Comments
Transcript
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DSThe question is how do you control Congress and the President once they can print money at will? Congress has a history of giving up power to the President so they are not held accountable. Do you really want the money supply in the hands of any President? This would be the fastest way for America to decline. The rich can buy hard assets, the poor will just get poorer. DLS
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GSAnyone interested in Mosler's view on gold... https://twitter.com/Optimistbot/status/1169652928203939840 LOL. (Though it differs not much from Warren Buffet's view, with the added pure hubris.)
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SBGreat interview Ed. I do like Mosler's humble attitude and model. However it may be more useful for analysis rather than policy implementation. 1) Free money is the most addictive substance known to politicians. Once they get started, politicians won't have the fortitude to raise taxes or cut spending in the face of stagflation. If in doubt, picture an economy with inflation above target and falling into recession. Will you hike taxes, pushing businesses offshore, or cut spending on health, education or welfare? Pretty damn non-Keynesian! 2) Why are we talking about this with unemployment at 4/5 decade lows? One of his arguments is to release unemployed back to work. Arguably wrong part of cycle. 3) Borrowing rates tend to follow inflation expectations. So, in a highly indebted economy, a little inflation might be helpful, a lot may be catastrophic. 4) There is a coercive component to this model - by his own admission. Contrast this with a state with private money. By giving the State a larger role, we naturally become more authoritarian/coercive. Remember, North Korea has one of lowest unemployment rates currently. Similarly, in USSR and Nazi Germany, being unemployed was not an option.
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JKThe most interesting video to date. Thanks RV.
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KSI am really shocked that people with some kind of financial knowledge can watch this interview and not have everything that thought they knew about how our system works flipped on its head. Instead, I see these absolutely ridiculous statements that the US is going to turn into the Weimar Republic, Venezuela, and Zimbabwe -- What?? These are complete straw man arguments once you examine them. Germany did not control its debt (reparations) in its own currency - it had to pay it back in gold. Venezuela tied social programs to price of oil & when priced dropped it printed to pay for them and they never monitored inflation levels. Problem is you guys are not looking at money for what it is -- IT IS NOT A THING, it is a political idea - it is a tool. The WORST thing a govt can EVER do is to tie it’s money to a thing (gold) it can not control - it shackles its ability to act. It is NOT how much money a govt prints into the system, it is the amount of inflation that matters. Mosler is spot on when he says Japan prints more than anyone and has for 30 years, so where is the inflation? Oh, yeah it is coming soon LOL. Inflation from the 1970’s was not caused by US spending on the Vietnam War & Johnson’s Great Society programs - again a fallacy (repeating a talking point I heard, without ever question whether it was true or not). Mosler again opens my eyes - inflation was caused by OPEC and their monopoly pricing of oil - it went from $2 to $40 dollars a barrel in ten years - this drove up business costs on everything and higher pricing. Just like today, health care costs and education costs are sky high - is this being caused by an over supply of money in the system and in turn creating this inflation - Nope - health costs are high because of insurance monopolies. Treasuries Rates having nothing to do with deficit spending (when u print your own money) --- Govt doesn’t even have to have sell treasuries because it does not borrow to spend, it creates the money out of nothing, it is a keystroke entry on a computer. Bernanke said this to Scott Pelley on 60 minutes when he was interviewed about creating USD to do currency swap with the ECB. Our economy is dying because private sector is loaded down with debt and it can’t spend and the govt thinks it is going to run out of money so it won’t spend -- it is ridiculous. The US govt can never run out of money it prints - this is so crazy obvious. The government should be SPENDING - on infrastructure, all kinds of research, build the WALL it has the money it will help the economy. Give tax breaks to working and middle class - it does not use taxes to pay for its budget. Key is to monitor the levels of inflation- money can be taken out of the system through taxing and less spending by govt. Thank you Mr. Mosler you have opened my eyes - and for someone who got a 1.8 cum - I would take what you have to say over a Larry Summers, Robert Rubin, or many Nobel Prize winning economists. We have been lied to and purposely mislead to how system really works and your book "Seven Deadly Innocent Frauds of Economic Policy" should be a must read by every US Congressman and American citizen. I read it for free on line, I couldn't put it down.
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ABIs it a corollary then that if tax collection is not robust, that's when you get runaway inflation?
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MEAmazing people never learn, make the same mistake over & over and expect different result. Just this century, Germany, venazula , Iran, etc. MMT WILL NEVER HAPPEN IN USA. RESERVE CURRENCY.
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NSWould love to hear any challenge to grand claims.. this is Real Vision.. bullshit flags are welcome. (:
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KCEvery one does realize it's a theory and not fact right?
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MPSocialism is the philosophy of failure, The creed of ignorance, The gospel of envy. It’s inherent virtue is the equal sharing of misery —Winston Churchill
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CCThis was a fascinating interview, and just understanding the simple concepts of monetary operations Mr. Mosler explained was worth the time. The negative comments baffle me. I love Real Vision for bringing interviews just like this, that challenge our accepted truths and make us reconcile a new way of looking at something with those accepted truths. i want to watch this again for just that purposed. That's not saying the accepted truths are always wrong, but anyone dissing this interview should at least be able to explain how he is wrong.
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NRThis first RV i could not finish. Most painful to watch.
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CBSo the guy who cam up with MMT was someone who couldn’t hack it as an engineer, had a 2.5 GPA, and used economics as a fallback? I’m not even surprised. We get it, you can change a number in a spreadsheet and magic more money. How does Venezuela or Zimbabwe dig their way out of inflationary spiral? His whole concept is that it works until it doesn’t and we aren’t too sure why it doesn’t.
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MERather see 2-3 top quality guests than see anyone with pulse in financial industry. Want my old real vision back.
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DHHow does MMT fit in with the reality that 97% of money is created by commercial banks making loans? https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy
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GFMy curiosities: MMT sounds kind of like how Argentina runs its economy. Argentina is nice, but is the US willing to become a big Argentina? How does MMT attract foreign investment? How does MMT attract foreign immigrants? His talk assumes the US is a closed system. FWIW Ancient Rome was pretty close to a closed system. What is this Green New Deal? The Green New Deal was sending recycling to China. Eventually, the Chinese government realized there was no Green New Deal, what the US was sending was garbage not recycling and then banned it. The US needs high interest rates to keep the sanctions regime going. Sanctions only work if the US$ is coveted.
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ARKudos to the interviewer for his style - he didn’t come to the interview with an ideological position/opinion allowing for a good discussion. If a second interview were to be held it would be good to cover MMT in the context of international trade.
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DSMoney printing in many forms has happened over and over during the course of human history. There is an excellent book called "Fiat Money Inflation In France" that describes why money printing never works.
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YEThis guys is completely crazy- his years in ‘monetary operations’ only taught him papernomics. He has no clue about real economies. He didn’t discuss real economy supply and demand and how people clear markets. This is a psychotic so called ‘theory’. If you believe this I got a bridge in Brooklyn I want to sell you. The interviewer didn’t help- completely clueless and out of his depth. Feedback- if you bring someone with as controversial a theory as this put against him someone that can really test if this guy is on to something.
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BDWatching this I had the thought is how China is stimulating its economy a form of MMT? I really am not sure but interested in others views.
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LPWhy wasn’t the last 10 minutes of the interview used to allow him explain why his version of MMT won’t eventually lead to hyperinflation in the US? The interviewer asked him this type of question at least twice, but he never answered it. He said he could go into it, but never did. This interview is very incomplete as a result. Please post a part 2.
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AWHe did not do a good job of explaining his side. Kind of terrible. Im "offended" he glosses over so much, assuming people just automatically believe what he understands to be true. He does not come across as intelligent as i'm sure he is.
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FBThis was by far was the most strange,incoherent and delusional interview I have seen anywhere. This guy is B.T. Barnum incarnate,it does not surprise me at all that progressives like AOC listen to his theory. He ignores,demographics,globalization,innovation,political evolution etc..as a source of anything. He directly ignored the question of the source of problems for Argentina,Germany etc and the inflation these countries experienced. He has taken a mechanical operation and twisted into an economic theory. Clearly his 1.8 GPA is showing,clever,deceiving and slight of hand but not smart.
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RDthere is no structure to this interview.....all I get it "I'm smarter than the average bond trader cause I figured out Treasury back office operations....." where is the logic behind the theorey?
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DCI'm sorry, I still don't get it. What, exactly, is MMT? How can you resolve the inherent problem of no free lunch? What are the misconceptions surrounding MMT? I don't think the interviewer asked these questions directly. Instead it felt like traipsing around the issue. RealVision is great but challenging interviewees is not one of its strengths.
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BMA point that is always glossed over in MMT is the subnational organizations in the country. How do states and cities work within this framework? Presently the states don't create money and then tax. As Mosely said that's the federal process. It seems that individual states and towns would need to create a demand for money in a budget of some sort that the federal government would have to agree to and then fund through the fed. Perhaps the assumption underlying this is that any level of government would get whatever they wanted. It would be good if someone who support MMT could explain how this is implemented at a state and city level. I cant find anything in any of the literature I have read to date.
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PVThis interview scares the hell out of me... basically the money in your wallet is not yours but really is owned by the government that can debase it, tax it or confiscate it in any way they want... buy Bitcoin, Gold or real assets.... Gresham Law is coming...
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HTThanks for an excellent interview, and to all for the insightful comments. I am trying to get my head around this topic and therefore downloaded the transcript, as I'm a better reader than listener, only to find numerous errors. Just one example: "ED HARRISON: Nehru, that's not accelerating interest rate of unemployment." I know what he meant to say, but for all of us subscribers, could someone please clean up the transcript, as it really is a fascinating topic which we will all deal with over the coming decades! Much appreciated...
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SMLike all theory, it works on paper!! But the worls is much more complexe than his theory. He never answer the question asked TWICE: "What is that something else" (that won't turn the U.S. into Venezuela or Zimbabwe)?!?! If you want to learn about MMT fallacy: https://www.armstrongeconomics.com/?s=mmt
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TJI enjoyed hearing Warren’s take on MMT but am not convinced it will be anything other than a complete disaster if ever adopted in the US. I genuinely share Ed’s concerns about inflation, and believe that if the MMT genie were ever allowed to escape in our already crazily indebted world, there would be no way back. I would love to see Real Vision have Ed interview Dr Lacy Hunt on this topic. As well as being an incredibly astute market strategist who has for decades correctly forecast long term US interest rate trends, he is an economics history scholar with few peers on these subjects. From various comments and analysis that I have seen from him, he is very concerned about the possibility of MMT being adopted. In the latest quarterly economic review from Hoisington Investment Management, he explains, "Harvard Professor Kenneth Rogoff, writing in Project- Syndicate.org (March 4, 2019), states 'A number of leading U.S. progressives, who may well be in power after the 2020 elections, advocate using the Fed’s balance sheet as a cash cow to fund expansive new social programs, especially in view of current low inflation and interest rates.' How would MMT be implemented and what would be the economic implications? The process would be something like this: The Treasury would issue zero maturity and zero interest rate liabilities to the Fed, who in turn, would increase the Treasury’s balances at the Federal Reserve Banks. The Treasury, in turn, could spend these deposits directly to pay for programs, personnel, etc. Thus, the Fed, which is part of the government, would be funding its parent with a worthless IOU. In historical cases of money printing, the countries were not the reserve currency of the world, as the U.S. is today. Thus, the entire global system could be destabilized in very short order if this were to occur." Dr. Hunt concludes, "There would be no real increase in services or money since very little time would lapse before people realized increasing inflation was not increasing real purchasing power. If the government responded by issuing more central bank legal tender, the inflationary process would become self-perpetuating, and as was the case in numerous historical instances this would lead to hyper-inflation. Moreover, the central bank would have no capability of reducing the money supply. All they could offer would be the zero maturity, zero interest liabilities of the government, but there would be no buyers. This would mean that hyper-inflation would be difficult to stop." I think Dr. Hunt would be the ideal guest to counter some of Warren's arguments and explain to me and other RV subscribers the very serious potential implications of MMT ever being permitted in the US.
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PPFascinating interview. I am not a proponent of government spending supporting the economy, but this is where we are today as Jeff Gundlach noted in his Just Markets call of early 2019 - the real US deficit seen by the actual increase in outstanding US govt debt as a % of GDP has been annualizing ~8% in a US economy growing 3%, so Gundlach asked if there was no US gov't deficit would the US economy be growing at all ? MMT questions were raised in the spectacular Michael Green March 19th 2019 interview on MMT & the Profit Equation. The argument is where does the money get spent, and why should we pay taxes if government can fund itself ? Somewhere a few years back there was a Kyle Bass interview where he discussed a conversation with Barney Frank on how the US topped up its contribution to the IMF, and I paraphrase but believe Kyle said "Bernie where did the xxx hundred billion for the IMF come from ? and Barney Frank replied, Kyle you know very well it was just a book entry credit, to which Kyle said he replied well why not just give them x trillion then ?" This interview is much closer to the current sad state of a debt ridden & reliant US economy. As for why it does not become Zimbabwe or Venezuela, I would think that in a dictatorship, the Mugabe or Maduro needs to pay the military & people who keep him in control first - who spend & buy up goods ahead of the people & the hyper inflation spiral commences. In Weimar Germany I believe government employees were adjusted ahead of the private workers, so the street sweeper was ok, but the professional was selling furniture to buy food. I do not see how this all does not have an Austrian ending.
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KSGreat interview! The whole concept is centered around the fact that gov first spends and then receives funds in the form of taxes, which at the surfaces is great, but in my view fails to dig deeper. Not once was it mentioned that the gov spending needs to create value in the economy that compounds and grows itself - in other words, the quality and ROI of the gov spending was completely overlooked. Whether that was simply not stated in the interview or it is an overlook of the MMT framework itself, I don't know. Otherwise, you have debt (currency creation) growing at a faster rate (rate of change) than the economy itself - which by definition is exactly the inflationary circumstance his example of 1 coin vs 2 coins per day provides. On another note, if currency creation is growing faster than economy, then gov simply starts crowding out private enterprise, which reduces tax receipts... Unless I am misunderstanding something in the above explanation, nothing new under the sun.
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SSReally a missed opportunity. A stronger interviewer might have been able to draw better info out of Mosler (David Salem would have been a good choice.) There were lots of theoretical arguments, with no reference to supporting data or evidence. Most of it struck me as sloppy and loosely reasoned. Maybe more time was needed to fill in the gaps. Many of Mosler's ideas made no sense to me, but a few of the more notable ones were: 1. Raise interest rates and you pay more to people with money (i.e., bond holders?). Wrong. Most bonds pay fixed coupon amounts until called or maturity. The payment amounts do not change. The value of the bonds declines, so "people with money" actually suffer a reduction in wealth. 2. Higher interest rates make inflation worse. Wrong. Paul Volker in 1981 is a classic example of raising rates to end an inflationary spike. 3. "I say monetary policy doesn't work." Wrong, at least partly. Volker proved that it can defeat inflation. Monetary policy's ability to defeat deflation or recession is weaker, but probably does have an impact. The interviewer never got an answer to his question about what caused hyper- inflations. He should have asked about the numerical values of fiscal multipliers. I suggest you invite Mosler back to talk with someone who will contest his ideas.
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EHThank you for all the comments thus far. I have a request though: please comment more!! And the reason is simple. We are going to do an Exchange video in a couple of weeks as a bolt-on to this interview. It will have different personalities who understand MMT but have some pushback on it as well. And so the goal at that time is to answer some of the questions you had about THIS video. The comment that MMT "only applies to fiat currency regimes, which are inherently unstable" precipitated my comment here. I think that's a perfectly valid question to pose to our next guests on MMT. For example, it goes to whether having state money at the core of a financial system has some role in creating the ever-recurring crises we have had. And so, I look forward to our panelists' response. More questions like this please. I will make sure we incorporate many of them into the discussion.
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DSAt least we know how to invest with inflation that will be caused by MMT as night follows day. The Japanese example does not work for us. The Japanese are amazing savers and work toward consensus. In the Reagan days the two parties fought daily, but also worked together to help the common good. Social programs were proposed, but the final bill included the strong input of the fiscal conservatives to lessen the abuse of the law. This was middle left and middle right working together some of the time. Of course, they all met in the evening without yelling and screaming at each other. If we in America continue this bipolar, antagonistic current political carnage, we will cannot succeed at governing ourselves. We will fall into a plutocracy of the far left or right depending on which TV network is most successful. Montesquieu believed that a republic relies on the principle of virtue, whereas despotisms rely on fear. Where is virtue today - singly or collectively? DLS
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JMThe Pompeii story was interesting.....but ancient Roman cities had no police (citizens had to apprehend the criminal and bring him/her before a magistrate to get justice i.e.,do it yourself. At the time Rome took control of Pompeii (89 BC) Rome controlled many gold/silver (and other metals) mines in Spain. Romans used lots of low-cost slave labour in their mines. It was therefore a great source of revenue for Rome (as well as wealth gained from their conquests). Not sure but don't think they were even taxing their citizens during that specific time period - hard to believe! (https://www.unrv.com/economy/roman-taxes.php) Other than that, the Pompeii story was good!
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PNThis was a really great interview. I think that Mr. Moser has a great understanding of how the current monetary system works. What he seems to have missed is the consequences of using this money system.
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DSAll fiat currencies rely on the fiduciary responsibility of the issuer - trust. Does anyone actually believe that Congress is or will be fiduciarily responsible regardless of how the money is accounted for? MMT is a perfect way for politicians to spend, spend, spend, spend. Does anyone believe that Congress needs an additional incentive to spend? Mr. Mosler may be able to make money out of this personally as in the past, but the government spending will go to the sky. (It is already through the roof.) Even in a closed system who would want the currency. Thank you RVTV for helping verify what MMT is. DLS
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EHAs the interviewer, let me give you my take. The most interesting part to me that Mosler first developed MMT to make money -- and that he did consistently make money using MMT as a operational framework. For me, that's the first litmus test. It says there are benefits to understanding what he is saying that can either help avoid losses (in bond markets) or make profits (as in his Italian bond trade example. But, just because he made money doesn't mean the framework is perfect (or even good). The second litmus test for me was the European situation, where apparently he and the MMT folks were early in assessing the flaws in the eurozone's design. If you followed that call, you could have made a lot of money. And, personally, I think there is still money to be made there i.e. via a divergence in spreads (in the underlying and in CDS market) depending on the ECB's backstop for specific debtors as the European business cycle turns down. We are already seeing Italy and Greece in trouble. So, as an operational framework, it does a pretty good job - certainly better than the mainstream (New Keynesian) framework has done. The problem I have with MMT is on policy. And while I know Warren says it's not ABOUT policy (for example, notice that he doesn't advocate for the Green New Deal but simply says it's a policy option), that's exactly where the trouble lies for me. That's because, IF MMT became accepted as the framework through which to conduct standard macro fiscal policy, I think inflation would be a problem. I am not at all convinced that you can control it if everyone and is brother steps up to the plate asking for pet projects against which to deficit spend, with the understanding that the government can't ever default. For me, that's where the rubber hits the road. We're not there yet. But, in the next downturn - with monetary policy stopped out - we could be. That's my take. I hope you enjoyed the interview. I certainly did.
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JQShould of hit this guy head on. MMT is going to be what the 2020 elections will be about. Where debt matters!! Folks it does. Disappointed in interview.
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AR"The ELR offers a job at a fixed money wage (including a benefit package) to any individual ready, willing and able to work, which creates infinitely elastic labour demand at the ELR wage. All ELR employees can engage in a maximum number of hours of work per week (say 35) or less if preferred." "The buffer stock of ELR jobs expands (declines) when private sector activity declines (expands). A smooth transfer of labour between sectors occurs, because ELR workers are paid the minimum wage to avoid upsetting the private sector wage structure" Watts paper: https://drive.google.com/file/d/10Q8WbJvXLShS2qwcqQFPDtWV1i__E6x-/view?usp=sharing Job Guarantee (ELR) workers are paid the Minimum to avoid upsetting the private sector wage structure" Mr. Mosler forgot to mention that in his comments. Must explain why Bernie Sanders went to Walmart to ask for $15/hr. The current Federal Minimum wage is not $15/hr + benefits. It is $7.25/hr plus nothing. How exactly is a bunch of people working at $7.25 going to do anything for inflation? And who (in their right mind) leaves the Guaranteed Healthcare (and wage) from the government for something less secure?
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PWLot of interesting comments here. I still have a hard time reconciling the claims made by MMT against the historical examples of failure, particularly in Zimbabwe where I had direct economic and humanitarian exposure. I was really disappointed that the interview did not elicit Mosley's theory on what happened there (and in Venezuela and Weimar Germany and...). I will definitely be interested in future interviews on this topic.
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KGDear all, Let's say I feel like I need more materials to learn about MMT. What would you suggest?
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JSWhat a fascinating brilliant guest...but: What if the economy isn't a machine that can be easily controlled via levers of policy as if it were one's home thermostat? What if it is instead it is an incredibly complex system that can't be modeled or expected to behave in a constant state of equilibrium? I think MMT is something we would like to believe (and will eventually try) because it theoretically solves the greatest economic imbalances in human history with minimum pain. And if recent history has taught us anything, its that we fear pain more than death.
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lDi can not believe just how much i learn from this website - yoy rate of change of my brain is off the charts. str8
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MSI’m looking forward to the day that Trump comes out in favor of MMT and the GOP twists themselves into knots trying to figure out how to support it.
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TPAnyone notice when the "godfather" of MMT was asked how it specifically would work, he went on a long ramble about how Taxation was the "pull" for using currency? Oh really? I guess he forgot about that long period in U.S. history where there was NO INCOME TAX and growth was high. At that moment in the interview, where he dodges the question and starts blustering, I became disgusted. This is the best an academic can offer? "Taxes make money work?". Get out of here with that bald-faced lie. I was hoping the interviewer would press for an answer, but that didn't happen. Ridiculous.
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RTThe Austrian economist Robert Murphy has taken apart MMT on several occasions and would be a great person to interview in response to Mr. Mosler: https://mises.org/wire/mmt-even-more-dubious-aocs-green-new-deal https://mises.org/library/upside-down-world-mmt
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SSAgree wholeheartedly with many of the critical comments here. I posed this question to Prof. Steven Hail, an MMT proponent from Adelaide, "How will MMT not result in the eventual transfer of all assets from the private to the public sector?" Still waiting on an answer... maybe Mosler can answer. Anyone cheering on MMT is cheering on the wholesale enslavement of humanity. Can you imagine how many guns the MMT police state will need, to force people to continue to use their vile "currency"? Who's going to keep the fruits of their labour in the State managed donation box called negative-interest-rate bank accounts (unless their actual life depends on it)? This is the death of human incentive and the wholesale destruction of human freedom. Bye bye cash, bye bye privacy, bye bye productivity. The only Truth is the State. Ph*k the State. It's the reason for every problem it endeavors to solve. And what he said about price is total BS. Price is sacred. Value is REAL (not a miraculous by-product of central bank hubris). Just because you can build a boat doesn't mean you can price an entire economy. What a (sick) joke. This guy's the reason I've bean stacking beans. Full credit to Ed for the interview. Impossible to dislike the guy. Waiting for the follow up on the "Something else" issue.
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GSI can understand why that guy had a 1.8 gpa & failed out of engineering. No one works for the purpose of paying taxes as he says. You can work and not pay taxes at all. Also the government doesn’t set interest rates, only Fed controls short rates. Otherwise yield curves would never invert. Unemployment is not by design due to taxation, it’s entirely a function of the productive capacity of the economy compared to needed labor. Everything about that interview was a waste of time other than reinforcing how dumb MMT is.
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CHThis is a really valuable interview, and I thank RealVision for it. It shows the extent to which the thinking behind MMT is utter rubbish. The narrative is entirely state-centric, the concept that money arises out of taxation and the need to provision the state, and that government deficit spending is only relevant as a book-balancing activity. The conclusion is that a government could generate any amount of currency for any amount of government spending, without repercussions. It is absolute rubbish. Deficit spending does matter. The natural end-state of MMT is a worthless currency, all assets in the possession of the state, and a state defaulting on its debt ledger through printing that worthless currency. As Mr Mosler suggests, it is essentially a way to covertly tax away the entire economy. With an annual deficit of US$867 billion soon to be approaching a trillion dollars, and the Fed as the Treasury purchaser on last resort, the US is effectively implementing MMT as a matter of chronic policy. We will soon see the implications of this gentleman’s monetary theory, although Europe and Japan will probably be ahead of the curve. Though he doesn’t seem to realise, Mosler explains the mechanism of the currency crisis, not its solution. Does Mosler honestly believe that he has discovered the theoretical framework for state success, which all other states and currencies throughout history have failed to do?
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ATThe trouble with MMT is political as well as economic. Any economic system has a context so any complete analysis of any economic theory needs to venture into political economy. It is clear that nearly all MMT proponents are left progressives as their main motivation is to analyse the failings of crony capitalism. Nevertheless, it remains the case under fiat, unrestricted credit creation has the potential to improve the productive economy through monetary policy, at least in the short term. It It also likely to be the case that central political control of the printing press by democratic forces (an illusion given the reality of the principal agent problem) will crowd out the more efficient private sector that ultimately drives growth through innovation. (What economists call supply side economics) Eventually MMT does nothing more than delivers a highly centralised and inefficient economic system that will not be far removed from the crony socialism that left progressive MMT supporters refuse to accept as their likely legacy, The trade-offs in economics have never been resolved by resorting to simplistic insights from either the left or right.
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RKDude is literally dangerous. Intelligent people can have idiotic ideas. What a perfect example. For god's sake study Austrian economics to see the consequences of these restarted ideas.
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PBThank you Ed & Warren! This was brilliant!
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ETAs long as people are still motivated to continue putting in the hours of labour to earn a $USD or accept the $USD as a form of payment for their time, everything is fine - and the govt. can continue running up the national debt (and I view perpetually increasing national debt where the debt is just rolled over indefinitely as an implicit form of MMT). As soon as that is no longer holds true - people stop seeing the "value" of the $USD because the govt has printed too many, then you have a problem. Only question is when does this "breaking" point occur? When does the currency become the next Venezuelan Bolivar, where the quantity simply loses meaning? (we know that Venezuela can add all the 0s it wants - no one even cares any more if the currency has three 0s at the end or six 0s.)
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AMI very much enjoyed this. A unique perspective that I don't share, but I managed to watch the whole interview. What happens if (or when) the general public realizes they don't actually need what the monopolist has? One can reasonably argue this is a low probability event, but it is not a zero probability event. Hence there is a fly in the ointment. I think the boat analogy is flawed. Engineering a boat is (I assume) 100% physics and mathematics. Engineering the world's monetary system is definitely not (enter Taleb quote here). The basic issue I have
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BAEd did a great job, once again. Love your work Ed.
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JCEd, questions to ask MMTers: 1. He keeps saying the gov't has monopolistic control of the price of its currency, but we live in a world of hundreds of monopolies that create their own currencies that derive their value in relation to each other on the FX markets, so doesn't that override the gov't control of the price (or value) of its own currency. Meaning, he's only right if the world was one gov't and one currency. Only then would it be able to control its value - until a black market currency arose as the people abandoned every cent in excess of the taxes they had to pay. 2. What happens to the bond market in a country that implements MMT? Why would the Treasury have to issue bonds if the gov't can spend its own currency into existence? And if there's no bonds, what would act as the collateral supporting the entire financial system, or provide the "risk-free" rate of safe returns? 3. If the gov't can give everyone a job via a guarantee or through its ability to issue its own currency, why would people have to work at all? Why not just send people money every month, or pay people to dig holes and then fill them back in? Doesn't a job need to be funded by the profits of a productive company that is only kept viable by the support of consumers buying their product or service?
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JSMMT just doesn't pass the smell test for me. Please invite Lacy Hunt to critique. My understanding is that he thinks it's a crock
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MMInteresting interview. There is just one thing I find very strange about MMT. The government is seen as being central of pumping money into the economy. The government spends without taxing first because the fed writes up the accounts and voila, you have money in the economy. But nothing is being said about the private sector creating money. Almost the whole money supply is being created by private banks extending loans. How can you have a theory without acknowledging that our money supply is created by the private banking sector? Does MMT accept this and do they just add the fact that the government also creates money when they do deficit spending? The idea that private banks create the money supply has now (after a long time) been acknowledged by the BoE, the ECB, the Bundesbank and the BIS. Is there any proof that the government actually doesn't collect taxes before it spends or is it just an assumption that MMT makes that seems to work in practice? MMT seems to explain a lot, but endogeneous money theory (like post-keynesian economics) who accept the fact that private banks create the money supply, can explain all the same things and is more scientifically supported in my opinion. Looking forward to feedback.
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KSAmazing --- I think you have to change the indoctrination of how you think US govt funds itself and how in reality it actually does. Mosler does a great job of debunking the narrative that governments that create their own money - are required to borrow first and then spend. How can someone lend a govt money in a currency it doesn't have? The government has to spend the money (jobs program, infrastructure spending) or just give it to the banks in reserves to get the money into the system in the first place. This false narrative about money creation has EVERYONE thinking about it the wrong way and it blinds you from seeing how the system really works. People that point to the Weimar Republic as why this can never work, completely miss the point that Germany had to pay reparations denominated in a currency that it didn't control. I agree with Mosler, questions are about fiscal policy and not monetary policy. Venezuela and Zimbabwe both show what can happen when bad fiscal policy is implemented - people should research both these countries and the reasons for their runaway inflation before assuming the same would happen in the US. I would love to see a tax break for labor, or govt guaranteed jobs program - these fiscal policies would put money in the hands of people who would spend it into the real economy and this in hand would stimulate growth.
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DSMr. Mosler: “But just doing that is not what creates Venezuela or Zimbabwe or Weimar. It's something else.” Mr. Harrison: “What is that something else?” Mr. Mosler like a good magician pointed at another shiny object and did not answer the question. DLS
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JJGreat perspective, although there are some main underlying assumptions I disagree with. Government does not spend first in order to tax. A simple look back in history disproves this. An economy can exist without a government or a federal reserve. How did our economy work and grow without the federal reserve and the printing press or government taxes? As the government grew, it took money from the economy. 2nd assumption is that government is in complete control of the money supply. I would live to hear from MMT proponents explaining how weimar, Zimbabwe, John law's France and every other key printing press hyperinflation episode is different than the fed's printing press. To me this is what happens when you have an industry whose only experience has been falling rates. This is what the end of cycles look like. The longer it lasts, the bigger the whiteout will be.
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BPRun fast. Voodoo economics
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PDModern Monetary Theory isn't modern*, has nothing to do with money** and isn't a cogent theory***. * Dates back to Georg Friedrich Knapp's state theory of money a century ago. ** Gold. *** The idea that you can give any group of people a printing press and that they will be able to control their spending defies historical evidence.
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SASo.....the government sets the days wage? The only way the government can contract the money supply is by taxing it? The unemployment rate is subject to change in definition (politically). It kind of sound like a utilitarian approach to fiscal policies. That "something else" that creates Zimbabwe is politics failing the people, like discounting a check and balance of a budget. The moment our politicians are given free rein to inject money to their personal projects without regard is the moment fiscal responsibility is lost. Inflation and supply/demand are real. When our supply of dollars has no demand, they will return.
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WMI wanted so much to hate this as soon as I heard the title (and only gagged once when Alexandria Ocasio Cortez name was mentioned). However, Warren made some interesting points (interest rates having less impact on housing than perhaps folks might believe) and valid points (about Japan not defaulting like many said was going to happen, and the European debt ratios / non consolidation of debt). He also appears to have a good track record with fixed income investments. It appears to me that a massive expansion of debt is coming, all over the West. Both Europe and the USA will try anything to avoid a recession of any significance which would likely flatten the markets and bust pension funds. So a QE for the people that focusses on infrastructure appears certain. The question for me is one of confidence. At what point will the rest of the world reject the US $ as a reserve currency potentially due to a soar debt. I agree it may not be soon but if it happens dollars will come flooding back either as liquidations or as purchases of US assets. US debt is on an exponent path today. It looks like it will be $30 trillion by 2025 or very much sooner if there is a recession. Adoption of MMT appears to me to just worsen this problem. It just feels like another "its different this time"......
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MHEdward: lose those shoes!
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SWMasterful deductive reasoning and mathematically consistent statements matter only in so far as the predicates to those are valid. Mr. Mosler has contestable predicates; these tend to get glossed over and buried by technical economic minutiae. Some objections: He states that one needs government money in order to have savings. Disagree. Savings are an excess of what one produces. I can have my savings in gold, silver, grain, farmland, houses, floor joists... Dollars are the most convenient and fungible vessel FOR NOW and for as long as I accept them as such. He states that government can simply employ the currently unemployed and obtain value. But this is very simplistic - it assumes employment is merely paying a person x$ for y hours of output. But output of what? How is that value determined? Wealth accrues because people produce "things" that others value and are willing to trade their produce for. Is wealth created by having X number of people dig holes and then fill them back in in perpetuity? No. I would never trade my produce for that; wealth is actually destroyed in that manner. Queue Bastiat here as well. He claims that a state somehow spontaneously arises and forces acceptance of monopoly money, rather than evolving from an extant functioning society and economy based upon exchange of real things (gold). He ignores that an accepted currency has value to a society only when certain conditions are met. Stable currency is a more desirable condition than mere barter for a number of reasons well stated elsewhere. But currency is not a precondition for trade or an economy, and a currency does not have value et ipso facto. He executes a sleight of hand by taking as a given that state assets (currency or bond) have value, and as such one can do A, B, C... AOC. Models fall apart when it's not a given.
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FAThe US has being doing a form of MMT for a very long time. Instead of just changing the digits in an account we've issued bonds that pay interest that will never be paid without issuing more bonds. Only difference is someone (who he calls people that already have money) are getting paid "digitized interest income". Many of the things Mosler discusses are how the "plumbing" works. We have already been practicing a bastardized form of MMT.
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JLoff topic: 6 month real vision subscription being offered for 1$ today, my mate just got a promotional email, personally I think everyone should know to assess their options looking forward (yes I paid a premium when prices were said to be rising and was instead dealt a 6 year subscription out to 2024)
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ELJust read your comment Ed about questions. This is very general question, but core to having a smoothly functioning society. How do we develop a system that allows us to produce what we need, when we need it while keeping everyone involved in the production process, in other words doing their share of the "work" and keep some from running away with the lions share of the "profits"?
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ELHello Ed, I found this piece to be really informative and for the first time I think I have heard the true description of Modern Monetary Theory. Thank you Ed, for bringing Warren Mosler on RV. Will have to re-listen to take it in on a deeper level. We will see how it finds or not it's way into the general consciousness and into our daily lives. And get job interviewing, Ed, as always.
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THTo me, there's nothing "modern" in the MMT. The first experiment started quite exactly 100 years ago. It seems that MMT is not necessarily that far from how the finances of the Soviet Union worked. There the state had privileged access to mispriced funds. Initially, the arrangement seemed to be working and there was full employment. However, quite soon it became evident, that the investments of the state were of poor quality and caused the loss of competitiveness. The economy was "zombified". Because the efficiency of the economy degraded, inflation was not a problem for a very long time. Some assets just became unreachable to the common people. The inflation became a problem only, when the rotted structures collapsed AFTER 70 YEARS! We know today for a fact, that cheap money poured into one sector of the economy causes that sector to become inefficient and its role in the economy gets out of proportion. QE caused this to financial sector and MMT will cause the same to the public sector. This kind of development can happen again. The scary part of this is, that it does not result as a rapid collapse of the economy, but as a slow rotting. Has any MMT advocate ever discussed this aspect? Do the MMT folks even acknowledge, that the missing hurdle rate for investments could be a problem?
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MEMMT would result in inflation and inflation would destroy the currency. MMT is not for reserve currency. If MMT was a magic bullet, how come it hasn’t worked for Japan????
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DSBuy Gold! DLS
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SAEarth shattering interview. Amazing!
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PUWow! I need to watch this again. I am not sure I want to share this, but my immediate thoughts were "master snake oil salesman" and even "antichrist". HOWEVER, I am not sure why these came to me. I really need to try to wrap my head around what he is saying. It goes against all of my prior understanding(s). I have an economics degree, an accounting degree, a masters in finance and this hurt my head.
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JBFrom 2008-2011 the MMT crowd were all saying how China was the best example of and the future of MMT for every country because of their infrastructure spending. When I was a lowly IAR in 2007-2008 and was just waking up during and after the 2008 financial crisis, I started researching MMT back then and became friends with a handful of really outspoken ones in the MMT community who hated Peter Schiff, Austrian School Economics, any form of capitalism, and anyone making a profit at all. Most of the MMTers back then were very hardcore socialists or Marxists. I am sure that they will disavow China as the model implementation of MMTm now that China is having immense problems just like how socialists, including Bernie Sanders, Jeremy Corbyn and Joseph Stiglitz have disavowed Venezuela as the mode for socialism. But, they were indeed praising Venezuela in 2008-2009 under Hugo Chavez. Same types of people. Bernie Sanders' main economic advisor is MMT (Stephanie Kelton). So the socialists see MMT as a means to an end.
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SLThis was a very good interview. I hope it helps illuminate the failings of MMT as an economic theory. True, it explains how fiat currency regime operate. But that is precisely the problem; it only applies to fiat currency regimes, which are inherently unstable. MMT does not have any wider applicability to monetary regimes or economies as such. Such is its failing as a theory. Furthermore, it incorrectly places the state at the center of economic activity. I don't think it's an accident that Mr. Mosler notes that Marx was misunderstood a couple of times. Really?! Mr. Mosler is no dummy, but I think he (and all MMT proponents) simply misunderstand central planning's place in economics. It's no coincident that all previously existing fiat currency regimes failed. Centralized systems (monetary or fiscal) are unstable systems. I'd expect disciples of Minsky to know better. Perhaps their technocratic desires have blinded them.
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RPLooking forward to the comments section outrage today ;-)
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RMWow - great interview! Mr Mosler is obviously a very intelligent and sophisticated individual (and seemed like a very enjoyable character!) and explained MMT quite well. I still did not understand all the nuances of it but at least I have some broad based knowledge of the concept now. Still don't think it will work with our economic system or just the general behavior of human beings when presented with "free cash", but it is an interesting theory. [Also, Mr Mosler had a great analysis of the European/Euro situation.] Ed, thanks for bringing this to us and your great questions in trying to flesh this out!
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KCThe problem with all economic theory is that it is perverted to support government's goal of growing itself at the expense of the freedoms of the governed. Look first to the assumptions used in the various theories. MMT assumes that people will hold their government currency beyond what is required to pay the taxes owed. The loss of in the confidence in the currency happens quickly and the people will hold balances in anything but that currency. Zimbabwe, and Venezuela being the most recent examples.
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ARYou should have asked Mr. Mosler about where MMT sets the policy rate. His words exactly: "I would make the current zero interest rate policy permanent. This minimizes cost pressures on output, including investment, and thereby helps to stabilize prices." -Warren Mosler This would cause the mother of all asset bubbles. MMT is wholly silent on this glaring hole in their theory.
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LJThe problem i have with "negative interest rates is a tax on the rich" is that it's simply not because the rich don't have cash they have assets that grow in value simply because of the fact that money loses value. Smart guy but i feel like alot of his arguments are completely flawed and naïve.
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BJI think the RBA need to listen to this interview so they understand how shit works
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BJThis is very interesting, has changed my view on how I see a lot of things in regards to central banks.
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TEVery enlightening. I need to digest this for a bit..
WARREN MOSLER: I've described myself as a long time insider of monetary operations.
I was isolated at the time with that opinion, it was entire trading desk. I'd been there a year, everybody else dismissed it. Just a basic understanding of the logic behind the currency was something I was interested in very early.
The currency itself is a simple public monopoly. So, if somebody says to me, how do we pay for the Green New Deal? I said, well, Congress appropriates the money. And then the Treasury instructs the Fed to credit the appropriate accounts. And that's how it's paid for. And then the Green New Deal people go, yeah, that.
The cause of unemployment by design is taxation, for the further purpose of the government provisioning itself.
ED HARRISON: I'm really excited for this next interview with Warren Mosler, who I would call the godfather of modern monetary theory. He's really the individual who started the whole movement. The question is, is this economics theory, what is it? I know that Warren Mosler has described it as monetary operations, but what is it really? What can we do with it in terms of policy? What can we do with it in terms of investing? That's what we hope to get out of this next segment. We hope you'll like it. Let's get right to Warren.
Warren Mosler, it's very good to have you here at our studios in Real Vision, been trying to talk to you about MMT for a very long time, I think we're going to end up calling you the godfather of MMT for this particular video. And I wanted to start with, because MMT is a really hot topic now. And you were the progenitor of MMT? Are you very excited about the fact that it's been getting a lot of press? Or do you think that it's been misrepresented in the press, and that's giving you a difficult time?
WARREN MOSLER: Yeah. Well, I'm very pleased that it's gotten there at all. And yes, it gets misrepresented around the edges. And that's always going to happen, I can imagine Marx and Keynes feel much the same way about what's happened to it. But they've said and that's the way things are, that's the way the world works. But we've got a lot of good MMT proponents, they're called, people like Stephanie Kelton, Randy Ray, and Bill Mitchell, Carson or probably somebody else I should be naming but who've been with me for over 25 years, trying to get the word out, doing the research, writing the papers, and they're out there doing the best they can to keep the message on message and just very pleased with the way it's been going.
ED HARRISON: I was telling you before that