@@PoliticalEconomy101 - - Sometimes a good visual is just the help a person needs to learn about Modern Monetary Theory ruclips.net/video/DoMPlG5kgNE/видео.html MMT in Minsky at the 2nd Poznan MMT Summer School 2022 . The best beginning point is a college course (there are many online also) about an introduction to accounting which teaches how professionals "account" for the movement of money from place to place; from person to person; from person to firm; from firm to firm. It took me 7 seconds to see the correct sequence. Don't be discouraged if it takes you more time. Sounds like someone told you there are multiple problems. FYI, those are often people who follow another school of economics Sounds like the same someone (or maybe other someones) told you there is dis-information about MMT. That is when it is time to return to the source texts to learn. You are fortunate to be learning MMT now, in 2022, when there are several popular books, a textbook, & several college courses online.
Props to the interviewer here. It is rare that the interviewer actually inputs value further to just platforming the subject, and your knowledge really took this interview to the next level
Hey Joeri, it would be great if you would publish your money and macro talks as a podcast. Because I don't have RUclips Premium and I would like to do something else in these 1,5 hours with my phone. Also, I really like your show. Keep it up.
@24:00 "No unemployment" (in buckeroos for 25 years of operation). But he took a short-cut. The imposition of the liability for students getting their grades creates unemployment for students in buckeroos. But the UMKC Dept. then eliminates all the unemployment they just generated when they pay buckeroos to students who do the hour of community service. They never refuse a student the community service if they want their grades. *_That's the lesson!_* You do not create unemployment (ethically) unless you are prepared to then immediately eliminate it, otherwise you're damaging people like a sociopath, with no need or purpose.
So that's the job guarantee right? UMKC can always buy student labour priced in it's own currency (buckaroos). Real currency sovereign governments can always buy labour priced in it's own currency (dollars, pounds, yen etc). Doing so would ensure that no one is left unemployed, everyone is gainfully employed, and the country is producing more wealth than it was before.
@@Baxwell. Yes, exactly that. The issuer can of course always afford to hire labour that is willing and able to work for the currency it issues. This is eliminate involuntarily unemployment. Of course there can still be people that do not want to work in those job programs or that are transitioning from one job to another but that is not involuntarily. There are only two possibilities: You either have an unemployed labour buffer stock for the private economy to hire from or an employed one. The discussion ist mostly about inflation when it comes to the question which would be better. After all everybody needs an income anyways, even in a system with an unemployed buffer stock. The question is, what about the philips curve and inflation?
@@trixn4285 You are misdirecting people by saying that government 'issues' the currency. You are in denial of the fact that most of the money in the economy is created by private banks and they are not government . They are private institutions owned by shareholders who take profits and losses. They create credit fiat money which is the same as the Federal reserve bank creates and lends to government. Private banks lend on a risk and return basis. They are not government agents since they actually create the money they lend. You can see the explanation of this if you really care to look at the site which explains the operations of how money is created and by whom you can find it on the government of Canada's parliament. It states Money is created in the Canadian economy in two main ways: through private commercial bank loans or asset purchases, and through the Bank of Canada’s asset purchases. The majority of money in the economy is created by commercial banks when they extend new loans, such as mortgages. see :- lop.parl.ca/sites/PublicWebsite/default/en_CA/ResearchPublications/201551E
@@Rob-fx2dw _"You are misdirecting people by saying that government 'issues' the currency. You are in denial of the fact that most of the money in the economy is created by private banks and they are not government"_ That's a Strawman, Rob. I never claimed that only the government can issue money. The central bank issues the currency. Private banks can and do issue money. But that is their own private money in their own private books limited to the bank itself. If they want to make ANY transaction to another bank they need central bank money to settle the transaction because other banks do not accept the book money of that bank. _"They create credit fiat money which is the same as the Federal reserve bank creates and lends to government."_ NO, of course not. It's not THE SAME money. That's the whole point. If banks could issue reserves they wouldn't have to take billions in loans at the central bank. That's the whole point of a two-tier-monetary system. Everybody can issue money. A private bank can do it, I can do it, you can do it. The problem is to get it accepted. When a private bank makes a loan it only creates book money in its own books, NOT reserves. This money has no acceptance outside of its own books. If ANY transaction needs to happen to another bank the other bank will demand central bank reserves and this can ONLY be created by the central bank. Bank money is not the same as central bank money. Those are two independent circuits of money and central bank money is higher up in the hierarchy. _"It states Money is created in the Canadian economy in two main ways: through private commercial bank loans or asset purchases, and through the Bank of Canada’s asset purchases. The majority of money in the economy is created by commercial banks when they extend new loans, such as mortgages."_ Of course. I know that. What makes you think I say anything else? I mean, every MMTer says exactly that. Why the straw manning? What you don't want to accept is that the bank has to go to the central bank to borrow enough reserves (or sell assets to the central bank) to settle any transactions with other banks. So yes, the bank can create money, but it is not accepted by other banks at all. Other banks will always demand CB reserves for settlement because this can not created by private banks. It would be completely pointless if any bank could settle any payment with money it can create itself.
@@trixn4285 You are wrong about the central bank money being needed to settle accounts at other banks. The mistake you make is not understanding that transfers between banks are only done through a process known as a clearing house. Clearing houses do not create or use money themselves from central bans. They operate only in the margin of payments where the flow of funds is in an imbalance for a limited time between the two banks involved in the settlement. Sometimes that imbalance is very small for instance when two banks each transfer nearly the same from bank "a" to bank "B" and vice be versa. The central bank will require funds for a short time then those funds are no longer required after the situation balances out and they are returned to the respective banks. the reason is that private banks cannot create their own money and lend it to themselves or other banks.
I absolutely loved this. I wish you could have pressed him more for better explanations on certain things, but obviously that’s not possible for either you or him absent significant preparation with data. I would love it if you did a series of follow up videos on some of these topics, getting more in depth with some of his claims.
Bizarre. Just bizarre ideas. No relation to reality whatsoever but the gullible lap up his sophist nonsense. He was basically asked what problem MMT solves and his answer was none! He just wants people to accept his bizarre version of monetary economics. Feel free to hit me up with what problem *you* think MMT solves.
@@happipat3374 weird, to me what he's saying seems much more internally consistent than the orthodox story and way more based in reality. Perhaps it comes off as exotic to you because it contradicts the information you've come around to believing?
@@happipat3374 I mean, I think using the perspective of MMT helps change how people think about govt spending. Lots of people wanna reign in congressional spending and think that’s at the heart of inflation. MMT makes them consider other kinds of money creation that are actually more important like private bank credit creation and CB activity. It also makes them consider other factors like taxation and how they affect the money supply and thus inflation/deflation/savings/spending etc.
@@happipat3374 Id argue a revelation of MMT, at least it was for me personally, is that, when you have a monetary system like ours, you can tax/redistribute quite a lot of the money that the top 1-10% of the population makes and put that into a jobs program, public education, etc. A lot of the money will just end up back in the hands of the property owners after the working/middle class spends it on stuff. Instead of creating more billionaires and trillionaires we should be creating a healthy flow of money so Americans, in general, are more prosperous, not just the top 1% of wealth holders.
@@happipat3374 Agreed. - The ideas Mosler puts out are the most badly thought out ideas that anyone could pursue. His example of how the accounts could work is does at all address the central problem of what the study of economics is aimed at and merely describes a post factum way of accounting for what has happened. It really shows him putting the cart before the horse.
One further comment, he was absolutely right that the reason the ruble is up is because they can’t import anything. One of the most misunderstood aspect of Western sanctions is that the purpose wasn’t supposed to stop Russian exports. They were meant to, and did, stop Russian imports. This is why you’re seeing Russia scrambling to import things like ammunition from North Korea. Because any raw, intermediate, or final components are sanctioned. This is ultimately why Russia cut off natural gas exports to Europe, because they realized that all the money that they were getting from selling natural gas couldn’t actually be used to buy anything, so why sell it?
I disagree with your statement "This is ultimately why Russia cut off natural gas exports to Europe, because they realized that all the money that they were getting from selling natural gas couldn’t actually be used to buy anything, so why sell it?". They could have bought plenty from other countries such as those who take US dollars or Euros or other currency that the contracts designated as the currency of payment.
@@Rob-fx2dw The components and intermediate products they need are mostly sold by western countries that all adopted the sanctions. Sure, they could use Dollars or Euros to buy from China or India (given they accept them in payment) but those countries do not produce a lot of the stuff they need. Also a big chunk of russian currency reserves have been frozen and the russian government isn't even allowed to move their euros, because those are simply balances in the european banking system (as every euro with the exception of cash). So if they wanted to spend euros they have to do it with a middle men that has enough euros at a bank account that is not frozen and that is not sanctioned which is certainly possible but harder to do.
@@trixn4285 Yes of course it is harder and they need a middle man scenario or someone in between but they still could buy and it would not be impossible to get those middle man dealers living in other countries which are not sanctioned. There are a lot of products sold to non sanctioned countries and a lot of actual services which can be applied and that makes it even harder to trace. There are even deals done through share acquisitions in companies which are almost impossible to trace.
@@Rob-fx2dw _"There are a lot of products sold to non sanctioned countries"_ Again. Those products produced elsewhere are not those in need. A lot of stuff Russia needs has been produced by western countries and those other countries can not easily produce those things as they lack the know-how and the production equipment to do so. Also it's not about the country where the owner of a bank account lives. Russian bank accounts currently frozen aren't in russia either. They are in the Eurozone. Euros are ONLY held at european bank accounts ultimately. There might be correspondent banks in other countries that manage accounts for foreigners but those banks can only operate because they have a partnering bank in the Euro zone. A Euro can not leave the european banking system at all as all Euros are ultimately accounted for in the european banking system. The ONLY exception is cash, printed paper notes which can actually physically leave the country. I'm not saying that it is impossible to circumvent the sanctions (through said middle men). But it is much harder and also the products russia wants aren't available for sale to begin with in those other countries.
The Buckaroo example has similarities with how school works in general: Students normally have to turn assignments in to get individual grades, and they need a certain sum of grades to pass. (It's usually expressed as an average, but the total number of assignments divided out doesn't change much, even if you don't do those assignments, so it's really more like a sum.) The individual assignments are usually very specific, but I had a (0 credit hour but mandatory) "recital attendance" class as a music major, where, in addition to having to attend the regular student recitals of music majors we had at the school, we also had to go out and attend a certain number of other performances each semester. Now, we didn't get any "buckaroos" to turn in in exchange for proving we went to a performance - they mostly just wanted us to collect the programs from the concerts we went to and turn them in at the end of the year - but getting some tokens like that alone wouldn't matter much. The main differences from the Buckaroos is that I don't think we had a regular system for saving programs from one semester to the next, and, though I'm sure it was possible, it would have been considered cheating to trade programs for money or anything else (just as with other school assignments), so no larger economy than the student-teacher relationship was supposed to, or very much allowed to, develop.
Yes. Basically, to compel action like learning, the school/teacher imposes a liability on the student "You will fail this course unless". You weren't failing in class when you were not in school. The teacher then has monopolistic/dictatorial powers and defines how you pass through assignments, quizzes, projects, extra credit etc. The difference is that students don't earn currency they can trade with each other, only that the work is immediately translated into grades. In a video game, the game imposes dangers on you to which you must respond else you die. You pay the game with your activity. For example, in Minecraft you must find food or else you'll die of hunger, you must find protection - shelter/weapons or monsters will kill you, to get resources you need to cut trees, make tools, mine for minerals, etc etc. In Minecraft, Diamonds serve as a sort of currency for trade in many multiplayer worlds because of the rarity, usefulness in the game, and work involved to acquire them. In the Monopoly game, you have to roll the dice and play the game to earn money, to pay fines, and buy properties. All the money comes from the game, the game never goes bankrupt. The price of properties and fines is calibrated in Monopoly games based on the rate of earnings. If the prices are too high, the game becomes too difficult and slow. If the prices are too low, then acquiring property becomes easy and game speeds up. In sovereign currency, the government wants your goods or services, it imposes a tax on you which compels you to earn the government currency. People offer goods and services which the government can then buy. For example, in the Bible, Jesus says "Render unto Caesar the things that are Caesar's". The Roman government minted those coins, why would they spend them just to tax them back? Taxes were imposed to create demand for these coins which seems was well understood back in those days.
Markets can only price items relative to each other, in order to have absolute prices - something must be used as the measuring stick. When prices are denominated in a sovereign fiat currency, the issuer sets the anchor with supply (from accumulated government deficit spending). Demand is what people are willing to do for that currency which is based on their faith in the legitimacy and policies of the sovereign. Hyperinflation can happen if the government spends too much to a ridiculous degree, or it can also happen when the people lose faith in the currency and thus demand collapses. Usually, both are happening in these occasions.
@@Basta11In regards to hyperinflation, government having to excessively spend to boost up money stock is not a sufficient condition to create hyperinflation with examples like Japan, China and USA having higher GDP/Govt debt ratios. My theory on it is that the rule of law dynamics that govern contractual arrangements for trading capital have to dramatically collapse that it forces capital retreat to a nation that is a net exporter and that capital retreat forces the nation to revert to net importing position drastically. These kind of conditions tend to have extreme market volatility not limited to pricing but in certainty expectations of production of future goods near term and it will encourage a rush to get more goods and govt money printing becomes a result that already aggravates 2nd to third order effects that will push the inflation rate of all goods.
@@georgeokello8620 Essentially people have lost faith in the currency due to the policies of the national government. And so instead of transacting and working in that currency, they use other means of exchange such as foreign currency, trading goods and services directly, private credit arrangements (but not derived from the value of the falling currency). This means the demand for that currency falls which means its price falls. You need higher amounts of it to buy things = inflation. People hoard goods. Workers stop working for wages that don't pay for anything. Factories stop producing because workers left. Shops close as owners hoard the stuff for themselves. They go into the black market - selling goods in foreign currencies. Farms stop selling produce, keep the food to themselves, barter directly for the things they need. People who can leave, people such as businessmen and professionals as well as the hard working people. The best human capital goes abroad. Foreign capital left a while ago. With a less stuff to buy, less services available, the money is worth less and less creating a viscous cycle. Government deficits explode pouring more money into the economy. It spends more money paying for inflation adjusted goods and services. The country is most likely very indebted in foreign loans. The print money to buy foreign currency to pay off foreign debts and to import things needed by the population. This makes the exchange rate fall even more. There is a massive need for imports but no profitable exports to bring in foreign currency. Foreign importers can't import more to take advantage of the exchange rate because there is no spare production. Political insiders short the currency as well, take on huge loans from government controlled banks. They exchange them for foreign currencies and assets, then pay off the loan when its value is worthless. The central bank foolishly increase interest rates to ridiculous degree. All this does is put more new money into the hands of bond holders (usually rich people) who in turn buy foreign currencies and assets with the returns. Basically, wiping out the purchasing power of the poor with inflation to increase the foreign bank accounts of the rich.
One of the things that comes up in this conversation that we're really bad at in our current media platforms is nuance!! Contacts always matters when talking about anything in detail and our tendency to just try to make things into a this or that is very destructive to thoughtful communication
The desire to eat, does inspire a lot of innovative methods of creating Income. The stability to insure a comfortable lifestyle, seems to drive some Folks to be inventive. Inventing new methods to insure Capital as a measure of Value remains constant, seems to be a popular subject lately?
This so stupid. It assumes that people will actually work to a certain level for thier Buckaroo. The reason why the Communist system failed is there was no incentive for people to work hard. They always got paid food coupons or a share of the crop whether they worked or not. That did not and does not work. You always need an incentive to work and you need counter party risk insurance which is interest. What this guy is saying is so stupid. If eneryone is fully empolyed and they all get buckaroos then they bid on an available house. Someone will always pay more than its worth if there is a shortage. Thats inflation! He has not eliminated anything.
What you say makes no sense. MMT is ultimately correct, the real question is rather, what can we learn from it? In some sense, MMT has been validated by decades of Fed money printing. MMT does not inherently provide a basis for limitless spending or stuff like that.
In the buckaroo example Mosler says there were 100 extra buckaroos left at the end of the term.These buckaroos are worthless because there is nothing left to spend them on. So why would anyone accumulate these things? My guess is a secondary market developed in which buckaroos were being exchanged for things other than discharging class obligations. Likely these things were dollars. So we can imagine a buckaroo:dollar exchange rate. Such a rate would not be constant, but rather would tend to lower near the beginning of the term, when there was plenty of time to get the needed buckaroos through volunteering. But as the end of the term approaches, procrastinating students who haven't acquired their full set of buckaroos will be willing to pay more for buckaroos, if necessary because they no longer can earn enough of them. So there is a potential for the exchange rate to rise at the end of the term. This might incent some students to acquire extra buckaroos to sell at a premium at the end of the term. Of course if too many people have this idea, then there will be excess buckaroos seeking buyers at the end of the term with nobody needed any. Mosler calls the excess 100 buckaroos left over at the end of the term "savings", but i would call them losses, since someone did an hour of work and got nothing in exchange. Terms like "savings," or "inflation," cannot be applied to buckaroos because they are not yet *money*. For buckaroos to be money they (1) have to be exchangeable for all sorts of things outside of volunteering and discharging course obligations, and (2) be used to denominate credit. In actual human societies, credit came first. Money showed up a couple of thousand years later. Money was indeed created by states that desired to access a more complex array* of goods through the imposition of taxes that were required to be paid with money. This created a need for money. Since people who paid taxes needed to have money, credit began to be denominated in terms of money rather than, say, measures of wheat or weight of silver. So right from the start of money you had it used for many more purposes than just paying taxes, which makes it different from the buckaroo example. *Prior to money, states were more autarkic with the king producing most of everything he needed inside of his own domain.
@@Achrononmaster Fixed against what ? You are fooling yourself . There is nothing to measure it against? If you disagree then point out what it is fixed to or has been able to actually buy. It's just a Ponzi like idea.
@@happipat3374 It's the exact opposite actually: simply describing how fiat is actually created based on institutional operations, vs the limitations the govt puts on it out of ideology.
I'm only halfway through the video right now, but I have to confess I don't understand where exactly MMT predicts fundamentally different outcomes from the mainstream. His examples were not very clear to me. I'll have to read that white paper and come back
MMT policy prescriptions differ in that they want more fiscal policy control over the economy and have the CB support fiscal policy more closely. They theory part is just a gimmick to combat the US RW narrative against fiscal policy.
@@PoliticalEconomy101 Hi 101, where on earth did you get that from? I have been reading the blogs of people who formulated Mmt lens (it is not a policy prescription, but common sense flows from a change in paradigm).
Here is my understanding, not as an expert, but as someone who is pretty well informed from original sources (rather than most ppl talming about it, who don't seem to bother With that): The main difference is that maimstream economic ideology & paradigm assumes the Currency Issuer is like a houehold that must get money from somewhere before it spends, assumes any new money is always inflationary (by strict ideology), but it also tends to ignore private bank created money ( called "credit creation process") being inflationary to the same degree. The MMT perspective is neither a "deficit hawk" or a "deficit dove", but a "Deficit Owl" - seeing what is a self imposed restriction, rather than reality based restrictions. So MMT Lens is to see that money is a system we created, rather than a master we must serve (that imo always seems to mean serving financial system elites). So what actaully matters for a sane Currency Issuer is not "where will we get our own currency, we must borrow it from ppl we gave it to". Instead it is: (1) The amount of money supply in economy - is it too small or too big? Currency is put in & leaked out (e.g. tax, imports) (2) What real resources are available in the currency? (3) various inflation issues for a Currency Issuer. Also, Legal requirement to pay tax is what backs the value of a fiat, and taxing something is what makes it valuable as a currency. Like The Buckaroo (in the above interview), which Mosler used as a base case for analysis, a currency can be designed to serve whatever interests we want - in the university Buckaroos case, it is serving the community that has the value (pay 10 buckaroos tax, which means either work X hours for community, or buy Buckaroos from free market from those that did). We create the money system, it can serve us, rather than we be its slaves (or imo at least, slaves of financial elites that fund & spread economic ideology & beleifs by what they own & fund; or hire & fire).
@@PoliticalEconomy101 What do you make of Prof Richard Wolfs take on MMT? He seems to realize that the MMT Lens, description & insights are absolutely nessesary to break the hold of Captalist Elites. You can't change a money system to serve the public, if we don't understand it. MMTers also do not tend to praise or trust those who run central banks, not sure if you are aware of that, quite the opposite - except Bank of Japan to some degree, on Prof Bill Mitchell's blog.
Hmm, something strikes me as not quite right when Warren says QE doesn't affect inflation. When the government sells a bond, it is removing liquidity from the market, dollars you can actually use to buy a car, buy dinner, pay your taxes, whatever. You can't buy those things with treasury bonds, you have to first find a buyer for the bond and convert it into actual dollars. True, you can sell that bond at any time to someone else, but then THAT person has lost liquidity and parked HIS money in the time-lock money garage, and so on until the bond either reaches maturity or the government buys it back through QE. So bond sales would seem to be a way for the government to slow down the aggregate velocity of money, except I suppose that banks can use bonds as collateral for issuing loans, betting that the interest rates won't rise.
Correct, what you overlook, though is that for any liability that's created, there is also a deposit that's created. You just exchanged one type of capital (money in your account) to another form (a bond in your account).
@ I mean, the original price level of that Fiat currency was derived from its historic price level under a gold standard. Which was derived from subjective valuation within trade before it was a median of exchange. So yeah, it does You’re not gonna be able to bring up a Fiat currency from nothing without first having some sort of gold standard or commodity back to currency You’re not gonna be able to get people to accept the value of that currency without basically tricking them when it’s starting off at the beginning . Like show me an example within human existence where a Fiat currency just started as the first currency of a civilization. To my knowledge, you’re not going to find one.
How is the beginning about Government spending? When it comes to currency, isn't the beginning a medium of exchange that makes trading more efficient? And when you increase the money supply by printing more currency, don't you create inflation unless there happens to be spare supply of all the goods and services just waiting for that extra money?
That sounds exactly like the traditional perspective that the guest believes is completely backwards but most commonly adhered to. This entirely interview is about explaining the alternative point of view.
@@gregwilliams2746 You are correct. The MMT proponents obviously haven't read The Theory of Money and Credit by Ludwig von Mises. Instead, they simply treat all money as debt. Whereas a money just has to be some kind of a store of value (which is subjective). Which is why many ancient peoples used different commodities as currency (grain, salt, metals, etc; basically something that most people needed, or really wanted -- like dried tobacco, to survive or use on a daily basis). But since gold doesn't rot or erode, it's hard to mine, and it can be divided into smaller pieces relatively easily; it has been settled upon by numerous civilizations over thousands of years as the ideal money. Then came the money substitutes. Money substitutes were an innovation to make it so you could hand someone essentially an invoice (this is why we call them dollar bills) while being able to store the commodity in a centralized and protected place until you wanted to redeem the paper for the actual commodity. At some point people realize that if they are the ones making the bills that they can print more than the base commodity, and because they have a monopoly and get to spend it first, they get the best price before the inflation of the money supply makes it's way through the economy to raise prices. MMTers think that because we got rid of the redemption factor that now we can just print what we want without having to borrow money through Treasury bonds. The problem with that is a very large number of our bonds are owned by people throughout the world. If we start printing, the bond holders will assume that we won't ever pay the money back and they'll sell the bonds. Then they'll take the dollars they get from selling the bonds and buy goods and assets in our country which will raise prices on things. That's when people see the really bad effects of inflation. MMTers ignore the bond system all together because they see it as a relic from when we were on a gold standard. They think we can just print money to spend without paying people to buy the debt. But they never have an answer for when it's too much. They have no clue when the inflation of the money supply will drive up aggregate prices. And even when it does (like after the pandemic spending), they just blame it on other things like supply shocks. The completely take for granted the international manufacturing and trade routes that help to bring down prices for us. And they don't see the supply of labor or goods as finite. It's pretty absurd. But because we don't teach Austrian Economics in school, they're able to take advantage of an under educated citizenry.
Great interview and I'm learning more about MMT and it's changing my understanding of macro economics and how money really works. I hope Dr. Schasfoort brings on Dr. Dirk Ehnts to discuss how money really works in the EU market. I learned a lot from a podcast interview with him (titled "Dirk Ehnts: Do Markets Control Our Politics?"). It would be great to hear Joeri and Dirk speak together about the money situation in the EU.
I enjoyed hearing his perspective. I am sorry you had to go through his inability to let you speak. I do appreciate your patience and you interviewed him very professionally. Please keep up the good work. I liked how people explained the theory well in the comments, like what Platypus Paws wrote below, it is from him (not me): "Here is my understanding, not as an expert, but as someone who is pretty well informed from original sources (rather than most ppl talming about it, who don't seem to bother With that): The main difference is that maimstream economic ideology & paradigm assumes the Currency Issuer is like a houehold that must get money from somewhere before it spends, assumes any new money is always inflationary (by strict ideology), but it also tends to ignore private bank created money ( called "credit creation process") being inflationary to the same degree. The MMT perspective is neither a "deficit hawk" or a "deficit dove", but a "Deficit Owl" - seeing what is a self imposed restriction, rather than reality based restrictions. So MMT Lens is to see that money is a system we created, rather than a master we must serve (that imo always seems to mean serving financial system elites). So what actaully matters for a sane Currency Issuer is not "where will we get our own currency, we must borrow it from ppl we gave it to". Instead it is: (1) The amount of money supply in economy - is it too small or too big? Currency is put in & leaked out (e.g. tax, imports) (2) What real resources are available in the currency? (3) various inflation issues for a Currency Issuer. Also, Legal requirement to pay tax is what backs the value of a fiat, and taxing something is what makes it valuable as a currency. Like The Buckaroo (in the above interview), which Mosler used as a base case for analysis, a currency can be designed to serve whatever interests we want - in the university Buckaroos case, it is serving the community that has the value (pay 10 buckaroos tax, which means either work X hours for community, or buy Buckaroos from free market from those that did). We create the money system, it can serve us, rather than we be its slaves (or imo at least, slaves of financial elites that fund & spread economic ideology & beleifs by what they own & fund; or hire & fire)." Platypus Paws
You don't need taxes for money to exist and have value. It's quite possible to have money even sans taxes (just plop a dozen people on an island and watch them use shells as currency, even without any taxes to pay). For an entire nation state, where the govt. does have some cost for its operations, just consider an oil state where the govt. owns the oil industry and gets its income from there. That would allow it to have no taxes, direct or indirect, on its people. And yet it can still issue currency and people use it for trading.
@@ArawnOfAnnwn- Is there a fundamental difference between charging a tax for supplying the service of governing and offering protection via a state-sponsored army whilst citizens can then use their after-tax earnings to buy oil in the free market, as compared to supplying, say, govt-monopoly oil at a higher price then using the excess revenue to govern and pay for the army?
@@ArawnOfAnnwn there are many problems with the shell example. Firstly, the shells don't have any value - you have to hope that the other person you want to trade with accepts shells, which presumably they would only do if they believe other people will too. The point of the monopolistic government perspective is thst they ensure that the money has value; the money can pay taxes, and you have to pay taxes. If there was a government that took a certain amount of sea shells every month on that island then seashells do have real value there. Secondly, there is no printing sea shells, which is another big part of what MMT wants to look at - the consequences of government deficits and issuance of more currency.
How does a modern monetary theorist expect that increasing monetary supply (or decreasing interest rates to expand lending to effectively increase monetary supply) will create demand for the skills and goods provided by the unemployed as opposed to the skills and goods provided by the already employed (which are the people that generally speaking are determined by the aggregate of small scale free market dynamics to be the ones providing more valuable services and goods)?
The government doesnt decide prices of everything in the economy. (Unless your in a communist country and that never worked well.) So saying that the government sets the prices of stuff doesnt make sense. They just print the money and choose what to spend it on. They pay whatever the market price is currently at. Imagine the government trying to only pay a baker $1 for bread but the current market rate is $2. The baker is going to tell them no unless they threaten to destroy him. Otherwise the government must pay the market rate. And if the government printed money to pay for the bread then the demand for bread would rise i.e. inflation and everyone else has to suffer. MMT dEbUnkEd. This guy was annoying the way he kept saying"its not complicated. A child can understand it." When he couldnt even give a good example of MMT or explain it easily lol
But under QE the Fed is buying securities from entities that presumably wanted securities (which is why they had them in the first place). So it seems logical that the recipient of the cash received from the Fed will be used to acquire some other financial asset that the seller values more than the security sold. Why would they want more reserved earning them essentially a zero return. It seems to be that the money used by the Fed for QE will eventually end up in the stock market or other high-return asset. So QE should be expected to produce large rises in asset prices, which it seems to have done so.
Yeah, I find that to be plausible too. The whole idea of QE boosting investment and taking loans is silly. It is simply an asset swap. Demand for money is endogenous and you can't force cash onto people and you also can't force them to invest into something they deem unprofitable even at zero interest rates. Part of QE was probably absorbed by governments taking more debt which increases the amount of bonds in the secondary markets again (and actually boosts the economy through demand increase). _"end up in the stock market or other high-return asset"_ Not necessarily high-return assets. Bonds are usually owned because they are the safest asset there is, not because they have a high yield. It is used for hedging, for example by pension funds or on the money market, where they are used like in a pawn shop. You probably would want another asset that can be considered safe (and therefore has a lower yield). QE makes sense if the central bank wants to support fiscal expansion through increased government debt. It makes no sense to "boost" the economy on it's own.
I agree with Warren Mosler. MMT unquestionably explains the current monetary operations better than any other economic school of thought. That being said, even if we put all the policy that he has championed (not only the ones from this video), in my opinion, the financial sector has become a parasite on the real economy. It seems like everything takes second nature to the financial side. The only reason companies produce a product is to increase their financial assets. If a company can achieve their goal without hiring or selling anything, they'll gladly do it. Now I know the U.S. in particular, prides itself on a culture of harboring small business. But small business don't tank an entire economy with their financial activities.
I didn't like the way Moser skirted around the issue of interest rates. Two things spring to mind - can we say that issuing a loan against an asset to be purchased is not really creating money as the money eventually gets paid back? But banks don't lend money for no profit so inherent in the process is the idea of charging interest - this in turn means that at the end of the entire process the "created" money will have been repaid from money that already existed and the asset bought with it could be sold to replace that money, but the interest charged must suck more money out of the system than what was originally there unless new money is injected and therefore the value of the money must reduce over time if there is any amount of borrowing and lending in any economy. Without interest there are fewer factors driving prices and investments up, nor reasons for the value of the currency to go down. Interest is the effective time-value of money. With no interest there's no urgency to pay back loans and less incentive to work or make a business successful vs competitors. Second - if interest rates were zero there would soon be no properly functioning stockmarket. Every company that was making a profit could borrow money for free to buy back it's own shares to earn a positive dividend return paid out of its own profits. Or in the absence of borrowing it could simply use its profits to buy back its own shares over a longer period - eventually buying itself out completely. Companies that were consistently losing money wouldn't be able to borrow cos the lender would not accept only risk for no return, so instead these companies would have to keep issuing endless amounts of equity on the promise of future dividends until, barring the occasional spectacular turnaround, each share was worth zilch.
@peteneville698 The interest rate that Mosler is talking about is the overnight rate. This is what mostly everyone is referring to when speaking on the "interest rate." There is an overwhelming amount of research that suggests that this overnight rate does nothing to influence the private sector's economic decisions. And even if it did affect the private sector's decisions, it doesn't borrow at zero rate. Borrowers need to meet certain criteria set by banks, and that determines what rate they get when they borrow money. The overnight rate almost entirely only comes into play when banks borrow among themselves.
@@peteneville698 If interest rates were zero then the money would be easier to borrow but the obligation to pay it back would still be there but the continuation of guaranteed interest rates at zero would mean almost anyone would be able and willing to continue borrowing at no cost (no interest) therefore the money would be utterly worthless. Presently and in the past there has been no guarantee that interest rates would stay at zero so that effect has not materialised.
When the British invaded Kenya in the late 1890s for 70 years, they needed labour but the locals were pretty happy in their farms tending to crops and livestock. So they introduced a tax for each home payable in the British currency. Sad.
You are terribly wrong if you think the tax made the money worth something. You have drawn the wrong conclusion. Taxes are money transfer and that is all. It was and still is the existence of goods and services that makes the money worth something. No goods and services means no value to money. If you have hundred dollars and are lost in the desert with friend what is the value of the money? - Nothing because it can buy nothing when there is nothing to buy. Ask yourself if transferring money from you to someone else or them taking it without permission makes it worth more in purchasing power than it had previously. The obvious answer is No ! just like the government taking it as tax does not put any value into it.
@@Rob-fx2dw what a bunch of nonsensical analogies. Taxes are enforced by the currency issuers. In the desert of course it has no value because no government is there to force you to pay taxes! Anyone takes money from me by force of course doesn't make the money more valuable because they are not the currency issuer! You're missing the whole point!
@@kurnaPunk Who are the currency issuer in an economy where 90% or more of the money is created by private banks through lending and the rest is created by the central bank by lending money they created the same was as private banks created it ? Either take your shoes off and let that thinking of yours get out of your socks without getting confused or start using your head to think instead of swallowing rubbish MMT.
I'm a fan of Mosler (and Kelton), and agree with a lot of their observations regarding the way macro government budgets and spending work. However, they have a fundamental flaw in their models. Governments are not the monopolists of currency. Currency/money is debt. And most debt in the modern economies are created by private entities. Fractional deposit banking in the U.S. now accounts for more money creation that any other mechanism. The money created by the federal U.S. government is probably the 3rd most prolific money creator (through deficit spending).
I hate to say it but I came out of this more confused than before😅 extremely interesting and some great discussions but I felt like his answers relied on a level of understanding already that I and most may potentially lack. Any chance Joeri of a summary/break down of his points in a more succinct and articulate way? Mosler is definitely a wealth of knowledge but it was such a deluge I felt like key stuff either wasn’t touched upon or I wasn’t able to understand. He seemed to hand wave away a lot of stuff that I think would’ve made it easier to understand if it was explained or examined more especially to someone as smooth brained as myself.
I would love to hear the statement made at @10:47 expanded on. He just slipped it in there, but it seems to be a completely and obviously false statement "In a non-monetary system, you wouldn't have people looking for paid work at all." Does this just mean, without a monetary system, the only way to trade is through barter? If we all traded in Bitcoin, would that be considered a monetary system, or no?
Why do we chairs for social security and other tax based funded programs if taxes don’t matter when it comes to gov spending. Seems like a redundant position?
I would like to hear him discuss Anwar Shaikh’s critique. If you guarantee jobs in your economy at a certain rate of reimbursement, you are artificially limiting your reserve army of labor and will therefore see wages rise (why would I work for a demanding employer for $15/hr when I can work the gov job carefree for the same amount? Therefore the employers will have to outbid the gov for workers, hence wages rise), which reduces profits and makes your country less appealing for investment. That limits your growth, which causes inflation. I’d like to know if he has a good answer for this dilemma, because I can see the merit in that argument.
The scenario depends on the needs and resources of the economy, if the govt jobs increase the productivity of the country that's a win and good incentive to invest Otherwise your conclusion happens. Hiring almost everyone is not a bad thing, the problem arises when they are hired into producing something the economy doesn't need which results in wastage n higher wages to inflation.
“That limits your growth, which causes inflation” I don’t think that’s a statement that can always be true. I mean Japan exists right? Or am I missing something?
Mosler says at 35:55 "The currrency value is defined by what the government says is the tax liability". Absolutely WRONG and proven so by the fact that the currency's value became Zero in the countries where massive inflation made the currency worthless despite taxes being collected. Some examples are Zimbabwe, Hungary, the Weimar republic. Even their own governments abandoned their worthless currency.
The government defines its value in terms of what the government pays in order to get the currency. Of course it does not set prices for what else can be privately exchanged but nobody claimed that to begin with. You are again fighting a straw man you put up yourself. And weimar did not abandone a national currency all together, they did a currency reform. And they kept collecting taxes in the currency at all times.
@@trixn4285 You don't connect financial things very well in your head. If the government hasa tax of 25% then by MMT theory it issues a dollar the 25% tax would make it worth $0.25 . So effectively it would always be always going broke. But of course the reality is all money of the country is fiat credit money and government does not issue the money at all. It borrows money and taxes the private sector to get the private sector's money which the banks ptivate banks have created. You say the Weimar did not abandon a national currency at all. What about Zimbabwe and Hungary and others who did abandon their currency entirely.
@@trixn4285 You say the Weimar id not abandon their currency - OK . The reality is they exchanged it at a rate of One Billion marks for one Rentenmark. So the how much did the tax make every mark which earlier exchanged with the UK pound at 98 marks to the pound in 1919. In 1922 it was 461,468 for one British pound. So what part of the value did the tax put on the mark ?
@@trixn4285 Your reply is so absurd that it is laughable. Firstly- The reality is nothing can make itself anything other than it is by exchange form on person to another. So tax can't put value into anything because it is merely exchanged and never becomes worth anything else by mere exchange. Secondly the term 'value' does not mean anything other than buying power of something else.
@@Rob-fx2dw Look Rob, I know you are a troll on the mission to comment nonsense under every video about MMT on the internet. You make absolutely no sense at all and you still do not know even the basics of MMT or macro economics in general. Your comments generally make no sense, show a lack of knowledge about MMT and macroeconomics and you are very stubborn and unable to follow any argument. You have proven this over and over in hundreds of comments you wrote under basically every MMT video there is on YT. So it is completely pointless to debate you. I don't know many people that are so hopelessly lost as you. If you genuinely listened to all the videos you commented you should by now know the answer to all the silly questions you repeatedly ask. And the reason some countries are dollarized is foreign debt, import dependence on basic goods and the unability to enforce taxes due to political struggles and corruption. Nobody ever said that being a developing country and running an own currency is easy. But that does not invalidate anything said in this video. Also MMTers do not say that there can't be inflation. But that is usually also caused by again foreign debt, import dependence, war, political crisis, supply shocks in general. It is NOT caused by the government investing in streets, schools and the like and it is not caused by the government deficit.
That's exactly the question you should be asking. The answer to it tells you all you need to know about crypto. For gold, for example, the "tax" is imposed by the industries using gold (jewelry, tech), that's how the initial currencies came into existence. Crypto is ultimately useless, despite people probably being able to stay deluded for quite some years to come.
I've only watched a few presentations on MMT, but most of them start with the assumption that MMT is true and a good thing. I like that the interviewer here comes across as skeptical, putting the interviewee in a position of having to defend MMT against skepticism. The arguments presented by the interviewee feel more grounded.
When done correctly, I think critical engagement in interviews is the best way to handle it. This doesn't come off adversarial, but skeptical. And there's an important difference. Ideas should always be challenged, but you can't challenge an idea correctly if you're not actually *engaging* with the idea honestly in the first place. That said, I agree.
ruclips.net/video/DoMPlG5kgNE/видео.html MMT in Minsky at the 2nd Poznan MMT Summer School 2022 . People not familiar with system dynamic mathematics & differential Calculus can be helped with a good visual .
Although it is depicted as a "new" theory in fact most of the foundations are not new and simply post-keynesian economic theory. It's shouldn't be hard for a post-keynesian to accept most if not all of MMT. It mostly differs in focus and framing, not so much in theoretical implications. The foundations of MMT are the "state theory of money" (Georg Friedrich Knapp) and the "credit theory of money" (Alfred Mitchell-Innes). Both are authors that Keynes already knew at the time and that he made favourable comments about. He even wanted Knapp's work to be translated into english in the first place. It's also based on stock-flow-consistent modelling, also something that Keynes, Wicksell and Kalecki already thought and which was further developed by Wynne Godley. Another important influence is the "functional finance" approach (Abba Lerner). So you see all the foundations of MMT are quite old and made by established and credible economists of the last century. Mosler is an insider from the financial world and he has come to his conclusions based on his experience and observations of banking and currency trade independently without knowing the work of those economists in detail. If you want to study MMT scientifically you should read the work of Randall Wray (a student of Hyman Minsky - also a post-keynesian that had very similar views on money as MMTers do) and Bill Mitchell.
@@trixn4285 You direct people to Randall Wray and Mitchell. That about sums up your knowledge and lack of inability to think critically. They can't explain why the MMT (including Kelton, Randall Wray and Mitchell) say the national debt is not a debt for the future and never has to be paid off when the reality is ALL of it is paid off as the bonds which it was created from all mature and all of the past national debt . I suppose you can explain that ? Randall Wray and Mitchell along with Mosler and any other MMT economists cannot explain why their theory says taxes pit value into the money and get it accepted when the reality is in all of the countries where the inflation made the currency worthless there were taxes which did nothing to keep it accepted or put any value into it. But I am not very hopeful that you can even do that or understand that it is part of the denial of reality you are avoiding.
@@Rob-fx2dw _"say the national debt is not a debt for the future and never has to be paid off when the reality is ALL of it is paid off as the bonds which it was created from all mature and all of the past national debt "_ Rob, you literally follow those debates for years and you still do not understand anything about it? All money in literally every economy in the world is debt. How can you not understand that? It's not about that one bond that has to be serviced. It's about sectoral balances and how much credit is taken out vs how much is paid back vs how much is saved. Nations are rolling over debt and they can do that until the sun implodes. The question is NEVER the size of the debt but how much is saved, spent and invested in the economy. Sure, bonds are serviced when they mature, SO WHAT? That is not the point. And that you think this is the crucial point just shows that you did not understand it. You simply are unable to think macroeconomically and this is why you miserably fail to understand anything about macroeconomic relations. If the private sector saves another sector can and has to go into debt. Monetary debt and assets are two sides of the same medal.
One thing Warren Mosler is doing incorrectly is that he is neglecting the fact that the MARKET set rates. He should know how OPEN MARKET OPERATIONS work with Bonds.
@@trixn4285 1. FED rate is for BANKS. General public don’t get those rates. 2. FED buy/sell bonds in the open market where the private sector also buy/sell bonds. That is what sets rates.
@@mentalgame5608 You are missing the crucial point here. The central bank SETS the interest rate on reserves (it literally declares the target) and then buys/sells as much bonds as needed to achieve that rate. by adding/draining reserves from the interbank reserve market. There is no second opinion about that the central bank is the one that sets the interest rate and not the market. Also the inter bank market for reserves has dried out since the global financial crisis. That means that central banks around the world act in permanent unconventional monetary policy mode, crisis mode if you want so. It's kind of arrogant the way you put it because you don't seem to have a good understanding of OMOs yourself. Mosler is a very successful bond trader for decades and he talks to many central bankers and bond traders. And they all basically agree with him on the way it works. Funnily enough there is a lot of agreement from bankers about MMT and not so much from economists which often even fail to express their views with sound balance sheet techniques. Many mainstream economists completely fail to understand modern banking operations. Mosler is an insider. He knows what he's talking about. Maybe you should be a little bit more humble and actually study the things you are making claims about. It doesn't seem you understand it very well. _"FED rate is for BANKS. General public don’t get those rates."_ Of course. You must have misunderstood that point. No MMTer, including Mosler, claims anything else. The interest rate on reserves that the central bank sets and carries out through by OMOs ist the base rate. Private banks obviously add to that rate based on risk assessment and expected profit rates. Nobody claimed otherwise. Banks need to refinance their credits by borrowing from the central bank. They need to pay the interest the central bank sets. Therefore they will mark up their interest rates based on that interest rate. This is the whole point of monetary policy.
@@trixn4285 I understand now that you’re a Fan of Mosler and hence you’re blinded from noticing a lot of his inaccuracies. When he and other MMT folks stated that “raising interest rates is inflationary” You didn’t notice how wrong he was? Or even when it played out in REAL LIFE when he claimed Erdogan was right for lowering rates only for the Turkish lira to DEVALUE That wasn’t enough evidence to see that he is in fact WRONG!
@@mentalgame5608 You are correct and the supporting evidence is that lower interest rates deceases also the value (purchasing power) of money. Interest rates have been described as the price of borrowing money which increases the ability of people to do just that. It does that in practice.
Erdoğan should hire this guy. As long as he's only hiring people who think lowering interest rates will reduce inflation, this guy's probably a good pick.
Central Planning has never ended well for the man who would live "Free". If a man were only his "stomach" these ideas would suit the creature - keeping him safe and corralled. Fortunately, (or not so), there is another dimension to a man's existence - for that, "Buckaroo Bucks" just won't cut it ! Still, the conversation is appreciated - thank you. Let's hope the Republic is still standing long after the MMT'rs have disappeared into the sunset.
Lack of central planning has never ended well for anyone. That's why people have always banded together to form societies with governments. As for the Republic, it has always operated on MMT principles, just like any other country. The USA literally wouldn't exist if hadn't been able to print money to pay the Revolutionary Soldiers :)
@@BarrySlisk Like, how far back are you talking about? The Romans planned their economy. So did the Egyptians. So did the Sumerians. Literally the first civilizations planned their economy. What are you talking about?
The Buckaroo - where the Currency Issuer pays for community based labor done - seems like a great national economic solution to me as a 2nd currency that doesn't inflate. In fact it's value only grew against US dollar.
You are misdirecting people again. Why do you do that when the facts are available and contradict you. There is no such thing as government currency issuer. Government does not issue currency . Government is the biggest single spender of existing money in the economy. Most money is created in the economy is created by private banks who create it when they lend. It is not money created by the government or the Federal reserve bank. Even money created by the Federal reserve bank is loaned to government in exchange for Treasury bonds and has to be paid back in time when those bonds mature.. I have directed you previously to the explanation given on the Parliament of Canada which lays out what happens in this statement " Money is created in the Canadian economy in two main ways: through private commercial bank loans or asset purchases, and through the Bank of Canada’s asset purchases. The majority of money in the economy is created by commercial banks when they extend new loans, such as mortgages."
@@Rob-fx2dw Oh hello again Rob, I see you still have basic facts wrong. Both private banks & govt create currency, actually. There is no reason for Govts to sell bonds, unless to benefit the usually very wealthy people or organizations that buy them. Bank of Japan has almost zero interest on their bonds......they still have currency to spend. Why do you always seem to be for the WEF types of cronies in the world, Rob?
BTW if anyone wants to think Rob has any humility about these questions, just go to Deficit Owls & see him argue, then delete his comments instead of a admit he made a mistake. Never changes his mind on anything, that I have ever seen in the years he has been trying to vilify he very things that could help our society, instead of elites.
Absurd foundational idea that the human drive for acquisition comes from the need to pay taxes. Insane. The drive for acquisition starts with security and matures to material benefit and then status. These drives existed before currencies, but opportunity for success was limited to only a few..
People will believe, especially intelligent people will believe, whatever is necessary to justify their desires, no matter how delusional. Such is MMT.
"People will believe, especially intelligent people will believe, whatever is necessary to justify their desires, no matter how delusional. Such is MMT." I agree well said.
God 30min in and this is annoying …Mosllers goes on way too much about this tax aspect and his buckaroo example is just annoying - I get the point he’s trying to make but what he ignores is this discussion is that money in general only has value because there is stuff available to buy. It’s not just about tax - which is why the Zimbabwean currency collapsed - because they didn’t have enough stuff to buy. Mosler obviously understands this as this is what MMT describes, but I just think he obsesses on the tax stuff too much and this explanation so far is just going to confuse people who don’t understand MMT. Also - it’s not just the ‘government’ that creates money - its central banks too and most of all commercial banking which MMT seems to unforgivably overlook altogether ….the origin of fist currency was not from taxation, it was via banking …
_"Also - it’s not just the ‘government’ that creates money - its central banks too and most of all commercial banking which MMT seems to unforgivably overlook altogether"_ They don't overlook that at all, Randall Wray writes and talks a lot about that as well as many other MMTers. It's simply not possible to comprehend all the body of work MMTers have created over the past 25 years and Mosler mostly focuses on a few very simple points. It's not like any MMTer denies the importance of private banking. Also when MMTers talk about "the government" they often consolidate the CB and the treasury for simplicity because many balance sheet operations have exactly the same outcome no matter if you consolidate those entities or not. The CB is a creature of law and a public institution. Although it is somewhat independent in it's day to day decisions (also simply by law) it's not nearly as independent as some people suggest. _"the origin of fist currency was not from taxation, it was via banking"_ Okay, what are the origins of banking and when was it? What's the historical evidence? You seem to be so sure about this, shouldn't be hard for you to present it. We have a lot of historical evidence that contradicts that dating as far back as ancient Babylonia about 5000 years ago. Taxation is much older than banking.
Congratulations. I have more questions now than when you started. You didn't discuss retirement. So everyone works till they die. But the most striking thing is that you explained well that we're not running MMT at all. Maybe that's the whole point of the interview. I'll watch it again
Notice he tip toes the deficits don't matter question. Also leaves out giving money to the rich lower prices because they build automated factories with the printes money.
When your core "base case" model bases the entire understanding of money on a version of taxation that doesn't exist (mandatory flat tax on everyone), and you still have the ego to say it's not a theory it's simply the way the world has always worked... economists astound me
It's Communism. No linkage to reality. Just a religious doctrine for your followers to use to satisfy their selfishness. And Mosler and Felton know it.
What, economists aren’t allowed to use illustrative examples? It’s not analytical, it’s descriptive. I’m guessing you just don’t like the truth it’s describing, therefore you feel compelled to clumsily accuse Mosley of having an “ego.” Swing and a miss, my dude.
What, economists aren’t allowed to use illustrative examples? It’s not analytical, it’s descriptive. I’m guessing you just don’t like the truth it’s describing, therefore you feel compelled to clumsily accuse Mosley of having an “ego.” Swing and a miss, my dude.
Agreed. Contrast this odd, coercive definition of money to the more common sense definition from Lyn Alden in recent talks about broken money: Two people want to trade goods or services; "Money is the tradeable item where you never feel like you have too much." It's a common unit that both parties want more of. Different items can fill this role. For example, Bitcoin, which has no government or taxation beneath it. The Austrian definition given by Lyn is based on voluntary consent to transact. One must wonder: What opportunity cost do we pay when we instead build our entire economy from a premise of government coercion, threats of imprisonment or worse, and forced seizure of your private property to non-consensually transfer it into the "public domain," such as the definition given in the early part of this video above?
@@idxerr Currency has no diminishing marginal utility. It converts to whatever you need or want most right now. If the govt wants its taxes in dollars, hold Bitcoin until tax day, and then buy dollars and pay Auntie Samantha.
could someone please help me understand how to (or if we need to at all) factor in those who do not pay taxes (but still spend), either because they dont have to (on support payments like pensioners) or because they dont want to (voluntary unemployed). and i guess what would happen if lots of people didnt want to work?
Richard Werner and Richard Murphy. Both contributors on YT. Everyone interested in Banking and Monetary issues must follow their videos. Confusion in many aspects of monetarism is rampant. "Princes of the Yen" is a real eye opener. It originated from the book R. Werner published years ago.
the biggest issue with MMT is it's understanding of the history of money is just factually incorrect money did not arise with the state, nor did single currency zones arise with taxation.
You are wrong. Bukaroo coins are not equivalente to production there are no transactions on Bukaroos, if someone starts working 1 Bukaroo value hours and sells for 100 US a Bukaroo for someone that needs it, then you have inflation working.
When Warren mentions the effect of collapse of tax collection during war I am reminded of my uncle's story about the UK tax regime when he was bomber aircrew during WW2. He said they collected taxes DAILY. OK, now I see their point!
Great discussion. Just a few comments: - I'm glad you pushed Warren on the "inflation" vs "relative price changes". When your salary stays at $1 and the cost of pasta goes from $1 to $3, that's both inflation *and* a relative price change. Labour is getting relatively cheaper and food relatively pricier, but even with that relative change, the nominal price of labour is not going down. He didn't seem to want to change his mind on this and just waffled, unfortunately. - While I totally get where he's coming from that taxes create demand for a currency (and I assumed that was mainstream), it's far from clear that government bonds don't have a similar role. I would love an in-depth analysis as to whether a government borrowing money, by issuing bonds, can substitute for taxes and create demand for a currency.
Why do you think taxes create a demand for the currency when they did nothing to create a demand for it in countries where the money failed to have any value at all like in Zimbabwe and other countries where despite taxes the value and demand for money dived to nothing and was rejected by everyone including finally it's own government? Obviously the proof that tax does nothing to create a demand for the money given the reality of this.
In your example: there is inflation in the price of pasta but no inflation in the price of your labor. But perhaps there is inflation in the price of the "labor" of an oil company executive. Perhaps, previously, your monthly real salary was 3000 buckets of pasta, whereas now it is only 1000 buckets of pasta. But maybe the oil company executive's real salary has increased from 100,000 buckets of pasta to 200,000 buckets of pasta. Supposing production of pasta is unchanged, maybe the 100,000 increase in the executive's real salary (measured in pasta) came from the reductions of the real incomes of 50 workers like yourself by 2,000 each. 50 × 2,000 = 100,000 Or perhaps the economy is unable to produce as much pasta as before. But if production of pasta is constant or increasing, then we may analyze this "inflation" or "relative price change" - or whatever you want to call it - as a distributional struggle that is inherent in capitalism: what share of real economic output does a person get? For example: Will an oil company executive be able to extract more of the share of total real output if he is able to increase oil prices? Or if he does so will everyone else be able to increase their nominal prices (including prices of labor) in such a way that it cancels out the oil company's attempt to extract a larger portion or real output, such that everyone's real incomes are unchanged? The answers to these questions depend on relative pricing power: e.g., are you in a labor union (easier to demand higher salary)?; is the oil industry oligopolistic (easier to price oil higher)?; etc. Regarding your second point, why would anyone want to accumulate government bonds if the currency that they convert to at the maturation date cannot be used to pay taxes (or converted to gold or something else one might want)?
ruclips.net/video/DoMPlG5kgNE/видео.html MMT in Minsky at the 2nd Poznan MMT Summer School 2022 . People not familiar with system dynamic mathematics & differential Calculus can be helped with a good visual . ruclips.net/video/urmJP9MZApY/видео.html Can We Make Money Work For Us? with L. Randall Wray
@@thomasd2444 You have picked Keen and Randall Wray as independent supporters of the MMT . Firstly re Keen;- I questioned him about why his sectoral balance claims were that deficits are a saving for the private sector as his money flow diagram shows it and why he had not taken notice of the fact that deficits require borrowing in the form of treasuries which have to be paid back by the private sector which he has ignored. He replied that he was right - because his Minsky software shows it ! So he used his own diagram to justify his own claim. How dumb is that using his own statement to prove he is right and not using independent facts. Secondly Randall Wray who says "All money comes from the government " and "the government has to spend first before taxes can be collected." He completely ignores the 90% of money in the economy which comes from private bank lending which is not government and taxes are collected in that money such as income taxes, sales tax .
Seems like there’s a problem with the first premise: mr Mossler says that we should start with tax as a liability on currency. However, this seems to deny there is a real component to tax. If we look at the origins of tax though, we can see that it was most often paid through goods, commonly grain or livestock, as in tithes to the church in the Middle Ages. The real goods came first, tax through currency came later, as an abstract valuation on real goods. If MMT was true, wouldn’t it seem to unlink tax/currency from real goods? To be sure the link is indirect between currency and real goods in the modern economy, but that is vastly different to saying it is not linked at all.
My 2 cents... TAXES AND GOVERNMENT AS AXIOM FALACY MMT claims the PURPOSE of money is to serve a deficit created by government (or equivalent institution). This fundamental assumption is wrong, and is a faux-first-principle. Origin and purpose are not the same thing. The origin of the resource of money might be the an institution such as the government (origin is not fundamental), but the PURPOSE is to serve as a liquid medium of accounting and exchange in both the free-market and the government. A deficit as a function of the government may be a tolerable necessary part of the system. That is until the deficit affects the currency’s parallel utility (and role) which is to liquidate the market. This does enable the productive value to create taxes, but taxes are not a fundamental function of currency. MMT, allows and encourages excess sovereign debt. This excess sovereign debt is a liability, and creates increased counter party risk within the currency system. There is a tipping point of trust, where the risk-to-utility of the currency outweighs the utility, as more and more money is printed relative to the GDP which can never keep up. Currency needs no government. Currency requires participants exchanging value, that is all. NO INFLATION FALACY Another claim by MMT is that inflation is a relic function carried over from an age of exchange currencies,… Currencies of nations, must serve a large diverse number of competing stakeholders who occupy the same market domain. With no inflation, those positioned to have even a little margin of currency after essential liabilities in that market would systematically passively accumulate currency, without offering value or liquidity to the system. The liberalism that celebrates MMT, is the same one that is opposed extreme wealth gaps. Inflation encourages liquidity of the currency. Liquidity is fundamental to the purpose currency. JOB GUARANTEE FACALY 'The job guarantee’ is the claim that 100% of market participants can be employed simply by the government funding participation in the workforce, regardless of productivity. MMT advocates mistake productivity for participation. Productivity in a competitive market with scares resources is the attempt or execution to create realised market value. Productivity bring value and sustainability tot the marketplace. In a large market, where individuals are in competition with strangers, both personally and culturally, and currency is paid for ‘just turning up’… Participants are incentivised to ‘freeload’. Destroying the marketplace, and eventually the currency, as one of the fundamental purposes is to liquify that marketplace. The published number for the government will be" 100% employed"... but at that point, the measurement irrelevant.
I think this post is worth it, but please fix the spelling. "Falacy, Facaly, Scares"... Also, don't tell Keynesians that government creating jobs for the sake of creating jobs is bad.
@@waterbloom1213 Thanks for the complement, I'll leave the spelling mistakes for now though... a) I think comments are stronger look they haven't been edited, b) Its authentically my work, worts and all. :)
@@waterbloom1213 If there was a job going, where all I had to do was 'turn up' I would go for it. I would have no negative intention towards my fellow citizens. But I would be on tiny protozoa, blindly feeding myself in a parasitic system. As a librarian, I find one of the strongest steel man arguments against my position is 'the tragedy of the commons'.
Thank you for this. I’ve been curious about MMT for a while and now have some things to think about. I’ll probably have to watch this a second time and actually read Mosler’s work.
If you get a chance the RUclips page 1dime has a video on MMT in which they show 3 other economists along with mosler who have contributed to the subject. It also names their books
@@ReallyDarnell 1Dime is a political hack and MMT is for morons. "The idea that deficits don’t matter for countries that can borrow in their own currency I think is just wrong." ~Jay Powell, Chairman of the Federal Reserve Bank of the United States of America
Mosler "You can't trade a currency based on interest rate differentials you are going to lose a lot of money". The realty is someone trading with you will win since the other person wins. It is as simple as that which makes his statement a false since he only looks at it from one perspective. i.e. the losers one rather than the winner.
@1:04:00 no dude! What matters is fully employing willing workers, because you want to maximise needed output and minimise the hours each _one_ person has to work (no bullsh*t jobs) to produce the needed ouput. So the deficit should be _whatever it needs to be_ to guarantee full employment. That's why the deficit never matters! You do not even have to publish the number, and you never know what it _should be!_ That's an inapplicable question. "How much should the deficit be to ensure full employment?" You cannot say! Once you show you've got no one turning up to collect unemployment benefits, and everyone can pay their rent and grocery bills, then you know you've got the "right deficit" residual at the end of the year. C'mon Mr Macro. Do better.
The problem with MMT is not its history analysis, the problem is the conclusion it arrives. Look at Argentina (not even mentioning Venezuela). That’s what you get when you don’t have an independent central bank that finance government spending.
I am from Argentina and MMT is absolutely correct in practice on how money actually works... What we have in Argentina's media is the opposite of this, is a population under the belief that money is still a commodity somehow or has a representation in gold or somewhat, because everyone is terrified of the "fiscal deficit" and then the untrust increase prices, people save in foreign exchange, etc. Inflation has been an issue for a long time but is not related exclusively to money printing at all and can be fixed with increasing salaries and just spending, there is no real risk on "fiscal déficit" USA has an increasing fiscal déficit since the country was funded... Price formation/price levels is a separate discussion and like Mr. Mosler here said, there's no consensus on what the value really should be, so inflation can be caused by many different factors... Of course like now some absurd libertarians in Argentina are proposing, to dolarize the economy would get rid of the current inflation but the consecuences of not being able to print your own money is pretty much the only way a government can get insolvent... Because if you can print your PESOS, create a tax liability like mosler said and spend, you can basically inject money to the economy.
@@MagnusAnand I am from Argentina and MMT is correct. Inflation doesn't have to do with money "printing" (not really printed), it might have an effect on inflation, yes, but inflation is a mixture of many differrent factors.
Neither of these countries have currency sovereignty and have a lot of debt in foreign currencies. MMT only applies to countries where the vast majority of government debt is donated in a currency it controls. E.g usa, Japan, uk, Australia etc
@@MoneyMacroTalks Why do banks 'borrow' from central bank? They just need asset- liability records and reserves for inter bank transfer, right? In New Zealand govt + Reserve Bank had a lending scheme during covid times FLP - Funding for Lending Program. Idea was to provide cheap money.. but not sure how it worked. Thanks
11:20 why is it when people discuss unemployment they never ask "at what price"? I mean if I was talking about some steel that wouldn't sell, the price is the first thing you would ask about.
Wouldn’t raising taxes primarily affect non essential consumption? If you get to the point where people cannot sustain themselves many might defer paying tax
Taxation is a tool to drain purchasing power created by prior government spending. If the government tried to raise taxes in a period where general purchasing is too low and consumption is low it would only lead to less tax revenue as the economy would be collapsing. At the same time expenses for social welfare would be increasing automatically pushing the government budget into deficit. This is an automatic stabilizer. A government surplus is only reasonable when income is so high that the economy is overheating and in that scenario raising taxes only drains spending in excess of capacity.
Let’s play a game called who can come up with more obvious flaws in the whole buckaroos experiment in under a minute. I’ll go first: 1) it assumes an endless outside source of demand for the students time 2) it assumes that each students time is equally valuable 3) it doesn’t take into account the amount of time/energy/resources expended on necessity items (food, water, shelter, warmth…) 4) selection bias of participants 5) doesn’t relate the buckaroos to the cost of providing the services to the participants (infact it assumes that people aren’t actually being provided a service by the administration in the first place… which it obviously is otherwise no one would give a fuck about the buckaroos… you can’t just come up to some random land owner and say hey I’m starting a government I’ll be needing you to start paying taxes on your property it’s ok tho I’m going to give you the credits to do so in the first place and expect them to just say oh cool guess these taxes need to be paid and this currency is therefore valuable) Jesus there’s so many to choose from. You get the point the fact someone tries to prove a point using this experiment is simply laughable.
on your last point I suppose it works because behind you is 100 000 soldiers to his 100. Also I don't understand what you mean in point 4 about selection bias?
1:20:13 "I think nobody can deny that no current economic systems have sustained full employment: That's never been the case." Taking "full employment" completely literally is kind of ridiculous, at least for something as large as a whole country, but I wonder if you're considering "communist" states in this statement, because I was under the impression that some of them did quite well in terms of fulfilling their job guarantees, and, in fact, his whole MMT way of looking at things reminds me a bit of state socialism and makes me wonder how the people running "communist" state economies understood these things. I guess maybe that kind of communism isn't a "current economic system" anymore, though.
I don't know how you define communism. A JG has nothing to do with that. Communism means "no privately owned means of production". Certainly this is nothing that MMTers propose at all. They simply say that unemployment is caused by the monetary system imposed (people seeking for work that pays the currency). And unemployment is used as a policy variable to tame inflation which means that some poeple can not possibly find a job even if they want to. Do you know the game "musical chairs" (not sure if it's called like that in english)? There is always one chair less than people dancing around them and when the music stops everybody tries to get on a chair. Obviously there is no chance that everybody gets one even if they all try as hard as they can. This is kind of the system we have. Isn't it very cruel to make paid work the only way to sustain yourself but then intentionally and systematically prevent that there actually are enough jobs? There are only two possible ways you can have it: You either have an unemployed buffer stock of labour force (NAIRU) for the private sector or you have an employed buffer stock (JG).
@@trixn4285 You seem to be reacting more to the "reminds me a bit of" part rather than the part before. Saying it reminds me a bit of "communist" countries is not the same as saying I think MMT is communism. Also, it looks like you spend some time at the end defending job guarantees, which makes me think that you view a comparison to "communism" as a criticism. This is a valid guess, given how common it is as a right-wing epithet, but not what I was doing. In fact, what I was trying to do was call out "first world" economists for what I suspect is a common habit among them of not thinking much about the economics of socialist countries, particularly those that have become heavily maligned in the "first world", although I admitted that it might actually have been a valid omission in this particular case, since I didn't know if any state _currently_ has a job guarantee. Since then, what I've found interesting is that countries that DID have something that looks like a job guarantee still reportedly had unemployment levels around 1~3% (and that's not even the inverse of labor participation rate, which I somewhere saw as 80% in the USSR at some point). As for how I define "communism", I specifically avoided doing that, but my point was that I have heard of job guarantees in countries that are often called "communist", such as the USSR, although I wonder exactly what those entailed. I also wonder if it's truth or just ignorance that caused Buisiness Insider to label Marienthal, Austria's job guarantee as "the world's first universal jobs guarantee experiment".
@@Mr.Nichan _"Saying it reminds me a bit of "communist" countries is not the same as saying I think MMT is communism. Also, it looks like you spend some time at the end defending job guarantees, which makes me think that you view a comparison to "communism" as a criticism"_ It's not uncommon to hear from people that a policy proposal that involves the government planing basically anything to be "communism" or a "planned economy". Of course that's just a ridiculous straw man. A JG wouldn't be communism or a planned economy. Only people that can not find a job in the privately organized and market based economy are eligible for the job program and it serves a macroeconomic anchor for inflation and the value of the currency. I'm sorry if I suspected you to try to put it in the communism corner. Have probably done you wrong there. But it just happens so often that people come up with this. It's kind of a reflex to reject it. There are actually other notable job programs that you could point to. To list some of them: The New Deal (1930s USA), Plan Jefes y Jefas de Hogares (Argentina), National Rural Employment Guarantee Act (India) to name a few. Those countries wouldn't be considered communist at all I guess. Anyways the defining feature of communism is that all means of production are publicly owned, so there are no capitalists (people that own companies) and no profit-driven production, only "workers". As there is no profit-driven production where companies compete on markets for profit it's usually also is a planned economy. Of course that doesn't exist anywhere in the world and I'm not even sure if it can exist. The whole point of a job guarantee is to eliminate what is caused by the monetary system imposed on people, without risking macroeconomic instability. Unemployment is used as a policy variable (see e.g. NAIRU or the Philips Curve). That means unemployment is depicted as a "necessary evil" primarily to tame inflation. This is a sadistic system because no matter how hard everyone tries some will always be involuntarily unemployed. _"reportedly had unemployment levels around 1~3%"_ Well, it depends on the implementation of JG and the definition of "involuntarily unemployed". But yeah, of course there might always be people that are unemployed but a JG would reduce that to the bare minimum. Everybody should get an offer. They are always free to accept it. And of course there should also be a social safety net beyond a JG.
@@trixn4285 One thing that complicates things is that a government program designed to give jobs to the unemployed is not the same as a universal job guarantee. For example,* obviously South Africa's Expanded Public Works Program can't be working as a universal job guarantee if a third of South Africa's potential workforce is still unemployed, unless this is another definition problem like adults living in farming families being called unemployed or something. Anyway, I don't think it is, because the final recruitment guidelines contain the text: """ The high demand to participate in an EPWP project coupled with local and municipal dynamics may impact negatively on the recruitment of participants. Potential challenges include: a) patronage in the recruitment of participants, b) inconsistency in the process of recruiting participants, c) lack of transparency, and d) poorly defined criteria and processes. These pose a reputational risk to the EPWP brand and where such problematic practices occur, or are perceived to occur, they may lead to delays or disruptions in the implementation of projects. Thus a clearly defined recruitment process that speaks to the recruitment of participants and defines the role of stakeholders is needed. """ *another example showing how we mirror Wikipedia
Its ironic that a lot of what he is putting into words and examples is something intuitively understood by some. Great conversation, I'm glad he doesn't dilute anything with nonsense politics
As far as his whole foundational point of needing to pay in the monopolized currency, that seems incomplete to me. even without a monopoly currency, you can still impose a tax burden of X amount of grains, slaves, gold, etc. And you may even be flexible as to the exact payment - maybe potatoes are acceptable substitute for grain tribute, 10x more pack animals may be accepted instead of slaves, silver and sapphires instead of gold, etc.
- Sometimes a good visual is just the help a person needs to learn about Modern Monetary Theory ruclips.net/video/DoMPlG5kgNE/видео.html MMT in Minsky at the 2nd Poznan MMT Summer School 2022 .
MMT or not mmt, the fact is that money can be totally unnecessary for an economy to work, but with money the economy can operate at a higher rate, ie. the much higher speed of exchanges of goods and services.
Low income and low wealth with low taxes ? Not problem at all.- just make taxes 99% so everyone would be so much better off ! That would work so well according to Mosler.. (excuse the sarcasm.)
@@Rob-fx2dw When you make taxes 99% people will be tempted to stop using money in transactions, or they just go underground to evade tax, or they will go self-sufficiency economy, no exchange of goods and services, life will be boring, productivity will be low.
"The idea that deficits don’t matter for countries that can borrow in their own currency I think is just wrong." ~Jay Powell, Chairman of the Federal Reserve Bank of the United States of America
The Problem with MMT is that is Great to explain financial and financialized problems, but many of their framework is disconected from behavioral dynamics of producing good and services, that could be fungible or not and they roots of why those dynamics happens. And that is and abyss of difference.
The essence of the problem of excessive inflation with paying off foreign debts is that if you have unrestrained government expansion of their deficits then it leaves more money in the economy without a corresponding increased amount of goods and services. That results in lower purchasing power for every unit of currency and this corresponds to less value in relation to the cost of paying off foreign debt because the more adverse exchange rate of your own currency for others. It is as simple as that. Yet you have MMT supporters who ignore the time line of what happens saying the foreign debt in their currency is the problem.
Crypto is not part of nor related to MMT at all. MMT is concerned with government currency and bank credit, denominated in the government currency. Crypto is more akin to a commodity; albeit an electronic commodity. Yes, is was "sold" as a currency, but is far more involved in speculative trading.
Soooo...people work to pay taxes...hmm....not to live and survive. What about people that don't ever work and don't want to work... I get it that we technically can't go bankrupt but what should we spend money on? does it matter?
The buckaroos example is not comparable to a currency. That is because the buckeroo is tied specifically to the student and not to the community. It is not able to be traded for anything else than a student's liability to do a specified number of task or tasks. A nation's currency is not tied to the work of specific person or persons but is tradable for many things including past debts or foreign debts. You can't even use backaroos to pay for things that the university provides itself like educational instructions and you have to separately pay for those things with actual currency. The buckaroos are only applicable to a student already in a contract with the university not someone else for whom they are useless and worthless.
No. Absolutely wrong. The nationally designated official currency is not issued by the government. It is created by the central reserve bank in exchange for securities sold to the reserve bank by the treasury department. Those treasuries mature and the money has to be paid back. However Most money is created by private Banks when their customers get an approved loan. It is all credit and debt money and is also tradable for other countries' money. Nobody can trade those buckeroos.
@@Rob-fx2dw you've got the important details wrong. firstly, the Central bank is part of the government. In America, it was a legal fiction to say it was private, but ultimately when the rubber met the road the courts decided to go back on this fiction and explicitly treat it as government. This was determined legally in US vs Wells Fargo 2019. Secondly, since the central bank is setting an interest rate policy with treasury bills it has no choice but to monetize treasury debt either indirectly or directly. If it didn't, it would lose control of interest rates. Think about the market dynamics here. Of course most money is created by private banks as you say. But considering that this private money trades at par with government money it's better to think of them as a public private partnership than purely private banks. Making private money trade at par is not trivial. That's what FDIC is for and also why the government is so heavily involved in regulating the banks. Of course you can trade the Buckaroos, Mosler talks about how some students would rather pay other students dollars for Buckaroos. This is basically foreign exchange. All of these details are said by Mosler elsewhere, it's not like he doesn't know them. They just didn't come up in the video.
@@jetfaker6666 You are wrong about the U.S. Federal reserve which is a central reserve bank. The U.S. Federal central bank is not "part of the government". It is separate authority that acts in similar way to what private banks operate in the private sector but it's exclusive customer to whom it makes loans is the government's treasury department. It buys government treasury securities and pays for them in money it creates as credit and debt. All of the treasury securities it gets from the government mature and the total amount of money is paid back to the Federal reserve bank by the government treasury. Your statements such as "But considering that this private money trades at par with government money it's better to think of them as a public private partnership than purely private banks" are just bluring the situation. It is failure to identify the roles and legal resposibilities of the two. You cannot concoct the situation to fit previously held views as you have done. Private banks are Not government and rules that restrict private banks do not make the two synonymous. There is no partnership and their actions are purely private. They are not government agents because the term agency is one in which a person or business is purely an intermediary between producers and buyers of a product that the producer creates. The Federal reserve is distinctly different organisation from private banks and it's actions do not equate to those of private banks. Private banks lend for profit. Their employees are private people. The bank's income is private income paid to shareholders. They are a registered private business. They are commenced and cease to do business based on their own decisions not government or the Federal Reserve. The private banks act in private lending environment where risk assessment is the first concern in their lending operations. The Federal Reserve does not risk assess before or when lending to government. It acts in separate lending environment since it's monopoly customer is the treasury. The Federal Reserve does not lend to private people or private business like private banks do. Private banks do Not get money to lend from the Federal Reserve. The government does not fund private banks for their losses from lending and neither does the Federal reserve. Re your comments about Buckeroos:- They are not tradable to the public and are not useful to anyone except the students. They cannot buy any other product than that offered by the university. Mosler's statements which i have previously seen are purely fantasy like his idea that the private banks are government agents. He doesn't know what agency actually is so uses the term incorrectly to cover his previously badly thought out ideas. I ask you if you are government agent when you have drivers license and must obey a lot of rules? - Of course the idea of licensed drivers being government agents because of the need to accept and comply with rules is equally absurd as believing private banks are government agents. Does a private person obeying rules of the government issued driving licence mean they are government agents? No, not unless the person claiming so is trying to blur the correct and distinctly different understanding.
@@Rob-fx2dw Read the decision in United States vs Wells Fargo 2019. It says the Federal reserve banks are agents of the government. If you don't like it, take it up with the judges. As for private banks, Moslers got a new video out in the last couple of days where he talks about managing the bank and how he felt like he was working as an agent of the state. You said that banks commence business on their own initiative but did you know that if the regulators don't like your earnings they'll wind you up? He likens it to being a soldier, you make your own decisions but you're still an agent of the army. And as I've alluded to the Buckaroo isn't so different from a national currency. Yen is only useful to the Japanese and yet there's a Forex market out there.
This is great. My initial exposure to economics was Austrian school. Which makes sense when you're coming from no knowledge. But then I watched Warren vs an Austria school guy and it blew my mind. I had to dig deeper into MMT. The more I learn, the more difficult I find it to refute Warren's position. Other MMT folk seem a little out there, but Warren is so grounded in his positions it's hard to find holes.
Holes in his theory - One:- Government deficits are not saving for the economy. They are an increased ability for government to spend more at the taxpayer's expense. If they were then all debt would be always a saving for the economy. It is clearly not because debt is a liability of one party and as asset of the other. Federal deficits are Not savings for the private sector because the private sector is the debtor due to the fact that the government taxes the private sector to pay off it's debts and that is an obligation for the private sector. No government pays off it's own debts.
user-hy7wk4ou41 is right: All debt-instruments create a debtor, and a debtee. And all US debts have always been paid-off as they came due, because the US has always been successful at auctioning new bonds to raise cash to redeem maturing bonds whenever it was necessary. (And when-ever the 'bond market' did fail to subscribe to an entire bond issue, well, the price of those bonds was reduced and reduced, until all bonds were subscribed. That's why all US bonds have always been successfully paid-off at maturity, which is likewise why all US bonds have (usually) been afforded the highest credit-rating, by every credit rating agency, such as Moodys, S&P, Fitch, etc. Unfortunately, such "refinancings" have become "increasingly necessary", because (1.) tax revenues account for a smaller proportion of total spending than in earlier years, and (2.) bond-buyers generally avoid buying "Long-Term Bonds" when interest rates are at historic lows (as they have been since 2008, though interest rates reached their absolute lows a few years later, i.e., under the Fed's "QE" regime.) The Austrians should be credited with this sort of insight for re-pricing such bonds at auction, ... but they would also have grave concerns that the "Average US T-Bond Maturation" has fallen from 10 years (in 2007) to 5 years (in 2012) to (I'd guess) 2 years in 2023. If that's accurate, then about half the US debt matures each year, and must be refinanced in a simple "roll-over". The total US debt hit $30 Trillion a year ago, or so. Finally, Austrians would also have deep skepticism that this auction process could continue under any MMT regime. That's because the tenants of MMT are literally incompatible with the operations of a Central Bank. (That's why MMT "assigns" taxation and borrowing as the new tools for fighting inflation. Example: Do you think bond-buyers would buy bonds from a Gov't that has the right to pay bond redemptions with newly-printed money, straight-off the printing press? Many people would say "Yeah, that's great!", but that's only because they don't realize that Central Banks issue money into circulation by buying T-Bonds from the Bond Market. Later on, any excess money can be retreived from circulation by simply selling such T-Bonds back to the Bond Market. MMT doesn't borrow money to fund operations: MMT spends the newly-printed money in to cirulation, and later on, uses taxation and borrowing to retrieve money from circulation, to fight inflation. However, gov't can't hit-up the citizens with a large tax increase, because many folks would not be able to pay it, and many would have to tighten their belts. Belt-tightening can create a recession, which reduces tax revenue. Not good. That leaves borrowing as MMT's "best bet" for fighting unexpected inflation. But who would lend to any Gov't which uses a printing press, like a counterfeitor, to create money to pay its bills? Today's bondbuyers have confidence in the US financial outlook because the bond market sends a clear signal every time the Gov't seeks to borrow money, and that signal is generated in the Bond Auction, prior to the spending recently authorized by Congress. Under MMT, there is no Bond Auction prior to spending the money, and therefore, no clear signal can be generated by the Bond Market. Uncle Sam only needs to borrow money if inflation seems probable, or inflation has already occurred. Bond market participants can't be certain that "taxes" and "borrowing" in an MMT regime can fight inflate effectively as central banks have proven able to do, at least since 1994. No one in the Bond Market would lend money at today's low interest rates, unless there's good reason to believe inflation won't be a significant risk. MMT proponents have fostered lies that MMT actually describes how our monetary system works, just like Flat-Earth Believers want us all to believe that the Earth is flat. Before anyone subscribes to the MMT tenants, they should read the Federal Reserve Act (see the Federal Register), which clearly states that the Fed is required to always maintain collateral (i.e., value of assets, usually T-Bonds) equal to or greater than the liabilities (created by the central bank by issuing of money into circulation). This negates MMT's claim that the famous question "How ya gonna pay for it?" can be simply answered with, "We'll just print the money". No, the answer has always been, "We'll conduct a T-Bond Auction, and lower the price (i.e., raise the yields) on the Bonds until the issue is fully subscribed. And since MMT clearly fails to correctly describe how our current Monetary System works, my conclusion is that MMT proponents are either (1.) lying ... or (2.) deceiving themselves, due to an insufficient education in Monetary Economics. I've said many times that "MMT is incompatible with a Central Bank", because IF mmt's claim regarding "spending newly-printed money into circulation" were true, then central banks would not be able to buy bonds with newly printed cash, and not able to fight inflation by selling said bonds back to the Bond Market, to fight inflation. Central Banks require total control of the part of money that they created, which is usually about 11%, within in a healthy economy, in normal circumstances.
@@Rob-fx2dwif the government has currency sovereignty then it can always pay its debts. Taxes don’t actually pay for debt or any government services they use the central bank to create the money and debit it to the appropriate accounts
@@Alex-fm5ke You are totally wrong. Who told you that? Let me guess. - Some MMT economist who can't explain why the mathematics behind it doen't add up and why their explanation contradicts what the central Reserve banks' official explanations are. they are the institutions who actually crete new money so they know what they are doing. If you want the genuine explanatons rather than the MMT fantasy then go to the correct place which is the banks who s do it or their official sources such as the Bank of England or the official explanation of the Canadian Library of Parliament site which explains the process in Canada. It is common to the same process as most other countries. Canada's process is here :- lop.parl.ca/staticfiles/PublicWebsite/Home/ResearchPublications/HillStudies/PDF/2015-51-e.pdf
"The more I learn, the more difficult I find it to refute Warren's position. " What is warren possition and the contradiction with the Austrian school?
Raising taxes and reducing demand can definitely reduce the rate of inflation. Obviously a competitive market is also necessary. Increasing competition reduces prices. I’ve seen this in video game markets. Immediately raising taxes generally raises the price of everything, but as the taxes take money out the economy, prices come down. Now, other policies/things effect this like the trade balance, but you get the simple idea. Raising taxes is a way for the govt to take money out, spending money puts money in. Congressional budget surpluses net take more cash out the economy than they put in, deficits vice versa.
ruclips.net/video/DoMPlG5kgNE/видео.html MMT in Minsky at the 2nd Poznan MMT Summer School 2022 . People not familiar with system dynamic mathematics & differential Calculus can be helped with a good visual .
"Immediately raising taxes generally raises the price of everything, but as the taxes take money out the economy, prices come down. " Less money around would also mean less money for employees, so this would result in either lower wages or unemployment. Since wages are pretty "sticky" probably unemployment in the short run and lower wages in the longer run.
Relative-timing ratio-rates Perspective of Logarithmic Time makes "modern, money and theory" definitions all Vapourware, thought experimentation for Analysts.
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Cant believe you didnt press him on the multiple problems and disinformation of MMT. You should do a follow up video debunking most of it.
@@PoliticalEconomy101 - - Sometimes a good visual is just the help a person needs to learn about Modern Monetary Theory
ruclips.net/video/DoMPlG5kgNE/видео.html
MMT in Minsky at the 2nd Poznan MMT Summer School 2022 .
The best beginning point is a college course (there are many online also) about an introduction to accounting which teaches how professionals "account" for the movement of money from place to place; from person to person; from person to firm; from firm to firm.
It took me 7 seconds to see the correct sequence. Don't be discouraged if it takes you more time.
Sounds like someone told you there are multiple problems. FYI, those are often people who follow another school of economics
Sounds like the same someone (or maybe other someones) told you there is dis-information about MMT. That is when it is time to return to the source texts to learn.
You are fortunate to be learning MMT now, in 2022, when there are several popular books, a textbook, & several college courses online.
Im a socialist. MMT is capitalist garbage. Its useless for socialism.
The audio on this video is very unpleasant
You have no clue what he's talking about because you've been brainwashed your entire life by Capitalist bullshit.
Props to the interviewer here. It is rare that the interviewer actually inputs value further to just platforming the subject, and your knowledge really took this interview to the next level
Thank you Kyan! Very happy to hear that.
you'll find that academics (except for social justice subjects) generally do this, while marketers and politicians generally do the opposite.
@@MoneyMacroTalks you did great man, really interesting to watch
@@gwhoEven the social justice subjects do. It’s just that most of the clips are from feel good events rather than serious policy discussions
Hey Joeri, it would be great if you would publish your money and macro talks as a podcast. Because I don't have RUclips Premium and I would like to do something else in these 1,5 hours with my phone.
Also, I really like your show. Keep it up.
I'd listen to it...
@24:00 "No unemployment" (in buckeroos for 25 years of operation). But he took a short-cut. The imposition of the liability for students getting their grades creates unemployment for students in buckeroos. But the UMKC Dept. then eliminates all the unemployment they just generated when they pay buckeroos to students who do the hour of community service. They never refuse a student the community service if they want their grades. *_That's the lesson!_* You do not create unemployment (ethically) unless you are prepared to then immediately eliminate it, otherwise you're damaging people like a sociopath, with no need or purpose.
So that's the job guarantee right? UMKC can always buy student labour priced in it's own currency (buckaroos). Real currency sovereign governments can always buy labour priced in it's own currency (dollars, pounds, yen etc). Doing so would ensure that no one is left unemployed, everyone is gainfully employed, and the country is producing more wealth than it was before.
@@Baxwell. Yes, exactly that. The issuer can of course always afford to hire labour that is willing and able to work for the currency it issues. This is eliminate involuntarily unemployment. Of course there can still be people that do not want to work in those job programs or that are transitioning from one job to another but that is not involuntarily.
There are only two possibilities: You either have an unemployed labour buffer stock for the private economy to hire from or an employed one. The discussion ist mostly about inflation when it comes to the question which would be better. After all everybody needs an income anyways, even in a system with an unemployed buffer stock. The question is, what about the philips curve and inflation?
@@trixn4285 You are misdirecting people by saying that government 'issues' the currency. You are in denial of the fact that most of the money in the economy is created by private banks and they are not government . They are private institutions owned by shareholders who take profits and losses. They create credit fiat money which is the same as the Federal reserve bank creates and lends to government. Private banks lend on a risk and return basis. They are not government agents since they actually create the money they lend.
You can see the explanation of this if you really care to look at the site which explains the operations of how money is created and by whom you can find it on the government of Canada's parliament.
It states Money is created in the Canadian economy in two main ways: through private commercial bank loans or asset purchases, and through the Bank of Canada’s asset purchases. The majority of money in the economy is created by commercial banks when they extend new loans, such as mortgages.
see :- lop.parl.ca/sites/PublicWebsite/default/en_CA/ResearchPublications/201551E
@@Rob-fx2dw _"You are misdirecting people by saying that government 'issues' the currency. You are in denial of the fact that most of the money in the economy is created by private banks and they are not government"_
That's a Strawman, Rob. I never claimed that only the government can issue money. The central bank issues the currency. Private banks can and do issue money. But that is their own private money in their own private books limited to the bank itself. If they want to make ANY transaction to another bank they need central bank money to settle the transaction because other banks do not accept the book money of that bank.
_"They create credit fiat money which is the same as the Federal reserve bank creates and lends to government."_
NO, of course not. It's not THE SAME money. That's the whole point. If banks could issue reserves they wouldn't have to take billions in loans at the central bank. That's the whole point of a two-tier-monetary system. Everybody can issue money. A private bank can do it, I can do it, you can do it. The problem is to get it accepted. When a private bank makes a loan it only creates book money in its own books, NOT reserves. This money has no acceptance outside of its own books. If ANY transaction needs to happen to another bank the other bank will demand central bank reserves and this can ONLY be created by the central bank. Bank money is not the same as central bank money. Those are two independent circuits of money and central bank money is higher up in the hierarchy.
_"It states Money is created in the Canadian economy in two main ways: through private commercial bank loans or asset purchases, and through the Bank of Canada’s asset purchases. The majority of money in the economy is created by commercial banks when they extend new loans, such as mortgages."_
Of course. I know that. What makes you think I say anything else? I mean, every MMTer says exactly that. Why the straw manning? What you don't want to accept is that the bank has to go to the central bank to borrow enough reserves (or sell assets to the central bank) to settle any transactions with other banks. So yes, the bank can create money, but it is not accepted by other banks at all. Other banks will always demand CB reserves for settlement because this can not created by private banks. It would be completely pointless if any bank could settle any payment with money it can create itself.
@@trixn4285 You are wrong about the central bank money being needed to settle accounts at other banks.
The mistake you make is not understanding that transfers between banks are only done through a process known as a clearing house. Clearing houses do not create or use money themselves from central bans. They operate only in the margin of payments where the flow of funds is in an imbalance for a limited time between the two banks involved in the settlement. Sometimes that imbalance is very small for instance when two banks each transfer nearly the same from bank "a" to bank "B" and vice be versa. The central bank will require funds for a short time then those funds are no longer required after the situation balances out and they are returned to the respective banks.
the reason is that private banks cannot create their own money and lend it to themselves or other banks.
I absolutely loved this. I wish you could have pressed him more for better explanations on certain things, but obviously that’s not possible for either you or him absent significant preparation with data. I would love it if you did a series of follow up videos on some of these topics, getting more in depth with some of his claims.
Bizarre. Just bizarre ideas. No relation to reality whatsoever but the gullible lap up his sophist nonsense. He was basically asked what problem MMT solves and his answer was none! He just wants people to accept his bizarre version of monetary economics. Feel free to hit me up with what problem *you* think MMT solves.
@@happipat3374 weird, to me what he's saying seems much more internally consistent than the orthodox story and way more based in reality. Perhaps it comes off as exotic to you because it contradicts the information you've come around to believing?
@@happipat3374 I mean, I think using the perspective of MMT helps change how people think about govt spending. Lots of people wanna reign in congressional spending and think that’s at the heart of inflation. MMT makes them consider other kinds of money creation that are actually more important like private bank credit creation and CB activity. It also makes them consider other factors like taxation and how they affect the money supply and thus inflation/deflation/savings/spending etc.
@@happipat3374 Id argue a revelation of MMT, at least it was for me personally, is that, when you have a monetary system like ours, you can tax/redistribute quite a lot of the money that the top 1-10% of the population makes and put that into a jobs program, public education, etc. A lot of the money will just end up back in the hands of the property owners after the working/middle class spends it on stuff. Instead of creating more billionaires and trillionaires we should be creating a healthy flow of money so Americans, in general, are more prosperous, not just the top 1% of wealth holders.
@@happipat3374 Agreed. - The ideas Mosler puts out are the most badly thought out ideas that anyone could pursue. His example of how the accounts could work is does at all address the central problem of what the study of economics is aimed at and merely describes a post factum way of accounting for what has happened. It really shows him putting the cart before the horse.
One further comment, he was absolutely right that the reason the ruble is up is because they can’t import anything. One of the most misunderstood aspect of Western sanctions is that the purpose wasn’t supposed to stop Russian exports. They were meant to, and did, stop Russian imports. This is why you’re seeing Russia scrambling to import things like ammunition from North Korea. Because any raw, intermediate, or final components are sanctioned. This is ultimately why Russia cut off natural gas exports to Europe, because they realized that all the money that they were getting from selling natural gas couldn’t actually be used to buy anything, so why sell it?
And they could give the Europeans the same anxiety and give them back some of their own medicine
I disagree with your statement "This is ultimately why Russia cut off natural gas exports to Europe, because they realized that all the money that they were getting from selling natural gas couldn’t actually be used to buy anything, so why sell it?". They could have bought plenty from other countries such as those who take US dollars or Euros or other currency that the contracts designated as the currency of payment.
@@Rob-fx2dw The components and intermediate products they need are mostly sold by western countries that all adopted the sanctions. Sure, they could use Dollars or Euros to buy from China or India (given they accept them in payment) but those countries do not produce a lot of the stuff they need. Also a big chunk of russian currency reserves have been frozen and the russian government isn't even allowed to move their euros, because those are simply balances in the european banking system (as every euro with the exception of cash). So if they wanted to spend euros they have to do it with a middle men that has enough euros at a bank account that is not frozen and that is not sanctioned which is certainly possible but harder to do.
@@trixn4285 Yes of course it is harder and they need a middle man scenario or someone in between but they still could buy and it would not be impossible to get those middle man dealers living in other countries which are not sanctioned.
There are a lot of products sold to non sanctioned countries and a lot of actual services which can be applied and that makes it even harder to trace. There are even deals done through share acquisitions in companies which are almost impossible to trace.
@@Rob-fx2dw _"There are a lot of products sold to non sanctioned countries"_
Again. Those products produced elsewhere are not those in need. A lot of stuff Russia needs has been produced by western countries and those other countries can not easily produce those things as they lack the know-how and the production equipment to do so.
Also it's not about the country where the owner of a bank account lives. Russian bank accounts currently frozen aren't in russia either. They are in the Eurozone. Euros are ONLY held at european bank accounts ultimately. There might be correspondent banks in other countries that manage accounts for foreigners but those banks can only operate because they have a partnering bank in the Euro zone. A Euro can not leave the european banking system at all as all Euros are ultimately accounted for in the european banking system. The ONLY exception is cash, printed paper notes which can actually physically leave the country.
I'm not saying that it is impossible to circumvent the sanctions (through said middle men). But it is much harder and also the products russia wants aren't available for sale to begin with in those other countries.
The Buckaroo example has similarities with how school works in general: Students normally have to turn assignments in to get individual grades, and they need a certain sum of grades to pass. (It's usually expressed as an average, but the total number of assignments divided out doesn't change much, even if you don't do those assignments, so it's really more like a sum.) The individual assignments are usually very specific, but I had a (0 credit hour but mandatory) "recital attendance" class as a music major, where, in addition to having to attend the regular student recitals of music majors we had at the school, we also had to go out and attend a certain number of other performances each semester. Now, we didn't get any "buckaroos" to turn in in exchange for proving we went to a performance - they mostly just wanted us to collect the programs from the concerts we went to and turn them in at the end of the year - but getting some tokens like that alone wouldn't matter much. The main differences from the Buckaroos is that I don't think we had a regular system for saving programs from one semester to the next, and, though I'm sure it was possible, it would have been considered cheating to trade programs for money or anything else (just as with other school assignments), so no larger economy than the student-teacher relationship was supposed to, or very much allowed to, develop.
Yes. Basically, to compel action like learning, the school/teacher imposes a liability on the student "You will fail this course unless". You weren't failing in class when you were not in school. The teacher then has monopolistic/dictatorial powers and defines how you pass through assignments, quizzes, projects, extra credit etc. The difference is that students don't earn currency they can trade with each other, only that the work is immediately translated into grades.
In a video game, the game imposes dangers on you to which you must respond else you die. You pay the game with your activity. For example, in Minecraft you must find food or else you'll die of hunger, you must find protection - shelter/weapons or monsters will kill you, to get resources you need to cut trees, make tools, mine for minerals, etc etc. In Minecraft, Diamonds serve as a sort of currency for trade in many multiplayer worlds because of the rarity, usefulness in the game, and work involved to acquire them.
In the Monopoly game, you have to roll the dice and play the game to earn money, to pay fines, and buy properties. All the money comes from the game, the game never goes bankrupt. The price of properties and fines is calibrated in Monopoly games based on the rate of earnings. If the prices are too high, the game becomes too difficult and slow. If the prices are too low, then acquiring property becomes easy and game speeds up.
In sovereign currency, the government wants your goods or services, it imposes a tax on you which compels you to earn the government currency. People offer goods and services which the government can then buy. For example, in the Bible, Jesus says "Render unto Caesar the things that are Caesar's". The Roman government minted those coins, why would they spend them just to tax them back? Taxes were imposed to create demand for these coins which seems was well understood back in those days.
Markets can only price items relative to each other, in order to have absolute prices - something must be used as the measuring stick. When prices are denominated in a sovereign fiat currency, the issuer sets the anchor with supply (from accumulated government deficit spending). Demand is what people are willing to do for that currency which is based on their faith in the legitimacy and policies of the sovereign.
Hyperinflation can happen if the government spends too much to a ridiculous degree, or it can also happen when the people lose faith in the currency and thus demand collapses. Usually, both are happening in these occasions.
@@Basta11In regards to hyperinflation, government having to excessively spend to boost up money stock is not a sufficient condition to create hyperinflation with examples like Japan, China and USA having higher GDP/Govt debt ratios.
My theory on it is that the rule of law dynamics that govern contractual arrangements for trading capital have to dramatically collapse that it forces capital retreat to a nation that is a net exporter and that capital retreat forces the nation to revert to net importing position drastically. These kind of conditions tend to have extreme market volatility not limited to pricing but in certainty expectations of production of future goods near term and it will encourage a rush to get more goods and govt money printing becomes a result that already aggravates 2nd to third order effects that will push the inflation rate of all goods.
@@georgeokello8620 Essentially people have lost faith in the currency due to the policies of the national government. And so instead of transacting and working in that currency, they use other means of exchange such as foreign currency, trading goods and services directly, private credit arrangements (but not derived from the value of the falling currency). This means the demand for that currency falls which means its price falls. You need higher amounts of it to buy things = inflation.
People hoard goods. Workers stop working for wages that don't pay for anything. Factories stop producing because workers left. Shops close as owners hoard the stuff for themselves. They go into the black market - selling goods in foreign currencies. Farms stop selling produce, keep the food to themselves, barter directly for the things they need. People who can leave, people such as businessmen and professionals as well as the hard working people. The best human capital goes abroad. Foreign capital left a while ago.
With a less stuff to buy, less services available, the money is worth less and less creating a viscous cycle.
Government deficits explode pouring more money into the economy. It spends more money paying for inflation adjusted goods and services. The country is most likely very indebted in foreign loans.
The print money to buy foreign currency to pay off foreign debts and to import things needed by the population. This makes the exchange rate fall even more. There is a massive need for imports but no profitable exports to bring in foreign currency. Foreign importers can't import more to take advantage of the exchange rate because there is no spare production.
Political insiders short the currency as well, take on huge loans from government controlled banks. They exchange them for foreign currencies and assets, then pay off the loan when its value is worthless.
The central bank foolishly increase interest rates to ridiculous degree. All this does is put more new money into the hands of bond holders (usually rich people) who in turn buy foreign currencies and assets with the returns. Basically, wiping out the purchasing power of the poor with inflation to increase the foreign bank accounts of the rich.
One of the things that comes up in this conversation that we're really bad at in our current media platforms is nuance!! Contacts always matters when talking about anything in detail and our tendency to just try to make things into a this or that is very destructive to thoughtful communication
The desire to eat, does inspire a lot of innovative methods of creating Income.
The stability to insure a comfortable lifestyle, seems to drive some Folks to be inventive.
Inventing new methods to insure Capital as a measure of Value remains constant,
seems to be a popular subject lately?
This so stupid. It assumes that people will actually work to a certain level for thier Buckaroo. The reason why the Communist system failed is there was no incentive for people to work hard. They always got paid food coupons or a share of the crop whether they worked or not. That did not and does not work. You always need an incentive to work and you need counter party risk insurance which is interest.
What this guy is saying is so stupid. If eneryone is fully empolyed and they all get buckaroos then they bid on an available house. Someone will always pay more than its worth if there is a shortage. Thats inflation! He has not eliminated anything.
What you say makes no sense. MMT is ultimately correct, the real question is rather, what can we learn from it? In some sense, MMT has been validated by decades of Fed money printing. MMT does not inherently provide a basis for limitless spending or stuff like that.
In the buckaroo example Mosler says there were 100 extra buckaroos left at the end of the term.These buckaroos are worthless because there is nothing left to spend them on. So why would anyone accumulate these things? My guess is a secondary market developed in which buckaroos were being exchanged for things other than discharging class obligations. Likely these things were dollars. So we can imagine a buckaroo:dollar exchange rate. Such a rate would not be constant, but rather would tend to lower near the beginning of the term, when there was plenty of time to get the needed buckaroos through volunteering. But as the end of the term approaches, procrastinating students who haven't acquired their full set of buckaroos will be willing to pay more for buckaroos, if necessary because they no longer can earn enough of them. So there is a potential for the exchange rate to rise at the end of the term. This might incent some students to acquire extra buckaroos to sell at a premium at the end of the term. Of course if too many people have this idea, then there will be excess buckaroos seeking buyers at the end of the term with nobody needed any. Mosler calls the excess 100 buckaroos left over at the end of the term "savings", but i would call them losses, since someone did an hour of work and got nothing in exchange.
Terms like "savings," or "inflation," cannot be applied to buckaroos because they are not yet *money*. For buckaroos to be money they (1) have to be exchangeable for all sorts of things outside of volunteering and discharging course obligations, and (2) be used to denominate credit.
In actual human societies, credit came first. Money showed up a couple of thousand years later. Money was indeed created by states that desired to access a more complex array* of goods through the imposition of taxes that were required to be paid with money. This created a need for money. Since people who paid taxes needed to have money, credit began to be denominated in terms of money rather than, say, measures of wheat or weight of silver. So right from the start of money you had it used for many more purposes than just paying taxes, which makes it different from the buckaroo example.
*Prior to money, states were more autarkic with the king producing most of everything he needed inside of his own domain.
The buckeroo has appreciated against the USD pretty continuously. That's because the buckerooo has a fixed value. The USD does not.
@@Achrononmaster Fixed against what ? You are fooling yourself . There is nothing to measure it against? If you disagree then point out what it is fixed to or has been able to actually buy. It's just a Ponzi like idea.
Of course you are right. The Buckeroo is worthless because it has bought nothing in the real world.
It's fixed against labor hours
@@idonnow2 What value of labor hours ? - A very low rate due to very low productivity. Heading for the bottom level of wealth creation.
I know it’s nerdy but I’m super excited for this video.
Hahaha same
Meee tooooo
It ain't nerdy. It's a fairy tale. Fantasy economics.
@@happipat3374 It's the exact opposite actually: simply describing how fiat is actually created based on institutional operations, vs the limitations the govt puts on it out of ideology.
@@happipat3374 And btw, where are u getting your info on mmt from? Did you learn from original sources?
I'm only halfway through the video right now, but I have to confess I don't understand where exactly MMT predicts fundamentally different outcomes from the mainstream. His examples were not very clear to me. I'll have to read that white paper and come back
MMT policy prescriptions differ in that they want more fiscal policy control over the economy and have the CB support fiscal policy more closely. They theory part is just a gimmick to combat the US RW narrative against fiscal policy.
The comment above from Polical Economy has no idea what he is talking about.
@@PoliticalEconomy101
Hi 101, where on earth did you get that from?
I have been reading the blogs of people who formulated Mmt lens (it is not a policy prescription, but common sense flows from a change in paradigm).
Here is my understanding, not as an expert, but as someone who is pretty well informed from original sources (rather than most ppl talming about it, who don't seem to bother With that):
The main difference is that maimstream economic ideology & paradigm assumes the Currency Issuer is like a houehold that must get money from somewhere before it spends, assumes any new money is always inflationary (by strict ideology), but it also tends to ignore private bank created money ( called "credit creation process") being inflationary to the same degree.
The MMT perspective is neither a "deficit hawk" or a "deficit dove", but a "Deficit Owl" - seeing what is a self imposed restriction, rather than reality based restrictions.
So MMT Lens is to see that money is a system we created, rather than a master we must serve (that imo always seems to mean serving financial system elites).
So what actaully matters for a sane Currency Issuer is not "where will we get our own currency, we must borrow it from ppl we gave it to".
Instead it is:
(1) The amount of money supply in economy - is it too small or too big?
Currency is put in & leaked out (e.g. tax, imports)
(2) What real resources are available in the currency?
(3) various inflation issues for a Currency Issuer.
Also, Legal requirement to pay tax is what backs the value of a fiat, and taxing something is what makes it valuable as a currency.
Like The Buckaroo (in the above interview), which Mosler used as a base case for analysis, a currency can be designed to serve whatever interests we want - in the university Buckaroos case, it is serving the community that has the value (pay 10 buckaroos tax, which means either work X hours for community, or buy Buckaroos from free market from those that did).
We create the money system, it can serve us, rather than we be its slaves (or imo at least, slaves of financial elites that fund & spread economic ideology & beleifs by what they own & fund; or hire & fire).
@@PoliticalEconomy101
What do you make of Prof Richard Wolfs take on MMT? He seems to realize that the MMT Lens, description & insights are absolutely nessesary to break the hold of Captalist Elites. You can't change a money system to serve the public, if we don't understand it.
MMTers also do not tend to praise or trust those who run central banks, not sure if you are aware of that, quite the opposite - except Bank of Japan to some degree, on Prof Bill Mitchell's blog.
Hmm, something strikes me as not quite right when Warren says QE doesn't affect inflation. When the government sells a bond, it is removing liquidity from the market, dollars you can actually use to buy a car, buy dinner, pay your taxes, whatever. You can't buy those things with treasury bonds, you have to first find a buyer for the bond and convert it into actual dollars. True, you can sell that bond at any time to someone else, but then THAT person has lost liquidity and parked HIS money in the time-lock money garage, and so on until the bond either reaches maturity or the government buys it back through QE. So bond sales would seem to be a way for the government to slow down the aggregate velocity of money, except I suppose that banks can use bonds as collateral for issuing loans, betting that the interest rates won't rise.
Not working for the banks so well.
Correct, what you overlook, though is that for any liability that's created, there is also a deposit that's created. You just exchanged one type of capital (money in your account) to another form (a bond in your account).
Austrian economics actually has a theory on where the price level derives from
It's not fitting fiat currencies with floating exchange rates, though.
@ I mean, the original price level of that Fiat currency was derived from its historic price level under a gold standard. Which was derived from subjective valuation within trade before it was a median of exchange.
So yeah, it does
You’re not gonna be able to bring up a Fiat currency from nothing without first having some sort of gold standard or commodity back to currency
You’re not gonna be able to get people to accept the value of that currency without basically tricking them when it’s starting off at the beginning .
Like show me an example within human existence where a Fiat currency just started as the first currency of a civilization. To my knowledge, you’re not going to find one.
Seems functional from a politician's point of view but not from a citizen's.
How is the beginning about Government spending? When it comes to currency, isn't the beginning a medium of exchange that makes trading more efficient? And when you increase the money supply by printing more currency, don't you create inflation unless there happens to be spare supply of all the goods and services just waiting for that extra money?
Yeah, but mmt is a method of pseudo-logical gymnastics to try and pretend that what youve said isn't true.
That sounds exactly like the traditional perspective that the guest believes is completely backwards but most commonly adhered to. This entirely interview is about explaining the alternative point of view.
@@gregwilliams2746 You are correct. The MMT proponents obviously haven't read The Theory of Money and Credit by Ludwig von Mises.
Instead, they simply treat all money as debt.
Whereas a money just has to be some kind of a store of value (which is subjective). Which is why many ancient peoples used different commodities as currency (grain, salt, metals, etc; basically something that most people needed, or really wanted -- like dried tobacco, to survive or use on a daily basis).
But since gold doesn't rot or erode, it's hard to mine, and it can be divided into smaller pieces relatively easily; it has been settled upon by numerous civilizations over thousands of years as the ideal money.
Then came the money substitutes. Money substitutes were an innovation to make it so you could hand someone essentially an invoice (this is why we call them dollar bills) while being able to store the commodity in a centralized and protected place until you wanted to redeem the paper for the actual commodity.
At some point people realize that if they are the ones making the bills that they can print more than the base commodity, and because they have a monopoly and get to spend it first, they get the best price before the inflation of the money supply makes it's way through the economy to raise prices.
MMTers think that because we got rid of the redemption factor that now we can just print what we want without having to borrow money through Treasury bonds. The problem with that is a very large number of our bonds are owned by people throughout the world. If we start printing, the bond holders will assume that we won't ever pay the money back and they'll sell the bonds. Then they'll take the dollars they get from selling the bonds and buy goods and assets in our country which will raise prices on things. That's when people see the really bad effects of inflation.
MMTers ignore the bond system all together because they see it as a relic from when we were on a gold standard.
They think we can just print money to spend without paying people to buy the debt. But they never have an answer for when it's too much. They have no clue when the inflation of the money supply will drive up aggregate prices. And even when it does (like after the pandemic spending), they just blame it on other things like supply shocks. The completely take for granted the international manufacturing and trade routes that help to bring down prices for us. And they don't see the supply of labor or goods as finite. It's pretty absurd. But because we don't teach Austrian Economics in school, they're able to take advantage of an under educated citizenry.
Great interview and I'm learning more about MMT and it's changing my understanding of macro economics and how money really works.
I hope Dr. Schasfoort brings on Dr. Dirk Ehnts to discuss how money really works in the EU market. I learned a lot from a podcast interview with him (titled "Dirk Ehnts: Do Markets Control Our Politics?"). It would be great to hear Joeri and Dirk speak together about the money situation in the EU.
I enjoyed hearing his perspective. I am sorry you had to go through his inability to let you speak. I do appreciate your patience and you interviewed him very professionally. Please keep up the good work. I liked how people explained the theory well in the comments, like what Platypus Paws wrote below, it is from him (not me):
"Here is my understanding, not as an expert, but as someone who is pretty well informed from original sources (rather than most ppl talming about it, who don't seem to bother With that):
The main difference is that maimstream economic ideology & paradigm assumes the Currency Issuer is like a houehold that must get money from somewhere before it spends, assumes any new money is always inflationary (by strict ideology), but it also tends to ignore private bank created money ( called "credit creation process") being inflationary to the same degree.
The MMT perspective is neither a "deficit hawk" or a "deficit dove", but a "Deficit Owl" - seeing what is a self imposed restriction, rather than reality based restrictions.
So MMT Lens is to see that money is a system we created, rather than a master we must serve (that imo always seems to mean serving financial system elites).
So what actaully matters for a sane Currency Issuer is not "where will we get our own currency, we must borrow it from ppl we gave it to".
Instead it is:
(1) The amount of money supply in economy - is it too small or too big?
Currency is put in & leaked out (e.g. tax, imports)
(2) What real resources are available in the currency?
(3) various inflation issues for a Currency Issuer.
Also, Legal requirement to pay tax is what backs the value of a fiat, and taxing something is what makes it valuable as a currency.
Like The Buckaroo (in the above interview), which Mosler used as a base case for analysis, a currency can be designed to serve whatever interests we want - in the university Buckaroos case, it is serving the community that has the value (pay 10 buckaroos tax, which means either work X hours for community, or buy Buckaroos from free market from those that did).
We create the money system, it can serve us, rather than we be its slaves (or imo at least, slaves of financial elites that fund & spread economic ideology & beleifs by what they own & fund; or hire & fire)."
Platypus Paws
You don't need taxes for money to exist and have value. It's quite possible to have money even sans taxes (just plop a dozen people on an island and watch them use shells as currency, even without any taxes to pay). For an entire nation state, where the govt. does have some cost for its operations, just consider an oil state where the govt. owns the oil industry and gets its income from there. That would allow it to have no taxes, direct or indirect, on its people. And yet it can still issue currency and people use it for trading.
@@ArawnOfAnnwn- Is there a fundamental difference between charging a tax for supplying the service of governing and offering protection via a state-sponsored army whilst citizens can then use their after-tax earnings to buy oil in the free market, as compared to supplying, say, govt-monopoly oil at a higher price then using the excess revenue to govern and pay for the army?
@@ArawnOfAnnwnwho would use sea shells as currency. Seems rather far fetched.
@@ArawnOfAnnwn there are many problems with the shell example. Firstly, the shells don't have any value - you have to hope that the other person you want to trade with accepts shells, which presumably they would only do if they believe other people will too. The point of the monopolistic government perspective is thst they ensure that the money has value; the money can pay taxes, and you have to pay taxes. If there was a government that took a certain amount of sea shells every month on that island then seashells do have real value there.
Secondly, there is no printing sea shells, which is another big part of what MMT wants to look at - the consequences of government deficits and issuance of more currency.
How does a modern monetary theorist expect that increasing monetary supply (or decreasing interest rates to expand lending to effectively increase monetary supply) will create demand for the skills and goods provided by the unemployed as opposed to the skills and goods provided by the already employed (which are the people that generally speaking are determined by the aggregate of small scale free market dynamics to be the ones providing more valuable services and goods)?
I’m mostly listening to this while walking the dog… but… Marco does need to light himself better. Unless the Dr Doom look is a style choice 😅
The government doesnt decide prices of everything in the economy. (Unless your in a communist country and that never worked well.) So saying that the government sets the prices of stuff doesnt make sense. They just print the money and choose what to spend it on. They pay whatever the market price is currently at. Imagine the government trying to only pay a baker $1 for bread but the current market rate is $2. The baker is going to tell them no unless they threaten to destroy him. Otherwise the government must pay the market rate. And if the government printed money to pay for the bread then the demand for bread would rise i.e. inflation and everyone else has to suffer. MMT dEbUnkEd.
This guy was annoying the way he kept saying"its not complicated. A child can understand it." When he couldnt even give a good example of MMT or explain it easily lol
But under QE the Fed is buying securities from entities that presumably wanted securities (which is why they had them in the first place). So it seems logical that the recipient of the cash received from the Fed will be used to acquire some other financial asset that the seller values more than the security sold. Why would they want more reserved earning them essentially a zero return. It seems to be that the money used by the Fed for QE will eventually end up in the stock market or other high-return asset. So QE should be expected to produce large rises in asset prices, which it seems to have done so.
Yeah, I find that to be plausible too. The whole idea of QE boosting investment and taking loans is silly. It is simply an asset swap. Demand for money is endogenous and you can't force cash onto people and you also can't force them to invest into something they deem unprofitable even at zero interest rates. Part of QE was probably absorbed by governments taking more debt which increases the amount of bonds in the secondary markets again (and actually boosts the economy through demand increase).
_"end up in the stock market or other high-return asset"_
Not necessarily high-return assets. Bonds are usually owned because they are the safest asset there is, not because they have a high yield. It is used for hedging, for example by pension funds or on the money market, where they are used like in a pawn shop. You probably would want another asset that can be considered safe (and therefore has a lower yield).
QE makes sense if the central bank wants to support fiscal expansion through increased government debt. It makes no sense to "boost" the economy on it's own.
Exactly it causes asset price increases in the stock market and real estate market, which is exactly what we've seen in the last few years
I agree with Warren Mosler. MMT unquestionably explains the current monetary operations better than any other economic school of thought. That being said, even if we put all the policy that he has championed (not only the ones from this video), in my opinion, the financial sector has become a parasite on the real economy. It seems like everything takes second nature to the financial side. The only reason companies produce a product is to increase their financial assets. If a company can achieve their goal without hiring or selling anything, they'll gladly do it. Now I know the U.S. in particular, prides itself on a culture of harboring small business. But small business don't tank an entire economy with their financial activities.
I didn't like the way Moser skirted around the issue of interest rates.
Two things spring to mind - can we say that issuing a loan against an asset to be purchased is not really creating money as the money eventually gets paid back? But banks don't lend money for no profit so inherent in the process is the idea of charging interest - this in turn means that at the end of the entire process the "created" money will have been repaid from money that already existed and the asset bought with it could be sold to replace that money, but the interest charged must suck more money out of the system than what was originally there unless new money is injected and therefore the value of the money must reduce over time if there is any amount of borrowing and lending in any economy. Without interest
there are fewer factors driving prices and investments up, nor reasons for the value of the currency to go down. Interest is the effective time-value of money. With no interest there's no urgency to pay back loans and less incentive to work or make a business successful vs competitors.
Second - if interest rates were zero there would soon be no properly functioning stockmarket. Every company that was making a profit could borrow money for free to buy back it's own shares to earn a positive dividend return paid out of its own profits. Or in the absence of borrowing it could simply use its profits to buy back its own shares over a longer period - eventually buying itself out completely. Companies that were consistently losing money wouldn't be able to borrow cos the lender would not accept only risk for no return, so instead these companies would have to keep issuing endless amounts of equity on the promise of future dividends until, barring the occasional spectacular turnaround, each share was worth zilch.
@peteneville698 The interest rate that Mosler is talking about is the overnight rate. This is what mostly everyone is referring to when speaking on the "interest rate." There is an overwhelming amount of research that suggests that this overnight rate does nothing to influence the private sector's economic decisions. And even if it did affect the private sector's decisions, it doesn't borrow at zero rate. Borrowers need to meet certain criteria set by banks, and that determines what rate they get when they borrow money. The overnight rate almost entirely only comes into play when banks borrow among themselves.
@@peteneville698 If interest rates were zero then the money would be easier to borrow but the obligation to pay it back would still be there but the continuation of guaranteed interest rates at zero would mean almost anyone would be able and willing to continue borrowing at no cost (no interest) therefore the money would be utterly worthless. Presently and in the past there has been no guarantee that interest rates would stay at zero so that effect has not materialised.
When the British invaded Kenya in the late 1890s for 70 years, they needed labour but the locals were pretty happy in their farms tending to crops and livestock. So they introduced a tax for each home payable in the British currency. Sad.
You are terribly wrong if you think the tax made the money worth something. You have drawn the wrong conclusion. Taxes are money transfer and that is all. It was and still is the existence of goods and services that makes the money worth something.
No goods and services means no value to money.
If you have hundred dollars and are lost in the desert with friend what is the value of the money? - Nothing because it can buy nothing when there is nothing to buy.
Ask yourself if transferring money from you to someone else or them taking it without permission makes it worth more in purchasing power than it had previously. The obvious answer is No ! just like the government taking it as tax does not put any value into it.
Brits!
@@Rob-fx2dwgreat comments
@@Rob-fx2dw what a bunch of nonsensical analogies. Taxes are enforced by the currency issuers. In the desert of course it has no value because no government is there to force you to pay taxes! Anyone takes money from me by force of course doesn't make the money more valuable because they are not the currency issuer! You're missing the whole point!
@@kurnaPunk Who are the currency issuer in an economy where 90% or more of the money is created by private banks through lending and the rest is created by the central bank by lending money they created the same was as private banks created it ?
Either take your shoes off and let that thinking of yours get out of your socks without getting confused or start using your head to think instead of swallowing rubbish MMT.
I'm a fan of Mosler (and Kelton), and agree with a lot of their observations regarding the way macro government budgets and spending work. However, they have a fundamental flaw in their models. Governments are not the monopolists of currency. Currency/money is debt. And most debt in the modern economies are created by private entities. Fractional deposit banking in the U.S. now accounts for more money creation that any other mechanism. The money created by the federal U.S. government is probably the 3rd most prolific money creator (through deficit spending).
This is great content, thank you so much for making it happen
Incredible crossover
I hate to say it but I came out of this more confused than before😅 extremely interesting and some great discussions but I felt like his answers relied on a level of understanding already that I and most may potentially lack.
Any chance Joeri of a summary/break down of his points in a more succinct and articulate way? Mosler is definitely a wealth of knowledge but it was such a deluge I felt like key stuff either wasn’t touched upon or I wasn’t able to understand.
He seemed to hand wave away a lot of stuff that I think would’ve made it easier to understand if it was explained or examined more especially to someone as smooth brained as myself.
Warren has that effect, but I take the view he relies more on a level of MISunderstanding...
Even his supposed white paper doesn't explain anything. It's turtles all the way down.
His sequence assumes people will pay taxes without any gvt employees to enforce tax payment…am I missing something?
I would love to hear the statement made at @10:47 expanded on. He just slipped it in there, but it seems to be a completely and obviously false statement "In a non-monetary system, you wouldn't have people looking for paid work at all." Does this just mean, without a monetary system, the only way to trade is through barter? If we all traded in Bitcoin, would that be considered a monetary system, or no?
One could be paid in potatoes, so yeah, that sounds like a BS statement.
Why do we chairs for social security and other tax based funded programs if taxes don’t matter when it comes to gov spending. Seems like a redundant position?
I would like to hear him discuss Anwar Shaikh’s critique.
If you guarantee jobs in your economy at a certain rate of reimbursement, you are artificially limiting your reserve army of labor and will therefore see wages rise (why would I work for a demanding employer for $15/hr when I can work the gov job carefree for the same amount? Therefore the employers will have to outbid the gov for workers, hence wages rise), which reduces profits and makes your country less appealing for investment. That limits your growth, which causes inflation.
I’d like to know if he has a good answer for this dilemma, because I can see the merit in that argument.
The scenario depends on the needs and resources of the economy, if the govt jobs increase the productivity of the country that's a win and good incentive to invest Otherwise your conclusion happens. Hiring almost everyone is not a bad thing, the problem arises when they are hired into producing something the economy doesn't need which results in wastage n higher wages to inflation.
“That limits your growth, which causes inflation” I don’t think that’s a statement that can always be true. I mean Japan exists right? Or am I missing something?
Mosler says at 35:55 "The currrency value is defined by what the government says is the tax liability".
Absolutely WRONG and proven so by the fact that the currency's value became Zero in the countries where massive inflation made the currency worthless despite taxes being collected. Some examples are Zimbabwe, Hungary, the Weimar republic. Even their own governments abandoned their worthless currency.
The government defines its value in terms of what the government pays in order to get the currency. Of course it does not set prices for what else can be privately exchanged but nobody claimed that to begin with. You are again fighting a straw man you put up yourself. And weimar did not abandone a national currency all together, they did a currency reform. And they kept collecting taxes in the currency at all times.
@@trixn4285 You don't connect financial things very well in your head.
If the government hasa tax of 25% then by MMT theory it issues a dollar the 25% tax would make it worth $0.25 . So effectively it would always be always going broke.
But of course the reality is all money of the country is fiat credit money and government does not issue the money at all. It borrows money and taxes the private sector to get the private sector's money which the banks ptivate banks have created.
You say the Weimar did not abandon a national currency at all. What about Zimbabwe and Hungary and others who did abandon their currency entirely.
@@trixn4285 You say the Weimar id not abandon their currency - OK . The reality is they exchanged it at a rate of One Billion marks for one Rentenmark. So the how much did the tax make every mark which earlier exchanged with the UK pound at 98 marks to the pound in 1919. In 1922 it was 461,468 for one British pound. So what part of the value did the tax put on the mark ?
@@trixn4285 Your reply is so absurd that it is laughable. Firstly- The reality is nothing can make itself anything other than it is by exchange form on person to another. So tax can't put value into anything because it is merely exchanged and never becomes worth anything else by mere exchange.
Secondly the term 'value' does not mean anything other than buying power of something else.
@@Rob-fx2dw Look Rob, I know you are a troll on the mission to comment nonsense under every video about MMT on the internet. You make absolutely no sense at all and you still do not know even the basics of MMT or macro economics in general. Your comments generally make no sense, show a lack of knowledge about MMT and macroeconomics and you are very stubborn and unable to follow any argument. You have proven this over and over in hundreds of comments you wrote under basically every MMT video there is on YT. So it is completely pointless to debate you. I don't know many people that are so hopelessly lost as you.
If you genuinely listened to all the videos you commented you should by now know the answer to all the silly questions you repeatedly ask.
And the reason some countries are dollarized is foreign debt, import dependence on basic goods and the unability to enforce taxes due to political struggles and corruption. Nobody ever said that being a developing country and running an own currency is easy. But that does not invalidate anything said in this video. Also MMTers do not say that there can't be inflation. But that is usually also caused by again foreign debt, import dependence, war, political crisis, supply shocks in general. It is NOT caused by the government investing in streets, schools and the like and it is not caused by the government deficit.
What’s the relationship between interest rates and trade deficits?
You're giving the electorate WAY more credit than it deserves.
And the fed....
So who is impossing the tax to incentive people to trade in crypto? 🤔
Crypto is a commodity masquerading as a currency
That's exactly the question you should be asking. The answer to it tells you all you need to know about crypto. For gold, for example, the "tax" is imposed by the industries using gold (jewelry, tech), that's how the initial currencies came into existence. Crypto is ultimately useless, despite people probably being able to stay deluded for quite some years to come.
@@asmith1ofmanya useless commodity
these college community service "buckaroos" probably just result in rich kids paying poor kids to work more outside of classes
I've only watched a few presentations on MMT, but most of them start with the assumption that MMT is true and a good thing. I like that the interviewer here comes across as skeptical, putting the interviewee in a position of having to defend MMT against skepticism. The arguments presented by the interviewee feel more grounded.
When done correctly, I think critical engagement in interviews is the best way to handle it. This doesn't come off adversarial, but skeptical. And there's an important difference. Ideas should always be challenged, but you can't challenge an idea correctly if you're not actually *engaging* with the idea honestly in the first place.
That said, I agree.
This guy is crazy, modern monetary theory is wild to me. Merit to some of his arguments but I struggle to see a coherent viewpoint from mmt
ruclips.net/video/DoMPlG5kgNE/видео.html MMT in Minsky at the 2nd Poznan MMT Summer School 2022 . People not familiar with system dynamic mathematics & differential Calculus can be helped with a good visual .
I agree MMT seem to be just "print, baby, print" craziness...
Ditto
It is a Ponzi scheme. I can’t believe people are so stupid to believe this will last in the long term.
Magic Money Tree
Interesting, sounds extremely reasonable. Have to let it sink in a bit and maybe re-watch in a few days!
I think there’s a lot of propaganda that strawmans MMT. Gives people a simplified and incorrect view.
@@parallaxcrafttale It's not like the alternatives are so correct that they'll lead to reliable predictions.....
Although it is depicted as a "new" theory in fact most of the foundations are not new and simply post-keynesian economic theory. It's shouldn't be hard for a post-keynesian to accept most if not all of MMT. It mostly differs in focus and framing, not so much in theoretical implications.
The foundations of MMT are the "state theory of money" (Georg Friedrich Knapp) and the "credit theory of money" (Alfred Mitchell-Innes). Both are authors that Keynes already knew at the time and that he made favourable comments about. He even wanted Knapp's work to be translated into english in the first place. It's also based on stock-flow-consistent modelling, also something that Keynes, Wicksell and Kalecki already thought and which was further developed by Wynne Godley. Another important influence is the "functional finance" approach (Abba Lerner).
So you see all the foundations of MMT are quite old and made by established and credible economists of the last century. Mosler is an insider from the financial world and he has come to his conclusions based on his experience and observations of banking and currency trade independently without knowing the work of those economists in detail.
If you want to study MMT scientifically you should read the work of Randall Wray (a student of Hyman Minsky - also a post-keynesian that had very similar views on money as MMTers do) and Bill Mitchell.
@@trixn4285 You direct people to Randall Wray and Mitchell. That about sums up your knowledge and lack of inability to think critically.
They can't explain why the MMT (including Kelton, Randall Wray and Mitchell) say the national debt is not a debt for the future and never has to be paid off when the reality is ALL of it is paid off as the bonds which it was created from all mature and all of the past national debt .
I suppose you can explain that ?
Randall Wray and Mitchell along with Mosler and any other MMT economists cannot explain why their theory says taxes pit value into the money and get it accepted when the reality is in all of the countries where the inflation made the currency worthless there were taxes which did nothing to keep it accepted or put any value into it.
But I am not very hopeful that you can even do that or understand that it is part of the denial of reality you are avoiding.
@@Rob-fx2dw _"say the national debt is not a debt for the future and never has to be paid off when the reality is ALL of it is paid off as the bonds which it was created from all mature and all of the past national debt "_
Rob, you literally follow those debates for years and you still do not understand anything about it? All money in literally every economy in the world is debt. How can you not understand that? It's not about that one bond that has to be serviced. It's about sectoral balances and how much credit is taken out vs how much is paid back vs how much is saved. Nations are rolling over debt and they can do that until the sun implodes. The question is NEVER the size of the debt but how much is saved, spent and invested in the economy. Sure, bonds are serviced when they mature, SO WHAT? That is not the point. And that you think this is the crucial point just shows that you did not understand it. You simply are unable to think macroeconomically and this is why you miserably fail to understand anything about macroeconomic relations. If the private sector saves another sector can and has to go into debt. Monetary debt and assets are two sides of the same medal.
One thing Warren Mosler is doing incorrectly is that he is neglecting the fact that the MARKET set rates.
He should know how OPEN MARKET OPERATIONS work with Bonds.
What about open market operations contradicts what Mosler said? Can you elaborate a little bit? I'm sure Mosler knows how OMOs work.
@@trixn4285
1. FED rate is for BANKS. General public don’t get those rates.
2. FED buy/sell bonds in the open market where the private sector also buy/sell bonds. That is what sets rates.
@@mentalgame5608 You are missing the crucial point here. The central bank SETS the interest rate on reserves (it literally declares the target) and then buys/sells as much bonds as needed to achieve that rate. by adding/draining reserves from the interbank reserve market. There is no second opinion about that the central bank is the one that sets the interest rate and not the market.
Also the inter bank market for reserves has dried out since the global financial crisis. That means that central banks around the world act in permanent unconventional monetary policy mode, crisis mode if you want so.
It's kind of arrogant the way you put it because you don't seem to have a good understanding of OMOs yourself. Mosler is a very successful bond trader for decades and he talks to many central bankers and bond traders. And they all basically agree with him on the way it works. Funnily enough there is a lot of agreement from bankers about MMT and not so much from economists which often even fail to express their views with sound balance sheet techniques. Many mainstream economists completely fail to understand modern banking operations. Mosler is an insider. He knows what he's talking about.
Maybe you should be a little bit more humble and actually study the things you are making claims about. It doesn't seem you understand it very well.
_"FED rate is for BANKS. General public don’t get those rates."_
Of course. You must have misunderstood that point. No MMTer, including Mosler, claims anything else. The interest rate on reserves that the central bank sets and carries out through by OMOs ist the base rate. Private banks obviously add to that rate based on risk assessment and expected profit rates. Nobody claimed otherwise. Banks need to refinance their credits by borrowing from the central bank. They need to pay the interest the central bank sets. Therefore they will mark up their interest rates based on that interest rate. This is the whole point of monetary policy.
@@trixn4285 I understand now that you’re a Fan of Mosler and hence you’re blinded from noticing a lot of his inaccuracies.
When he and other MMT folks stated that “raising interest rates is inflationary”
You didn’t notice how wrong he was? Or even when it played out in REAL LIFE when he claimed Erdogan was right for lowering rates only for the Turkish lira to DEVALUE
That wasn’t enough evidence to see that he is in fact WRONG!
@@mentalgame5608 You are correct and the supporting evidence is that lower interest rates deceases also the value (purchasing power) of money. Interest rates have been described as the price of borrowing money which increases the ability of people to do just that. It does that in practice.
Erdoğan should hire this guy. As long as he's only hiring people who think lowering interest rates will reduce inflation, this guy's probably a good pick.
Turkey has a lot of foreign debt
Central Planning has never ended well for the man who would live "Free". If a man were only his "stomach" these ideas would suit the creature - keeping him safe and corralled. Fortunately, (or not so), there is another dimension to a man's existence - for that, "Buckaroo Bucks" just won't cut it ! Still, the conversation is appreciated - thank you. Let's hope the Republic is still standing long after the MMT'rs have disappeared into the sunset.
That’s why you have the means of production owned by the workers
Lack of central planning has never ended well for anyone. That's why people have always banded together to form societies with governments. As for the Republic, it has always operated on MMT principles, just like any other country. The USA literally wouldn't exist if hadn't been able to print money to pay the Revolutionary Soldiers :)
Paper money printed during the revolution created great conflict following the war and contributed to the failure of the Articles of Confederation.
@@ast453000
Well governments used to mainly be about justice and stuff like that, not planning the entire economy.
@@BarrySlisk Like, how far back are you talking about? The Romans planned their economy. So did the Egyptians. So did the Sumerians. Literally the first civilizations planned their economy. What are you talking about?
The Buckaroo - where the Currency Issuer pays for community based labor done - seems like a great national economic solution to me as a 2nd currency that doesn't inflate. In fact it's value only grew against US dollar.
You are misdirecting people again. Why do you do that when the facts are available and contradict you.
There is no such thing as government currency issuer. Government does not issue currency . Government is the biggest single spender of existing money in the economy. Most money is created in the economy is created by private banks who create it when they lend. It is not money created by the government or the Federal reserve bank.
Even money created by the Federal reserve bank is loaned to government in exchange for Treasury bonds and has to be paid back in time when those bonds mature..
I have directed you previously to the explanation given on the Parliament of Canada which lays out what happens in this statement " Money is created in the Canadian economy in two main ways: through private commercial bank loans or asset purchases, and through the Bank of Canada’s asset purchases.
The majority of money in the economy is created by commercial banks when they extend new loans, such as mortgages."
@@Rob-fx2dw Oh hello again Rob, I see you still have basic facts wrong.
Both private banks & govt create currency, actually. There is no reason for Govts to sell bonds, unless to benefit the usually very wealthy people or organizations that buy them.
Bank of Japan has almost zero interest on their bonds......they still have currency to spend.
Why do you always seem to be for the WEF types of cronies in the world, Rob?
BTW if anyone wants to think Rob has any humility about these questions, just go to Deficit Owls & see him argue, then delete his comments instead of a admit he made a mistake.
Never changes his mind on anything, that I have ever seen in the years he has been trying to vilify he very things that could help our society, instead of elites.
@@Rob-fx2dw
I note you changed the subject too. The topic was the Buckaroo, not normal fiat.
@@Rob-fx2dw Do you want to respond to what i said about the Buckaroo? It worked when the University tried it, plus went up in value over the years.
What about the impact of reduced digital advertising efficiency due to increased digital privacy?
This subject interests me immensely but the audio made it unreadable for me to follow. Thank you regardless.
Absurd foundational idea that the human drive for acquisition comes from the need to pay taxes. Insane. The drive for acquisition starts with security and matures to material benefit and then status. These drives existed before currencies, but opportunity for success was limited to only a few..
Well done. You were able to put it in a way that was very simple to understand.
People will believe, especially intelligent people will believe, whatever is necessary to justify their desires, no matter how delusional. Such is MMT.
"People will believe, especially intelligent people will believe, whatever is necessary to justify their desires, no matter how delusional. Such is MMT."
I agree well said.
i like how the creator is pretty humble about his theory. like a true academic.
the opposite of Paul Krugman's attitude.
People who have experience risking their own money in financial markets tend to be more humble about their theories lol
Ok, he is still wrong and krugman is still right. MMT = 🗑
God 30min in and this is annoying …Mosllers goes on way too much about this tax aspect and his buckaroo example is just annoying - I get the point he’s trying to make but what he ignores is this discussion is that money in general only has value because there is stuff available to buy. It’s not just about tax - which is why the Zimbabwean currency collapsed - because they didn’t have enough stuff to buy. Mosler obviously understands this as this is what MMT describes, but I just think he obsesses on the tax stuff too much and this explanation so far is just going to confuse people who don’t understand MMT. Also - it’s not just the ‘government’ that creates money - its central banks too and most of all commercial banking which MMT seems to unforgivably overlook altogether ….the origin of fist currency was not from taxation, it was via banking …
_"Also - it’s not just the ‘government’ that creates money - its central banks too and most of all commercial banking which MMT seems to unforgivably overlook altogether"_
They don't overlook that at all, Randall Wray writes and talks a lot about that as well as many other MMTers. It's simply not possible to comprehend all the body of work MMTers have created over the past 25 years and Mosler mostly focuses on a few very simple points. It's not like any MMTer denies the importance of private banking. Also when MMTers talk about "the government" they often consolidate the CB and the treasury for simplicity because many balance sheet operations have exactly the same outcome no matter if you consolidate those entities or not. The CB is a creature of law and a public institution. Although it is somewhat independent in it's day to day decisions (also simply by law) it's not nearly as independent as some people suggest.
_"the origin of fist currency was not from taxation, it was via banking"_
Okay, what are the origins of banking and when was it? What's the historical evidence? You seem to be so sure about this, shouldn't be hard for you to present it. We have a lot of historical evidence that contradicts that dating as far back as ancient Babylonia about 5000 years ago. Taxation is much older than banking.
Congratulations. I have more questions now than when you started. You didn't discuss retirement. So everyone works till they die. But the most striking thing is that you explained well that we're not running MMT at all. Maybe that's the whole point of the interview. I'll watch it again
Notice he tip toes the deficits don't matter question. Also leaves out giving money to the rich lower prices because they build automated factories with the printes money.
@@NathansHVAC"lowers prices because they build factories..... Is that part of mmt or your theory"????
It really sucks the way they treat people like me in america , i dont like it
When your core "base case" model bases the entire understanding of money on a version of taxation that doesn't exist (mandatory flat tax on everyone), and you still have the ego to say it's not a theory it's simply the way the world has always worked... economists astound me
It's Communism. No linkage to reality. Just a religious doctrine for your followers to use to satisfy their selfishness. And Mosler and Felton know it.
What, economists aren’t allowed to use illustrative examples? It’s not analytical, it’s descriptive. I’m guessing you just don’t like the truth it’s describing, therefore you feel compelled to clumsily accuse Mosley of having an “ego.” Swing and a miss, my dude.
What, economists aren’t allowed to use illustrative examples? It’s not analytical, it’s descriptive. I’m guessing you just don’t like the truth it’s describing, therefore you feel compelled to clumsily accuse Mosley of having an “ego.” Swing and a miss, my dude.
Agreed. Contrast this odd, coercive definition of money to the more common sense definition from Lyn Alden in recent talks about broken money: Two people want to trade goods or services; "Money is the tradeable item where you never feel like you have too much." It's a common unit that both parties want more of. Different items can fill this role. For example, Bitcoin, which has no government or taxation beneath it. The Austrian definition given by Lyn is based on voluntary consent to transact. One must wonder: What opportunity cost do we pay when we instead build our entire economy from a premise of government coercion, threats of imprisonment or worse, and forced seizure of your private property to non-consensually transfer it into the "public domain," such as the definition given in the early part of this video above?
@@idxerr Currency has no diminishing marginal utility. It converts to whatever you need or want most right now. If the govt wants its taxes in dollars, hold Bitcoin until tax day, and then buy dollars and pay Auntie Samantha.
could someone please help me understand how to (or if we need to at all) factor in those who do not pay taxes (but still spend), either because they dont have to (on support payments like pensioners) or because they dont want to (voluntary unemployed). and i guess what would happen if lots of people didnt want to work?
I hope you see this question, how does Bitcoin, as a currency get its value?
Stupidity and criminals who needs It on internet ?
@@renaudfilippi2599 I was thinking it was bcoz it is tied to the dollar
Richard Werner and Richard Murphy. Both contributors on YT. Everyone interested in Banking and Monetary issues must follow their videos. Confusion in many aspects of monetarism is rampant. "Princes of the Yen" is a real eye opener. It originated from the book R. Werner published years ago.
the biggest issue with MMT is it's understanding of the history of money is just factually incorrect
money did not arise with the state, nor did single currency zones arise with taxation.
You are wrong. Bukaroo coins are not equivalente to production there are no transactions on Bukaroos, if someone starts working 1 Bukaroo value hours and sells for 100 US a Bukaroo for someone that needs it, then you have inflation working.
Thank you for having Warren Mosler on. Your Elon Musk impression is a bit unnerving though :D
The Federal Reserve is a private bank. Coinage issued by the mint is, on the otherhand, issued directly.
When Warren mentions the effect of collapse of tax collection during war I am reminded of my uncle's story about the UK tax regime when he was bomber aircrew during WW2. He said they collected taxes DAILY. OK, now I see their point!
So a currency is really a tax credit
Great discussion. Just a few comments:
- I'm glad you pushed Warren on the "inflation" vs "relative price changes". When your salary stays at $1 and the cost of pasta goes from $1 to $3, that's both inflation *and* a relative price change. Labour is getting relatively cheaper and food relatively pricier, but even with that relative change, the nominal price of labour is not going down. He didn't seem to want to change his mind on this and just waffled, unfortunately.
- While I totally get where he's coming from that taxes create demand for a currency (and I assumed that was mainstream), it's far from clear that government bonds don't have a similar role. I would love an in-depth analysis as to whether a government borrowing money, by issuing bonds, can substitute for taxes and create demand for a currency.
Why do you think taxes create a demand for the currency when they did nothing to create a demand for it in countries where the money failed to have any value at all like in Zimbabwe and other countries where despite taxes the value and demand for money dived to nothing and was rejected by everyone including finally it's own government? Obviously the proof that tax does nothing to create a demand for the money given the reality of this.
In your example: there is inflation in the price of pasta but no inflation in the price of your labor. But perhaps there is inflation in the price of the "labor" of an oil company executive. Perhaps, previously, your monthly real salary was 3000 buckets of pasta, whereas now it is only 1000 buckets of pasta. But maybe the oil company executive's real salary has increased from 100,000 buckets of pasta to 200,000 buckets of pasta. Supposing production of pasta is unchanged, maybe the 100,000 increase in the executive's real salary (measured in pasta) came from the reductions of the real incomes of 50 workers like yourself by 2,000 each. 50 × 2,000 = 100,000
Or perhaps the economy is unable to produce as much pasta as before. But if production of pasta is constant or increasing, then we may analyze this "inflation" or "relative price change" - or whatever you want to call it - as a distributional struggle that is inherent in capitalism: what share of real economic output does a person get? For example: Will an oil company executive be able to extract more of the share of total real output if he is able to increase oil prices? Or if he does so will everyone else be able to increase their nominal prices (including prices of labor) in such a way that it cancels out the oil company's attempt to extract a larger portion or real output, such that everyone's real incomes are unchanged? The answers to these questions depend on relative pricing power: e.g., are you in a labor union (easier to demand higher salary)?; is the oil industry oligopolistic (easier to price oil higher)?; etc.
Regarding your second point, why would anyone want to accumulate government bonds if the currency that they convert to at the maturation date cannot be used to pay taxes (or converted to gold or something else one might want)?
ruclips.net/video/DoMPlG5kgNE/видео.html MMT in Minsky at the 2nd Poznan MMT Summer School 2022 . People not familiar with system dynamic mathematics & differential Calculus can be helped with a good visual .
ruclips.net/video/urmJP9MZApY/видео.html
Can We Make Money Work For Us? with L. Randall Wray
@@thomasd2444 You have picked Keen and Randall Wray as independent supporters of the MMT .
Firstly re Keen;- I questioned him about why his sectoral balance claims were that deficits are a saving for the private sector as his money flow diagram shows it and why he had not taken notice of the fact that deficits require borrowing in the form of treasuries which have to be paid back by the private sector which he has ignored.
He replied that he was right - because his Minsky software shows it !
So he used his own diagram to justify his own claim. How dumb is that using his own statement to prove he is right and not using independent facts.
Secondly Randall Wray who says "All money comes from the government " and "the government has to spend first before taxes can be collected." He completely ignores the 90% of money in the economy which comes from private bank lending which is not government and taxes are collected in that money such as income taxes, sales tax .
Rising prices are not inflation, they can be a symptom of it, but inflation is a purely monetary phenomenon.
Great conversation, learned a lot.
Seems like there’s a problem with the first premise: mr Mossler says that we should start with tax as a liability on currency. However, this seems to deny there is a real component to tax. If we look at the origins of tax though, we can see that it was most often paid through goods, commonly grain or livestock, as in tithes to the church in the Middle Ages. The real goods came first, tax through currency came later, as an abstract valuation on real goods. If MMT was true, wouldn’t it seem to unlink tax/currency from real goods? To be sure the link is indirect between currency and real goods in the modern economy, but that is vastly different to saying it is not linked at all.
My 2 cents...
TAXES AND GOVERNMENT AS AXIOM FALACY
MMT claims the PURPOSE of money is to serve a deficit created by government (or equivalent institution). This fundamental assumption is wrong, and is a faux-first-principle.
Origin and purpose are not the same thing.
The origin of the resource of money might be the an institution such as the government (origin is not fundamental), but the PURPOSE is to serve as a liquid medium of accounting and exchange in both the free-market and the government.
A deficit as a function of the government may be a tolerable necessary part of the system. That is until the deficit affects the currency’s parallel utility (and role) which is to liquidate the market. This does enable the productive value to create taxes, but taxes are not a fundamental function of currency.
MMT, allows and encourages excess sovereign debt. This excess sovereign debt is a liability, and creates increased counter party risk within the currency system.
There is a tipping point of trust, where the risk-to-utility of the currency outweighs the utility, as more and more money is printed relative to the GDP which can never keep up.
Currency needs no government. Currency requires participants exchanging value, that is all.
NO INFLATION FALACY
Another claim by MMT is that inflation is a relic function carried over from an age of exchange currencies,…
Currencies of nations, must serve a large diverse number of competing stakeholders who occupy the same market domain.
With no inflation, those positioned to have even a little margin of currency after essential liabilities in that market would systematically passively accumulate currency, without offering value or liquidity to the system.
The liberalism that celebrates MMT, is the same one that is opposed extreme wealth gaps.
Inflation encourages liquidity of the currency. Liquidity is fundamental to the purpose currency.
JOB GUARANTEE FACALY
'The job guarantee’ is the claim that 100% of market participants can be employed simply by the government funding participation in the workforce, regardless of productivity.
MMT advocates mistake productivity for participation. Productivity in a competitive market with scares resources is the attempt or execution to create realised market value.
Productivity bring value and sustainability tot the marketplace.
In a large market, where individuals are in competition with strangers, both personally and culturally, and currency is paid for ‘just turning up’…
Participants are incentivised to ‘freeload’. Destroying the marketplace, and eventually the currency, as one of the fundamental purposes is to liquify that marketplace.
The published number for the government will be" 100% employed"... but at that point, the measurement irrelevant.
I think this post is worth it, but please fix the spelling. "Falacy, Facaly, Scares"...
Also, don't tell Keynesians that government creating jobs for the sake of creating jobs is bad.
@@waterbloom1213 Thanks for the complement, I'll leave the spelling mistakes for now though... a) I think comments are stronger look they haven't been edited, b) Its authentically my work, worts and all. :)
@@waterbloom1213 If there was a job going, where all I had to do was 'turn up' I would go for it. I would have no negative intention towards my fellow citizens.
But I would be on tiny protozoa, blindly feeding myself in a parasitic system.
As a librarian, I find one of the strongest steel man arguments against my position is 'the tragedy of the commons'.
Thank you for this. I’ve been curious about MMT for a while and now have some things to think about. I’ll probably have to watch this a second time and actually read Mosler’s work.
If you get a chance the RUclips page 1dime has a video on MMT in which they show 3 other economists along with mosler who have contributed to the subject. It also names their books
@@ReallyDarnell 1Dime is a political hack and MMT is for morons.
"The idea that deficits don’t matter for countries that can borrow in their own currency I think is just wrong." ~Jay Powell, Chairman of the Federal Reserve Bank of the United States of America
Mosler "You can't trade a currency based on interest rate differentials you are going to lose a lot of money". The realty is someone trading with you will win since the other person wins. It is as simple as that which makes his statement a false since he only looks at it from one perspective. i.e. the losers one rather than the winner.
@1:04:00 no dude! What matters is fully employing willing workers, because you want to maximise needed output and minimise the hours each _one_ person has to work (no bullsh*t jobs) to produce the needed ouput. So the deficit should be _whatever it needs to be_ to guarantee full employment. That's why the deficit never matters! You do not even have to publish the number, and you never know what it _should be!_ That's an inapplicable question. "How much should the deficit be to ensure full employment?" You cannot say! Once you show you've got no one turning up to collect unemployment benefits, and everyone can pay their rent and grocery bills, then you know you've got the "right deficit" residual at the end of the year. C'mon Mr Macro. Do better.
I should've written "Krugman could do better." Your interview was good, very informative to listeners I hope.
The problem with MMT is not its history analysis, the problem is the conclusion it arrives.
Look at Argentina (not even mentioning Venezuela). That’s what you get when you don’t have an independent central bank that finance government spending.
I am from Argentina and MMT is absolutely correct in practice on how money actually works... What we have in Argentina's media is the opposite of this, is a population under the belief that money is still a commodity somehow or has a representation in gold or somewhat, because everyone is terrified of the "fiscal deficit" and then the untrust increase prices, people save in foreign exchange, etc. Inflation has been an issue for a long time but is not related exclusively to money printing at all and can be fixed with increasing salaries and just spending, there is no real risk on "fiscal déficit" USA has an increasing fiscal déficit since the country was funded...
Price formation/price levels is a separate discussion and like Mr. Mosler here said, there's no consensus on what the value really should be, so inflation can be caused by many different factors...
Of course like now some absurd libertarians in Argentina are proposing, to dolarize the economy would get rid of the current inflation but the consecuences of not being able to print your own money is pretty much the only way a government can get insolvent... Because if you can print your PESOS, create a tax liability like mosler said and spend, you can basically inject money to the economy.
@@toletoles If you're from Argentina you should know that MMT sucks.
@@MagnusAnand I am from Argentina and MMT is correct. Inflation doesn't have to do with money "printing" (not really printed), it might have an effect on inflation, yes, but inflation is a mixture of many differrent factors.
Argentina's problem was it's wealthy elite kept taking money out of the country to stuff into offshore bank accounts or to buy overseas property.
Neither of these countries have currency sovereignty and have a lot of debt in foreign currencies. MMT only applies to countries where the vast majority of government debt is donated in a currency it controls. E.g usa, Japan, uk, Australia etc
I watched throught it all yet I am more cunfused than when i came in. Still dont get the clear picture what MMT is. Makes no sense to me.
If the interest rate is zero, wouldn't companies take credit they don't need?
I think the main idea is that the interest rate paid on reserves is 0%. Not necessarily on borrowing from the central bank at 0%
Debt for the private sector will be above zero even if base rate is set at zero because banks have to add their fee on top for risk and expenses.
@@MoneyMacroTalks Why do banks 'borrow' from central bank? They just need asset- liability records and reserves for inter bank transfer, right?
In New Zealand govt + Reserve Bank had a lending scheme during covid times FLP - Funding for Lending Program. Idea was to provide cheap money.. but not sure how it worked.
Thanks
11:20 why is it when people discuss unemployment they never ask "at what price"? I mean if I was talking about some steel that wouldn't sell, the price is the first thing you would ask about.
MMT is garbage
Wouldn’t raising taxes primarily affect non essential consumption? If you get to the point where people cannot sustain themselves many might defer paying tax
Taxation is a tool to drain purchasing power created by prior government spending. If the government tried to raise taxes in a period where general purchasing is too low and consumption is low it would only lead to less tax revenue as the economy would be collapsing. At the same time expenses for social welfare would be increasing automatically pushing the government budget into deficit. This is an automatic stabilizer.
A government surplus is only reasonable when income is so high that the economy is overheating and in that scenario raising taxes only drains spending in excess of capacity.
And yet SO MANY monopolies have been ALLOWED to occur in our markets. Especially in Tech and Military Weapons...
Let’s play a game called who can come up with more obvious flaws in the whole buckaroos experiment in under a minute.
I’ll go first:
1) it assumes an endless outside source of demand for the students time
2) it assumes that each students time is equally valuable
3) it doesn’t take into account the amount of time/energy/resources expended on necessity items (food, water, shelter, warmth…)
4) selection bias of participants
5) doesn’t relate the buckaroos to the cost of providing the services to the participants (infact it assumes that people aren’t actually being provided a service by the administration in the first place… which it obviously is otherwise no one would give a fuck about the buckaroos… you can’t just come up to some random land owner and say hey I’m starting a government I’ll be needing you to start paying taxes on your property it’s ok tho I’m going to give you the credits to do so in the first place and expect them to just say oh cool guess these taxes need to be paid and this currency is therefore valuable)
Jesus there’s so many to choose from. You get the point the fact someone tries to prove a point using this experiment is simply laughable.
Agreed. - Which is typical of MMT. Full of obvious flaws throughout.
on your last point I suppose it works because behind you is 100 000 soldiers to his 100. Also I don't understand what you mean in point 4 about selection bias?
Thank you
man i am struggling to hear what he's saying with the audio quality of the professor's mic.
Turn on captions.
1:20:13 "I think nobody can deny that no current economic systems have sustained full employment: That's never been the case."
Taking "full employment" completely literally is kind of ridiculous, at least for something as large as a whole country, but I wonder if you're considering "communist" states in this statement, because I was under the impression that some of them did quite well in terms of fulfilling their job guarantees, and, in fact, his whole MMT way of looking at things reminds me a bit of state socialism and makes me wonder how the people running "communist" state economies understood these things. I guess maybe that kind of communism isn't a "current economic system" anymore, though.
I don't know how you define communism. A JG has nothing to do with that. Communism means "no privately owned means of production". Certainly this is nothing that MMTers propose at all. They simply say that unemployment is caused by the monetary system imposed (people seeking for work that pays the currency). And unemployment is used as a policy variable to tame inflation which means that some poeple can not possibly find a job even if they want to. Do you know the game "musical chairs" (not sure if it's called like that in english)? There is always one chair less than people dancing around them and when the music stops everybody tries to get on a chair. Obviously there is no chance that everybody gets one even if they all try as hard as they can. This is kind of the system we have. Isn't it very cruel to make paid work the only way to sustain yourself but then intentionally and systematically prevent that there actually are enough jobs? There are only two possible ways you can have it: You either have an unemployed buffer stock of labour force (NAIRU) for the private sector or you have an employed buffer stock (JG).
@@trixn4285 You seem to be reacting more to the "reminds me a bit of" part rather than the part before. Saying it reminds me a bit of "communist" countries is not the same as saying I think MMT is communism. Also, it looks like you spend some time at the end defending job guarantees, which makes me think that you view a comparison to "communism" as a criticism. This is a valid guess, given how common it is as a right-wing epithet, but not what I was doing. In fact, what I was trying to do was call out "first world" economists for what I suspect is a common habit among them of not thinking much about the economics of socialist countries, particularly those that have become heavily maligned in the "first world", although I admitted that it might actually have been a valid omission in this particular case, since I didn't know if any state _currently_ has a job guarantee. Since then, what I've found interesting is that countries that DID have something that looks like a job guarantee still reportedly had unemployment levels around 1~3% (and that's not even the inverse of labor participation rate, which I somewhere saw as 80% in the USSR at some point).
As for how I define "communism", I specifically avoided doing that, but my point was that I have heard of job guarantees in countries that are often called "communist", such as the USSR, although I wonder exactly what those entailed. I also wonder if it's truth or just ignorance that caused Buisiness Insider to label Marienthal, Austria's job guarantee as "the world's first universal jobs guarantee experiment".
@@Mr.Nichan _"Saying it reminds me a bit of "communist" countries is not the same as saying I think MMT is communism. Also, it looks like you spend some time at the end defending job guarantees, which makes me think that you view a comparison to "communism" as a criticism"_
It's not uncommon to hear from people that a policy proposal that involves the government planing basically anything to be "communism" or a "planned economy". Of course that's just a ridiculous straw man. A JG wouldn't be communism or a planned economy. Only people that can not find a job in the privately organized and market based economy are eligible for the job program and it serves a macroeconomic anchor for inflation and the value of the currency. I'm sorry if I suspected you to try to put it in the communism corner. Have probably done you wrong there. But it just happens so often that people come up with this. It's kind of a reflex to reject it.
There are actually other notable job programs that you could point to. To list some of them: The New Deal (1930s USA), Plan Jefes y Jefas de Hogares (Argentina), National Rural Employment Guarantee Act (India) to name a few. Those countries wouldn't be considered communist at all I guess. Anyways the defining feature of communism is that all means of production are publicly owned, so there are no capitalists (people that own companies) and no profit-driven production, only "workers". As there is no profit-driven production where companies compete on markets for profit it's usually also is a planned economy. Of course that doesn't exist anywhere in the world and I'm not even sure if it can exist.
The whole point of a job guarantee is to eliminate what is caused by the monetary system imposed on people, without risking macroeconomic instability. Unemployment is used as a policy variable (see e.g. NAIRU or the Philips Curve). That means unemployment is depicted as a "necessary evil" primarily to tame inflation. This is a sadistic system because no matter how hard everyone tries some will always be involuntarily unemployed.
_"reportedly had unemployment levels around 1~3%"_
Well, it depends on the implementation of JG and the definition of "involuntarily unemployed". But yeah, of course there might always be people that are unemployed but a JG would reduce that to the bare minimum. Everybody should get an offer. They are always free to accept it. And of course there should also be a social safety net beyond a JG.
@@trixn4285 One thing that complicates things is that a government program designed to give jobs to the unemployed is not the same as a universal job guarantee. For example,* obviously South Africa's Expanded Public Works Program can't be working as a universal job guarantee if a third of South Africa's potential workforce is still unemployed, unless this is another definition problem like adults living in farming families being called unemployed or something. Anyway, I don't think it is, because the final recruitment guidelines contain the text:
"""
The high demand to participate in an EPWP project coupled with local and municipal dynamics
may impact negatively on the recruitment of participants. Potential challenges include:
a) patronage in the recruitment of participants,
b) inconsistency in the process of recruiting participants,
c) lack of transparency, and
d) poorly defined criteria and processes.
These pose a reputational risk to the EPWP brand and where such problematic practices
occur, or are perceived to occur, they may lead to delays or disruptions in the implementation
of projects. Thus a clearly defined recruitment process that speaks to the recruitment of
participants and defines the role of stakeholders is needed.
"""
*another example showing how we mirror Wikipedia
@@trixn4285
Communism means "no privately owned means of production"
No, that's Socialism.
Its ironic that a lot of what he is putting into words and examples is something intuitively understood by some. Great conversation, I'm glad he doesn't dilute anything with nonsense politics
As far as his whole foundational point of needing to pay in the monopolized currency, that seems incomplete to me.
even without a monopoly currency, you can still impose a tax burden of X amount of grains, slaves, gold, etc.
And you may even be flexible as to the exact payment - maybe potatoes are acceptable substitute for grain tribute, 10x more pack animals may be accepted instead of slaves, silver and sapphires instead of gold, etc.
- Sometimes a good visual is just the help a person needs to learn about Modern Monetary Theory
ruclips.net/video/DoMPlG5kgNE/видео.html
MMT in Minsky at the 2nd Poznan MMT Summer School 2022 .
People have to understand MMT only works on certain specific conditions.
Not every governments or nations can do it.
MMT or not mmt, the fact is that money can be totally unnecessary for an economy to work, but with money the economy can operate at a higher rate, ie. the much higher speed of exchanges of goods and services.
Low income and low wealth with low taxes ? Not problem at all.- just make taxes 99% so everyone would be so much better off ! That would work so well according to Mosler.. (excuse the sarcasm.)
@@Rob-fx2dw When you make taxes 99% people will be tempted to stop using money in transactions, or they just go underground to evade tax, or they will go self-sufficiency economy, no exchange of goods and services, life will be boring, productivity will be low.
"The idea that deficits don’t matter for countries that can borrow in their own currency I think is just wrong." ~Jay Powell, Chairman of the Federal Reserve Bank of the United States of America
Guy is the absolute best. Well explained.
The Problem with MMT is that is Great to explain financial and financialized problems, but many of their framework is disconected from behavioral dynamics of producing good and services, that could be fungible or not and they roots of why those dynamics happens. And that is and abyss of difference.
The essence of the problem of excessive inflation with paying off foreign debts is that if you have unrestrained government expansion of their deficits then it leaves more money in the economy without a corresponding increased amount of goods and services. That results in lower purchasing power for every unit of currency and this corresponds to less value in relation to the cost of paying off foreign debt because the more adverse exchange rate of your own currency for others.
It is as simple as that. Yet you have MMT supporters who ignore the time line of what happens saying the foreign debt in their currency is the problem.
Am not yet through, need time to digest. Does he talk about crypto? How does crypto relate to MMT?
In my view MMT proves crypto worthless. But Mosler doesn't seem to stress that point too much
Quite well.
Crypto is not part of nor related to MMT at all. MMT is concerned with government currency and bank credit, denominated in the government currency. Crypto is more akin to a commodity; albeit an electronic commodity. Yes, is was "sold" as a currency, but is far more involved in speculative trading.
If interest rates don’t matter to currency valuation why is the dollar so high?
Soooo...people work to pay taxes...hmm....not to live and survive. What about people that don't ever work and don't want to work... I get it that we technically can't go bankrupt but what should we spend money on? does it matter?
10:19 in fact most of the money used in the united states during the 18th century was spanish gold coins
The buckaroos example is not comparable to a currency. That is because the buckeroo is tied specifically to the student and not to the community. It is not able to be traded for anything else than a student's liability to do a specified number of task or tasks. A nation's currency is not tied to the work of specific person or persons but is tradable for many things including past debts or foreign debts. You can't even use backaroos to pay for things that the university provides itself like educational instructions and you have to separately pay for those things with actual currency. The buckaroos are only applicable to a student already in a contract with the university not someone else for whom they are useless and worthless.
National currency works the same way.
Try paying for your coffee in Yen.
No. Absolutely wrong. The nationally designated official currency is not issued by the government. It is created by the central reserve bank in exchange for securities sold to the reserve bank by the treasury department. Those treasuries mature and the money has to be paid back. However Most money is created by private Banks when their customers get an approved loan. It is all credit and debt money and is also tradable for other countries' money. Nobody can trade those buckeroos.
@@Rob-fx2dw you've got the important details wrong. firstly, the Central bank is part of the government. In America, it was a legal fiction to say it was private, but ultimately when the rubber met the road the courts decided to go back on this fiction and explicitly treat it as government. This was determined legally in US vs Wells Fargo 2019.
Secondly, since the central bank is setting an interest rate policy with treasury bills it has no choice but to monetize treasury debt either indirectly or directly. If it didn't, it would lose control of interest rates. Think about the market dynamics here.
Of course most money is created by private banks as you say. But considering that this private money trades at par with government money it's better to think of them as a public private partnership than purely private banks. Making private money trade at par is not trivial. That's what FDIC is for and also why the government is so heavily involved in regulating the banks.
Of course you can trade the Buckaroos, Mosler talks about how some students would rather pay other students dollars for Buckaroos. This is basically foreign exchange.
All of these details are said by Mosler elsewhere, it's not like he doesn't know them. They just didn't come up in the video.
@@jetfaker6666 You are wrong about the U.S. Federal reserve which is a central reserve bank.
The U.S. Federal central bank is not "part of the government". It is separate authority that acts in similar way to what private banks operate in the private sector but it's exclusive customer to whom it makes loans is the government's treasury department. It buys government treasury securities and pays for them in money it creates as credit and debt. All of the treasury securities it gets from the government mature and the total amount of money is paid back to the Federal reserve bank by the government treasury.
Your statements such as "But considering that this private money trades at par with government money it's better to think of them as a public private partnership than purely private banks" are just bluring the situation. It is failure to identify the roles and legal resposibilities of the two. You cannot concoct the situation to fit previously held views as you have done.
Private banks are Not government and rules that restrict private banks do not make the two synonymous. There is no partnership and their actions are purely private. They are not government agents because the term agency is one in which a person or business is purely an intermediary between producers and buyers of a product that the producer creates.
The Federal reserve is distinctly different organisation from private banks and it's actions do not equate to those of private banks. Private banks lend for profit. Their employees are private people. The bank's income is private income paid to shareholders. They are a registered private business. They are commenced and cease to do business based on their own decisions not government or the Federal Reserve.
The private banks act in private lending environment where risk assessment is the first concern in their lending operations. The Federal Reserve does not risk assess before or when lending to government. It acts in separate lending environment since it's monopoly customer is the treasury. The Federal Reserve does not lend to private people or private business like private banks do.
Private banks do Not get money to lend from the Federal Reserve. The government does not fund private banks for their losses from lending and neither does the Federal reserve.
Re your comments about Buckeroos:- They are not tradable to the public and are not useful to anyone except the students. They cannot buy any other product than that offered by the university.
Mosler's statements which i have previously seen are purely fantasy like his idea that the private banks are government agents. He doesn't know what agency actually is so uses the term incorrectly to cover his previously badly thought out ideas.
I ask you if you are government agent when you have drivers license and must obey a lot of rules? - Of course the idea of licensed drivers being government agents because of the need to accept and comply with rules is equally absurd as believing private banks are government agents.
Does a private person obeying rules of the government issued driving licence mean they are government agents? No, not unless the person claiming so is trying to blur the correct and distinctly different understanding.
@@Rob-fx2dw
Read the decision in United States vs Wells Fargo 2019. It says the Federal reserve banks are agents of the government. If you don't like it, take it up with the judges.
As for private banks, Moslers got a new video out in the last couple of days where he talks about managing the bank and how he felt like he was working as an agent of the state. You said that banks commence business on their own initiative but did you know that if the regulators don't like your earnings they'll wind you up? He likens it to being a soldier, you make your own decisions but you're still an agent of the army.
And as I've alluded to the Buckaroo isn't so different from a national currency. Yen is only useful to the Japanese and yet there's a Forex market out there.
Greatest MMT interview yet
This is great. My initial exposure to economics was Austrian school. Which makes sense when you're coming from no knowledge. But then I watched Warren vs an Austria school guy and it blew my mind. I had to dig deeper into MMT. The more I learn, the more difficult I find it to refute Warren's position. Other MMT folk seem a little out there, but Warren is so grounded in his positions it's hard to find holes.
Holes in his theory - One:- Government deficits are not saving for the economy. They are an increased ability for government to spend more at the taxpayer's expense.
If they were then all debt would be always a saving for the economy. It is clearly not because debt is a liability of one party and as asset of the other. Federal deficits are Not savings for the private sector because the private sector is the debtor due to the fact that the government taxes the private sector to pay off it's debts and that is an obligation for the private sector.
No government pays off it's own debts.
user-hy7wk4ou41 is right: All debt-instruments create a debtor, and a debtee. And all US debts have always been paid-off as they came due, because the US has always been successful at auctioning new bonds to raise cash to redeem maturing bonds whenever it was necessary. (And when-ever the 'bond market' did fail to subscribe to an entire bond issue, well, the price of those bonds was reduced and reduced, until all bonds were subscribed. That's why all US bonds have always been successfully paid-off at maturity, which is likewise why all US bonds have (usually) been afforded the highest credit-rating, by every credit rating agency, such as Moodys, S&P, Fitch, etc.
Unfortunately, such "refinancings" have become "increasingly necessary", because (1.) tax revenues account for a smaller proportion of total spending than in earlier years, and (2.) bond-buyers generally avoid buying "Long-Term Bonds" when interest rates are at historic lows (as they have been since 2008, though interest rates reached their absolute lows a few years later, i.e., under the Fed's "QE" regime.) The Austrians should be credited with this sort of insight for re-pricing such bonds at auction, ... but they would also have grave concerns that the "Average US T-Bond Maturation" has fallen from 10 years (in 2007) to 5 years (in 2012) to (I'd guess) 2 years in 2023. If that's accurate, then about half the US debt matures each year, and must be refinanced in a simple "roll-over". The total US debt hit $30 Trillion a year ago, or so.
Finally, Austrians would also have deep skepticism that this auction process could continue under any MMT regime. That's because the tenants of MMT are literally incompatible with the operations of a Central Bank. (That's why MMT "assigns" taxation and borrowing as the new tools for fighting inflation. Example: Do you think bond-buyers would buy bonds from a Gov't that has the right to pay bond redemptions with newly-printed money, straight-off the printing press?
Many people would say "Yeah, that's great!", but that's only because they don't realize that Central Banks issue money into circulation by buying T-Bonds from the Bond Market. Later on, any excess money can be retreived from circulation by simply selling such T-Bonds back to the Bond Market.
MMT doesn't borrow money to fund operations: MMT spends the newly-printed money in to cirulation, and later on, uses taxation and borrowing to retrieve money from circulation, to fight inflation. However, gov't can't hit-up the citizens with a large tax increase, because many folks would not be able to pay it, and many would have to tighten their belts. Belt-tightening can create a recession, which reduces tax revenue. Not good.
That leaves borrowing as MMT's "best bet" for fighting unexpected inflation. But who would lend to any Gov't which uses a printing press, like a counterfeitor, to create money to pay its bills?
Today's bondbuyers have confidence in the US financial outlook because the bond market sends a clear signal every time the Gov't seeks to borrow money, and that signal is generated in the Bond Auction, prior to the spending recently authorized by Congress.
Under MMT, there is no Bond Auction prior to spending the money, and therefore, no clear signal can be generated by the Bond Market. Uncle Sam only needs to borrow money if inflation seems probable, or inflation has already occurred.
Bond market participants can't be certain that "taxes" and "borrowing" in an MMT regime can fight inflate effectively as central banks have proven able to do, at least since 1994.
No one in the Bond Market would lend money at today's low interest rates, unless there's good reason to believe inflation won't be a significant risk. MMT proponents have fostered lies that MMT actually describes how our monetary system works, just like Flat-Earth Believers want us all to believe that the Earth is flat. Before anyone subscribes to the MMT tenants, they should read the Federal Reserve Act (see the Federal Register), which clearly states that the Fed is required to always maintain collateral (i.e., value of assets, usually T-Bonds) equal to or greater than the liabilities (created by the central bank by issuing of money into circulation). This negates MMT's claim that the famous question "How ya gonna pay for it?" can be simply answered with, "We'll just print the money". No, the answer has always been, "We'll conduct a T-Bond Auction, and lower the price (i.e., raise the yields) on the Bonds
until the issue is fully subscribed.
And since MMT clearly fails to correctly describe how our current Monetary System works, my conclusion is that MMT proponents are either (1.) lying ... or (2.) deceiving themselves, due to an insufficient education in Monetary Economics.
I've said many times that "MMT is incompatible with a Central Bank", because IF mmt's claim regarding "spending newly-printed money into circulation" were true, then central banks would not be able to buy bonds with newly printed cash, and not able to fight inflation by selling said bonds back to the Bond Market, to fight inflation.
Central Banks require total control of the part of money that they created, which is usually about 11%, within in a healthy economy, in normal circumstances.
@@Rob-fx2dwif the government has currency sovereignty then it can always pay its debts. Taxes don’t actually pay for debt or any government services they use the central bank to create the money and debit it to the appropriate accounts
@@Alex-fm5ke You are totally wrong. Who told you that? Let me guess. - Some MMT economist who can't explain why the mathematics behind it doen't add up and why their explanation contradicts what the central Reserve banks' official explanations are. they are the institutions who actually crete new money so they know what they are doing.
If you want the genuine explanatons rather than the MMT fantasy then go to the correct place which is the banks who s do it or their official sources such as the Bank of England or the official explanation of the Canadian Library of Parliament site which explains the process in Canada. It is common to the same process as most other countries. Canada's process is here :- lop.parl.ca/staticfiles/PublicWebsite/Home/ResearchPublications/HillStudies/PDF/2015-51-e.pdf
"The more I learn, the more difficult I find it to refute Warren's position. "
What is warren possition and the contradiction with the Austrian school?
Raising taxes and reducing demand can definitely reduce the rate of inflation. Obviously a competitive market is also necessary. Increasing competition reduces prices. I’ve seen this in video game markets. Immediately raising taxes generally raises the price of everything, but as the taxes take money out the economy, prices come down. Now, other policies/things effect this like the trade balance, but you get the simple idea. Raising taxes is a way for the govt to take money out, spending money puts money in. Congressional budget surpluses net take more cash out the economy than they put in, deficits vice versa.
ruclips.net/video/DoMPlG5kgNE/видео.html MMT in Minsky at the 2nd Poznan MMT Summer School 2022 . People not familiar with system dynamic mathematics & differential Calculus can be helped with a good visual .
then again lowering taxes can also reduce the rate of inflation if you do it through VAT, energy taxes etc.
"Immediately raising taxes generally raises the price of everything, but as the taxes take money out the economy, prices come down. "
Less money around would also mean less money for employees, so this would result in either lower wages or unemployment. Since wages are pretty "sticky" probably unemployment in the short run and lower wages in the longer run.
Relative-timing ratio-rates Perspective of Logarithmic Time makes "modern, money and theory" definitions all Vapourware, thought experimentation for Analysts.
Great talk!
I wish he would talk a little clearer. It's strenuous to listen.
This is one of the most ridiculous conversations ever to appear on the internet.