It's pretty important to understand that MMT isn't some kind of new magic. It's just looking at the same economics from a different angle. It's a much more sane way to view a large modern economy than previous angles, but you're still looking at the same stuff. So the money supply is still real, inflation and deflation are real worries, and things can still get out of hand. But a modern view of money creation, velocity, and controls gives a more realistic view of what's possible. The "How are you going to pay for it?" argument isn't really an economic argument so much as a political hook that resonates with people whose view of economics is dominated by household finance.
Very well put. Economists and politicians are not omniscient beings with perfect understanding of these systems. Far from it. The older models of the economy persist through laziness and inertia, with politicians happy to use a household budget myth as an easy message to get across.
Indeed, it is not really correct to call it a 'theory'. It is JUST how the economy works in any sovereign currency-issuing nation. The only theory aspect is that it enables a very different outlook to the die-hard, neo-conservative, 'must balance the budget' economic theories.... which are false and are causing great economic harm to our nation and environment.
@@ernststravoblofeld every civilization has tried to pay their bills by devaluing their currency has collapsed. Modern monetary theory was used by the Romans.
@@petesig93 I don’t think this is correct. There is no way this should be called a theory let alone a empirical explanation of the economy. Ash brought up the most damning counterpoint in mentioning the way that MMT would negatively impact exchange rates and lead to currency devaluations. Kelton couldn’t even properly refute that point because Ash is right. The US can maybe deficit spend but it is in a unique position to do so as a global power and the world reserve currency. The UK cannot do the same. It might have been able to when it was still an empire but those days are gone.
Question for everyone here , why have national debt ? Why pay interests on these debts if we can just print money and pay it all off before the next interest rate payment is due . Too inflationary? Well isn't that payment just going to go up with deficits?
I hope people watch until the 44 minute mark. She makes a great point. When we just talk about raising taxes on the rich to pay for specific programs it's not just that it doesn't get past the political system; it actually makes those attacks on the rich weaker. When we separate "how do we pay for it?" from "how much should we reduce inequality?" we can actually pose more aggressive attacks on extreme rentier wealth because it isn't limited to what will simply pay for a given program.
Hey can you help me understand… I thought that how you approach question 2 (how do we address inequality) impacts the first question (how do we pay for it) because the taxation system takes capacity out of the economy and hence helps to control inflation. So I get her point that we should have a separate question around what a fair taxation system looks like but I don’t understand what the question (and answer) of how do you pay for it is without taking about tax
@@ronakattackidk kinda sounds like the crypto bros want the Fed to release additional currency & devalue the dollar to absorb the value into their economic system.
@ronakattack tax in the context of wealth inequality is about exerting tax on very high incomes and wealth. Essentially, it's a proactive, socially necessary pruning of the unearned excessive wealth (and therefore economic and political power) produced by our capitalist economic system. Tax when it comes to provisioning the public purpose is largely about releasing the right real resources from private employment if they are not already idle and available for purchase by the government without bidding up prices. But this is rarely a "if I tax £1 from you, I can spend £1 over there" since marginal propensities to consume the efficiencies of different consumption behaviours etc mean it doesn't work like a currency user's budget
@Moving2Win the more the fed creates currency the value is eroded, little by little without functioning tax. I agree that in the short term you could decouple the two functions, long term the system would destabilise particularly when you factor in exchange to other currencies & particularly when you factor in non fiat currency.
Yes! I've been curious about MMT for a while, and Ash is always excellent at raising relevant criticisms of her guests' ideas. Couldn't have asked for a better interview
Good interview. It's a shame that, judging by the comments in here, many people remain wilfully ignorant, or just downright ideologically opposed to MMT. Check out how many really dumb and misleading comments there are. Is it really that difficult to comprehend what Kelton is saying?
@@DoctorQcumberyou must be joking, she was being deliberately obtuse: continually confusing political & economic choices. Bastani doesn't "like" MMT because, you know, "I'm a Marxist" therefore even if -- Stephanie Kelton's explanations should've at least encouraged ppl to discover more -- it is a solution to some/most of our ills, he/they aren't going to support it because as Keynes said ..."he's the slave of some defunct economist"
No. She did a crap job because she let her become repetitive. Ash should have grilled her more eg So did you oppose Elizabeth Warren's wealth tax idea? And what about setting up a wealth tax that doesn't pay for everything you want it to in the first instance because it's a beginning on which you can build? Once it's set up and running you can hike it to the level you need it to be! But if you never set it up you'll never be able to do that! I think this woman is a useful idiot for avoiding getting the necessary work of setting up a wealth tax done.
She’s exactly the one economist I’ve been expecting to hear from in the British context because of Rachel reeves fiscal policies, how nonsensical they actually are. Private banks have been creating money, why can’t the Bank of England invest on the UK economy, why can’t the government use it to invest.
"Private banks have been creating money ..." Would you put some evidence to support this assertion ? "... why can't the Bank of England invest on the UK economy ... " The Bank of England is not run for the benefit of the UK, the Bank of England is a wealth extraction mechanism, which once the UK has been financially exhausted, will move on to the next host and suck the life out of that one.
@apflewis Private banks are licensed to create money when they provide loans. The Bank of England documents this. The Bank of England serves the state. How it does that depends on Parliament.
She can't do that without higher taxes. Wealth tax is controversial as one needs to have a good understanding of it before applying it (Wealth is in stocks, or some company in British Virgin Islands owns prime real estate, with holding company outside the UK n many other intricacies have to well thought out) Bank of England can invest upto a limit. The limit depends on the fiscal deficit (how much value v add in comparison to how much we consume). If she chooses to over invest without showing additional sources of revenue, then the value of the pound will fall, which will increase inflation n v know what happens after that. I hope this helps brings more clarity.
@@karatsurba4791 MMT understand well the impact of inflation on spending, what is missing from your argument, is that public service spending can reduce inflation. a simmple example of that is bus passes, for those that want to use the service they can without the need for extra money. Also the argument against private ownership of those forms of transport is that they keep cutting routes to maintain profits - due to the increases in costs from fuel hikes etc., thereby denying access to that service.
This does not surprise me.When the Tories continuously paid out money for contracts during Covid, and wasted millions, and on the Rwanda scheme, and all the failed projects e.g.HS2, plus all the expensive think tanks that did not precede any actions, this money went to the already wealthy. Even the Covid grants and welfare payments eventually ended up with Corporations and Landowners, giving them more money to buy even more assets, and inflating the prices, creating more innequality.
I agree. I thought exactly the same. Please watch Professor Richard Murphy explain MMT in his videos. It will give you a different view on the national debt.
Meanwhile, the elephant in the room is that there’s no ecosystem remaining on the planet that is not in decline. A monetary system with an exponential growth obligation on a planet with finite resources. Seemed like a good idea at the time?
The high taxes are a RESULT of the massive inflation caused by money expansion. This mid witted woman doesn’t understand the first thing about monetary policy. The wealth gap is a DIRECT result of MMT causing inflation and massive amounts of debt which now the government is trying to control via massive taxation, despite everyone already having been taxed through the devaluation of the purchasing power of our money.
The problem in economics today is that most economists look at things through the gold standard lens. We are not dependent on gold. The one thing I was fuzzy on was why is there such pushback, and when Prof Kelton explained why the banks didn't like it clicked for me. Big Finance which has been taking over our economy trying to financialize everything, loses. Why would you need Venture (vulture) Capital if there is a government program that might invest in your new business. It makes perfect sense now.
No, most economists dont look at economics through the "gold standard lense", the view it at its fubdementals. That is, as a system of trade of goods and services. MMT just thinks that money is the economy, it isnt.
@@davidhobbs5679 What is it if it isn't money? That's fundamental to all of it. You have none of it without money, and if you don't have that right, you can't possibly get the rest of it right, and if you've lived longer than the last 30 years you'd witness, they haven't had it right for a good long time.
I wasn't sure about this going in, but she really changed my mind. Ash's observations are astute as always, she really got the best out of Prof Kelton.
@@timothyrussell4445 It is precisely because she is not an economist, but is an excellent interviewer, that she asked all the right questions for a lay audience. If you want an academic level discussion, this is not the forum, try the LSE
It sounds like Ash was well-primed by her economist colleagues as to what to ask. I reckon they didn't want more economically-minded interviewers to do this because Kelton would possibly have dismantled their "professional economist" views and "handed their asses to them", so to speak. Could've been embarrassing. This way, the economists on the Novara Team (is James Meadway on their team?) can still present full and vehement opposition to MMT. In Meadway's opinion, MMT is the economic antichrist. It is Capitalism's final boss to be defeated before ushering in the promised land of fully automated luxury communism. I still don't know why Meadway is so opposed - I reckon it's just professional jealousy, a bit like being a Methodist clergyman (sensible fiscal rules) and being jealous of the Pope's fancy costumes (MMT 'we can have nice stuff').
Many of us lefties already knew this stuff and have read Stephanie’s book and follow Richard Murphy. We requested it on Down Stream probably because we felt that it was time the Novare team got a grip of it as well.
People of history are well aware of this theory and it is not modern. It’s been tried over and over and each time has failed miserably and has brought misery to the people this theory was attempted on.
What is "Modern" about MMT? Printing money has been tried in every great power and eventually fails. When inflation heats up taxing more is very difficult politically but MMT shrugs it off as if they are clairvoyant and will have the will to do what the theory says they should. Also MMTer's seem to think that command and controlled government economic policies will be a net positive. With little to no accountability for mal investments governments have low to no disincentive to avoid failure. You have a few elites placing bets that the whole society will rely on as opposed to decentralized private decisions where investors take the risk not the whole society. Seems to me MMT is simply putting lipstick on a pig. The lipstick might be better with the benefit of hindsight but its sill on a pig.
@@peterponcedeleon3368 To say that MMT "has been tried over and over etc.." indicates that you do not really understand what MMT is. At its core, MMT merely describes the reality that the government spends money into existence.
@@terrygibson7143 thats not what mmt is "at its core", rather the core of mmt is based upon that reality. its a response to the switch to fiat after bretton woods
The Argentinian Peso was allowed to "collapse" twenty odd years ago. Imports into Argentina became very expensive but exports out of Argentina became very competitive. It actually allowed Argentina to pay off its debt to the IMF.
Stop being so terrified of inflation, inflation can be a very good especially when elites have rigged the system to deliberately suppress wage inflation for 50 years, yes there will be inflation to counter balance the abuses.
MMT isn't simply a set of ideas, it's a model which describes how modern economies work and why the policy of austerity has been so damaging. It's not a theory that needs any sort of paradigm shift to adopt (like the shifts from barter to coinage to paper money), it needs to be taught because it informs us of the reactions you get to different spending decisions. As it turns out, it's quite an accurate model. It even describes the precise mechanism of the hyperinflation which afflicted Weimar Germany, Zimbabwe and Argentina.
I think that the acceptance of Friedman's idea that inflation is solely a monetary phenomenon has set the science of economics back 40 years. A much healthier way to look at it is that money in circulation is but a mere component of inflation. That there are many factors that contribute to inflation. Now you can study each component and develop precision tools for dealing with inflation. Friedman purposefully put blinders on what can and cannot be explored in favor of central control by his monetarists. Because of this the central bankers don't have the tools to actually control inflation (or event interest rates for that matter) because they don't actually understand inflation. MMT is a breath of air to a drowning victim that has been drowning for 40 years by design. It is ironic that MMT was born from the monetarist design of Reaganomics to front load a one sided (supply sided) redistribution of wealth that is now causing everything bubbles (market failures) in all the asset classes. Something that a progressive tax codes once tempered, but were systematically dismantled by the monetarists. Turning inflation into a weapon in a class war was poor form. Using MMT to correct some of the damage is priceless. Welcome to the economic renaissance.
@@debbiegilmour6171 There is nothing like Modern Monetary Theory it's just a theft of Marxist Ideas which handed over through Keynes to the contemporary western Orthodox economists and rebranded as MMT.....
@@donklee3514 MMT was tried and tested in September 2022. We called it the mini-budget: if you think it's the solution to our problems I may have a bridge to sell you.
@@PJH13 The flat earthers swore that Columbus would sail off the edge of the earth. They believed it as if it were fact. It is a good thing for the crown that Columbus didn't listen to the nay sayers. I hear that there are still flat earthers around still believing that the earth is flat in spite of pictures of earth from outer space. You are free to believe what ever blows your skirt up, but the borrow and spend provisions of Reaganomics is a monetarist version of MMT used to fund tax breaks and various industrial complexes. The monetarists have been doubling down on MMT for about 45 years. It works great and that is what WE call an inconvenient truth.
In the late 1990s with a surplus paying down the debt, had the stock market flying high, possibly some deflation, full employment, housing affordability, low interest rates.
My concern with MMT is that you can print money, but you can’t print value, you simply dilute it. If you track MMT and the S&P, very little if any actual value has been created, it’s just gone up proportionate to the money printed. Similarly house prices now are outrageous. These are symptoms of financially literate realising in a world where money has less value, they need assets that will increase with money supply. However the poor are not in a position to obtain assets and so is MMT increasing the wealth gap?
Yes, if you create money/loans for asset purchases all you do is create inflation which is of course why bank loans should be directed either by the state or private bank loans guided by state/democratic intervention. Of course if wealthy people can create money they are not going to risk doing anything new when they can do asset speculation; why do you think China is succeeding with their thousands of small local banks ( like the USA/Germany) directing money ( newly created, of course) to individuals/corporations based on a very long list of things the government want done?
Very interesting. I think the problem with the difficulty in accepting MMT is that most people confuse the symbol we use for wealth, money, for the real thing, wealth. What is wealth? Wealth is the people doing the work making stuff, the natural resources transformed into stuff, the knowledge helping to make stuff. That's the wealth. Money has no *intrinsics* value at all. From this starting point, MMT makes perfect sense.
@@benlap1977 Careful here. MMT's macro framework does indeed explicitly make the distinction between nominal monetary wealth and real resource wealth and that at the macro level of currency issuing governments, it's real resource mobilisation which is the constraint, not the nominal finances. This is perhaps it's most defining property as an economic framework. But MMT also explicitly recognises that we live within a monetary production capitalist economy in which a large proportion of production is undertaken via the spending of nominal money on inputs with the explicit objective of ending up with nominal money profits. Therefore, nominal finances drive our production systems and human economic behaviour. MMT's success as a theory of macroeconomics is that it understands both sides of this coin and follows the logical implications.
They need to stop calling "Money" that is really "Currency". Real "Money" has intrinsic value, ie: Gold, Silver. While "Currency" is only worth what people belive it's worth, being backed by the Cestui Que Trusts (in the US called Social Security) in the central bank made from our birth certificates of which were bonded and put on the market that we are the "Beneficiaries" of...
@@michaelkoester2333 sorry no, gold has very little intrinsic value, beyond it's physical properties; it's a great conductor and it's chemically non reactive. And it's not currency over money, the correct term if we're being that way is 'unit of account'
A few years back there was this comic that really resonated with me (can't seem to find it again). Basically aliens land on a barren, dead earth in the near future. One alien says to the next: "They could have saved themselves you know", alien two asks: "Why didn't they?". So alien one replies: "Apparently they didn't find the money to do it." Not everything is about freaking money, sometimes you just need to do what you NEED to get done for the good of all.
They call that inspiration "Empathy". Without that emotion, Humans would not have survived this long. Money is not an essential element of Human existence. It is a tool to control power.
THAT point is actually what Stephanie would agree with. No sense in screwing the population for some sort of wealthy elite's excesses, if those excesses are destroying the environment, the very basis of our economic production. No environment = no economy.
I was a Delagate for Sanders, in 2016. I asked about the implications of corruption from the Hillary Victory Committee at Convention. The concept of redistributing wealth is older that Marx. The Wealthy own the Leadership of Congress. Or the Chamber of Lords. They are not going to allow any attempt to take their money to proceed. Oligarchy has organized.
I know he's taking a well earned break, but I would love Novara Media to host a debate between Stephanie and Gary Stevenson, to test their degree of agreement, and areas of difference!
I agree, but to be fair he is an amazing communicator and could really learn a lot and benefit from such a discussion with Kelton. I try to hear and read every I can from both of these people.
"Taxing the rich" is a thing that needs to happen whether we need the money or not. Money is neither good nor bad, but extreme wealth concentrations are socially problematic, and that is separate from any economic effects that they may have.
I've been following MMT and Stephanie for years. I haven't heard her speak lately and she has greatly improved her pitch. This talk filled in a lot of lacunae of misunderstanding for me.
Yes we really need to tax the rich. It’s not just about distribution. It’s about ensuring wealth inequality doesn’t rise. In developed countries where there is high wealth inequality everyone, including the rich, are unhappier and live on average shorter.
100% we live in a system where people get one vote. Unless they’re rich or a company in which case they can lobby government and get the voting power of thousands or millions of people. Democracy can not exist whilst there is huge wealth inequality or where money can be exchanged for massive, non democratic political influence.
The beauty of what Kelton just pointed out is that almost nobody can argue against properly funding public services. The wealthy don't need to be taxed, and the poor can be educated, cured, fed, kept safe, and allowed to bed empowered citizens. Feels like at the moment we're all just busy slogging our guts out every waking hour and still can't afford the basics of life, so how are we supposed to have time to campaign for changing things for the better. Dealing with wealth inequality and taxing high incomes seems like a much harder fight, so would be nice to secure public funding through larger deficits first.
49:40 Ash you make a good point here. while some poorer people were able to save during covid for the first time in their lives, the billionaire class got richer in the UK and USA (see Peter Philips Titans of Capital, 2024 you might find him to be a good interviewee). but what makes you think that the super-rich in the billionaire class pay any capital gains or income tax in the first place? why hang this on MMT when the billionaires have been avoiding national taxes for decades now through complex multinational tax avoidance (see the Panama Papers) ? as Kelton explained, if you want to go after growing inequity MMT is your ally not a foe.
Banks make money out of thin air...you go to the bank, ask for a loan, suddenly you have some currency in your account, you pay off the loan the currency created then disappears completely. Nations are casinos, the chips and rules are given, not our money not our property. All we pass on to each other is debt, there is no money. The government can borrow more money whenever they want. If you add up all debt/money and assets the government have, we are in fact in profit, there is no national debt. Your task now is to find out exactly what the UK national debt amount figure is. Good luck !
If money is being used for something other than just a receipt for goods and services then it's been used as a nation wide scam. National debt is nothing more than the interest private national central banks charge nations for using the currency they pull out of thin ai. Inflation and economic downturns are just systematic turndowns or what I call harvest season for the bank. The banks increase and decrease the money supply to create this affect. Human beings don't need employment they just need access to materials and tools to use and contribute to others
@@arturodelvalle3457 So confidently said as if the "debate" is over. Saying it with your chest doesn't make anyone believe you more my baby in Christ.
Fascinating interview. We really need to disconnect the idea that national finances work the same as a household budget, but of course that framing benefits those in power, so it'll be a struggle.
@@aleph8888 Or Sri Lanka, or even the UK during the mini-budget (yes, Liz Truss was practicing MMT). The problem with MMT is it fails to considered the secondary effects of the inflation it creates: higher private sector interest rates and worse exchange rates. These 'crowd out' any private sector activity and in doing so undermine living standards and growth.
It is not that budgets have to be 'balanced' to zero like a household but they do have to be 'balanced' in terms of how much the debt (and cost of debt) is growing vs. the economy as a whole. If debt levels grow faster than the economy on a sustained basis the effect is inflationary and drives interest rates up. That means an ever greater share of national output ends up being spent on debt interest and a lesser share therefore on actual public services. HMG's interest bill 20 years ago was 1.8% of GDP, today it is 4.5%. If that were still 1.8% we'd have about £70B more to spend on public services.
@@PJH13I'm not trying to be smart, I'm genuinely interested in your view. Seems on the one hand overburdening with debt is inflationary, and on the other, making the debt cheaper to service by reducing interest rates is also inflationary.
@@CBCSolutions Gary has a BSc in economics and mathematics from the London School of Economics and an MPhil in economics from the University of Oxford. He was a trader but trained in economics. He understands economics from a different perspective.
@@CBCSolutions LOL He's one of best economists there is! And he's plenty qualified. He just has the benefit of coming from a deprived background so he can see when traditional economic models don't make sense.
@@silvafox7719 He understands it from his "investor" perspective. She understands it from a more encompassing and "economist" perspective. (She doesn't make more $ by believing and working on MMT as opposed to working on a more traditional economic perspective) Learn about someone's incentive to tell you "a thing" and it helps guide you to whom you should trust more. Bye my guy. Never stop learning.
Debt doesn’t matter to the U.S. because it is the global reserve currency. That is the assumption behind this entire framework. Debt very much matters if you are any other country and you have to engage in global trade.
Additionally, this shows how MMT folks don’t care about distributional impacts. We don’t need to tax the rich because we can just print money. We may want to tax the rich so they don’t hoard money to influence politics
@@emmashouse We have a floating currency, therefore your premise is without foundation, since Thatcher dismantled our manufacturing base, we have had trade deficits averaging between £4 - £6 billion each month, month in month out going right back to her time in office. We are not an exporter we are a net importer of other nations goods.
@@mervynhyde1 I’m not sure what the example of the UK proves. Austerity obviously won’t work. But can Britain just print its way out of the problem? It is snake oil to think we can have a welfare state without taxing the rich.
If MMT would, for example, enable us to take public services out of private hands, that would represent a loss of income for corporations and their shareholders...so that would create opposition to MMT
it’s a central point of opposition to us having an MMT lens to understand macroeconomics. they literally hate in in most parts of the corporate hegemony. especially the MIC and fossil fuel lobby etc. .many of the haters in these comments have jobs in the corporate economy, banking or shadow banking (finance).
What should really matter is whether we have the people and the natural resources to make the goods and deliver the services that we need and want. Then we can print the money to distribute access to the wealth that we have created. The people that want to tell you that money comes first as those that have a lot of money or make their money by manipulating it. They say come to us and we’ll give you it at, an appropriate rate of interest!
Just get rid of money. Access abundance is what we need but it's too much of a radical idea and outside the (money)box for most people to consider. A complete system change. Not practical for right now but should be the goal to work towards.
I've been listening to Richard J Murphy recently. He explains MMT clearly and concisely in a series of short videos. I urge everyone watching this to check them out.
he does ok but he’s not an MMT academic and i’d say go to the source. there’s a lot of MMT economists communicating the work with a deeper understanding.
The topic that is rarely addressed in a macroeconomic discussion is the effect of using public options to reduce regulation costs, stabilize supply, cost and quality. The politics of discussing macroeconomics has been taboo in relation to provisioning basic needs for far too long.
How does a public option inherently reduce regulation costs? Typically it just results from the state run entities being free to (not) regulate themsleves at all. Another way of asking the question is "why is the cost of regulatory compliance so high?"
What is actually being said here is that government could use credit pretty much as private banks do now, for the good of society, not just the 0.1 %. In terms of monetary debate this is a bit limited but great.
Yes. Finding the money is easy. It is preventing the resulting inflation that is hard. It is like the plus 20 - 30 % cost increases we just experienced did not happen 🙄🤦♂️🤷♂️
Listening back to this, when she talks about the wealth inequality it was quite the side stepping of the question The question is why did wealthy quality get so much worse under these policies? And her answer was that wealth and equality has been an issue. That’s been long before these policies and these policies have nothing to do with wealth inquality. But the question was why was it worse underneath these policies? She didn’t address that and explain how those policies had nothing to do with the rapid increase in wealth and inequality.
I think that a government job guarantee is better than a Universal Basic Income because: 1 Communities get what they need 2 People are valued and improve self-esteem 3 Workers pay taxes 4 Workers improve their skills 5 No benefits/welfare are needed
@@adamscottpriceYes, Kelton says that the main stream media's successful association campaign between the COVID stimulus and inflation in the US makes UBI politically unviable.
I can't stress enough how the job guarantee stabilises prices and thus inflation automatically. The fact that it has a societal impact is actually incidental. UBI is inflationary and would end up not helping those it sets out to help. Stephanie talks about basic income which is not the same thing. Given the time constraints she didn't mention universal basic services, which is an aspect that UBI advocates never mention
The fact that we need to think differently about a deficit due to fiat currency, does not thereby make a huge national debt sustainable. There is no way to continue deficit spending without increasing the national debt, and with the interest on the national debt also increasing this requires inflation to reduce the strain of that interest. Consequently deficit spending is a short term benefit.
What you're missing is that the interest rate on UK government liabilities is ultimately a policy variable of the UK government. It's our policy of allowing monetary policy independence of the Bank of England and instructing them to use interest rate adjustments along orthodox modelling lines to control inflation that is resulting in the rate we pay on the government stock of liabilities being greater than the growth rate of the economy. Sustainable long term government fiscal policy is when r
I highly recommend reading the deficit myth. It deals with your points really well. I can't do the book adequate service if I attempt to summarise it to you here. The book had a massive impact on my outlook on how the world works though, so I can't recommend it enough 👍
The interest rate we pay on the national debt is set by the central bank, an arm of the state, we don't need to pay interest on it, because the money is not borrowed, it is just the other side of the balance sheet.
@@garethhumphries4039 as the deficit increases, the interest on the deficit also increases no matter how it is satisfied. Without inflation the interest would eventually swallow the entire budget.
The debt is irrelevant, only the deficit matters. The debt is only an issue if the debt holder decides to spend, money at rest has no bearing on the real economy. Only when it's spent can there be an effect to constrain supply and therefore create inflation.
What a fair minded guest. She provided many feasible and realistic solutions in order to stimulate the economy. I also agree that ubi doesn’t increase worker skill so it isn’t sustainable.
@@skyblazeeternoI guess the unspoken intention is to “increase productivity” except “productivity” has been increasing for decades without an equal rise in income for working class, so I don’t know why an “increase in worker skills” is required, I guess we should just let people starve as robots take their jobs 🤷🏼♀️
@@skyblazeeterno Because otherwise you increase demand without increasing supply, leading to an inflationary crisis. Also just on a human level, being skilled and educated is good.
@@773creyes tax is returning (french revenue) money to the issuer. It gives value to the currency by creating demand, it's why we use pounds and not dollars or yen, because taxes are only accepted in pounds. In order that you can return UK pounds to the government first they have to spend them into existence. When they do spend them they say what you have to do to obtain the pounds, they can do this because they hold the monopoly to create pounds and monopolists set the price.
MMT implemented properly within productive investment shouldn't tip inflation, if governments spend within the capacity utilisation gap of industry then the economy can absorb the increased money supply because it was done within industrial capacity, meaning supply was boosted thus jobs and revenue, unlike direct stimulus which only boosted demand.
A) Enact a permanent zero percent interest rate monetary policy B) Enact a Job Guarantee program A & B combined are very powerful instruments in order to ensure both (real) full employment AND price stability.
Novara Media (Downstream) might dedicate an hour per month as a Downstream special toward this subject and wealth taxation with a regular panel including Kelton, Stevenson, Robyns, Christophers, and others. Thank you Ash, Aaron, and the entire team. We love you.
@@bennettd1275 Listen to David ! Doesn't this theory ignore a really big problem ? Servicing the national debt's interest payment is a larger portion of the budget year by year. I was paying attention and I either didn't catch how that's not an issue or they didn't mention it and it seems like a pretty big issue . I know the government can just print more money to service this debt , but that interest payment isn't being made to the citizens , and the printing of money just creates more inflation. I'm open to getting schooled on how I'm wrong but I'm just not seeing how this is a good idea .
At 48:00 a really powerful point about banks. It's not often appreciated that when banks 'lend' money, they aren't actually lending you money, they are just creating it out of thin air on their balance sheet, so lending is inflationary, just as deficit spending is.
Really interesting discussion thanks. A little summary for those that don’t make it to the end: The interview explores Modern Monetary Theory (MMT), an economic framework that challenges traditional assumptions about government deficits and spending. The main ideas discussed include: - MMT argues that currency-issuing governments like the UK or US do not face the same spending constraints as households or businesses. Deficits are not inherently bad, as they represent surpluses in the non-government sector. - Inflation, not deficits, is the main constraint on government spending. Taxes are used to manage inflation, not to "pay for" spending. - MMT supports using government deficits to invest in public priorities like healthcare, education, and climate action, rather than obsessing over balancing the budget. - Taxing the wealthy is important for reducing inequality, but should be separated from the question of funding government programs. MMT argues the government can afford to make these investments without relying on tax increases. - A job guarantee program is proposed as a more effective way to maintain full employment and price stability compared to a universal basic income. The interview highlights how MMT provides a framework for rethinking the role of government spending and deficits, shifting the focus to real economic outcomes rather than arbitrary budget targets.
One correction, the job guarantee is a more effective way of controlling prices than monetary policy which uses interest rates to control unemployment. We replace the unemployed buffer stock with an employed buffer stock
Two of my favorite people! Thank you Stephanie. Thank you Ash! Our twin problem (private wealth consolidation) was addressed by Gary Stevenson, Brett Christophers, Ingrid Robyns, and many others interviewed by Ash and Aaron. The wealth (not money!) and the control will end up in the same hands without taxing extreme wealth. We in the USA have now in our congress 4 wealth tax bills. And there's another sponsored by brave person Summer Lee and PMs (Erica Payne): that will make 5. And we have convened a senate committee to discuss the IDEA of a wealth tax OVER THE COMING YEAR: THAT MEANS 2025! Let me end by saying that the OLIGARCH Act was sponsored by some of our best here, including Summer Lee and Jamaal Bowman. I urge Novara Media to assemble a panel of these and others to discuss these twin issues on a monthly basis. We need discussion and updates.
Amazing. Brilliant. Loved this discussion. Ash asked some great questions too. I shall be sharing this with a lot of folks to whom I personally have struggled to adequately represent the impact and potential of an MMT approach to managing things. Btw... Would love to see this kind of discussion between Gary Stevens and Stephany Kelton. They're both terrific communicators and quick minded in interviews.
MMT is the reality of how money currently (since the 1970s) functions. The key thing is that Government spending comes before taxation. Money only exists because Government is making and spending money, taxation removes that money to limit inflation. High spending and high taxes can be good for society!!
I tried to listen to this a couple of times, I was confused about what Stephanie Kelton was saying about Liz Truss (and it's a pity they didn't talk much about this). The view I had from a more traditional economics framing was that Liz Truss and Kwarteng did many things wrong in the mini-budget, including plans to increase government spending (on winter fuel payments) and simultaneously reduce government income from taxes which would cause a big increase in the deficit. Their actions caused an increase in interest rates on government bonds as fewer international investors wanted government bonds and led to a spiral in interest rates due to pension companies being forced to sell off more and more of their government bonds in a small crisis. I don't see how a government can ignore a sharp rise in interest rates like this, and as government debt mounts the more government spending is devoted to debt repayment. To me the Liz Truss experience seems to do huge damage to ideas of running a large budget deficit and requires a much larger rebuttal.
I totally disagree with you will own nothing and you will be happy. What side of the bed did you get up on or did I misunderstand you? We should be working towards a society where wealth is evenly distributed.
@@-win- i think you misunderstood me. i want a democratic society without people claiming ownership over the labor of others or existing on rent seeking practices that again, drain society.
@@sheepwshotguns42 nobody is forcing you to rent or work for someone else dude. You can do whatever you want, build your own house or start a business and work for yourself. What's the problem? Or maybe your actual problem is that you want to live rent free and get paid for doing nothing...
When she is talking about separating taxing the rich from spending to fix the poor's problems. What she is not saying out loud is that spending to fix the poor's problems would force the Rich to give the needed tax money to the government and in a speedy time frame before the dollar and everything the rich own became worthless. Better to brake off even 80% of your wealth then have 100% of it become worthless.
But money measures the value of those riches. More money means hyperinflation as there is excessive consumption from that extra money. Resources are not infinite.
Exactly! The right to own UNLIMITED in conjunction with the "meta ressource" called money, are unhinged! It's like a reverse pyramid and people owning are a pyramid! Inequality, destruction of the biosphere must be ended or we can choose between self destruction by humans or nature!
Exactly! The right to own UNLIMITED in conjunction with the "meta ressource" called money, is unhinged! It's like a reverse pyramid and people owning are a pyramid! Inequality, destruction of the biosphere must be ended or we can choose between self destruction by humans or nature!
Yes but if money doesn't have tangible value then it can become worthless tomorrow when tied to real things it can not. Tomorrow any crypto currency can be completely worthless.
Just a small point. Ash made the point that when governments are funding defence and such, the money is always there. It’s when they try to find stuff like health care that cause deficits to matter. That’s not always true. Canada’s last Conservative government cut defence spending by $5 bn Canadian between 2022 and 2015 in order to balance the federal budget.
These are the conversations that should be had on legacy media. What we have is the same tired narrative which seems logical but is actually counter to how the economy functions. until that happens the same arguments will persist because a lot of mainstream commentator accept that starting point in discussions about the economy. There are so many ways that real deliberation is impacted
Its an interesting question how MMT relates to services vs manifacturing economic structure. Generaly speaking one can supply infinite amount of services, but only finite amount of physical products. If money supply is directed towards services what do we get, megatons of paperwork? Or, what is the resale value of a haircut?
I have a (serious) question: does money matter at all? I mean, money is a transfer tool and does not generate value, i.e. wealth. One of our problems is the financialization of the economy. Wealth, and consequently our capacity of covering costs, is generated by real resources, which may or not be limited. The constraint is therefore not financial resources, but real, productive, resources.
I waited and waited till the issue is raised about governance. The main problem with MMT is that the government has virtually unlimited power to print money and debase people’s savings. Governments control your life fully if they are free to debase money and ”benefit” their buddies through deficits. Rich people invest and own assets that governments can’t print. Everyone else just submits to the whims of an increasingly centralized government. What the actual F? When do you ask this question? Basic income and MMT is freaking comunism on steroids, de-facto slavery. Put her to a 2-3 hour debate with an Austrian economst and he/she will shread Stephanie to pieces.
Mmt is a description. And government do have unlimited power to print. Mmt is not prescribing to print large amounts to debase the currency. I think the misunderstanding is that mmt highlights that government can create as much as they want, so when people say government can't pay for that, they certainly can pay because they can print their own currency. The real issue is should the money be created and spent that item. That is what mmt highlighting. For instance should the government dig a big hole and fill it with concrete or instead should they build a school. They can pay for both it's not a money issue, the question is 'should they?' digging the hole and filling it had no use, the school has a productive use. If we had a abundance of schools then building another school would also be a waste of resource, so neither should be built.
@@mutton_man Sounds like a problem in the field of sophistry. Someone's gonna be contracted to do either thing, a school or a pool of concrete won't plop out of thin air. There will have to be workers, a concrete factory, vehicles, sand, water, all kinds of bureaucratic red tape and so on. Printed money will change hands, and then it will go into the economy, and cause inflation. Unlimited printed money = unlimited currency debasement.
@@dmitryfedorov114 increase in money doesn't mean it's inflation. Japan is over 200% debt to GDP. Where was this inflation? Most countries after the 2008 hugely increase the government debt, where was the inflation? You can increase the money supply without getting high inflation.
Why is it that my comments do not seem to be visible in here? I post thoughtful and valid comments and yet when I return the next day they are not visible...??? Some sort of mysterious algorithmic filtering?
MMT is pretty much realism. I highly recommend that you invite Steve Keen to your programme. He will really suit your audience, and is a leading figure alone with Michael Hudson on the problems with neoliberalism and how to correctly view private and public debt.
It’s not people’s fault that they don’t under basics of economics. Politicians has been lying about for decades, especially since gold parity ended. Money IS debt. Your mortgage is debt. Your pension is debt - without government debt there would be no ISAs or pension funds…. When government raises debt, we “lend the money” to ourselves.
How come the more "we lend money to ourselves" the poorer we get? I don't know about your country but besides the bankrupt government pension system we also have private pension funds which don't depend on the willingness of politicians to bankrupt the country.
Bullsh1t. New Zealand does this, so does Australia, Canada, Japan, UK, the list goes on. Japan have had near zero rate policy for over 30 years. Also, the strongest currency in the world is the UMKC Buckeroo, a tiny ecosystem, total full employment, zero inflation. 1 buckeroo is worth today exactly what it was worth in 2001 (up to minor student worker productivity gains). The buckeroo has appreciated against the US dollar by about 20x over about as many years. The FEDs have so far not "crushed" the UMKC currency, and likely never will, why would they?
No true. Most sovereign nations with control of their own currency can. It's when a nation falls into debt of another country currency they fall into trouble. Like most of the emerging countries, they have alot of US denominated debt.
May I point out that a “political problem” is actually the will of the people and any modern theory hoping to get around this problem is fundamentally tyrannical. It’s not just rejection of taxation. We disagree with most initiatives in the strategical sense. It has failed since 2009.
Debt does matter. Debt requires future growth to pay interest. Genuine future growth is not possible in any category we are in planetary overshoot without destroying the substrate for future life. In overshoot, redistribution is possible so some can have growth, but the system as a whole cannot safely grow. That interest is also a mechanism for transferring wealth from the poor to the rich. Focus should be on redistribution, not more promises to pay the rich our future labour.
National Debt doesn't matter, it is just one side of the accounting spreadsheet. Public sector debt is equal to private sector wealth, it is an acounting identity. The interest paid on public sector debt is not a requirement of the debt, since public sector debt is not borrowed, it is issued, it is very different to when you take out a lone privately. Currently 75% of Gilts are held by UK citizens, and mostly in pension schemes. If we changed how pensions functioned we could very well offer 0% interest on Gilts provided the economy was geared to accomodate that. Regarding the planetary growth cap, obviously in a finite world there is a finite cap, but whether we are near that cap is hugely debateable. We have obvioulsy seen significant gains historically in the way in which natural resources are used and have as a result been able to sustain a larger population. The question then becomes can we regear productive capacity to be sustainable, I would argue that we can but it is very difficult currently given the economic incentives.
Japan is functioning fine at 250% of it's GDP. The UK is just over 100%. I think there is room for spending and growth. The NHS was formed on the basis that healthier people would be more productive, live longer and have better outcomes.
@@garethhumphries4039 for info, according to studies into the subject, we have passed 7 out of 9 planetary boundaries to date. Govt debt is issued in bonds. Under the current arrangement, those bonds would not be purchased if there was no interest on them. Pensions and other investors expect profit, particularly in an inflationary environment. Totally agree that the incentives are not working in a sustainable way. I see this as a problem with our rewards structure which has become too materials dependent.
@@garethhumphries4039 if the government issues public debt at 0% interest, they will not attract buyers of those bonds which will ultimately be extremely inflationary. It seems to me that a nation still has to be concerned with the size of its debt as that translates directly to finance charges, and while every debt has a debtee to balance it the way a nation processes interest payments that outweigh its income is via inflation or growth. The conversation here seems more about recognizing how different kinds of deficits transform into different impacts on different groups. Deficits created in broad reduced taxes for the rich are very different than deficits created to fund green energy which will be different than those to fund tuition or first time home buyers.
I think that was an excellent interview with a highly relevant economist. Bravo for asking the right questions (e.g. why Liz Truss failed / impact of Covid spending on the wealth gap) and then letting Stephanie actually answer without interrupting her. Too many interviews turn into either a disrespectful tit-for-tat, or a battle of egos, neither of which were present here. I'm not entirely satisfied with some of the answers (e.g. the covid spending), but at least this I/V has provided UK citizens with the thoughts of this hugely relevant modern economist. I personally see MMT as the round world answer to the trad economists flat earth. I love her answer to why so many economists reject MMT. Similar story occurred in diet in the 1980s when Australian universities disproved theories of simple v complex carbs through actual testing, now referred to as GI. Despite the actual proof, dieticians to this day still refer to the old approach, because that's what they know and it's too much of a fundamental shift to accept that the basis of their entire education and professional work was actually wrong. To me, the biggest question is whether we, the mass public, will actually expect our politicians to act responsibly once our basic understanding of MMT is widely known and accepted. The pressure on politicians to act irresponsibly with currency creation will be huge. Everyone will want 'free money' but nobody will be prepared to accept the required taxes to control the money supply. Let's see how this plays out.
Special prize for the dumbest, most blatant ideologically-based misinformation on here... and that's quite something for the comments under this video 🤑🤑🤑🤑
@@MrRhomas913 Read up about MMT. It suggests that there are huge potential problems for govts that borrow in currencies other than their own. Argentina (and especially Milei) does not following an MMT-based approach. It has problem debt denominated in US dollars. It has a history of dysfunctional regimes. But you know that, right? I reckon you're just trying to put people off actually understanding MMT.
@@controldata972 So what happens when a smallish economy like Argentina endlessly prints money? FDI dries up, the currency weakens, and inflation skyrockets. What's the solution? Print more money? True...best to not borrow in a foreign currency but printing money is not the solution. Maybe try to run a budget balance and not promise ever-increasing social welfare payments in excess of tax revenues.
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Hey Ash. You ought to interview Steve Grumbine founder and CEO of Real Progressives and host of the podcast Macro N Cheese. Although he isn't an economist, he does a masterful job at explaining power dynamics and class struggle through the lens of MMT.
The money is already created from nothing but with a nuclear arsenal , navy, air force and standing army to protect and tens of millions of people who's labor can be directed to create real goods? What do you think is more versatile; a pile of gold to the value of the the last 40 years of labor from 1000 people or the ability to direct said people for the next 40 years? If we ignore the opportunity cost of not having the money up front it's always better to be able to be adaptable and people are a far easier resource to multiple than gold is. Why would you restrict the size of the economy to the size of the gold holdings of the UK or restrict the global economy to the size of the gold? Is there really so little value and why would you couple it to metals that can end up in one country if they win a war or gain some dominance? Do you care about self determination or equality at all or do you have power fantasies about sitting op top of a very rare pile of gold?
post-capitalism is when we no longer care about balancing the budget, "the deficit will be spent on public sector" is a big if the ghouls will latch into the money machine
Or maybe post-capitalism happened multiple times in history, and every time it happened it was some empire debasing its currency to "pay" for prolonging the lavish lifestyle, just before it succumbs to barbarians at the gates.
10:20 nations don't run out of money, unlike households 11:20 deficits matter but not in conventional sense. Govt deficit = collective surplus on the other side 25:40 deficits don't matter as long as inflation under control, econ good 28:40 limit is whatever is for sale in your own currency
Excellent discussion... If there is one thing I love about MTT it is that it moves past the idea that Tax is how we pay for things (i.e. government 'income') to the idea that Tax is how you balance the economy (i.e. manage inflation*). With regards to UBI, I'm not sure what the system is in the UK or US, but here in Australia we have a very inefficient, slow, and punitive welfare system ... I see UBI as a way to replace that with a very simple system (that treats people with respect); i.e. everyone gets UBI regardless, have a bad year and the UBI is effectively a 'welfare' payment, have a good year and the UBI (or part there of) is effective paid back via the Tax system. * As opposed to purely through interest rates - which hit people with mortgages or rents very hard, meanwhile boosting the income of the established and the rich - and / or government spending - no prizes for guessing which areas of spending get cut first.
It's pretty important to understand that MMT isn't some kind of new magic. It's just looking at the same economics from a different angle. It's a much more sane way to view a large modern economy than previous angles, but you're still looking at the same stuff. So the money supply is still real, inflation and deflation are real worries, and things can still get out of hand. But a modern view of money creation, velocity, and controls gives a more realistic view of what's possible.
The "How are you going to pay for it?" argument isn't really an economic argument so much as a political hook that resonates with people whose view of economics is dominated by household finance.
Very well put.
Economists and politicians are not omniscient beings with perfect understanding of these systems. Far from it.
The older models of the economy persist through laziness and inertia, with politicians happy to use a household budget myth as an easy message to get across.
Indeed, it is not really correct to call it a 'theory'. It is JUST how the economy works in any sovereign currency-issuing nation.
The only theory aspect is that it enables a very different outlook to the die-hard, neo-conservative, 'must balance the budget' economic theories.... which are false and are causing great economic harm to our nation and environment.
@@ernststravoblofeld every civilization has tried to pay their bills by devaluing their currency has collapsed. Modern monetary theory was used by the Romans.
@@petesig93 I don’t think this is correct. There is no way this should be called a theory let alone a empirical explanation of the economy.
Ash brought up the most damning counterpoint in mentioning the way that MMT would negatively impact exchange rates and lead to currency devaluations. Kelton couldn’t even properly refute that point because Ash is right. The US can maybe deficit spend but it is in a unique position to do so as a global power and the world reserve currency. The UK cannot do the same. It might have been able to when it was still an empire but those days are gone.
Question for everyone here , why have national debt ? Why pay interests on these debts if we can just print money and pay it all off before the next interest rate payment is due . Too inflationary? Well isn't that payment just going to go up with deficits?
I hope people watch until the 44 minute mark.
She makes a great point. When we just talk about raising taxes on the rich to pay for specific programs it's not just that it doesn't get past the political system; it actually makes those attacks on the rich weaker.
When we separate "how do we pay for it?" from "how much should we reduce inequality?" we can actually pose more aggressive attacks on extreme rentier wealth because it isn't limited to what will simply pay for a given program.
Hey can you help me understand…
I thought that how you approach question 2 (how do we address inequality) impacts the first question (how do we pay for it) because the taxation system takes capacity out of the economy and hence helps to control inflation. So I get her point that we should have a separate question around what a fair taxation system looks like but I don’t understand what the question (and answer) of how do you pay for it is without taking about tax
@@ronakattackidk kinda sounds like the crypto bros want the Fed to release additional currency & devalue the dollar to absorb the value into their economic system.
never forget
THE government is not your friend
mmt = socialism for the rich capitalism for the rest
@ronakattack tax in the context of wealth inequality is about exerting tax on very high incomes and wealth. Essentially, it's a proactive, socially necessary pruning of the unearned excessive wealth (and therefore economic and political power) produced by our capitalist economic system.
Tax when it comes to provisioning the public purpose is largely about releasing the right real resources from private employment if they are not already idle and available for purchase by the government without bidding up prices. But this is rarely a "if I tax £1 from you, I can spend £1 over there" since marginal propensities to consume the efficiencies of different consumption behaviours etc mean it doesn't work like a currency user's budget
@Moving2Win the more the fed creates currency the value is eroded, little by little without functioning tax. I agree that in the short term you could decouple the two functions, long term the system would destabilise particularly when you factor in exchange to other currencies & particularly when you factor in non fiat currency.
I have to add that Ash Sarkar did an excellent job of eliciting important information from Stephanie. Thanks Ash!
Yes! I've been curious about MMT for a while, and Ash is always excellent at raising relevant criticisms of her guests' ideas. Couldn't have asked for a better interview
Indeed! A proper "political economy" discussion of MMT which was very enlightening. Nice work.
Good interview. It's a shame that, judging by the comments in here, many people remain wilfully ignorant, or just downright ideologically opposed to MMT.
Check out how many really dumb and misleading comments there are.
Is it really that difficult to comprehend what Kelton is saying?
@@DoctorQcumberyou must be joking, she was being deliberately obtuse: continually confusing political & economic choices. Bastani doesn't "like" MMT because, you know, "I'm a Marxist" therefore even if -- Stephanie Kelton's explanations should've at least encouraged ppl to discover more -- it is a solution to some/most of our ills, he/they aren't going to support it because as Keynes said ..."he's the slave of some defunct economist"
No. She did a crap job because she let her become repetitive.
Ash should have grilled her more eg So did you oppose Elizabeth Warren's wealth tax idea?
And what about setting up a wealth tax that doesn't pay for everything you want it to in the first instance because it's a beginning on which you can build?
Once it's set up and running you can hike it to the level you need it to be!
But if you never set it up you'll never be able to do that!
I think this woman is a useful idiot for avoiding getting the necessary work of setting up a wealth tax done.
Stephanie has clarified a lot of things about MMT which now makes sense to me. An excellent discussion.
She’s exactly the one economist I’ve been expecting to hear from in the British context because of Rachel reeves fiscal policies, how nonsensical they actually are. Private banks have been creating money, why can’t the Bank of England invest on the UK economy, why can’t the government use it to invest.
"Private banks have been creating money ..." Would you put some evidence to support this assertion ?
"... why can't the Bank of England invest on the UK economy ... " The Bank of England is not run for the benefit of the UK, the Bank of England is a wealth extraction mechanism, which once the UK has been financially exhausted, will move on to the next host and suck the life out of that one.
@apflewis Private banks are licensed to create money when they provide loans. The Bank of England documents this. The Bank of England serves the state. How it does that depends on Parliament.
She can't do that without higher taxes. Wealth tax is controversial as one needs to have a good understanding of it before applying it (Wealth is in stocks, or some company in British Virgin Islands owns prime real estate, with holding company outside the UK n many other intricacies have to well thought out)
Bank of England can invest upto a limit. The limit depends on the fiscal deficit (how much value v add in comparison to how much we consume). If she chooses to over invest without showing additional sources of revenue, then the value of the pound will fall, which will increase inflation n v know what happens after that.
I hope this helps brings more clarity.
It’s what the fractional reserve system is based on.
@@karatsurba4791 MMT understand well the impact of inflation on spending, what is missing from your argument, is that public service spending can reduce inflation. a simmple example of that is bus passes, for those that want to use the service they can without the need for extra money. Also the argument against private ownership of those forms of transport is that they keep cutting routes to maintain profits - due to the increases in costs from fuel hikes etc., thereby denying access to that service.
Unbelievable. The "modern era" financial system has no anchor to reality.
And when the flight to safety comes, they'll enforce this monopoly money with the guns they take away...smh
That’s why I buy gold and bitcoin
Bitcoin value is more real ?
Really doesn't! Just look at derivatives...
@@renaudfilippi2599 yes because it is capped in supply and neutral (non state actor controlled commodity)
This does not surprise me.When the Tories continuously paid out money for contracts during Covid, and wasted millions, and on the Rwanda scheme, and all the failed projects e.g.HS2, plus all the expensive think tanks that did not precede any actions, this money went to the already wealthy. Even the Covid grants and welfare payments eventually ended up with Corporations and Landowners, giving them more money to buy even more assets, and inflating the prices, creating more innequality.
I agree. I thought exactly the same. Please watch Professor Richard Murphy explain MMT in his videos. It will give you a different view on the national debt.
It’s HOW you spend matters, that’s the bottom line here.
You've watched Gary's economics I see 😂
@@Padraigp I watch many people talking about how money works.🧐
Richard Wolff.
Meanwhile, the elephant in the room is that there’s no ecosystem remaining on the planet that is not in decline. A monetary system with an exponential growth obligation on a planet with finite resources. Seemed like a good idea at the time?
If rich people keep on not paying taxes and asset prices keep on inflating then spending, with debt, can never stop.
They need the money to buy Politicians.
The top 10% pay 75% of federal income taxes. I would guess they pay about the same at the state level.
@@msisles6278 The top 10% AVOID paying 75% of federal income taxes. There, fixed your sentence for you.
The high taxes are a RESULT of the massive inflation caused by money expansion. This mid witted woman doesn’t understand the first thing about monetary policy.
The wealth gap is a DIRECT result of MMT causing inflation and massive amounts of debt which now the government is trying to control via massive taxation, despite everyone already having been taxed through the devaluation of the purchasing power of our money.
@@gregspandex427 If they are unable to dodge tax law, they are awarded Stimulus and it overcomes the loss through Taxation.
The problem in economics today is that most economists look at things through the gold standard lens. We are not dependent on gold. The one thing I was fuzzy on was why is there such pushback, and when Prof Kelton explained why the banks didn't like it clicked for me. Big Finance which has been taking over our economy trying to financialize everything, loses. Why would you need Venture (vulture) Capital if there is a government program that might invest in your new business. It makes perfect sense now.
No, most economists dont look at economics through the "gold standard lense", the view it at its fubdementals. That is, as a system of trade of goods and services. MMT just thinks that money is the economy, it isnt.
@@davidhobbs5679 What is it if it isn't money? That's fundamental to all of it. You have none of it without money, and if you don't have that right, you can't possibly get the rest of it right, and if you've lived longer than the last 30 years you'd witness, they haven't had it right for a good long time.
I wasn't sure about this going in, but she really changed my mind. Ash's observations are astute as always, she really got the best out of Prof Kelton.
Unfortunately Ash is not an economist, and so is out of her depth.
@@timothyrussell4445
It is precisely because she is not an economist, but is an excellent interviewer, that she asked all the right questions for a lay audience. If you want an academic level discussion, this is not the forum, try the LSE
It sounds like Ash was well-primed by her economist colleagues as to what to ask.
I reckon they didn't want more economically-minded interviewers to do this because Kelton would possibly have dismantled their "professional economist" views and "handed their asses to them", so to speak. Could've been embarrassing.
This way, the economists on the Novara Team (is James Meadway on their team?) can still present full and vehement opposition to MMT.
In Meadway's opinion, MMT is the economic antichrist. It is Capitalism's final boss to be defeated before ushering in the promised land of fully automated luxury communism.
I still don't know why Meadway is so opposed - I reckon it's just professional jealousy, a bit like being a Methodist clergyman (sensible fiscal rules) and being jealous of the Pope's fancy costumes (MMT 'we can have nice stuff').
Many of us lefties already knew this stuff and have read Stephanie’s book and follow Richard Murphy. We requested it on Down Stream probably because we felt that it was time the Novare team got a grip of it as well.
People of history are well aware of this theory and it is not modern. It’s been tried over and over and each time has failed miserably and has brought misery to the people this theory was attempted on.
What is "Modern" about MMT? Printing money has been tried in every great power and eventually fails. When inflation heats up taxing more is very difficult politically but MMT shrugs it off as if they are clairvoyant and will have the will to do what the theory says they should. Also MMTer's seem to think that command and controlled government economic policies will be a net positive. With little to no accountability for mal investments governments have low to no disincentive to avoid failure. You have a few elites placing bets that the whole society will rely on as opposed to decentralized private decisions where investors take the risk not the whole society. Seems to me MMT is simply putting lipstick on a pig. The lipstick might be better with the benefit of hindsight but its sill on a pig.
@@peterponcedeleon3368 To say that MMT "has been tried over and over etc.." indicates that you do not really understand what MMT is. At its core, MMT merely describes the reality that the government spends money into existence.
@@terrygibson7143 if what you’re saying is true, then MMT has been around for sometime and it is not new.
@@terrygibson7143 thats not what mmt is "at its core", rather the core of mmt is based upon that reality. its a response to the switch to fiat after bretton woods
Thanks
How do you maintain low inflation if the currency collapses?
The Argentinian Peso was allowed to "collapse" twenty odd years ago. Imports into Argentina became very expensive but exports out of Argentina became very competitive. It actually allowed Argentina to pay off its debt to the IMF.
Stop being so terrified of inflation, inflation can be a very good especially when elites have rigged the system to deliberately suppress wage inflation for 50 years, yes there will be inflation to counter balance the abuses.
MMT isn't simply a set of ideas, it's a model which describes how modern economies work and why the policy of austerity has been so damaging. It's not a theory that needs any sort of paradigm shift to adopt (like the shifts from barter to coinage to paper money), it needs to be taught because it informs us of the reactions you get to different spending decisions.
As it turns out, it's quite an accurate model. It even describes the precise mechanism of the hyperinflation which afflicted Weimar Germany, Zimbabwe and Argentina.
I think that the acceptance of Friedman's idea that inflation is solely a monetary phenomenon has set the science of economics back 40 years. A much healthier way to look at it is that money in circulation is but a mere component of inflation. That there are many factors that contribute to inflation. Now you can study each component and develop precision tools for dealing with inflation. Friedman purposefully put blinders on what can and cannot be explored in favor of central control by his monetarists. Because of this the central bankers don't have the tools to actually control inflation (or event interest rates for that matter) because they don't actually understand inflation. MMT is a breath of air to a drowning victim that has been drowning for 40 years by design. It is ironic that MMT was born from the monetarist design of Reaganomics to front load a one sided (supply sided) redistribution of wealth that is now causing everything bubbles (market failures) in all the asset classes. Something that a progressive tax codes once tempered, but were systematically dismantled by the monetarists. Turning inflation into a weapon in a class war was poor form. Using MMT to correct some of the damage is priceless. Welcome to the economic renaissance.
@@debbiegilmour6171 There is nothing like Modern Monetary Theory it's just a theft of Marxist Ideas which handed over through Keynes to the contemporary western Orthodox economists and rebranded as MMT.....
@@donklee3514 MMT was tried and tested in September 2022. We called it the mini-budget: if you think it's the solution to our problems I may have a bridge to sell you.
@@PJH13 The flat earthers swore that Columbus would sail off the edge of the earth. They believed it as if it were fact. It is a good thing for the crown that Columbus didn't listen to the nay sayers. I hear that there are still flat earthers around still believing that the earth is flat in spite of pictures of earth from outer space. You are free to believe what ever blows your skirt up, but the borrow and spend provisions of Reaganomics is a monetarist version of MMT used to fund tax breaks and various industrial complexes. The monetarists have been doubling down on MMT for about 45 years. It works great and that is what WE call an inconvenient truth.
Next time some confidence man tells you that Social Security is insolvent. Tell them to MMT it back into solvency. Problem solved.
In the late 1990s with a surplus paying down the debt, had the stock market flying high, possibly some deflation, full employment, housing affordability, low interest rates.
Thank you so much for having Stephanie! 🙏🥰🇩🇪
My concern with MMT is that you can print money, but you can’t print value, you simply dilute it. If you track MMT and the S&P, very little if any actual value has been created, it’s just gone up proportionate to the money printed. Similarly house prices now are outrageous. These are symptoms of financially literate realising in a world where money has less value, they need assets that will increase with money supply. However the poor are not in a position to obtain assets and so is MMT increasing the wealth gap?
You got it.
Capitalism appears to have exceeded the limitations of Fiat Currency.
It has failed to serve the majority of Humans.
Yes, if you create money/loans for asset purchases all you do is create inflation which is of course why bank loans should be directed either by the state or private bank loans guided by state/democratic intervention. Of course if wealthy people can create money they are not going to risk doing anything new when they can do asset speculation; why do you think China is succeeding with their thousands of small local banks ( like the USA/Germany) directing money ( newly created, of course) to individuals/corporations based on a very long list of things the government want done?
Very succinctly put. MMT is the root cause of the problems we face.
China is not succeeding with that - they have built entire ghost cities fit to house hundreds of millions of people with the money they’ve created.
Very interesting. I think the problem with the difficulty in accepting MMT is that most people confuse the symbol we use for wealth, money, for the real thing, wealth. What is wealth? Wealth is the people doing the work making stuff, the natural resources transformed into stuff, the knowledge helping to make stuff. That's the wealth. Money has no *intrinsics* value at all. From this starting point, MMT makes perfect sense.
@@benlap1977 Careful here. MMT's macro framework does indeed explicitly make the distinction between nominal monetary wealth and real resource wealth and that at the macro level of currency issuing governments, it's real resource mobilisation which is the constraint, not the nominal finances. This is perhaps it's most defining property as an economic framework. But MMT also explicitly recognises that we live within a monetary production capitalist economy in which a large proportion of production is undertaken via the spending of nominal money on inputs with the explicit objective of ending up with nominal money profits. Therefore, nominal finances drive our production systems and human economic behaviour. MMT's success as a theory of macroeconomics is that it understands both sides of this coin and follows the logical implications.
Money is the middle man. It represents a claim on the real wealth you mention.
Yes, we still have gold standard thinking. Money is not a thing, it's a concept
They need to stop calling "Money" that is really "Currency". Real "Money" has intrinsic value, ie: Gold, Silver. While "Currency" is only worth what people belive it's worth, being backed by the Cestui Que Trusts (in the US called Social Security) in the central bank made from our birth certificates of which were bonded and put on the market that we are the "Beneficiaries" of...
@@michaelkoester2333 sorry no, gold has very little intrinsic value, beyond it's physical properties; it's a great conductor and it's chemically non reactive.
And it's not currency over money, the correct term if we're being that way is 'unit of account'
A few years back there was this comic that really resonated with me (can't seem to find it again).
Basically aliens land on a barren, dead earth in the near future. One alien says to the next: "They could have saved themselves you know", alien two asks: "Why didn't they?".
So alien one replies: "Apparently they didn't find the money to do it."
Not everything is about freaking money, sometimes you just need to do what you NEED to get done for the good of all.
THIS
They call that inspiration "Empathy".
Without that emotion, Humans would not have survived this long.
Money is not an essential element of Human existence.
It is a tool to control power.
Half the population
My apartment is a mess get over here!😅 you see how that works
THAT point is actually what Stephanie would agree with. No sense in screwing the population for some sort of wealthy elite's excesses, if those excesses are destroying the environment, the very basis of our economic production.
No environment = no economy.
I'm very glad you got Stephanie on. She's a fantastic communicator.
So are all con artists
@@timothyrussell4445 what do you think she is trying to con you out of?
@@emyers6946 There are some bitcoin enthusiasts (still!) and goldbugs in the comments. They hate their illusion being washed away.
I was a Delagate for Sanders, in 2016.
I asked about the implications of corruption from the Hillary Victory Committee at Convention.
The concept of redistributing wealth is older that Marx.
The Wealthy own the Leadership of Congress. Or the Chamber of Lords.
They are not going to allow any attempt to take their money to proceed.
Oligarchy has organized.
I know he's taking a well earned break, but I would love Novara Media to host a debate between Stephanie and Gary Stevenson, to test their degree of agreement, and areas of difference!
That would be great
No match for Kelton
Tbf i would genuinely love that. Even better if Richard werner was involved too
I agree, but to be fair he is an amazing communicator and could really learn a lot and benefit from such a discussion with Kelton. I try to hear and read every I can from both of these people.
I would like to see that too. They agree and yet differ in so many parts of their thinking.
I appreciate the news Novara Media and their information
I still haven't got a clue what modern monetary theory actually is, was it explained at any point?
"Taxing the rich" is a thing that needs to happen whether we need the money or not. Money is neither good nor bad, but extreme wealth concentrations are socially problematic, and that is separate from any economic effects that they may have.
This was a very good interview with intelligent question and Stephanie at her best of digestible explanations! 🙏😎🇩🇪
Fantastic interview Ash.
She could have done a face 2 face interview in July when Stephanie was over presenting at the MMT conference in Leeds. An amazing 3 days
You guys should speak to Fadhel Kaboub for a global south focused MMT economist perspective
I've been following MMT and Stephanie for years. I haven't heard her speak lately and she has greatly improved her pitch. This talk filled in a lot of lacunae of misunderstanding for me.
Very well thought out questions posted by Novaro Media. Well done ✅👍
For an individual, using a debit card is more prudent than using a credit card. In life, unexpected things happen. I prefer to be on the safer side 😊
Yes we really need to tax the rich. It’s not just about distribution. It’s about ensuring wealth inequality doesn’t rise. In developed countries where there is high wealth inequality everyone, including the rich, are unhappier and live on average shorter.
Wealth inequality is also a problem for democracy.
100% we live in a system where people get one vote. Unless they’re rich or a company in which case they can lobby government and get the voting power of thousands or millions of people. Democracy can not exist whilst there is huge wealth inequality or where money can be exchanged for massive, non democratic political influence.
Resource allocation, it always boils down to resource allocation what do you want to apply your real world resources to achieving.
The beauty of what Kelton just pointed out is that almost nobody can argue against properly funding public services. The wealthy don't need to be taxed, and the poor can be educated, cured, fed, kept safe, and allowed to bed empowered citizens.
Feels like at the moment we're all just busy slogging our guts out every waking hour and still can't afford the basics of life, so how are we supposed to have time to campaign for changing things for the better.
Dealing with wealth inequality and taxing high incomes seems like a much harder fight, so would be nice to secure public funding through larger deficits first.
There are calls for pre-distribution, essentially preventing the circumstances where people become insanely wealthy
One problem is that governments lie about the inflation rate, vastly understating it.
49:40 Ash you make a good point here. while some poorer people were able to save during covid for the first time in their lives, the billionaire class got richer in the UK and USA (see Peter Philips Titans of Capital, 2024 you might find him to be a good interviewee). but what makes you think that the super-rich in the billionaire class pay any capital gains or income tax in the first place? why hang this on MMT when the billionaires have been avoiding national taxes for decades now through complex multinational tax avoidance (see the Panama Papers) ? as Kelton explained, if you want to go after growing inequity MMT is your ally not a foe.
Mmt is fantasy monney is not stuff
Banks make money out of thin air...you go to the bank, ask for a loan, suddenly you have some currency in your account, you pay off the loan the currency created then disappears completely. Nations are casinos, the chips and rules are given, not our money not our property. All we pass on to each other is debt, there is no money. The government can borrow more money whenever they want. If you add up all debt/money and assets the government have, we are in fact in profit, there is no national debt. Your task now is to find out exactly what the UK national debt amount figure is. Good luck !
Really pleased to see an interview with Stephanie, her book The Deficit Myth changed the way I thought about economics.
It changed my politics profoundly. I was such a fanboy when I told her such 🤩
If money is being used for something other than just a receipt for goods and services then it's been used as a nation wide scam. National debt is nothing more than the interest private national central banks charge nations for using the currency they pull out of thin ai. Inflation and economic downturns are just systematic turndowns or what I call harvest season for the bank. The banks increase and decrease the money supply to create this affect. Human beings don't need employment they just need access to materials and tools to use and contribute to others
Her theories are wrong. Read Rothbard
@@arturodelvalle3457 MMT is the only theory that fits real world data and doesn't tell reality that it's wrong
@@arturodelvalle3457 So confidently said as if the "debate" is over. Saying it with your chest doesn't make anyone believe you more my baby in Christ.
Fascinating interview. We really need to disconnect the idea that national finances work the same as a household budget, but of course that framing benefits those in power, so it'll be a struggle.
If your answer is to just print more money then look around at what happened to countries like Venezuela.
@@aleph8888 Or Sri Lanka, or even the UK during the mini-budget (yes, Liz Truss was practicing MMT). The problem with MMT is it fails to considered the secondary effects of the inflation it creates: higher private sector interest rates and worse exchange rates. These 'crowd out' any private sector activity and in doing so undermine living standards and growth.
It is not that budgets have to be 'balanced' to zero like a household but they do have to be 'balanced' in terms of how much the debt (and cost of debt) is growing vs. the economy as a whole. If debt levels grow faster than the economy on a sustained basis the effect is inflationary and drives interest rates up. That means an ever greater share of national output ends up being spent on debt interest and a lesser share therefore on actual public services. HMG's interest bill 20 years ago was 1.8% of GDP, today it is 4.5%. If that were still 1.8% we'd have about £70B more to spend on public services.
@@PJH13Why not reduce interest rates then?
@@PJH13I'm not trying to be smart, I'm genuinely interested in your view. Seems on the one hand overburdening with debt is inflationary, and on the other, making the debt cheaper to service by reducing interest rates is also inflationary.
Stephanie Kelton and Gary Stephenson would get along like a house on fire
Not really in the same league are they - Stephenson is no economist.
@@CBCSolutions Gary has a BSc in economics and mathematics from the London School of Economics and an MPhil in economics from the University of Oxford. He was a trader but trained in economics. He understands economics from a different perspective.
@@CBCSolutions LOL He's one of best economists there is! And he's plenty qualified. He just has the benefit of coming from a deprived background so he can see when traditional economic models don't make sense.
@@silvafox7719 He understands it from his "investor" perspective. She understands it from a more encompassing and "economist" perspective. (She doesn't make more $ by believing and working on MMT as opposed to working on a more traditional economic perspective) Learn about someone's incentive to tell you "a thing" and it helps guide you to whom you should trust more. Bye my guy. Never stop learning.
Debt doesn’t matter to the U.S. because it is the global reserve currency. That is the assumption behind this entire framework. Debt very much matters if you are any other country and you have to engage in global trade.
Additionally, this shows how MMT folks don’t care about distributional impacts. We don’t need to tax the rich because we can just print money. We may want to tax the rich so they don’t hoard money to influence politics
MMT is Keynesianism if Keynes were extremely naive
@@emmashouse We have a floating currency, therefore your premise is without foundation, since Thatcher dismantled our manufacturing base, we have had trade deficits averaging between £4 - £6 billion each month, month in month out going right back to her time in office. We are not an exporter we are a net importer of other nations goods.
How so?
@@mervynhyde1 I’m not sure what the example of the UK proves. Austerity obviously won’t work. But can Britain just print its way out of the problem? It is snake oil to think we can have a welfare state without taxing the rich.
If MMT would, for example, enable us to take public services out of private hands, that would represent a loss of income for corporations and their shareholders...so that would create opposition to MMT
it’s a central point of opposition to us having an MMT lens to understand macroeconomics. they literally hate in in most parts of the corporate hegemony. especially the MIC and fossil fuel lobby etc. .many of the haters in these comments have jobs in the corporate economy, banking or shadow banking (finance).
The problem in MMT is whether the government will act responsibly? They have no problem printing money and funding their war adventures.
What should really matter is whether we have the people and the natural resources to make the goods and deliver the services that we need and want. Then we can print the money to distribute access to the wealth that we have created. The people that want to tell you that money comes first as those that have a lot of money or make their money by manipulating it. They say come to us and we’ll give you it at, an appropriate rate of interest!
Just get rid of money. Access abundance is what we need but it's too much of a radical idea and outside the (money)box for most people to consider. A complete system change. Not practical for right now but should be the goal to work towards.
great interview on a super intresting subject. Give Stephanie and MMT a bigger podium!
I've been listening to Richard J Murphy recently. He explains MMT clearly and concisely in a series of short videos. I urge everyone watching this to check them out.
Yes Richard does a reasonable job but it's MMT 101, he also has weird ideas about the nature of QE
he does ok but he’s not an MMT academic and i’d say go to the source. there’s a lot of MMT economists communicating the work with a deeper understanding.
Yes, well done Stephenie and Ash
The topic that is rarely addressed in a macroeconomic discussion is the effect of using public options to reduce regulation costs, stabilize supply, cost and quality. The politics of discussing macroeconomics has been taboo in relation to provisioning basic needs for far too long.
Mainstream economics thinks macroeconomics is the sum of all microeconomics
How does a public option inherently reduce regulation costs? Typically it just results from the state run entities being free to (not) regulate themsleves at all. Another way of asking the question is "why is the cost of regulatory compliance so high?"
What is actually being said here is that government could use credit pretty much as private banks do now, for the good of society, not just the 0.1 %. In terms of monetary debate this is a bit limited but great.
Yes. Finding the money is easy. It is preventing the resulting inflation that is hard. It is like the plus 20 - 30 % cost increases we just experienced did not happen 🙄🤦♂️🤷♂️
Another Downstrean banger. I’ve learned loads from this.
Listening back to this, when she talks about the wealth inequality it was quite the side stepping of the question
The question is why did wealthy quality get so much worse under these policies?
And her answer was that wealth and equality has been an issue. That’s been long before these policies and these policies have nothing to do with wealth inquality.
But the question was why was it worse underneath these policies? She didn’t address that and explain how those policies had nothing to do with the rapid increase in wealth and inequality.
Thanks Ash, thanks Stephanie for publicising what our political class do not want us to know about how our economic system should be organised❤️👏
Excellent interviewer, excellent guest.
The idea of a job guarantee over UBI is pragmatism gone too far. Great talk.
What do you mean? That UBI is a better arrangement than the job guarantee, but that it's more achievable to fight for the job guarantee?
I think that a government job guarantee is better than a Universal Basic Income because:
1 Communities get what they need
2 People are valued and improve self-esteem
3 Workers pay taxes
4 Workers improve their skills
5 No benefits/welfare are needed
@@adamscottpriceYes, Kelton says that the main stream media's successful association campaign between the COVID stimulus and inflation in the US makes UBI politically unviable.
I can't stress enough how the job guarantee stabilises prices and thus inflation automatically. The fact that it has a societal impact is actually incidental. UBI is inflationary and would end up not helping those it sets out to help. Stephanie talks about basic income which is not the same thing. Given the time constraints she didn't mention universal basic services, which is an aspect that UBI advocates never mention
@@IanTresmanall true, but the primary focus has to be price stability
Important conversation. Glad you had it.
The fact that we need to think differently about a deficit due to fiat currency, does not thereby make a huge national debt sustainable. There is no way to continue deficit spending without increasing the national debt, and with the interest on the national debt also increasing this requires inflation to reduce the strain of that interest. Consequently deficit spending is a short term benefit.
What you're missing is that the interest rate on UK government liabilities is ultimately a policy variable of the UK government. It's our policy of allowing monetary policy independence of the Bank of England and instructing them to use interest rate adjustments along orthodox modelling lines to control inflation that is resulting in the rate we pay on the government stock of liabilities being greater than the growth rate of the economy. Sustainable long term government fiscal policy is when r
I highly recommend reading the deficit myth. It deals with your points really well. I can't do the book adequate service if I attempt to summarise it to you here. The book had a massive impact on my outlook on how the world works though, so I can't recommend it enough 👍
The interest rate we pay on the national debt is set by the central bank, an arm of the state, we don't need to pay interest on it, because the money is not borrowed, it is just the other side of the balance sheet.
@@garethhumphries4039 as the deficit increases, the interest on the deficit also increases no matter how it is satisfied. Without inflation the interest would eventually swallow the entire budget.
The debt is irrelevant, only the deficit matters. The debt is only an issue if the debt holder decides to spend, money at rest has no bearing on the real economy. Only when it's spent can there be an effect to constrain supply and therefore create inflation.
About time NM's 'taxpayer' talk was set right. I've been commenting upon it for three years!
What a fair minded guest. She provided many feasible and realistic solutions in order to stimulate the economy. I also agree that ubi doesn’t increase worker skill so it isn’t sustainable.
Why does worker skill need to increase?
@@skyblazeeternoI guess the unspoken intention is to “increase productivity” except “productivity” has been increasing for decades without an equal rise in income for working class, so I don’t know why an “increase in worker skills” is required, I guess we should just let people starve as robots take their jobs 🤷🏼♀️
@@skyblazeeterno Because otherwise you increase demand without increasing supply, leading to an inflationary crisis. Also just on a human level, being skilled and educated is good.
@@ValQuinnhaving necessities provided for is good
“Make us healthier and happier”? Isn’t our health getting worse and isn’t depression and anxiety at the highest levels ever?
tax is a mechanism to control the value of Fiat money in circulation, it is more of a feedback system for control.
Tax gives value to the currency, we start with the liability so that government can spend
@@craigtildesley1501 that is also a good explanation.
Wtf you talking about?? Taxation is transferring wealth, it's confiscation, it has nothing to do with determining the value.
@@773creyes tax is returning (french revenue) money to the issuer. It gives value to the currency by creating demand, it's why we use pounds and not dollars or yen, because taxes are only accepted in pounds. In order that you can return UK pounds to the government first they have to spend them into existence. When they do spend them they say what you have to do to obtain the pounds, they can do this because they hold the monopoly to create pounds and monopolists set the price.
I’m a bit confused, can someone explain how mmt would deal with the inflation that would occur?
It depends if the inflation is caused by the demand side or the supply side.
MMT implemented properly within productive investment shouldn't tip inflation, if governments spend within the capacity utilisation gap of industry then the economy can absorb the increased money supply because it was done within industrial capacity, meaning supply was boosted thus jobs and revenue, unlike direct stimulus which only boosted demand.
Raise taxes and sell the debt the Fed has on it's balance sheet.
A) Enact a permanent zero percent interest rate monetary policy B) Enact a Job Guarantee program
A & B combined are very powerful instruments in order to ensure both (real) full employment AND price stability.
This is insanity!
Novara Media (Downstream) might dedicate an hour per month as a Downstream special toward this subject and wealth taxation with a regular panel including Kelton, Stevenson, Robyns, Christophers, and others. Thank you Ash, Aaron, and the entire team. We love you.
Ignoring a problem doesn't make it go away!
Listen David. No one is ignoring anything. Listen again bro.
@@bennettd1275 Not ignoring a problem does not imply solving the problem...neither does talking about it...🤔👉🦧🦧
@@bennettd1275 Listen to David ! Doesn't this theory ignore a really big problem ? Servicing the national debt's interest payment is a larger portion of the budget year by year. I was paying attention and I either didn't catch how that's not an issue or they didn't mention it and it seems like a pretty big issue . I know the government can just print more money to service this debt , but that interest payment isn't being made to the citizens , and the printing of money just creates more inflation. I'm open to getting schooled on how I'm wrong but I'm just not seeing how this is a good idea .
At 48:00 a really powerful point about banks. It's not often appreciated that when banks 'lend' money, they aren't actually lending you money, they are just creating it out of thin air on their balance sheet, so lending is inflationary, just as deficit spending is.
Really interesting discussion thanks. A little summary for those that don’t make it to the end:
The interview explores Modern Monetary Theory (MMT), an economic framework that challenges traditional assumptions about government deficits and spending. The main ideas discussed include:
- MMT argues that currency-issuing governments like the UK or US do not face the same spending constraints as households or businesses. Deficits are not inherently bad, as they represent surpluses in the non-government sector.
- Inflation, not deficits, is the main constraint on government spending. Taxes are used to manage inflation, not to "pay for" spending.
- MMT supports using government deficits to invest in public priorities like healthcare, education, and climate action, rather than obsessing over balancing the budget.
- Taxing the wealthy is important for reducing inequality, but should be separated from the question of funding government programs. MMT argues the government can afford to make these investments without relying on tax increases.
- A job guarantee program is proposed as a more effective way to maintain full employment and price stability compared to a universal basic income.
The interview highlights how MMT provides a framework for rethinking the role of government spending and deficits, shifting the focus to real economic outcomes rather than arbitrary budget targets.
One correction, the job guarantee is a more effective way of controlling prices than monetary policy which uses interest rates to control unemployment. We replace the unemployed buffer stock with an employed buffer stock
Two of my favorite people! Thank you Stephanie. Thank you Ash! Our twin problem (private wealth consolidation) was addressed by Gary Stevenson, Brett Christophers, Ingrid Robyns, and many others interviewed by Ash and Aaron. The wealth (not money!) and the control will end up in the same hands without taxing extreme wealth. We in the USA have now in our congress 4 wealth tax bills. And there's another sponsored by brave person Summer Lee and PMs (Erica Payne): that will make 5. And we have convened a senate committee to discuss the IDEA of a wealth tax OVER THE COMING YEAR: THAT MEANS 2025! Let me end by saying that the OLIGARCH Act was sponsored by some of our best here, including Summer Lee and Jamaal Bowman. I urge Novara Media to assemble a panel of these and others to discuss these twin issues on a monthly basis. We need discussion and updates.
Amazing. Brilliant. Loved this discussion. Ash asked some great questions too. I shall be sharing this with a lot of folks to whom I personally have struggled to adequately represent the impact and potential of an MMT approach to managing things.
Btw... Would love to see this kind of discussion between Gary Stevens and Stephany Kelton. They're both terrific communicators and quick minded in interviews.
MMT is the reality of how money currently (since the 1970s) functions. The key thing is that Government spending comes before taxation. Money only exists because Government is making and spending money, taxation removes that money to limit inflation. High spending and high taxes can be good for society!!
This is not true. There was money before the US dollar was created and there were taxes before the US dollar was created
If you think government spending is out of control now, just watch how MMT will redefine the definition of "Bankrupt".
I tried to listen to this a couple of times, I was confused about what Stephanie Kelton was saying about Liz Truss (and it's a pity they didn't talk much about this).
The view I had from a more traditional economics framing was that Liz Truss and Kwarteng did many things wrong in the mini-budget, including plans to increase government spending (on winter fuel payments) and simultaneously reduce government income from taxes which would cause a big increase in the deficit.
Their actions caused an increase in interest rates on government bonds as fewer international investors wanted government bonds and led to a spiral in interest rates due to pension companies being forced to sell off more and more of their government bonds in a small crisis.
I don't see how a government can ignore a sharp rise in interest rates like this, and as government debt mounts the more government spending is devoted to debt repayment. To me the Liz Truss experience seems to do huge damage to ideas of running a large budget deficit and requires a much larger rebuttal.
we should be working towards a society where you can no longer make money simply by owning things.
I totally disagree with you will own nothing and you will be happy. What side of the bed did you get up on or did I misunderstand you? We should be working towards a society where wealth is evenly distributed.
@@-win- i think you misunderstood me. i want a democratic society without people claiming ownership over the labor of others or existing on rent seeking practices that again, drain society.
@@sheepwshotguns42 nobody is forcing you to rent or work for someone else dude. You can do whatever you want, build your own house or start a business and work for yourself. What's the problem? Or maybe your actual problem is that you want to live rent free and get paid for doing nothing...
Does that mean I can't use the tools in my truck to make money anymore?
@@s.chirca2977most are forced to sell their labour or starve and be homeless - dishonest to pretend otherwise. And build a house on what land?? 😂
When she is talking about separating taxing the rich from spending to fix the poor's problems. What she is not saying out loud is that spending to fix the poor's problems would force the Rich to give the needed tax money to the government and in a speedy time frame before the dollar and everything the rich own became worthless. Better to brake off even 80% of your wealth then have 100% of it become worthless.
Money is entirely virtual. If the actual riches (oil, resources, land, people) are available, money is never the problem.
But money measures the value of those riches. More money means hyperinflation as there is excessive consumption from that extra money. Resources are not infinite.
Exactly! The right to own UNLIMITED in conjunction with the "meta ressource" called money, are unhinged! It's like a reverse pyramid and people owning are a pyramid! Inequality, destruction of the biosphere must be ended or we can choose between self destruction by humans or nature!
Exactly! The right to own UNLIMITED in conjunction with the "meta ressource" called money, is unhinged! It's like a reverse pyramid and people owning are a pyramid! Inequality, destruction of the biosphere must be ended or we can choose between self destruction by humans or nature!
@@Zelp789: Neither is fiat money when inflation is taken into account, as Professor Kelton has been expounding for years.
Yes but if money doesn't have tangible value then it can become worthless tomorrow when tied to real things it can not. Tomorrow any crypto currency can be completely worthless.
Just a small point. Ash made the point that when governments are funding defence and such, the money is always there. It’s when they try to find stuff like health care that cause deficits to matter.
That’s not always true. Canada’s last Conservative government cut defence spending by $5 bn Canadian between 2022 and 2015 in order to balance the federal budget.
This presentation is pure and simple, insanity.
These are the conversations that should be had on legacy media. What we have is the same tired narrative which seems logical but is actually counter to how the economy functions. until that happens the same arguments will persist because a lot of mainstream commentator accept that starting point in discussions about the economy. There are so many ways that real deliberation is impacted
Also see Prof Richard Murphy.
Its an interesting question how MMT relates to services vs manifacturing economic structure. Generaly speaking one can supply infinite amount of services, but only finite amount of physical products. If money supply is directed towards services what do we get, megatons of paperwork? Or, what is the resale value of a haircut?
How about we just do socialism instead of all this other mumbo jumbo,
But then they can't keep their empire and pretend that they are the good guys.
you mean everybody being equally poor? oh we are going there fast.
@@schopen-hauer I'd prefer everyone be the same poor than just 99%
@@nikosgianna2213 the philosophy of envy and stupidity.
@@schopen-hauer please read
I have a (serious) question: does money matter at all? I mean, money is a transfer tool and does not generate value, i.e. wealth. One of our problems is the financialization of the economy. Wealth, and consequently our capacity of covering costs, is generated by real resources, which may or not be limited. The constraint is therefore not financial resources, but real, productive, resources.
I waited and waited till the issue is raised about governance. The main problem with MMT is that the government has virtually unlimited power to print money and debase people’s savings. Governments control your life fully if they are free to debase money and ”benefit” their buddies through deficits. Rich people invest and own assets that governments can’t print. Everyone else just submits to the whims of an increasingly centralized government. What the actual F? When do you ask this question? Basic income and MMT is freaking comunism on steroids, de-facto slavery. Put her to a 2-3 hour debate with an Austrian economst and he/she will shread Stephanie to pieces.
austrian economists are never held to account. outside of their clan, they’re considered bat shit crazy, with ample cause.
Mmt is a description. And government do have unlimited power to print. Mmt is not prescribing to print large amounts to debase the currency. I think the misunderstanding is that mmt highlights that government can create as much as they want, so when people say government can't pay for that, they certainly can pay because they can print their own currency. The real issue is should the money be created and spent that item. That is what mmt highlighting. For instance should the government dig a big hole and fill it with concrete or instead should they build a school. They can pay for both it's not a money issue, the question is 'should they?' digging the hole and filling it had no use, the school has a productive use. If we had a abundance of schools then building another school would also be a waste of resource, so neither should be built.
@@mutton_man Sounds like a problem in the field of sophistry. Someone's gonna be contracted to do either thing, a school or a pool of concrete won't plop out of thin air. There will have to be workers, a concrete factory, vehicles, sand, water, all kinds of bureaucratic red tape and so on. Printed money will change hands, and then it will go into the economy, and cause inflation. Unlimited printed money = unlimited currency debasement.
@@dmitryfedorov114 increase in money doesn't mean it's inflation. Japan is over 200% debt to GDP. Where was this inflation?
Most countries after the 2008 hugely increase the government debt, where was the inflation?
You can increase the money supply without getting high inflation.
Why is it that my comments do not seem to be visible in here?
I post thoughtful and valid comments and yet when I return the next day they are not visible...???
Some sort of mysterious algorithmic filtering?
MMT is pretty much realism. I highly recommend that you invite Steve Keen to your programme. He will really suit your audience, and is a leading figure alone with Michael Hudson on the problems with neoliberalism and how to correctly view private and public debt.
Modern economics is mostly bollocks, but, this should be good...
It’s not people’s fault that they don’t under basics of economics. Politicians has been lying about for decades, especially since gold parity ended.
Money IS debt. Your mortgage is debt. Your pension is debt - without government debt there would be no ISAs or pension funds…. When government raises debt, we “lend the money” to ourselves.
How come the more "we lend money to ourselves" the poorer we get? I don't know about your country but besides the bankrupt government pension system we also have private pension funds which don't depend on the willingness of politicians to bankrupt the country.
The real part that she doesn't talk about is that the US has the exclusive right of doing this....anyone else that would try would get crushed
Bullsh1t. New Zealand does this, so does Australia, Canada, Japan, UK, the list goes on. Japan have had near zero rate policy for over 30 years. Also, the strongest currency in the world is the UMKC Buckeroo, a tiny ecosystem, total full employment, zero inflation. 1 buckeroo is worth today exactly what it was worth in 2001 (up to minor student worker productivity gains). The buckeroo has appreciated against the US dollar by about 20x over about as many years. The FEDs have so far not "crushed" the UMKC currency, and likely never will, why would they?
No true. Most sovereign nations with control of their own currency can. It's when a nation falls into debt of another country currency they fall into trouble. Like most of the emerging countries, they have alot of US denominated debt.
The reason for that is the dollar is the world's trading currency
Thank you for the clarifications
May I point out that a “political problem” is actually the will of the people and any modern theory hoping to get around this problem is fundamentally tyrannical. It’s not just rejection of taxation. We disagree with most initiatives in the strategical sense. It has failed since 2009.
Debt does matter. Debt requires future growth to pay interest.
Genuine future growth is not possible in any category we are in planetary overshoot without destroying the substrate for future life. In overshoot, redistribution is possible so some can have growth, but the system as a whole cannot safely grow.
That interest is also a mechanism for transferring wealth from the poor to the rich.
Focus should be on redistribution, not more promises to pay the rich our future labour.
National Debt doesn't matter, it is just one side of the accounting spreadsheet. Public sector debt is equal to private sector wealth, it is an acounting identity. The interest paid on public sector debt is not a requirement of the debt, since public sector debt is not borrowed, it is issued, it is very different to when you take out a lone privately. Currently 75% of Gilts are held by UK citizens, and mostly in pension schemes. If we changed how pensions functioned we could very well offer 0% interest on Gilts provided the economy was geared to accomodate that.
Regarding the planetary growth cap, obviously in a finite world there is a finite cap, but whether we are near that cap is hugely debateable. We have obvioulsy seen significant gains historically in the way in which natural resources are used and have as a result been able to sustain a larger population. The question then becomes can we regear productive capacity to be sustainable, I would argue that we can but it is very difficult currently given the economic incentives.
Japan is functioning fine at 250% of it's GDP. The UK is just over 100%. I think there is room for spending and growth. The NHS was formed on the basis that healthier people would be more productive, live longer and have better outcomes.
@@garethhumphries4039 for info, according to studies into the subject, we have passed 7 out of 9 planetary boundaries to date.
Govt debt is issued in bonds. Under the current arrangement, those bonds would not be purchased if there was no interest on them. Pensions and other investors expect profit, particularly in an inflationary environment.
Totally agree that the incentives are not working in a sustainable way. I see this as a problem with our rewards structure which has become too materials dependent.
@@garethhumphries4039 if the government issues public debt at 0% interest, they will not attract buyers of those bonds which will ultimately be extremely inflationary. It seems to me that a nation still has to be concerned with the size of its debt as that translates directly to finance charges, and while every debt has a debtee to balance it the way a nation processes interest payments that outweigh its income is via inflation or growth.
The conversation here seems more about recognizing how different kinds of deficits transform into different impacts on different groups. Deficits created in broad reduced taxes for the rich are very different than deficits created to fund green energy which will be different than those to fund tuition or first time home buyers.
I think that was an excellent interview with a highly relevant economist. Bravo for asking the right questions (e.g. why Liz Truss failed / impact of Covid spending on the wealth gap) and then letting Stephanie actually answer without interrupting her. Too many interviews turn into either a disrespectful tit-for-tat, or a battle of egos, neither of which were present here. I'm not entirely satisfied with some of the answers (e.g. the covid spending), but at least this I/V has provided UK citizens with the thoughts of this hugely relevant modern economist. I personally see MMT as the round world answer to the trad economists flat earth. I love her answer to why so many economists reject MMT. Similar story occurred in diet in the 1980s when Australian universities disproved theories of simple v complex carbs through actual testing, now referred to as GI. Despite the actual proof, dieticians to this day still refer to the old approach, because that's what they know and it's too much of a fundamental shift to accept that the basis of their entire education and professional work was actually wrong. To me, the biggest question is whether we, the mass public, will actually expect our politicians to act responsibly once our basic understanding of MMT is widely known and accepted. The pressure on politicians to act irresponsibly with currency creation will be huge. Everyone will want 'free money' but nobody will be prepared to accept the required taxes to control the money supply. Let's see how this plays out.
It needs Keynesian economics, which takes MMT for granted
MMT did not work for Argentina.
Special prize for the dumbest, most blatant ideologically-based misinformation on here... and that's quite something for the comments under this video
🤑🤑🤑🤑
@@controldata972 Je ne comprends pas.
@@MrRhomas913 Read up about MMT. It suggests that there are huge potential problems for govts that borrow in currencies other than their own. Argentina (and especially Milei) does not following an MMT-based approach. It has problem debt denominated in US dollars. It has a history of dysfunctional regimes. But you know that, right? I reckon you're just trying to put people off actually understanding MMT.
@@controldata972 So what happens when a smallish economy like Argentina endlessly prints money? FDI dries up, the currency weakens, and inflation skyrockets. What's the solution? Print more money? True...best to not borrow in a foreign currency but printing money is not the solution. Maybe try to run a budget balance and not promise ever-increasing social welfare payments in excess of tax revenues.
@@controldata972 - Milei is not a proponent of MMT. He has slashed spending to balance the budget which is exactly the opposite of MMT.
Great interview.
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Hey Ash. You ought to interview Steve Grumbine founder and CEO of Real Progressives and host of the podcast Macro N Cheese. Although he isn't an economist, he does a masterful job at explaining power dynamics and class struggle through the lens of MMT.
Something for nothing. If you don't smell the scam here, I have a bridge I'd like to sell you.
The money is already created from nothing but with a nuclear arsenal , navy, air force and standing army to protect and tens of millions of people who's labor can be directed to create real goods? What do you think is more versatile; a pile of gold to the value of the the last 40 years of labor from 1000 people or the ability to direct said people for the next 40 years? If we ignore the opportunity cost of not having the money up front it's always better to be able to be adaptable and people are a far easier resource to multiple than gold is.
Why would you restrict the size of the economy to the size of the gold holdings of the UK or restrict the global economy to the size of the gold? Is there really so little value and why would you couple it to metals that can end up in one country if they win a war or gain some dominance? Do you care about self determination or equality at all or do you have power fantasies about sitting op top of a very rare pile of gold?
This was excellent. Great questions, Ash. Thank you.
post-capitalism is when we no longer care about balancing the budget, "the deficit will be spent on public sector" is a big if
the ghouls will latch into the money machine
Or maybe post-capitalism happened multiple times in history, and every time it happened it was some empire debasing its currency to "pay" for prolonging the lavish lifestyle, just before it succumbs to barbarians at the gates.
10:20 nations don't run out of money, unlike households 11:20 deficits matter but not in conventional sense. Govt deficit = collective surplus on the other side 25:40 deficits don't matter as long as inflation under control, econ good 28:40 limit is whatever is for sale in your own currency
Love me some MMT
Why are there three and four day old comments on a video that is five hours old?
From when it was advertised. People were keen😂
Economic pseudoscience.
Excellent discussion... If there is one thing I love about MTT it is that it moves past the idea that Tax is how we pay for things (i.e. government 'income') to the idea that Tax is how you balance the economy (i.e. manage inflation*).
With regards to UBI, I'm not sure what the system is in the UK or US, but here in Australia we have a very inefficient, slow, and punitive welfare system ... I see UBI as a way to replace that with a very simple system (that treats people with respect); i.e. everyone gets UBI regardless, have a bad year and the UBI is effectively a 'welfare' payment, have a good year and the UBI (or part there of) is effective paid back via the Tax system.
* As opposed to purely through interest rates - which hit people with mortgages or rents very hard, meanwhile boosting the income of the established and the rich - and / or government spending - no prizes for guessing which areas of spending get cut first.