMT, we get inflation through class war. Unless we understand class war and capital strikes, surplus value from labour and the role of unemployment as a mean of wage supression, we can be sure to see capital flight and other form of capital strike, as well as other forms of class war.
Soviet union had no inflation, and they didn't exactly do MMT. Until private sector and private capital was once again allowed, and what do you see? Class war in full employment environment, which produces inflation.
MMT just tells us what money is and how it is created. It tells us the govnt can create and spend money on anything it likes : it could print new money for banks (as it does now) or the military (as it does now) or private businesses (as it sometimes does) , or it could print new money to spend on building infrastructure, education, healthcare, transport and services or housing in either the private or public sector. So yes to usew your example, it could just as easily also be used to create public owned bread factories and supermarkets. MMT does not solve capitalism. It tells us the govnt could spend differently. Its neutral, like maths. What it chooses to spend this printed money on is a choice or spectrum between socialism and capitalism. It cannot benefit those who benefit from keeping people in the dark anbout MMT (banks).
I thought the idea that we can manage recessions, or rather eliminate them completely, is what created the 2001 and 2007 crash, when investors had way too much confidence in the economy and they gambled way too much. Am I correct?
Capitalism has recessions (boom and bust cycles) built into it.
97% of all money today is created out of thin air from computers/ digitally. The other 3% actually exists in physically currency. 2019: $200 trillion of global debt. $80 trillion in global money. There’s more debt than money in circulation because of interests/ principal
Dear Richard - why not just helicopter $1m to everyone then we would all be socialist millionaires like you!
What this professor does not tell you is that a newly created money kills the old existing money. The additional money created kills the purchasing power and devalues the savings. Basically, the government can steal money from savers and hand it over to spenders with a click of a button.
So recession is caused by a lack of liquidity?
Yes. My father grew up in the 1930's. I once asked him, "Dad, you are always talking about the depression. What exactly is a depression?" He replied, "There's no money around."
i thought money was regulated in the available resources that existed...so for example oil increases in value cuz its limited, but money is not itself an asset, its just a tool to use for ease of trading resources that have a value...money in itself should be worthless or the amount paper is worth that its printed on....also coins should have more value since, ten, copper, silver, zink is a limited resource...
We don't have to go through Recessions is utter Nonsense.
If the government is the problem, more government can't be a solution. Governments, central banks and all other banks need to stop issuing money (paper and digital) and people need to value only those forms of money that appears naturally on the market, any lasting and practical commodity will do, as it had worked for hundred of years.
Does he ever say if he supports this MMT madness?
Gilmartin nothing mad about it
So it'd be safe to say that Wolff agrees with mmt?
6:19 MMT and economic systems...not much commentary with regards to "But...small BUT at the end." For over 30 years, more than half my life, MMT has been the mechanism for 'Money on Account'. At the university I graduated, MMT is taught but for bits & pieces, cursory reference only. MMT repays study for one reason. MMT is tool for the Establishment. BTW: No easy task for the indoctrinated to learn MMT.
"It's an important and popular fact that things are not always what they seem." - Douglas Adams
Careful as we will, careful as we go.
without money remaining an iou from the government monitized by the treasury but becoming merely an invention of arbitrary self appointed lending institutions, don't we then get runaway inflation at least.
Mmt claims that inflation is based on scarcity of a product.
@@-robert-james- FFS... It's also based on an abundance of currency all chasing the same supply. It's called demand-pull inflation. Printing more money is fine only if you increase production enough to keep the supply in proportion.
No government in the world "issues" currency.
2:13 The government creates the *currency.* Banks can create *"money"* with credit.
So... As long as I have a credit card with no limit, I can't suffer economic hardship? Are you sure about that?
The problem I see is that money (gold and silver) must first be accumulated (worked for) before it can be invested. Debt (currency) is invested before it has been accumulated (taxed). It's like saying payday loans are a good way to run a budget. I disagree.
You're comparing the government's "budget" to your own household budget, and applying the same logic to both. It's a common mistake. We have a gut-level understanding of our own budget.
The word "budget" shouldn't even be used to describe the government's activities, though. Since they are the currency creator, they can never go broke for a debt in their own currency.
You use the country's currency to pay for your credit card. Your credit card doesn't create more credit. Look up the story of "Fortunatus' Purse." That's the difference.
@@susanmercurio1060
Alan Greenspan said it himself "The US gov't will always have dollars to pay its debts, but there's no guarantee as to the value of those dollar."
Debasing the currency is how empires fall.
Spookie economics that defies arithmetics. If you print tons of money, you get hiperinflation. End of story.
So why not lately? We've seen some but nothing major.
Yeah let’s trust a handful of individuals to decide how all money should be managed
You need to have a expert in modern monetary theory to explain it to you on your show,such as Stephanie Kelton i am sure she would come on your show.
What happens when people lose faith in the system?