L. Randall Wray - Modern Money Theory for Beginners
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- Опубликовано: 4 июн 2024
- As tax day approached, St. Francis College Economics Professors launched their first Economics Week with three days of guest speakers, and student research.
Professor L. Randall Wray, professor of economics at Bard College, discussed "Modern Money Theory for Beginners" on April 6, 2018.
His current research focuses on providing a critique of orthodox monetary theory and policy, and the development of an alternative approach. He also publishes extensively in the areas of full employment policy and, more generally, fiscal policy. Wray's most recent book is Why Minsky Matters: An Introduction to the Work of a Maverick Economist (2016). Professor Wray will also talk about the Levy Economics Institute of Bard College MA and MS Programs in Economic Theory and Policy.
sfc.edu
MMT can be summarized as “this time is different”.
Yes, sure it is…
The real 'difference' is it will be worse than when it failed before.
I think the history of money is absolutely fascinating
I felt this review plodding and superfluous. Altho for someone who may have never picked up a single book on any of this I suppose it's adequate. Not concerned if I come off any particular way, just sharing my experience for anyone else desiring an intro to MMT without all the redundant intro info. Cheers.
Erin, I found it fascinating too. As irrelevant as it might be today, going over early concepts like bartering are good foundations for what is to come.
Erin Taylor I agree😜
I think history is fascinating, money, weapons, even history of toilet paper
you mean the history of current-cy eis ,because all currencies becomes past
This lecture should have 25M views by now!
Because it is nonsense vacuum thinking?
@@ThomasJScharmann Did you listen? It's not a theory, it is a description of today's economy. Everything stated here is directly observable.
@@billmitchell2080 oh and economy is doing great yeah?
@@colingifford3113 you are aware that the US economy has become more volatile due to the adoption of Milton Friedman style economic policy. Reaganomics is a shitty term to use, however it puts the blame on the party and the individual who put it into practice.
Also, Nixon is the president who negotiated the deal with OPEC to only sell oil in US dollars. Which allowed them to fuck with the value of the US dollar and hurt the US economy.
@@billmitchell2080
(1.) No sir, MMT is *NOT* a description of today's economy, and *NOT* everything MMT claims is observable in any economy. Wray gets away with saying such things because all economic and/or monetary theories much have many points in common, but that doesn't mean MMT is currently in use, much less was *ever* in use ... though I'd grant you that it's possible that MMT's precepts were previously in use during the *Fall of the (Western) Roman Empire in 471 AD* - after all they had a lot of uncontrolled inflation, which is more-likely to occur under MMT's precepts, than any other so-called "theory".
(2.) Please explain how MMT squares with the *Federal Reserve Act* - which says the Fed can only issue money by exchanging newly-printed money for "high-quality" collateral of equal value, which has usually been bonds. (As you should be aware, "high quality" is required to ensure that the value of said bonds do not decline due to heightened suspicions of a pending US default, or US inflation.)
(3.) MMT claims they'd issue money by exchanging newly-printed dollars for government provisions or programs, and use taxation or borrowing to fight inflation, if such a threat arose.
(4.) MMT has never truly been implemented anywhere, except perhaps the Fall of the western Roman Empire (mentioned above), or perhaps during the *Weimar Republic of Germany* about a decade prior to WWII, when Germany suffered inflation so high that prices doubled roughly every hour.
(5.) Actually, MMT is incompatible with central banking, so that's a peculiar problem that all your Giants of MMT have swept quietly under the rug. Please kindly leave your thoughts and comments on that score, I'd love to see your reply.
16:00 "Where does money come from?" For a minute I genuinely thought he was going to say "it grows from the trees" 😂😂😂
Well, bank notes do 😂
MMT. It was called coin clipping in the Middle Ages
Wonder if he has an inflation linked pension!
I've seen a few economists argue against MMT. But surprisingly it's the dude arguing for it here that finally really explained to me why this entire theory is complete bollocks.
Thank you sir!
It is kind of like a cult to be honest
Thank you very much Sir. My view on economics has changed radically.
@kim ama Marxism is literally defined as a moneyless society ... just say you have no idea what you are talking about
@@freddiemercury5659 The commodity of exchange used is second to the issue with power.
@@freddiemercury5659 noooooo. That's way too simplistic of a reduction. Marxism is defined as a field of studying society, philosophy, and the economy inspired by Karl Marks (and Ingles). If you think it stops at the economy then you're missing the social aspect, which is at the core of the current political movement in the west.
That's not a good thing.
@@luckyjinxer Sounds spooky. What do you mean about marxist culture?
Is a link to the documents ever going to be provided?
Can we please have access to a chart pack of the slides displayed for this lecture. Its nice watching Professor Randall speak but would have been better if the slides were displayed too.
HI, We always balance adding slides with getting the videos live in a timely fashion. We thought Professor Wray did a great job explaining, so didn't see the need to wait. Sorry for the invconvenience.
This is a terrific talk. Thanks for sharing it.
Will the slides be available? If so, is there an estimated time? Thanks. Greatly appreciated the talk!
I’d like to see the slides too.
@@stevenhail2837 Stop trying to fool people. You are an MMT pusher from a university in South Australia and already a member of the group promoting MMT.
You can't even answer why you and other MMT promoters including Randall Wray claims Federal deficits are an asset for the private sector when it is the private sector that is burdened with paying off the debt that funds deficits.
I have heard this before, but I don't know why am I only getting it NOW.
I've never understood it. I would always just get small explanations of some concepts.
This was an explanation of the WHOLE picture. And it's wonderful.
ditto... I think the simplified historic build helped.
After the inflation we got do you still think it's "wonderful?"
@@ChrisWill The inflation was caused by corporations raising their prices. Please go do your research and stop blaming money printing
Does any one have the screen shots or notes for this lecture? Where can I find them??
Thank you St. Francis College and Professor Wray.
Christ, finally. I've spent weeks trying to figure out what federal taxes are for, because the whole 'funding' thing is such obvious BS. I don't particularly agree on every aspect of MMT but this at least explains how things operate today.
Now go read about Austrian economics and tell me which one makes more sense to promote individualism and liberty.
@@mjpaganetti Like I said, I don't like MMT, I just think it accurately describes the system we're forced to live under. It's just useful to know what's coming, since we can't change anything about it.
@@rodentRoundup Youre right. We have to understand something before we can think about changing, improving or discarding an idea.
@@rodentRoundup They want you to get with the program and accept your rulers all the way.
@@mjpaganetti you are free to stand alone and starve when you get ill.
Great Lecture. I enjoyed it.
"...affordability is not the issue........productive capacity is the issue". [For a national economy]
There's a number of similar, allied phrases that go with the above..... or go against it...
Those that go with it.
-Compete on Quality (Remember Michael Porter)
-Just Do it- Focus on Action - the things that need to be done to achieve the objective
-Build it and they will come (Steve Jobs lived this)
-There's always money to support a good idea
-Investment, Investment in all things, machinery, facilities etc. Good skilled workers want to work with the best tools in the best places.
-Focus on quality - of people, systems, policies, environment (natural and workplace)
...these are all part of 'productive capacity'. Look at a few companies - indeed a few countries - where the above ethics hold and compare their economic performance, living standards etc. (Germany for example)
Those that go against it.
-Complete on Cost. Undercut competitors and you undercut your margins if you don't put pressure on your cost side
-Sweat Your Assets....drive them into the ground before renewal.
-Pay Out High Divs...
-Make everything a cost type business case
-Cost, Cost, Cost
...these and more are all factors which drive a firm in the wrong direction and impede production capacity and/or production and product quality. Sure in the short term they give the appearance of good performance, but over time.....productivity and competitiveness are eroded. Look at companies and economies that exist with this mantra.(UK for example)
In fact, the UK and Germany are a great comparison. Even after re-unification [in Germany] the two countries are still comparable. There are structural differences of course (distribution of population, geography etc.) but certainly the above factors contribute to why Germany out-competes the UK. Germany does think differently about how its firms exist in their economy and how they compete internally and internationally. So does Britain - but in different directions.
Where can we found the slides?
I cannot find A Mitchell Ennis's writings on money, can anybody help please....
Amazing, I have never heard of that like this before.
Oh yes you have. Think of Latin American economies
@sgrant39 😅 what a douche... Central American economies are tied to the Forex exchange which is tied to the dollar. If you want to look at Central American countries, look at all the twos and economic barriers the United States has placed on them.
Why can I not see the PowerPoint?😐
Where can we find the presentation of the lecture? PDF? PPT?
13:00 what is the source for 50,000-500,000 years old accounting?
I could only find 7,000 years Mesapotemia
Very interesting, I remembered Wray or Mosler mentioned something written about bees. So it was Wray that mentioned A Mitchell Innes wrote about bees and two books about money. While searching out of curiosity who he was talking about, I came across Bernard Mandeville, who was an economist in the 1700s that wrote the Grumbling Beehive.
MMT is new to me. What I am hearing is that money is little more than a confidence game. If a country is in turmoil, an unbacked currency will lose value. LRW says trust is a thin reason for the keeping the value of money, but MMT is based on it. Secondly this type of economy does not rely on the objective measure of supply and demand, but rather the subjective judgement of self interested leaders who control money supply and taxation. Even smart people can make big errors.
LRW states that the US economy was doing very weill into the mid 70's. Coincidentally we left the gold standard in '71. Coincidence?
When we left the gold standard in 1971 debt climbed exponentially and so did the disparity of wealth. Printing money we don't have enriches the powerful and makes billionaires out of millionaires. While we’ve accumulated 20+ trillion in debt, the poor stay poor, the middle class treads water, and the rich get astronomically richer. Where does all that borrowed money go? To the wealthiest. When the money is circulated they can get much closer to the printing presses than the ordinary citizen. I think there are major flaws in this theory.
Ed Hauser MMT also assumes that the people controlling the levers of the system are trusted and competent. A monetary system needs to trust-less and controlled by no single power
Economic investigator Frank G Melbourne Australia is following this informative content cheers Frank 😊
Hi, he says money arose out of the ancient tribal practice known as 'vert gild'. not sure if i am spelling it right but i cant find any material. Please share a link? Thank!
It's spelled weregild
@@josejaimes-ramos1546 thank you so much. He also mentions this paper called 'How Governments actually spend.' Could you please share the link or something? Thank yo so much.
A couple of things you have to ask yourselves is why MMT may not be practical for us, since if no answer can be found, it is a sound path to embark on.
MMT's core fundamentals derive in part from Keynes' theories, which many would argue were an ideal set of monetary & fiscal policies that could help revive economies that collapsed due to a decrease in aggregate demand. However, Keynes himself argued that his theories where to be applied only under specific circumstances where AD fell and AS (aggregate supply remained constant) in which case the Government should increase their spending and create a fiscal deficit to consume the extra surplus in supply that would remain available in the economy in order to cut the bottom & later on the top from the business cycle. In order to do this, Keynes argued that governments should run a fiscal surplus during the boom years, reducing the monetary supply in the economy that had been introduced during the bust period. This is of course a huge oversimplification of his theories, however, few economists outside of the classical schools of economic thought found much issue in these recommendations, for which they were implemented by governments all over the world. The issue of course was that economic assumes that people are rational, at least to some extent, and that politicians want the best for their country, but as we all know, it is not from the goodness of the butcher's heart that we get meat to eat for dinner, it is due to their own self-interest. This meant that nations all over the world took Keynes idea's and kept only the part that was politically profitable, at the end of the day, who cared about the business cycle when elections creeped up in the corner, right? This has led nations all over the world to create huge fiscal deficits that they will never pay off. This has created different consequences for different nations since each situation is different. For those that borrowed in other country's currencies, the risk of default grew exponentially, causing many economical collapse along the years. For others, welfare states where implemented with the best of intentions to ensure that the people found themselves better off regardless of their faith, & slowly but surely these nation's cultures and motivations to continue innovating, continue growing (in terms of REAL GDP) and continue prioritizing their liberties over their paper money has subsided.
Now, where could MMT fail in the US? Let me start off by being clear, I am not sure whether it would work or not work, I am not sure whether it is desireable or not desireable, frankly, each individual's morality & ideology will lead them to a different conclusion, but I am sure that it is essential to question any theory or economical current that one seeks to adopt BEFORE doing so.
Firstly, for MMT to work the Federal Reserve would need to be politically independent in order to act in response to the levels of inflation and not to the demands of a president or congress seeking re-election. We know that on paper they indeed find themselves in this position, however, just a quick look at present times and at what has been historically done to Keynes' ideas can tell you that this is largely an idealistic utopian belief.
Secondly, The Federal reserve would need to have real time, exactly precise data on what the current monetary supply IN CIRCULATION is, the actual rate of price inflation in EACH AND EVERY INDUSTRY AND REGION since bubbles can form in all asset classes as well as all cities in the country, and one number reflecting all states and cities would not accurately do justice to the real situation on the ground. It would also have to find a way to inject or retrieve money from certain sectors of the economy and certain regions of the country without necessarily impacting all others, which would prove excruciatingly difficult in this era of special interests.
Thirdly, the individuals at the federal reserve would not only have to have even more power than they currently do, they should be expected to exercise this power absolutely perfectly, making all the right decisions at the exact right time with no margin of error whatsoever.
Fourthly, the currency value of the currency in foreign exchange markets would be expected to be analysed and controlled heavily to ensure that the country's exports remain competitive in the global outlook to ensure that more productive, supply generating companies and jobs are not lost as a result of government intervention, which would be considerably difficult since our currency follows the laws of supply and demand similarly to all other goods and services.
Even more points: Unelected officials will be given the remote control to our economy not only with the ability to create money like they currently do, but with the ability to decide or directly guide the taxation imposed upon the population regardless of the will of the people, since imposing taxes is vital in MMT's regulation of Inflation.
- In the event of that a given good's supply is reduced substantially, say Cars, the Fed would have to ensure that none of the money being introduced in the economy be directed towards the purchase of cars, since doing so would inherently become inflationary quite rapidly, for which they would have to greatly reduce the freedom independent adults have on what they want to do with the product of their work, going far beyond what we now consider the role of a government that believes in democracy and the will of the people.
- In the event that a mistake is made and inflation arises, taxation will have to be increased to levels much higher than what we currently consider reasonable, which will decrease motivation of production in the private sector thereby reducing aggregate supply of goods and reducing the amounts of goods available in the economy for money to purchase, creating more unemployment and either worsening inflation if people are subsequently employed by the job guarantee that MMT's superstars prescribe only to bid up the prices of these goods which are collapsing in supply, or creating mass suffering amongst people who have no job, have no money, have high demand for money since their tax obligations are high and are forced to see prices rise around them.
Many more things can be said about the theory but I've gotten quite tired as is. Again, I do not claim that these points are inherently valid or that MMTers cannot provide me an answer for them, as a matter of fact, that is exactly what I hope will happen as the reason I post this comment is to get some insight as to how you would combat these issues if MMT were to be implemented.
Personally I find many elements of MMT really insightful and extremely useful, whereas I struggle to grasp other elements of the theory like any other theory out there. Apart from the Job Guarrantee, I attempted to leave out policy prescriptions since they are for the most part absolutely appalling from my point of view, and it serves no purpose discussing them until we have reached a consensus on how MMT would actually work.
Whoever you are, & I plan to comment this on multiple videos to get more insight, I highly encourage to write your thoughts and comments on what I have just laid out, as well as any concern or alternative you have for the theory, please keep comments civil so we can learn and grow together, thank you!
MMT is not something to be implemented, its a new way of teaching how international finance already works
_"Apart from the Job Guarrantee, I attempted to leave out policy prescriptions since they are for the most part absolutely appalling from my point of view, and it serves no purpose discussing them until we have reached a consensus on how MMT would actually work"_
MMT is not a hypothetical, nothing that can be implemented. It's a description of how our monetary system operates to today. Therefore you can not implement MMT as it is not a policy. So we do not need to reach a consensus if it would work. We need to reach a consensus on if it is correct about how thinks work. And believe me, it is much more correct than any neoclassical view on the monetary system. It has mountains of proof at hand for every claim it makes about how the monetary system actually works. So what we have to change first is our mental model of money. Because if we do not get this step right, we can't base any policy on it and think that it will work the way we expect it to.
@@trixn4285 lol no
@@marcintanski8549 lol yes
I'm always confused by comments like this. MMT is first and foremost a description of what money is and where it comes from. Its most public-facing proponents have policy ideas, of course, but those ideas aren't dictated by the theory, which, again, is just descriptive.
Great intro to MMT, can someone please post a link to the slides?
They won't release it, because it'll be too easy for individuals to verify his facts and arguments.
Where can I see the slides?
Exquisite lecture! I appreciate this being available publicly!
Excellent points at the end about inter generational divide being stoked to undermine state welfare. Especially in light of yesterday’s hike in National Insurance contributions in the U.K. 08 Sept 2021.
How do i get money? Say 3 m
@@mjsmcdborrow it.
Whether or not you pay it back is up to you.
To put things straight: For the Yap Islanders these stones were used as money (currency = Rai). The stones didn't get the value through the Germans imposing taxes. The stones were used as money and had their value long before any European set foot on these Islands. The stones got their value through the dangerouse efforts to get them, the scarcity and the rare material.
All money has one thing in common (whether its stones, sanils, paper, gold etc.): It is realtively scarce!
It is easy to see why historically gold became the monetary standard. It was accepted by many people (not only civilized), it is relatively scarce, it is available in a constant quality that is easy to check (weight) and no one can multiply it easily, but it is easily divisible. That's why tabacco didn't work well as money in the colonies and paper money had frequently to be burned in Virginia.
BTW the value of the Rai on Yap Island was inflated by a steam boat connection to the neighboring island where the stones were found. Not because there were no taxes on the stones, but because they were suddenly not as scarce and the transport wasn't life-theatening anymore. Therefore stone money also had (intrinsic) value and it could change rapidly (as any other money)!
MMT doesn't specify that you can't use stones as money
The thing with money is that if you want someone to give you something in return for your money, whatever it might be, it should be something not easilly obtained by the person giving you the exchange.
If dirt or gravel was money, why should i give you 5 chickens for a handful of dirt or gravel if i can step out the door and pick up my own dirt and still have my chickens.
And why would i produce anything if i can just pick up a wheelbarrel of dirt on my way to the store and buy everything in it. Nothing would be produced so there would be nothing to buy with all the dirt in the world.
The key to money is how hard it is to obtain, not it's scarcity. That is why government can't spend limitless even though it could theorethicly.
Money is now tied to productivity, productivity provides acces to money trough labour because labour is needed to produce the things we want and need.
That is also why the gold standard is a stupid idea because that puts a limit on the supply of money and thus a limit on investment and the ability to buy labour to produce things.
Before fiat money economic development was so low because there was a chronic shortage of currency because the only money that could be invested was money that was saved and not spent on consumption which in turn limited demand. Decreasing the desire to invest.
As soon as there no longer was a limit on how much money could be created productivity and technological progress has skyrocketed because now the limit on the amount that can be invested in labour is the availabillity of labour, not the availability of money.
If we where still on the goldstandard we would still be using steam engines and telegraphs.
@@baronvonlimbourgh1716 Dear Baron, thanks for your comment. I like your analogy with the gravel and I agree on that. But what do you mean by "how hard it [money] is to obtain"? The scarcity of a good will automatically make it hard to obtain. And this is the difference of fiat money. Fiat money is very easy to obtain, never the less central banks _try_ to keep it scares, i. e. makes it relatively hard to obtain. Of course with the Greenspan put this has changed...
The gold standard is not a stupid idea because it was not "invented" by some bureaucrat. It evolved constantly during the history of money up to its peak before WWI. The rapid growth of the 19th century up to WWI shows that the gold standard did not prevent rapid economic growth and development. Within a few decades mankind has not only invented many things (phone, movie, camera, automobile, airplane, electricity, light bulb, rubber and plastics etc.), which are still the foundation of our technology of today, but it has also marketed all those things to make it accessble to all of us. Not to mention all scientific progress that has been made and the start of globalization with the rapid development of railways and steamboats (later diesel) back in those days. And all those things were mostly *privately funded (in contrast of today!).* So no, economic progress was not low but incredibly high under a gold standard. Anyway it is a different discussion if we should re-introduce a gold standard today...
Whenever there was or is a shortage of currency mankind has introduced different instruments like paper money, credit, leasing, bank transfer (clearing), bills of exchange etc. to pre-finance investments and consumption. Most of these credit instruments were *developed under the gold standard!* Even back then there was rarely a shortage of currency, but money was not always accessible where it was mostly needed. Of course this has improved through a world wide net of connected banks. So all those payment methods worked under a gold standard and improved the accessibility for means of payment even back then. Furthermore there was never throughout history a 100% backed gold standard - so no need to finance investments only through savings. Also under the gold standard the _fractional reserve banking_ was the norm, allowing to increase flexibly the money supply to meet demand.
I'm not sure where mankind would be if we would still be on a gold standard but I'm 100% sure that we wouldn't have only steam engines and telegraphs, since as I mentioned above the automobile (1886), phone (1861), airplane (1903), electric locomotive (1879), TV (1886), diesel engine (1893) electric motor (1835) etc. have already been invented under a gold standard. Not to mention all the scientific progress that laid the basis of modern science. Maybe we wouldn't have dozens of different sneakers, handbags and Barbies in our closets but since money would be _scarce_ we would hopefully have concentrated first on the most needed goods and services for mankind instead.
@@dave77v how hard it is to obtain just means access to it is not limitless. Like rocks can just be picked up without adding productivity to the economy.
Our current money is not limitless available to the general public, you need to perform labour to obtain it, it is your reward for the adding your economic output to the system. That makes it harder to obtain then the earlier mentioned wheelbarrel of dirt.
Even though money is harder to obtain it is in no way scarce because it is simply bits in a computer, there is no physical limit on it, neither has it any intrinsic value.
Which is a good thing, if money is needed it can simply be created and there is Always an unlimited amount available for investment and research and development.
@@dave77v the gold standard mayby was the best option available at the time, i'm not sure but it can be argued for.
Just like everything else, monetary theory and technology also evolves over time and better solutions that solve existing problems are developed along the way.
The industrial revolution was done by men in sheds with screwdrivers and wrought iron. It was a revolution of inventiveness, engineering and development in understanding of basic phisics principals.
All inventions you mention where made by 1 or 2 men with basic tools and resources and could be produced with the same simple tools and resources.
The capital intensitivity was low and often was simply funded by savings of 1 or a handful of modestly wealthy people, it simply can not be compared with what happened in the second half of the 20th century and forward.
The capital investment needed to build entire railway networks back then could maybe barely fund the development of a new generation of optics alone used in a new lithographic machine used for ic manufacture.
Technological development went in line with efficienty gains in agriculture for millenia. It only went exponential when capital became readilly available.
The problem with a physically backed currency is that credit can only be given in already existing currency that someone else put away as savings, a lease on something had to be payed first with physical existing currency before it could be leased to someone else. There could only ever be as much money as there was gold, or silver or whatever. A loan reprisented someone else's savings. Either the lender spent that money or the saver, it could not be spent by both at the same time. The fixed supply could only either be spent on consumption or investment in a self correcting fixed ratio.
We no longer have that problem. People can spend their money and capital for investment can now be created on demand without interfering in the consumption side of things.
Fractional reserve was implemented exactly to solve the currency shortage issue. We now simply have an further evolution of it. Currency shortage has been a chronic problem troughout history for the before mentioned reasons. It is not something that happened periodicly.
The steam engines and telegraps comment was a bit over the top to make a point ofcourse. But we would be living in the 50s or so.
A manufacture level using tenths or houndreds of a millimeter. Below that the needed investment levels simply skyrocket.
0:52:35 - Inflation before Full Employment IF :
1:09:29 - Young people being urged to trust again risky stock investments
1:09:44 - Productive Capacity is the issue. Affordability is not the issue.
affordability is an issue, a resource can either be divided equaly or in some other ratio. for a given raw material either you can create homes or you can create bridges, all the raw materials have many use cases and those resources needs to be allocated where they are most needed.
by thinking that people are unemployed and one can put them to work is false, the moment you will put those people to work they will work with some raw materail and from where that raw material will come?
it has to comes from places where it is produced but then it won't go where it was already going, as You have just out bid the other industry and given those resources to the people you saw as unemployed.
Now people in the industry from where you have taken these raw materials will be sitting idle or they will lose the job.
Hence you can't afford everything, because with limited resources you will always be facing this balancing problem. And you will never know where resources are needed the most. That's why there is free market which are more efficient and that is the reason all centeralized countries has failed.
Inflation is not the same for everybody.
Capacity is not homogeneous. How on earth is the government going to have factual information (accurate and in time) about the countries capacity.
@@MagnusAnandmaybe if you look towards history say WWII it's exactly how they fucking do it.
@@ChitranjanBaghiofficialthe only free market is one that is 12 miles outside the United States border in international waters where no laws exist
Sounds wonderful when your the one issuing the currency.
Would you think issuing money benefited you if you were in charge? Given the level of understanding exhibited by many comments here I would think it would be a huge headache. Your job is to issue the currency for government purchases and public use and a vocal minority is so addled by miseducation that they think money comes from Someplace Else! I couldn't deal with that.
we need more economists to start speaking truth to power and telling government to stop lying about how money, debt and taxes really work ... thanx Dr Wray ...
To be fair, the only reason it works is because the public doesn't understand how it works.
Money is only money because it's users trust in it's value and function. It it becomes something that is available in unlimited quantities it will lose it's value and then it's function.
There needs to be a system that limits the availability to make it functional. It needs to represents a value, so logicly you want it to be created when new value is created. And banks and investment have been chosen to be the vehicle to distribute it.
Traditionally debt is used to create new aditional value trough investment. And it also used to be a way to distribute that value trough society.
If you had a business you payed wages to local workers and the profits where spent locally because the owner was also local. He used it to buy bread from the baker, groceries at the grocer beer at the local bar etc. And those businesses also employed people and made profit payed with that money. And those owners spend their money again at the original business owner.
That way money gets distributed properly troughout society and the ones creating value end up with it and can spend it to buy other things of value.
Nowdays the owners are no longer local and no longer of practical size.
The baker that made a nice income from his business and spent it into the community has disapeared. That money is now extracted by wallmart into a central account. And every little community in the country lost that money from their communities and now 1 owner recieves the income of the tens of thousands of local businesses walmart replaced.
Money that will never return because one person can simply not spend the income of tens of thousands so it accumulates and is extracted from the economy.
And this has happened with virtually everything that is now bought and sold. Everything is now spent with multinationals who now accumulate it centraly away from the community it came from.
Creating a constant a constant flow from the public to multinationals without a return flow, the only way to keep replacing the money that disapears is by printing more of it and giving it out to the people to then spend it at these multinationals, or for people to borrow more to keep the feed going.
The only way to create a return flow is to tax it away from these central acumulators and spend it back into the communities it came from, again completing the circle. This makes the government fulfill the function of what previously was done by local business owners, redistribute that profit back trough the community it came from.
But people insist taxes need to stay low, so this circle stays interupted. So one side keeps being depleted and requires replenishing with newly created money while on the other side money is acumulated and not being used because to ones acumulating it acumulate it faster then they are able to spend it.
Until this cycle is again equalised again the population will keep getting poorer and more endebted and the acumulators will keep increasing the rate they grow the pile of excess money that is not allowed to fulfill the function it was created for.
When people know money can be created i definatly they will demand more and more of it will be created without new economic value being added to the economy.
It is a difficult problem that some political movements have weaponised to gain advantage..
If government is allowed to actually fulfill it's function and balance the system, programs like universal healthcare are an example of this required redistribution for example, it can be a pretty good way ofmaking sure money fullfills it's tasks and is usefull to everyone instead of a burden to the many and a free ride to the few.
How is this truth to power? Sounds like the banksters lapdog to me
Most Economists are there to get metrics right in order to get the desired result to discipline the working class
Too bad the video wasn't better. I would have liked to have seen the slides and had the camera follow him around. Otherwise, full of information.
I would have liked to see the slides too. I googled Professor Wray and found he has a book about the history of modern money. I reckon the images and material of the slides can be found in the book.
what money instrument is used as a commercial loan
PROBLEM! Everything I have seen on MMT equates Federal Reserve (or any Central Bank) with Government, but it's not. The Fed is privately owned and if that issues money and lends it to government MMT is flawed. Can anyone answer this?
@Justin Parkinson the fed is privately owned but controlled by the board of governors, an independent government organization. I.E privately owned, government-operated.
@@rydenkaye9735 The fed made $90M profit last year. To whom did that profit go?
There is a division of powers, the fed cannot spend on social programs, that is for congress to argue about. The fed is mainly independent. So MMT ideas about wresting control of the printing press are fanciful. The fed will step in in an emergency, it dosent just do what Biden, or Trump, or congess wishes it would do. But its not privately owned, its a government created entity. It was created by an act of congress.
Mind blown. This seriously challenges the Austrian stuff I’ve been listening to for years and it makes a lot of sense.
No it doesn’t, they really don’t even know their own theory and most of the historical evidence is shaky.
yes it's possible but everyone would be equally poor, except the elites of course.
Just statements from you both. No evidence or examples.
@@nathanbaldwin4495 Here you go
mises.org/library/mmt-not-modern-not-monetary-not-theory
@@brettmcclain9289 You quoted from a site that is dedicated to full-blown Neoliberalism like Ludwig Von Mises who was an ardent admirer & firm believer of all things Fascism.
Next time try to quote from a site that's NOT a front for reductive austerity economic ideologies.
You only have to see the plight of Greece. It's 11th year running in full-blown depression.
We need the slides!!!!
Great lecture professor. One question I have is is that if it's true that the government can "print" as much as it needs in order to service shortages in the real economy, and it can offset or avoid monetary inflation by doing so, then does this mean that there are no limits or constraints to foreign aid? It seems that the government here is printing to service a shortage so there's no inflation concern here. Is that right?
Who has a copy of the slides please?
This is very profound and has transformed my understanding of the economy and debt.
The government needs to print and spend money to utilize unused productivity.. If what is produced has value it won't cause inflation.
To talk about central bank debt is meaningless if it's denominated in its own currency.
Deflation is likely an indicator that the supply of money is not sufficient to exploit unused productive capacity
You are Wrong. So wrong and have been fooled by this crazy power seeking MMT pusher.
Government debt matters since it has to be repaid when it matures. It also has interst that the taxpayer has to pay in the interim.
When it matures it has to be paid in full and this is a burden on the taxpayer.
@@Rob-fx2dw I am increasingly skeptical about MMT. People like Charlie Munger point out that with the same conditions and actions the results can be completely different because there are too many variables.
QE apparently avoided / delayed a depression. But QE was also a huge transfer of wealth away from the 45% of US who don't own equity.
@@testblustacks5799 You are right to be skeptical about MMT. It is just wrong in so many respects.
The glaringly obvious part is that it claims taxes do not fund government spending which is totally rubbish since there never could have been a federal budget surplus if that were the case and the history of budgets is that there often has been a surplus. But that is just a start since it has so many facts wrong as well as it disregards other historical evidence which does not support it's claims.
You are also right that the QE transfered a large proportion of wealth away from the people who don't own equity. That is because there were a great number of companies who acted in their own ineterest as most people do and took cheap loans provided by the QE to buy back shares at an unprecedented rate. The ones who were left out and did not have shares or sold them were the losers in that.
You have been fooled by these mental gymnastics
3 great books that prepared me for this lecture and help me to understand the MMT movement.
1.The Book of Leviticus
2.Debt: the first 5000 years
3.LOTR : The Annals of the Kings
(Oh yeah and my B.A.A in Finance !)
What do you understand about it?
Well now you have to explain what those books have to do with it.
To paraphrase what Stephanie Kelton talks about in the deficit myth “ the federal government has options”, for example they could make more federal jobs programs.
I live in Japan where I work at a small business teaching S.T.E.A.M to children. It’s been my experience that in Japan job security comes before profits.
I speculate that since America and Japan are both sovereign nations so they can have big debt deficits, in Japans case they spend a good amount of money on keeping businesses afloat and infrastructure intact.
They say lots of Zombies companies exist here, but at least there isn’t much homelessness and it’s pretty easy to find work( not great work but work none the less )
They have dinosaurs and ancient tree companies over here too lol.
This is a lecture but we can't see the slides???? :)
Who recorded this? Why wouldn't focus on both the speaker and the slides?
A student, probably. Amateur. Set up the camera and walked away.
You can find a show of Randy doing this as a PowerPoint for college econ students where you can see the slides. Part 2 of that one is Michael Hudson.
I genuinely listed to this with an open mind but I found you just to be wrong on a few points here. Interesting nonetheless
What points do you find wrong?
Which ones?
As a linguist I would love if writing were invented by poets, but it is definitely not how the story goes.
Bingo.
So for bitcoin to be money and not a "ponzi scheme", a bitcoin miner(bit coin creator), would have to demand payment(ransomware debt issuement) in that currency?
Create demand. Tax is nation institution tool to create initial demand. Bitcoin? How bitcoin create demand? That's the real question.
Wish I could see the images being projected.
“If we fill the bubble REALLY carefully, it will never pop”
History shows it has always popped. Why is this time different?
@@First4America I've read arguments that other precedents of countries suffering runaway inflation (Weimar Republic Germany, Zimbabwe, etc) were not actually results of their governments adopting something akin to MMT, but rather were the results of other forms of mismanagement.
@@DanielVerberne Time will tell!
SoulfuzZ Right. Careful as in: not too fast (give enough time for real resources to be established along with it) and injected in the right places.
In theory, I can make sense of it.
It‘s in the trust in institutions of centralized power where MMT proponents tend to lose me. Seems like highly irrational optimism.
I guess either we fight to get people in power to use our real existing MMT monetary system to great public good. Or we fight to reduce centralized power and distribute it.
First4America maybe we should run with the the „money is a lubricant“ analogy.
Put the lubricant in the right place at the right time in the right amount it makes many things significantly better. volume knob turns, Car drives. Babies are made.
But too much lubricant in the wrong place all at once: speakers drown, cars crash, lovers can‘t make contact.
8:30. Barter economics still exists. I take care of my neighbor’s dog when they’re out of town and they look after our cats when we’re out of town.
@@lepidoptera9337 That is because taxes are about giving the government (politicians) more power over people. It's a wonder they don't put a price on any and all social interaction and exchange between people including copulation if they could.
@@lepidoptera9337 NO. They are not paying a debt i have to anyone. I have no debt to 'society ' because "society' is Nobody at all. It is purely social construct that is meaningless and has no defined measurable limits or restrictions. If you disagree then explain in monetary terms the extent of what anyone has in terms of a debt to society.
Of course you can't because it is just a meaningless throw away line. I can as easily say society has debt to me.
@@lepidoptera9337 You are running away from the issue again to avoid answering what I said. .
@@lepidoptera9337 What are my dues? How much and why. What are yours ?
Great lecture. I take exception only to one thing: Prof. Wray's characterization of the concept of legal tender.
The fact that the US Dollar is a legal tender in the United States does not mean vendors must accept it; it means creditors must accept it. The concept is irrelevant until there's a debtor/creditor relationship. Customarily, most retail transactions are arranged in such a way that the customer is at no point the vendor's creditor. The customer is typically required to perform first (by paying), and before that happens, the vendor doesn't have to do anything.
For example, I'm never indebted to Starbucks when I buy a coffee there, because I have to pay BEFORE they do anything. Rather Starbucks is indebted to ME between the time I pay and the time they deliver the coffee. By the terms of our unwritten contract, provision of the coffee extinguishes Starbucks' indebtedness. But if it wanted to, it could also discharge the debt by a tender of US Dollars (i.e., by giving me a cash refund). This works whether or not I consent; if Starbucks tenders the dollars and I refuse, the debt's still extinguished. If I sue, Starbucks can pay the amount of the tender into court, plead the defence of tender, and the court will dismiss my case. While I don't think there's much litigation like this, the threat of it is at least partly what makes the dollar money. If I'm owed "money" in the United States, I can't refuse to be paid in US Dollars.
Oh, also, a court judgment (as opposed to a declaration or injunction) is itself a debt. As such, almost any legal obligation (e.g., Wal-Mart's liability to somebody who slipped and fell in their parking lot) can be transformed into a debtor-creditor relationship that can be discharged by a legal tender. I wouldn't discount the importance of this fact to "monetizing" the dollar.
I'm a lawyer, not an economist, so I think of this as a lawyer. And I agree that one way or the other, the modern dollar has economic value because of its legal attributes. But as between the fact that the government will accept the dollar in settlement of public debts and the fact that they can't be refused in settlement of private debts, my sense is that the the latter probably has a bigger impact.
I take your explanation of the dollar being a participant in indebtedness between entities in the private sector as fact but you failed to see one of the most obvious flaws in MMT. That is the fact government is the big indebtor of others in the economy. It indebts others via taxes which allow it to spend and by selling securities to the market and the reserve bank to fund further spending.
It does not happen the other way around with the private sector taxing government to buy things.
The reality of money is most money in the economy is created by private bank lending rather than the reserve bank and taxes are paid on that money created by the private banks and lent to the customer.
MMTers pride themselves on what they call a different 'lens' to view the economy.
It is nothing but rose coloured glasses that ignore todays realities and historical fact. Facts like saying taxes drive value into money and ignoring the reality that taxes did not put any value into money in all of the instances where massive inflation made the money valueless and rejected by even their own government.
There are many instances of this including Zimbabwe, Brazil Hungary, Chile, the Weimar republic where their money became worthless.
I concur and will add that the demand for the dollar is highly bolstered by the government requiring it for tax payments. Which is a "debt" too eh?
What would happen if the tax rate was variable in real time to solve for the lag that creates the budget deficit. If mmt is accurate and it's the lag of quarterly, yearly taxation that creates the deficit wouldn't variable taxes at the immediate purchase /exchange level not quarterly/yearly be useful to balance the budget or something close to it. Even if they are saying it doesn't matter wouldn't that be useful politically to convert folks to mmt? I'm sure this is blindingly stupid, but im a complete layman here. Just curious as to what I'm missing..
The blood feud theory gives new meaning to the concept of money being the root of all evil.
If it is correct, though, Evil would be the root of all money.
Interesting beginning but I don't understand the case for mmt. At some point the argument seems circular. I need to rewatch this.
Belky Hernandez , MMT is not something you should want to be converted to. It gives the government freakish power and ability to abuse it. There is also no control for government overspending. Even though they give it lip service, they don’t seem to account for the limited resources of each economy. So often it comes across as “unlimited money equals unlimited resources!”
You cant "convert to mmt." You either understand the source of money is the government, or you don't understand. Its a matter of comprehension, not choice
I understand it better now. Mmt is a description of how money works currently. We just don't know it.
@@franzoking9956 wrong
@@Creshex8 MMT does not give, but points out the government has freakish power, and they are abusing it by bailing out banks. The question is that why when it comes to real economic development, the government says that they don't have money?
Thanks for sharing 👍♥️🙏
Where is the discussion of the impact of all of those keystrokes?
So money actually does grow on trees
*Keystrokes*
money doesn't but wealth can. the difference between money and wealth is something this liar decided to omit from this "lecture"
No, this clown is just trying to rationalize State counterfeiting
One of the best videos ever on how money works.
Oh - If that is so how do you explain Randall Wray's claims about taxes driving value into money when the historical facts prove otherwise?
It's pure fantasy and that is proven by the history of money and the history of failures of money in the 30 or more countries over the last 60 years where there were taxes but inflation caused the money to become utterly worthless despite what Randall Wray claims about taxes driving value into the money. The facts are against what I say is his plain stupid claim.
I would like to see your explanation of why I am wrong.
@@Rob-fx2dw you're wrong because of two things:
1. The ratio of taxes to money matters so too much money without enough taxes make the demand for money to pay taxes low
2. You also have to look at the global market and effects of PPP
@@MichaelRosmer Where did that happen? You have no evidence to show that is correct. There is evidence that I can provide to show what happened.
If you are correct just what ratio does it take to make your claim correct? Have you knowledge of the ratio of tax in the countries where inflation made the money fall to zero value or close to it?
What is also wrong with your claim is it defies facts of countries like Hungary or Argentina or the countries listed here :- www.munknee.com/21-countries-have-experienced-hyperinflation-in-last-25-years-is-the-u-s-next/
Were that all low taxed? Lower than the ratio?
@@Rob-fx2dw no, you're not looking at the broad view that's why I mentioned two factors.
Here's the thing you require a minimal amount of tax relative to currency to maintain demand IF there is also other demand specifically, additional demand priced in local currency because the exchange volume will adjust.
What happens in cases of extreme hyper inflation like Hungary and Argentina is they've got foreign debt and are reliant on imports that aren't priced in the local currency.
As they aren't able to make their payments they begin printing money in order to do so, which in small amounts isn't significant but as the velocity of printing increases the value of the currency begins to drop. As the value of the currency begins to drop they need to print more and more in a deadly spiral.
At the same time what happens is acceptance for the local currency to pay for goods as well as the ability to borrow in their currency decreases (all factors that decrease the demand for the currency) as confidence implodes. The less confidence there is the more money is needed to be produced to pay for things and the prices of goods explode until the currency isn't accepted at all.
You can see the same in Venezuela, ex-Yugoslavia, Zimbabwe, etc.
@@MichaelRosmer You said only this "1. The ratio of taxes to money matters so too much money without enough taxes make the demand for money to pay taxes low."
You now say "IF there is also other demand specifically additional demand priced in local currency because the exchange rate will adjust".
That seems to be something you just fabricated without presening any evidence. Where is the evidence?
So what you have said so far is you agree taxes drive the value of money But don't drive the value of money if they are not at a high enough level OR if there is not sufficient demand for the money in local currency.
You cannot have it both ways. Either taxes drive the value of money or thay don't. I know that don't and can supply evidence that they don't.
What you now say contradicts the MMT claims of taxes driving the value of money which I say is something in reality that does Not happen.
38:15 but do u know why central banks and business can just write each other iou´s physically or digitally and they are both assets until they are traded which at the point somehow a liability is obtained and in return you recieve something and set the budget to whatever suites there fancy
Rationing prevents inflation?
Reduces it yes because inflation comes from excess demand relative to production so if you're not allowed to buy more then the demand is reduced taking pressure off the supply.
@@MichaelRosmer people don't only deal in the white market 🥴
To St. Francis College: Thou shalt not bear FALSE WITNESS!!!
Magic Money Theory
Magic Money Tree lol
45:26 this is also true for businesses because remember the central bank is just monopolizing one record that being cash of many records of money or record of payment whether electronic assets or physical assets
But what if the treasury has no balance to debit when the check goes to your bank?
The game is up and the government's money is broke and it doesn't pay you or pays you in new worthless money. Simple as that .
@@Rob-fx2dw So that's where we are, right?
Does he really admit he's talking about a book he did not read?
He's talking about information from many sources, but which happened to be advanced on and articulated well in Graeber's book. But Wray has done is own research on the essentially political character of money even without Graeber's book.
It appears he literally did not even manage to read "Basic Economics" by Thomas Sowell. I think this guy doesn't like to let learning get in the way of his belief system.
@@alan17h lol the same can be said about your belief system.
@@thomaswaters7533 got an example or just a comment with no supporting evidence like the video we are commenting on?
I was Keynsian until I saw the hole in the experiment; humans (especially politicians) are willing to stimulate in lean times, but are not willing to roll back in boom years. Most recently with the US having "The best economy every" and pouring on stimulus so that we had no ammo when an inevitable disruption arose. I even went back and reread the General Theory this year among 6 other books on economics.
So is it that I continue to study or that my opinions continue to evolve that you feel supports your statement?
@@alan17h nah man he’s just pissed because the lefties always get angry when someone disagrees with them. It’s why they always end up with gulags and concentration camps
Randall, what you have just said applies only to USA and few rich countries because when you produce money here, it creates some degree of inflation to every holder of USA dollars (which is spreed all over the planet, even central banks), but the only direct beneficiares of the extra currency, subsidies, and social programs are the people who reside inside the USA (they can afford to buy goods from other countries with the extra currency). Do it in other countries like Argentina (1950-date), Venezuela (2000-date), Peru (1985-1990) and you won’t see a “miraculous multiplication of fish”. No need for fancy books, just ask them!
Even if it is true that within a country or a geographical location, It is the state or the religious authority which dictates what the medium of exchange is going to be, How do two rivalrous nations, geographical locations or religious authority come to a consensus about what the medium of exchange is going to be, It needs to be something which both parties agree to and it needs to be a store of value which means there would be some commodities which are socially selected to serve as the medium of exchange.
When the indus valley civilization around 3400 years ago traded with other ancient civilizations, They did with a mutually accepted medium of exchange which was silver and gold. why did they choose gold and silver ? , Or why do some specific goods become the socially acceptable medium of exchange? , what should we call the process where commodities are evolve into an object which stores values and is used in exchange
22:00 What drives value for the U.S. Dollar today? I am guessing you have to pay your Taxes in Dollars to participate in the U.S. Economy
Money arise from marketability, in a barter system there will be some goods which will be more marketable and people will prefer to convert to them and then exchange it in some other thing.
wheat acted like money because it was most marketable.
so how money gets it's value, first it will be a comodity, then the most marketable one will be prefered, then one remember from previous experience what he can get for that comodity that sets its initial value, but as more and more people start to store it because it is more marketable, it makes it more valueble than its other uses, other than medium of exchange and gain even more preference because it's social acceptance has increased.
Which makes people try attain more of it, this is what leads to mining or growing of the comodity, (there was a time when tobaco leaves where also used as currency it ended up in hyperinfaltion because everyone started planting tobacco).
as you can see the move towards something which doesn't get infalted easily, doesn't rust, easy to divide, transport and fungible got preference, the gold and silver were inevitable to become money.
authority never set what money will be, people do and then government tax it to latter fight war etc, but greed takes over, now because authority has monopoly of violence it uses the gold and put a stamp on it, soon normal gold gets collected and converted to stamped gold, till now both have equal value but as more and more is stamped the new authority one takes over.
then comes desperation either in famine, war or some other way. which makes the authority inflate the supply, either by mixing other metals in it or cliping off some gold and decreasing the size of gold coin. which again ends up in hyperinflation because we humans push it and we never stop. (the history is full of it.)
This is how romans did, this is how USA did when they broke the breaton wood system.
the system which is mentioned in this video is not a valid one and it is not how money works. but yes violence can make anything more marketable, but it last until hyperinflation take over and people revolt.
Now, now this is crazy talk. There is a reason why everyone has adopted a fiat currency. When the economy does very well and tons of wealth is created very quickly, gold standards cause unnecessary deflation. When the economy does do poorly or needs to run close to 100%, which inevitably happens during times of war or depressions, gold standards are almost always abandoned because they make necessary investments too expensive.
@@iWouldWantSky yes that is very much so, but that again doesn't take away the fact that market decide what will be the money.
At that time Gold was good for the system, now fiat came, but no fiat system ever survived.
Something new has to come to replace it and that can't be mmt, because even the new money will come from free market. Not the other way around.
Given people are not forced. (with force you can do almost anything.)
@@ChitranjanBaghiofficial While I wish you all the luck in the world with that, markets don't exist in vacuums. Capitalism requires a body with a monopoly on violence to enforce private property rights using legitimate force. Even cryptocurrencies can't help you here.
@@iWouldWantSky again you are right, and yet unable to see you are saying the same thing as I am.
individuals do violence against each other when that can't happen groups gets formed and when single group can't make it happen then multi groups join hands.
again the all mighty powers of violence is made up of individuals and again in the free market they either compete with each other or form groups to fight each other.
free market is part of nature and its participator set the regulations.
so even the monopoly that you see is because of free market and if monopoly doesn't work for its parts its individual parts will again form groups in free market against it.
so from currency to government monopoly everything is because of free market not the other way around.
@@ChitranjanBaghiofficialI wouldn't call that "free," I'd call it chaos. Thinkers of the past would call it the "state of nature." Out of the state of nature, order arose. Societies can fall back into a 'state of nature' at any time, but we are not free in such a state.
so... money really did grow on trees
Only if you are a king
Checks are correspondent ciphers of bank notes that are written payment orders to a dealer bank to pay a certain amount of representative money to the bearer, upon selling the security to the Federal Reserve.
What were those governments using to purchase what they needed to operate?
If you redefine money as something the government collects as tax payments then of course rocks were not money, but if you use the correct definition of money being an intermediary method of exchange, then those giant-ass wheel rocks were of course money.
To be fair he says that the giant rocks became money AFTER THE GERMANS TAXED THEM.
I don't agree to a word of his theory of money. Chinese growth is due to US government support and ineptitude.
I don't accept the definition of money in the video. I was only pointing out that the stones became money when the Germans taxed it. That is a strong point to refute. Example in India some governments taxed it kind. Specially paddy (rice) was taxed and paddy became money.
Paddy was accepted as payment of tax.
@Dale Harper Government steal things (taxes) to build White House and live in luxury. that is how it works. I do not agree with this crazy story. Example. Cigarettes' served as medium of exchange during war time and was money. Postage stamps served as money. Cowrie served as money and was not acceptable as tax. In India the Value of a Cowrie is maintained but is no longer freely exchangable.
My definition of money is any oblect that is freely exchangeable for goods and services that does not lose it's value after the exchange.
So this whole thing came about because he missed a couple of points people like Greenspan made?
Yes, the US Gov can print more money to not default on debt directly. Greenspan says we CAN print money to cover any debt but the reason we don't is it will devalue the dollar if done excessively. In Randall's world we cold seemingly take debt equal to the global GDP, but every square foot of real estate in other countries, then just print the money to cover it. There's a reason this can't be done; devaluation of currency.
He doesn't seem to understand that we have three markets for dollars. Domestic, Corporate, and what is usually called EuroDollar. These are like a pool a pond, and a lake connected by a garden hose. You can pump a lot of money into one and it takes some time to leak into the other, but it does leak.
Many people say "We did QE 1-3 and saw no inflation." First, we saw inflation. QE works at the Corporate level. QE inflation was very clear as we saw inflated equity prices. Those dollars went to the stocks. This leaks into the domestic economy as wealth in pension plans that would not otherwise have such high numbers, thus giving anyone drawing pension more money in the domestic economy. If we do helicopter money now through payments to individuals, forgive student loans, etc we will see inflation in the Domestic economy (the smallest group of dollars, the pool above).
This idea that we can just print money and there will be competition for resources so we'll have roads but no more Trump Towers misses that it will also devalue the savings of Bob who will not get a new car, Jane who will not get a new shirt, and Jack who will not get a new bike.
Currency is an arbitrary representation of goods and services. Increase the dollars without increasing the goods you get "inflation" but really it is more accurate to call it "currency devaluation". This is just the government promising to tax the wealth (wealth is the ability to acquire goods and services) you saved by devaluing your currency. Without fiat, governments would need to raise taxes to get your wealth. Raising taxes requires transparency on the part of the government. Instead with the government now able to print endlessly, the government doesn't have to say "We want to start a war and everyone needs to pay a war tax of 10%. Vote for me during re-election." Instead, we pretend that money doesn't represent wealth already accumulated and we let the government tax us without really bringing these important discussions forward.
Also, don't ask the government if we have consumer inflation. As he stated, things are more expensive for seniors. Because housing and healthcare matters, it is just ignored. The government constantly redefines the CPI in order to paint a narrative that works for them. "If it is going up, drop it from the metrics".
Also just because he can't take every exchange back to the first time someone said "I'll trade you this apple for that sea shell" doesn't mean there wasn't a first exchange done under a currency.
The problem with his argument is he came up with a view he wanted "We can all have all the things and nothing matters" then used selective facts to get to that point instead of just looking at the reality. I think he's 95% right in this. It's just that the 5% he ignores is what allows a government to exercise complete control over the citizenry by destroying their ability to save the wealth created under their own work. And yes, I hate Republicans too but this really seemed to be just a political propaganda video by the end.
Ben Silva his theories work perfectly well... for a little while. Then they collapse.
Like a person living the high life on credit cards. It is AWESOME... until one day you max out. Then it is a lot of pain.
There's no inflation if the government is soaking up excess capacity in the economy.
Grinning Guise an economist defines inflation as “an increase in the quantity of money and credit. ... The beginning of the inflow of additional money makes the prices of some commodities and services rise; other prices rise later.”
I assume you mean “price inflation” but I’m not sure which prices you reference. Inflation is rarely binary as in “we have it or we don’t”.
And when you say “soak it up” I assume you mean the government will print money and then use the reserves to buy goods and services. It’s hard for me to respond without knowing the specifics you reference but I’ll try. If the gov is soaking it up, then this is not a UBI process where they give the money to the people to spend. Instead it sounds like classic currency devaluation in lieu of taxation for the gov to control allocation of scarce resources. We can use the government cheese program example.
The government prints money instead of raising taxes. It can not allocate those dollars. It buys above natural demand quantities of cheese causing farmers to produce above natural levels of cheese. If done slowly the quantity grows as artificial demand grows and prices stay relatively stable over time. So in this case, you are correct. Cheese prices would not inflate (if done slowly, otherwise the spike in demand would certainly cause competition for scarce cheese and spike demand/competition/prices).
But this is going to divert more of the nations resources to cheese. As more money is created to buy cheese, this is still going to dilute the value of existing dollars (of course all of these assume a consistent velocity of money in order to theoretically isolate the change in M1 and M2). As we increase the pursuit of cheese this way we would still be dividing more currency among the same number of citizens. But now a large amount of cheese farmers exist and have more dollars to buy more trucks, tractors, fences, etc. At the same time existing dollars are chasing all non-cheese assets but since noncheese farmers and cheese farmers alm want a new truck and cheese farmers now have assets beyond a natural level you have more dollars chasing trucks and less power behind each dollar is less. This causes trick prices (and all other assets) to creep up to some extend. Maybe it is a .01% increase in trucks but it is across all things cheese farmers want. If we extend this to more commodities than cheese the price inflation accelerates.
Government generated demand, is still demand. It just makes a less efficient form of resource allocation and on this case it lead to a lot of poor people eating far more cheese than they wanted. There’s just no such thing as a free lunch, even cheese sandwiches.
Excellent take down of mmt
"Save the wealth created under their own work"- stated as if all work is the same with the same possible outcomes. Work involved in producing a piece of furniture is very different from the work involved in figuring out how to eliminate jobs and avoid taxes in order to maximize shareholder profit. Which of the two is rewarded? Hint: It isn't the artisan stashing away millions in cash.
16:52 vertgeld?
This theory raises lots of questions. But first why does this view of economics place the role of the government transcending the role of the market?
Because it is a fantasy belief that does not deal with the reality that goods and services are the real wealth and goods and services are created by the work in the private sector not someone creating more and more money for government to spend first through their deficits before anyone else gets to spend it.
Money creates markets. Money is always the creation of the authority. As Wray explains, there is no record of a "barter market" in history. You need a pricing mechanism to make it possible to buy and sell numerous kinds of goods. It should be tax supported to give it value and universality. You will buy goods with the instrument you pay your taxes with. You don't need to beg people to accept it for that reason.
Great explanation
On English paper currency, it's not the Queen "promising to pay the bearer", it's the Chief Cashier of the Bank of England.
What is he going to pay with? More debt?
@@First4America yes because money is debt: an IOU.
I imagine I’d prefer a society that isn‘t based on debt. Unless the only entity that‘s „in debt“ is the government. Instead it seems in our society almost every entity is in debt. People, companies, etc.
Debt sounds like slavery. Shackles. Fear. Stress. Pressure.
Who would be in favor of this? Who benefits?
Is this the best we can do?
The story at 32:26 sort of epitomizes my point. Are we supposed to be excited about living in a society where those with the better weapons and less happy minds like to motivate us to work for money by putting us in debt by design (taxation)?
Not a happy story
@@banzobeans I think your middle paragraph is an effect and the cause is the perpetuity of the idea that money comes from the barter system, i.e. one for one and if you don't have one it's a negative. The modern monetary theory is just an explanation for the system we find ourselves in. The policy and programs implemented are a result of the politics. Sort of like if you never knew what a car was and you wake up in one on cruise control at 40mph. You can hit the brakes, accelerate and steer but the car itself is just a car no matter what you do inside it.
@@brakeman211with one huge difference - that we know alternate ways. So why would we put up with something that increases the scope of the government's outreach? Government=one part of the society (not you, me) that has the tools and power to redistribute resources. Doesn't sound wrong? No? Ok, put yourself to sleep.
why not show the slides??? damn people
Was rejecting cash during covid illegal then?
Very glad to come across this podcast. It starts to make money make sense
Brilliant... as per usual.
6:48 it's not infinite. The original U.S. currency was based upon gold mine out of the ground, and the dollar was pegged at $20/ oz.
Not anymore
1:09:58 “productive capacity”
And how would you increase capacity with all this government intervention??
These things increase productive capacity:
1. Technological growth through capital injections.
or
2. Population growth (domestic or international immigration).
or
3. Utilize the underused sectors (however labor markets are very tight right now).
How do you account for the fact that banks don’t actually have to have the money they loan out?
pimliconz
Wouldn’t that make implementing mmt impossible? How can governments control inflation when banks issue most of the money?
pimliconz
I thought that most countries use a central banking system. Which ones use mmt?
pimliconz
Central banks are not part of government in fact you can do directly to the feds website and see this.
www.stlouisfed.org/in-plain-english/who-owns-the-federal-reserve-banks
pimliconz it’s shows that it was setup by congress but no explanation of how congress actually has a say in it’s operations. Just found out about mmt, learning about it. Just doesn’t seem that it can coexist with this type of central bank setup. Serious restructuring would be needed
"How can governments control inflation when banks issue most of the money?"
Bank-issued money doesn't increase the money supply. Loans must be paid back (with money that's already been issued into existence by the federal government).
All I got from this convoluted presentation is merely a description of modern mechanism of money creation and not a theory that explains consequences of unlimited money creation, nor on money’s role on real economy ( production, prices, disparity etc). The mechanism of money creation itself has become convoluted with the evolution of banking and the shift in the physical manifestation of money.. and, importantly the convoluting process of money creation is deliberate and political to concentrate wealth and power.
Yeah, that’s because MMT is not an actual honest attempt to comprehend and explain these things, it’s just a half hearted pseudoacademic attempt to justify that it’s ok to try to control the economy through taxes and money printing. Almost nothing he says about history of money is true or not taken out of context. There are thousands of years of history of foreign money being preferred to domestic one due to better value / more convenience. Even now, there are multiple countries in the world, in Africa, Central Asia, South America, Balkans, where USD or Euro are accepted instead of local currency even though neither is legal tender there. The pound sterling he mentions was redeemable in silver (A POUND OF SILVER to the surprise of absolutely nobody), etc... It’s just motivated reasoning all the way.
@@gtpk3527 Great point. To add to it, there's even a fiat currency in circulation, the Somali Shilling, which persists despite its government's lack of ability to tax the population. MMT has no explanation for this, and that is a red flag in particular for the Chartalism embedded in the MMT story.
MMT isn't about unlimited money creation. You can't just spend an unlimited amount at one time.
Parallax it’s the cumulative effect of total fiscal irresponsibility. “Unlimited” at once? Maybe not, but thirty years ago a “$4T infrastructure package would sound like unlimited money” basically this theory is the equivalent of a charlatan spending without repercussion. Except ultimately we all know there are repercussions of indiscriminate spending. We’d all have to file chapter 11, or worse get locked up.
@@mjpaganetti I see what you're alluding to but isn't that kinda... How should I say this? If the country survives, 200 years from now we could be running gazillion dollar budgets. For the founders in 1776, spending 3 trillion a year on anything would sound crazy, that amount would immediately destroy the economy. For us, we could spend that on top of a few more trillion a year without heating the economy too fast. We provided 29 trillion in relief to businesses and banks, large and small, national and international, during the wallstreet bailout. That was enough money to fund a 12k/yr universal basic income for over a decade without cutting spending anywhere else. Over ten years later our economy has inflated but not significantly, not hyperinflation, because the US dollar has special deflationary pressures other countries don't and the fed is expanding the sink on money (they destroyed about 1 trillion a few months ago). They're going to have to raise rates, this 0 interest policy might help private banks reduce interest burdens on businesses, but I have a feeling the federal govt could make up for it in deficit spending without having to even charge interest, and it would probably be cheaper because through Democratic control of the govt we could limit corporate welfare. Problem with all this is many people, democrats and republicans, would fight against anything that both give people more welfare and made the rich pay more tax. That's a big no no for the people who donate to our politicians and their super PACs.
Give us the slides!
The archeological "scratches on a rock" are inscribed depiction of string/knot records.
ask why king defaulted
Jamy Because he would no longer accept the payment that he issued.
38:38
No way are taxes and faith in the system exclusionary .
What happens when foreign holders of us dollars lose confidence and you can't tax them?
What happens is they get defaulted on by what is default in value of the money which MMT largely ignores and pretends it is not default.
@@Rob-fx2dw Don't cry for me Argentina!
@@amadeusdebussy6736 They are still in the sh..T now ! According to travellers experiences last year when travelling to Argentina it is best to pay your accomodation bills and restuarant bills in another currency than in the local because you can ask for up to 40% off and get it.
Yeah, I’ve been wondering the same thing.
56:00 you actually don't answer the question of why Germany couldn't just print the money?
It contradicts the main point
Tik Tok brought me here to get educated.
44:00 "No economist knew" the operational details of how the system worked but "the fed employees did because they had to do the work." From 1970 to 1990.
mark collins that‘s a very weird story. Who decided to implement a full fiat MMT system and why? Noone? So we just stumbled into this system which MMT proponents say is such a positive thing? An angelic conspiracy?
This is soooo whack. Begs the question: WHO knew when it was implemented. WHAT were their motivations?
Who can be so naive as to assume this system that not even the experts understood for 50+ years, let alone the people, was built for noble egalitarian reasons?
@@banzobeans You are getting it backwards. No one decided to implement MMT per se. Warren Mosler, one of the fathers of MMT just noticed that this is how the system worked, when he was a banker, and later described it. He didn't study economic history or theory. MMT was "implemented" in the US when Nixon took the dollar off the Gold standard.
Before that MMT did not exist in the US.
It's like evolution. One does not ask who went back to implement a dinosaur. We just look at their fossils and describe them.
Stewiehleba I understand MMT is purely descriptive. But I cannot accept the story that this was just decades of stumbling (what you call evolution) that lead to the system we now find. I cannot accept that no thought was put into such matters when the Fed was created and all the intermediate steps took place over multiple decades to end up where we now find ourselves.
Nothing about this process is natural or inevitable. These are a series of choices made by people in power and with all the knowhow available at the time and all the expertise to be able to understand the consequences of these decisions. That being the case I wonder what the real deliberations and motivations of those involved in these decisions were.
@@banzobeans Of course people created the systems we have today, but that is true about everything a human hand touches. Markets are not natural. Nothing we do is natural.
Can you give me the name of the ambassador please, i couldn't pick it up. Thanks.
The climate crises are a huge concern and addressing it properly may be inflationary. We may need to ration resources to do so.
This lecture has a lot of good information in it, but unfortunately the speaker neglects to explain that Austrian Economics makes a distinction between currency and money.
Currency is anything that's used as a means of exchange, but money also has to be a commodity. He gets close when he says that electronic currency doesn't have any intrinsic value because it's not physical, when he explains that currency started as a substitute for grain, and when he explains that fiat currency is only backed by faith in a government; but failing to at least present the concept of currency being different than money, makes this lecture incomplete.
_"when he explains that fiat currency is only backed by faith in a government"_
He said the exact opposite. That's the whole point. It's not backed by faith, it's backed by the power of the government to force a tax obligation on you and to enforce the redemption. Just try not to pay your taxes and see what happens. It is coercive and it has always been throughout the history. No trust involved.
_"but money also has to be a commodity"_
Not at all. Money is just a record of debt. How did you miss that? If I write on a piece of paper that I owe you 5 apples (or the equivalent of 5 apples to make it more abstract) that's money. It's book keeping. Nothing more. The only challenge is to get your money accepted.
Actually thinking of money as a commodity is one of the primary reasons why most people get almost everything about our monetary system and how it actually operates wrong. They think that US is borrowing from China, they think that when we pay Dollar to Russia the money actually physically leaves the country when in reality it's always just a balance on a domestic bank account that is not in russia. Money is not a commodity. Money is debt. And it always has been. You are starring at the wrong thing. Using gold as money is nothing but a pure barter economy. It works very badly and is restricting the economy for no good reason. Why should the economic activity depend on the amount of gold there is? It's such a strange idea.
@@trixn4285 First off, thanks for engaging.
As to your first point, I get what you're saying, but if you look at times when things get worse in the economy, the amount of people paying taxes goes way down. Look up what happened during the Great Depression and in Weimar Germany. When things get bad, people stop paying and the government doesn't want to enforce it because it knows the people will get violent if they're already having a hard time paying for food. Things have definitely changed as far as the government's ability to track the exchange of currency, services, and assets; so it'll be interesting to see what happens the next time things get really bad in first world countries. I think this is part of the reason the government wants to get rid of cash. It theoretically makes tax enforcement without physical violence much easier.
As far as the definition of money, it seems like you missed my point. You can use whatever definition you want, but conflating the separate ideas of currency and money makes it so people don't understand the difference between the two.
Currency is debt. Currency doesn't have much of a usage except to transfer/trade information. And as a credit system, it relies on faith.
Money is an asset that can be used to trade for other assets or services. The best money has usages outside of being used to trade for other things, and it's a store of value over long periods of time. You could make an argument that currency could be used as wallpaper, toilet paper, etc. so it has usages, but it's ability to last long periods of time compared to more sturdy substances like gold, is why it's not good to consider it as money.
This is a distinction that's made in Austrian Economics. And the whole reason this video is deficient for someone who wants a more complete understanding of economics, is because the lecturer didn't cover the extra information.
@@geoffgjof I agree that when "things go bad" either the ability or the willingness to enforce the tax obligation might disappear. But the "things go bad" part is almost exclusively because there was a major real economic disruption, like a war or something that greatly reduced the economic capacity. It's usually not the case that the government simply spent too much of its own currency in an otherwise working economy. Debt in a foreign currency and major breakdowns of production are usually the reasons. And it's true that in that case even if the government kept collecting taxes it isn't even able to get anything from the economy through issuing its currency because the economy itself is defective.
And I would disagree that you should be able to store "value" in money for a very long period of time. Money does not store real wealth it only stores "virtual wealth". Wealth is only what you actually produce. And for wealth to actually be produced you need to spend money to get resources working, not hoard it. So an economy is running much better if the value of money depletes over time. Not too much and ideally at a pretty much constant and predictable rate, but it should not be a perfect storage of value forever.
A house can store value because you can use it as shelter. It actually has value. Money is only a means to the goal to produce actual value.
_"You can use whatever definition you want, but conflating the separate ideas of currency and money"_
I would define currency as the unit of account and money as the representation of debt denominated in that currency. Unfortunately those two are often called the same, e.g. we call the currency Dollar and the actual note also a Dollar.
Money is just the physical representation of debt, it's book keeping. It can be printed paper or digital numbers in a spreadsheet. It doesn't matter. It's totally replaceable. The most important requirement must be that you can't counter-fit it to create debt if you are not the issuer.
The main defining criterium that distinguishes money from any other commodity is that it represents debt and there is no fixed amount of debt relations in a society. Gold is not money, bitcoin is not money, cars are not money. If you define those as money virtually anything is money, that is tradable. You simply loose the defining feature if you include every commodity into the money definition.
Now I understand that in some cases people have used commodites as means of exchange and also to store value. But still I prefer to call those what they are. Commodities. An economy without debt money is a pure barter economy where every transaction is immediately settled. And this works really poorly for advanced economies as there is simply always a shortage of the commodity where it needs to be.
@@trixn4285 A lot of great points. The one thing you're missing is that gold has held close to the same value on average (not price) for like 5000 years because there isn't a lot of it compared to other things, we can't just manufacture it (perhaps this will change later), and it doesn't degrade much. All those things are what makes it a great store of value. You can definitely argue about whether that's a good thing or not. But the things you say about currency and money make me think you don't respect property rights as much as you should. The greatest evils are always done under the guise of being what's best for everybody. And that's always what gets fiat currency into trouble. How many fiat currencies have survived longer than 500 years? Much less 5000.
Also, I don't agree that debt is money. Debt is based on faith. That's why assets often times have to be used to securitize larger amounts of debt.
@@geoffgjof Btw. Thank you for the exchange of ideas. It's always a good thing and I appreciate your input. If I disagree with you this is a good base for discussion and constructive exchange.
_"But the things you say about currency and money make me think you don't respect property rights as much as you should"_
This has nothing to do with property rights. Inflation is an endogenous effect. It's a constant battle for purchasing power between the owners of the means of production and the workers and it's absolutely necessary. The government doesn't set the inflation at will. It arises from processes endogenous to the economy. Inflation will be low if the power of workers and companies is about the same. This is when everybody will get a fair share of the purchasing power.
If you want to preserve the value of money over time you need to invest or you buy something that actually has value. There is no natural right on infinite hoarding of money and there is no right on risk-free interest payments.
_"The greatest evils are always done under the guise of being what's best for everybody"_
That is simply not true and pure ideology. Most Austrians do not realize that what they imagine to be a just world will be a horrible dystopia and feudalism 2.0. We evolved from that for a reason. A society can only endure a certain amount of inequality. And gold as a currency or something similar will both shut down economic activity and lead to a great amount of inequality which will in the end lead to everybody being much worse off. The reasonable way is to do what is best for both the individual and the community, not some extreme way.
I'm not arguing for communism or anything like that. There should be a great amount of private ownership and private investment and there should be markets. But to think that private ownership and markets everywhere will fix all the problems is a mistaken belief.
_"Also, I don't agree that debt is money. Debt is based on faith. That's why assets often times have to be used to securitize larger amounts of debt."_
Even if debt is based on faith (which arguably isn't the case) this wouldn't contradict money being debt. This is a non-sequitur. Debt is based on trust, not blind faith. This is something different. If trust in the debtors is lost, sure it will break down. But this is not an argument against debt at all. Debt and trust are integral parts of society and economy. And trust is always proportional to the evidence there is that debt will be paid back. The government should focus on providing a sound and fair system to deal with debt, not to get rid of it all together.
Also I think we can agree that conceptually there can be commodity money which is money backed by some real commodity (e.g. gold) and there is debt money which is simply an IOU and a transferrable record of debt. Is that fair to say? What I'm actually trying to say is that debt money plays the more important role both historically and today and when we talk about money usually its debt money. But I wouldn't disagree that there can also be commodity money. It's just important to distinguish the two because the implications of having one or the other are very different. So I guess we can skip arguing semantics and call it commodity money and debt money.
Much of the argument that's developed in the first 10 mins 45 seconds is a straw man fallacy. Most of the money used up until the Italian Renaissance was commodity money (so indeed a permutation from barter is historically the root).
Money in classical Greece and Rome entered the economy through coinage (Athenian silver for example, en.wikipedia.org/wiki/Roman_Republican_currency ) which circulated through trade . There's a fairly exhaustive account of Mesopotamian commodity money here: factsanddetails.com/world/cat56/sub363/item1514.html and a peer-reviewed account here: brill.com/view/journals/jesh/39/3/article-p224_2.xml?lang=en . Egyptian workers were "paid" with beer and bread, gold was held as sacred (associated with the sun and because it didn't corrode). One will find similar materials used in China ( en.wikipedia.org/wiki/History_of_Chinese_currency ) or India ( www.quora.com/Did-ancient-India-have-a-form-of-currency-If-so-what-was-it-and-how-was-it-developed? ) . Florins (the gold-coin currency of Florence) spread throughout Europe and were minted by the mercantile state (see Richard A. Goldthwaite's magisterial _The Economy of Renaissance Florence_ especially pages 48-57) and it's at that point that banking/credit began its prominence (with the Medici Bank, later with the Banks of Amsterdam, Sweden/Riksbank, and England). See Raymond de Roover's _The Rise and Decline of the Medici Bank: 1397 - 1494_ and _Money, Banking and Credit in Mediaeval Bruges_, also Jesus Huerta de Soto's _Money, Bank Credit, and Economic Cycles_.
So while in many/most cases city-states and eventual empires did orchestrate the creation (mining or other primary production) of money into an economy, the Austrian school does have the proper historical pedigree and premises. Money can be derived from savings (implying one is retaining something that he or she could otherwise have spent, and spending or not according to their choice of values), or credit issue, cryptocurrency creation, and fiscal or monetary stimulus can dominate -- with their evident biases according to whoever is allowed to issue them and to what ostensible purpose.
Historical facts means Nothing to MMTers. They just ignore it along with current facts. Their theory of taxes driving the currency is an example. If taxes drove the currency then all the countries where there was hypinflation and taxes at the same time (which is every one of them ) would Not have had a currency that became utterly worthless and which was dropped by their own sovereign government and everyone esle. All of those 30 or more countries in the last 80 years where inflation ruined the currency sufferd the same fate.
The "authority" claimed the value of whatever commodity used by taxing a specific amount based on property owned or transaction debt redemption. It's not some conspiracy to keep banks happily earning interest payments.
@@cdub9510 The fact remains that taxes failed to give the money any value in economies where the government created inflation and then hyperinflation. The taxes persisted yet the money became worthless. That proves taxes do not put any value at all into a currency so the MMT claims thaht it does are false.
One point of the MMT that I agree is the relevance of the State of the Government and the importance that it has and the relevance of it existace contrary to neoliberal monetary theory that omit and disregard the importance of the Government
49:10 expand and project all of this on any other country: a lot of which applies to us finances and us currency does not apply to other countries at all .
It applies to every country that issues its own currency, is in control of its money creation, usually through its central bank, and has no noteworthy debt in a foreign currency. I agree that many countries do not meet all of those requirements and some may meet it in a less complete way, like the euro zone but still the theory applies to those, just in a way that the theory rightfully claims those countries can simply not use deficit spending the way, a fully souvereign country could. But of course a country can only buy with its own money, what is available for that money. So if you have a supply-side breakdown, you can‘t just spend your way out of it. Spending has to meet real capacities.