1 00:00:10,560 --> 00:00:14,280 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,320 --> 00:00:18,959 Speaker 1: I'm Joe Wisenfal and I'm Tracy Alloway. Tracy, have you 3 00:00:19,079 --> 00:00:26,000 Speaker 1: noticed that there is a lot of talk about MMT lately? No? No, Joe, 4 00:00:26,000 --> 00:00:31,200 Speaker 1: I haven't noticed. What's what's MMT? No, it seems like, um, 5 00:00:31,200 --> 00:00:34,880 Speaker 1: hardly a day goes by where someone doesn't weigh in MMT. 6 00:00:35,440 --> 00:00:38,840 Speaker 1: It stands for modern monetary theory. It's say, I guess, 7 00:00:38,840 --> 00:00:42,360 Speaker 1: a a school of economic thought that's exploding uh in 8 00:00:42,479 --> 00:00:47,560 Speaker 1: popularity right now, very much online. And it's a kind 9 00:00:47,560 --> 00:00:50,000 Speaker 1: of complicated. There's a lot to it, but I think 10 00:00:50,000 --> 00:00:52,600 Speaker 1: the gist is that people get really excited about is 11 00:00:52,840 --> 00:00:56,240 Speaker 1: sort of rethinking our approach to deficits. So I think 12 00:00:56,280 --> 00:01:01,080 Speaker 1: the mainstream discourse government deficits are seen as bad or 13 00:01:01,120 --> 00:01:04,319 Speaker 1: maybe sometimes a necessary evil is something to be avoided. 14 00:01:04,880 --> 00:01:06,920 Speaker 1: And there's a lot more to it, but I think 15 00:01:07,000 --> 00:01:10,319 Speaker 1: it hard it's this view like no deficits and government 16 00:01:10,319 --> 00:01:12,280 Speaker 1: debt isn't the same as regular debt. We don't have 17 00:01:12,319 --> 00:01:16,560 Speaker 1: to be afraid of it. Yeah, and MMT by complete coincidence. 18 00:01:16,600 --> 00:01:20,199 Speaker 1: I'm sure it could also be interpreted as many macro 19 00:01:20,400 --> 00:01:24,760 Speaker 1: economists talking, which is what it has effectively become. Right, Like, 20 00:01:24,840 --> 00:01:29,200 Speaker 1: there is so much discourse about this particular topic, and 21 00:01:29,240 --> 00:01:31,720 Speaker 1: it's kind of weird to observe because you think, oh, 22 00:01:31,800 --> 00:01:35,520 Speaker 1: it's a relatively obscure economic theory. But I think what 23 00:01:35,640 --> 00:01:38,600 Speaker 1: gets people really excited about it is that it's in 24 00:01:38,640 --> 00:01:42,360 Speaker 1: an economic theory that essentially comes with a sort of 25 00:01:42,480 --> 00:01:46,679 Speaker 1: view of what the world is or how the world 26 00:01:46,720 --> 00:01:50,960 Speaker 1: should be, and also policy implications. So people get really 27 00:01:51,160 --> 00:01:54,320 Speaker 1: really riled up about this particular topic. I had never 28 00:01:54,400 --> 00:01:57,360 Speaker 1: heard that acronym any macro economists talking. I had heard 29 00:01:57,400 --> 00:02:03,040 Speaker 1: a magical money tree? Is it another? Uh, another pejorative 30 00:02:03,720 --> 00:02:06,120 Speaker 1: acronym for it? But I think you're right, and you know, 31 00:02:06,160 --> 00:02:09,760 Speaker 1: it's interesting. There are multiple parallels I think to bitcoin 32 00:02:09,840 --> 00:02:13,400 Speaker 1: actually in the sense like seventeen, all these sort of 33 00:02:13,720 --> 00:02:17,400 Speaker 1: old like, sort of mainstream people in banking and finance 34 00:02:17,639 --> 00:02:20,480 Speaker 1: were asked to comment about bitcoin, even though it never 35 00:02:20,560 --> 00:02:22,680 Speaker 1: got I never got any impression that they had even 36 00:02:22,760 --> 00:02:24,920 Speaker 1: understood what it is, and they all thought it was awful. 37 00:02:25,639 --> 00:02:29,160 Speaker 1: And now this year we're seeing the same with MMT 38 00:02:29,840 --> 00:02:32,440 Speaker 1: in the sense that a lot of people are criticizing 39 00:02:32,480 --> 00:02:35,680 Speaker 1: in saying, oh, if we adopt this we're gonna end 40 00:02:35,760 --> 00:02:38,200 Speaker 1: up like Zimbabwe or Venezuela. But it's not really clear 41 00:02:38,240 --> 00:02:41,280 Speaker 1: that they've actually put in any effort into learning about 42 00:02:41,280 --> 00:02:43,280 Speaker 1: what it is. And the other thing, I think that 43 00:02:43,520 --> 00:02:46,880 Speaker 1: parallel and you think about like why now both bitcoin 44 00:02:47,040 --> 00:02:50,880 Speaker 1: and MMT sort of post crisis rethinking of like what 45 00:02:50,960 --> 00:02:52,919 Speaker 1: money is And a lot of people are frustrated with 46 00:02:52,960 --> 00:02:59,320 Speaker 1: the economy, inequality, bankers, austerity, and so I think that 47 00:02:59,520 --> 00:03:02,600 Speaker 1: the frust straation with the post crisis period has sort 48 00:03:02,600 --> 00:03:06,679 Speaker 1: of opened the door for new ideas to take root 49 00:03:06,720 --> 00:03:10,200 Speaker 1: and gather steam and force the old guard to defend 50 00:03:10,200 --> 00:03:12,160 Speaker 1: the existing system in a way they're not used to. 51 00:03:12,600 --> 00:03:15,359 Speaker 1: Totally agree, and Bitcoin and m m T are sort 52 00:03:15,400 --> 00:03:19,320 Speaker 1: of two sides of a similar coin. I would say 53 00:03:19,320 --> 00:03:22,480 Speaker 1: Bitcoin is a question about whether or not a government 54 00:03:22,480 --> 00:03:26,079 Speaker 1: should have monopoly over money, and mm T is sort 55 00:03:26,120 --> 00:03:29,119 Speaker 1: of the implications of what happens when a government does 56 00:03:29,160 --> 00:03:32,840 Speaker 1: have monopoly over the money system. So I'm excited to 57 00:03:32,880 --> 00:03:35,200 Speaker 1: talk about this one. We will add to the MMT 58 00:03:35,480 --> 00:03:40,040 Speaker 1: many macro economists talking move in this particular episode. Yes, 59 00:03:40,160 --> 00:03:42,560 Speaker 1: and I mentioned that with both of the topics, I 60 00:03:42,680 --> 00:03:46,600 Speaker 1: felt like there was this phenomenon where everyone grabbed someone 61 00:03:46,640 --> 00:03:49,200 Speaker 1: on the stage and they said, what's your opinion on this? 62 00:03:49,800 --> 00:03:52,280 Speaker 1: And even if it's not clear that the person did 63 00:03:52,320 --> 00:03:54,640 Speaker 1: any idea what they're talking about, for some reason, they 64 00:03:54,680 --> 00:03:57,400 Speaker 1: will listened to. So today we're actually going to talk 65 00:03:57,480 --> 00:04:00,440 Speaker 1: to someone who has been a critic of MMT, but 66 00:04:00,800 --> 00:04:04,880 Speaker 1: unlike most critics, uh, he actually understands it well and 67 00:04:05,320 --> 00:04:07,560 Speaker 1: at one point he was more of an endherent of it. 68 00:04:08,080 --> 00:04:11,360 Speaker 1: And I first discovered MMT back and I think two 69 00:04:11,400 --> 00:04:16,679 Speaker 1: thousand nine by reading his blog. So yeah, very way 70 00:04:16,800 --> 00:04:20,360 Speaker 1: early adopters. So I am excited that on this week's 71 00:04:20,400 --> 00:04:23,440 Speaker 1: episode we have Cullen Roach. He is the founder of 72 00:04:23,560 --> 00:04:26,560 Speaker 1: Orkham Financial. A lot of people know him as the 73 00:04:26,600 --> 00:04:30,920 Speaker 1: author of the very popular finance blog Pragmatic Capitalist. Like 74 00:04:30,960 --> 00:04:33,720 Speaker 1: I said, I first discovered m MT through him in 75 00:04:33,760 --> 00:04:36,080 Speaker 1: two thousand nine. Now he's a bit of a critic, 76 00:04:36,120 --> 00:04:38,719 Speaker 1: but he understands it very well. Uh, Colin, thank you 77 00:04:38,800 --> 00:04:42,280 Speaker 1: very much for joining us. Hey, guys, thanks for having me. 78 00:04:42,600 --> 00:04:46,200 Speaker 1: So it's pretty extraordinary how much talk MMT is getting 79 00:04:46,240 --> 00:04:48,400 Speaker 1: these days, given that it was just you know, you 80 00:04:48,440 --> 00:04:51,520 Speaker 1: were just one of hardly anyone A handful of people 81 00:04:51,560 --> 00:04:55,440 Speaker 1: writing about it about ten years ago. Uh, why don't 82 00:04:55,440 --> 00:04:58,119 Speaker 1: you start off by saying, sort of in your view, 83 00:04:58,640 --> 00:05:02,159 Speaker 1: what attracted you to this framework of thinking about the 84 00:05:02,200 --> 00:05:06,640 Speaker 1: economy way back then? Yeah? So you know, gosh, coming 85 00:05:06,640 --> 00:05:09,560 Speaker 1: out of the financial crisis, I think what a lot 86 00:05:09,600 --> 00:05:13,080 Speaker 1: of people were looking for was answers about how things 87 00:05:13,160 --> 00:05:17,440 Speaker 1: worked because the world seemed so dysfunctional back then that 88 00:05:17,600 --> 00:05:19,400 Speaker 1: I think, especially a lot of us in the UH 89 00:05:19,760 --> 00:05:22,520 Speaker 1: in finance and economics, we were sort of rethinking the 90 00:05:22,560 --> 00:05:24,400 Speaker 1: way that we had been trained about a lot of 91 00:05:24,400 --> 00:05:27,480 Speaker 1: things and better trying to develop a model for for 92 00:05:27,520 --> 00:05:32,080 Speaker 1: better understanding the world basically. And the thing about MMT 93 00:05:33,040 --> 00:05:37,000 Speaker 1: is that it has a very precise descriptive aspect to it, 94 00:05:37,160 --> 00:05:41,160 Speaker 1: and they do in general a much better job of 95 00:05:41,200 --> 00:05:45,640 Speaker 1: describing how the financial system actually works. So the big 96 00:05:45,680 --> 00:05:49,320 Speaker 1: thing for me was in particular it was banking. They 97 00:05:49,400 --> 00:05:52,640 Speaker 1: understand banking extremely well, so all the post Kaynesians do. 98 00:05:52,720 --> 00:05:56,800 Speaker 1: The The mm T people are a strand of the 99 00:05:56,880 --> 00:06:00,760 Speaker 1: post Kaynesian school, and all of the post Keynesians have 100 00:06:00,800 --> 00:06:03,640 Speaker 1: a very solid understanding of banking because they understand and 101 00:06:03,720 --> 00:06:06,480 Speaker 1: dodges this money. Basically, the and dodged his money is 102 00:06:06,520 --> 00:06:09,599 Speaker 1: the concept that essentially banks create money from thin air. 103 00:06:09,640 --> 00:06:12,560 Speaker 1: They don't. They don't lend out their deposits, they don't 104 00:06:12,640 --> 00:06:15,279 Speaker 1: lend out their reserves. The central bank doesn't control the 105 00:06:15,320 --> 00:06:19,880 Speaker 1: money supply. Really, the banking system itself is indodgingus. It 106 00:06:20,320 --> 00:06:24,480 Speaker 1: literally can control the supply of money that is existent 107 00:06:25,120 --> 00:06:27,400 Speaker 1: at any given time. And this was really crucial to 108 00:06:27,480 --> 00:06:32,480 Speaker 1: understand coming out of the financial crisis, because at its heart, 109 00:06:32,640 --> 00:06:35,320 Speaker 1: the financial crisis was a banking crisis. It was a 110 00:06:35,320 --> 00:06:38,960 Speaker 1: crisis of too much credit, too much money being extended 111 00:06:38,960 --> 00:06:43,440 Speaker 1: by banks too you know, finance homes that people couldn't afford, 112 00:06:44,240 --> 00:06:48,800 Speaker 1: and when everything deflated, the central bank then responded with 113 00:06:48,839 --> 00:06:52,320 Speaker 1: all these big actions. And the interesting thing at that 114 00:06:52,400 --> 00:06:57,039 Speaker 1: time was that a lot of mainstream macro models said 115 00:06:57,040 --> 00:06:59,600 Speaker 1: that what the central bank was doing, through things like 116 00:06:59,680 --> 00:07:03,359 Speaker 1: q E and whatnot, we're going to potentially cause hyper inflation. 117 00:07:03,560 --> 00:07:08,000 Speaker 1: And understanding MMP and in Dodge's money was really important 118 00:07:08,040 --> 00:07:12,280 Speaker 1: because if you understood that that's not how things actually work. 119 00:07:12,600 --> 00:07:16,160 Speaker 1: You understood basically that if the central bank flooded the 120 00:07:16,160 --> 00:07:20,120 Speaker 1: banking system with reserves, it wouldn't necessarily cause banks to 121 00:07:20,280 --> 00:07:22,640 Speaker 1: lend more. And in fact, if the lending system and 122 00:07:22,680 --> 00:07:26,600 Speaker 1: the demand side of it was dysfunctional that banks wouldn't 123 00:07:26,680 --> 00:07:29,880 Speaker 1: lend more and it actually wouldn't cause high inflation. And 124 00:07:29,920 --> 00:07:33,960 Speaker 1: so from a market practitioner's perspective, that was a huge, 125 00:07:34,400 --> 00:07:38,080 Speaker 1: huge advantage to have by understanding the impact on financial 126 00:07:38,120 --> 00:07:41,240 Speaker 1: markets and bond markets in particular. And so that was 127 00:07:41,320 --> 00:07:45,200 Speaker 1: really my general attraction was that the post Kanesian schools 128 00:07:45,200 --> 00:07:49,040 Speaker 1: in general just have a better, a really more sensible 129 00:07:49,120 --> 00:07:53,200 Speaker 1: operational description of how things work. So Colin, I want 130 00:07:53,240 --> 00:07:55,040 Speaker 1: to dig into this point because I think a lot 131 00:07:55,080 --> 00:07:58,160 Speaker 1: of people won't remember that, you know, in the aftermath 132 00:07:58,200 --> 00:08:03,840 Speaker 1: of the two financial crisis, just how revolutionary or different 133 00:08:04,120 --> 00:08:08,440 Speaker 1: that idea was. When central banks around the world started 134 00:08:08,480 --> 00:08:13,400 Speaker 1: doing quantitative easing. I mean, the sort of common take 135 00:08:13,560 --> 00:08:15,880 Speaker 1: on that was that it was going to lead to 136 00:08:16,400 --> 00:08:20,120 Speaker 1: hyper inflation. And I will admit I remember writing up 137 00:08:20,160 --> 00:08:23,840 Speaker 1: some analyst notes that said exactly that, what was it 138 00:08:24,400 --> 00:08:28,640 Speaker 1: about practitioners of mm T, like, what did they see 139 00:08:29,120 --> 00:08:32,800 Speaker 1: that other people didn't? Well, I think it's that they 140 00:08:32,880 --> 00:08:35,960 Speaker 1: just had a They have a better understanding of how 141 00:08:36,080 --> 00:08:40,480 Speaker 1: banks actually work. So banks don't take their reserves from 142 00:08:40,520 --> 00:08:42,880 Speaker 1: central banks and actually lend them out. In fact, they 143 00:08:42,920 --> 00:08:45,960 Speaker 1: can't lend them out to non banks, and so people 144 00:08:46,040 --> 00:08:49,920 Speaker 1: who understood that operational aspect knew that if you added 145 00:08:49,960 --> 00:08:53,080 Speaker 1: a trillion dollars of reserves to the banking system, that 146 00:08:53,160 --> 00:08:58,520 Speaker 1: wouldn't be multiplied into you know, ten trillion dollars of money, 147 00:08:58,600 --> 00:09:02,280 Speaker 1: as the money multiply UH tells us. The money multiplier 148 00:09:02,400 --> 00:09:06,679 Speaker 1: is basically a great, big myth, and the indogenous money people, 149 00:09:07,240 --> 00:09:10,280 Speaker 1: they all understood that. And so, you know, it's interesting 150 00:09:10,360 --> 00:09:14,400 Speaker 1: for me because I I don't have a specifically a 151 00:09:14,400 --> 00:09:16,840 Speaker 1: banking background, but I know enough people in banking and 152 00:09:16,840 --> 00:09:19,280 Speaker 1: have worked with enough people in banking that and done 153 00:09:19,360 --> 00:09:21,960 Speaker 1: enough work with bankers that I have a pretty solid 154 00:09:22,040 --> 00:09:25,400 Speaker 1: understanding of how banking actually works. And so what I 155 00:09:25,440 --> 00:09:28,719 Speaker 1: was hearing from MMT and the post Kaynesians and the 156 00:09:28,880 --> 00:09:33,200 Speaker 1: theoretical side of things was being exactly relayed to me 157 00:09:33,280 --> 00:09:36,160 Speaker 1: when I was talking to people on the operational side 158 00:09:36,160 --> 00:09:38,640 Speaker 1: of things, and in particular, I was talking to a 159 00:09:38,640 --> 00:09:42,439 Speaker 1: lot of people in Japan market analysts who had been 160 00:09:42,480 --> 00:09:45,760 Speaker 1: through the various iterations of KWI and the two thousands, 161 00:09:46,080 --> 00:09:48,600 Speaker 1: and they laid out the accounting framework for me, and 162 00:09:48,640 --> 00:09:50,520 Speaker 1: I was kind of relaying what I was reading in 163 00:09:50,559 --> 00:09:53,000 Speaker 1: the theoretical works from the post Kaynesians and the m 164 00:09:53,080 --> 00:09:56,520 Speaker 1: MT people relaying it to these guys, and they were saying, yes, 165 00:09:56,600 --> 00:10:00,200 Speaker 1: this is exactly how this works, and the outcome will 166 00:10:00,200 --> 00:10:03,760 Speaker 1: be primarily the opposite of what a lot of people 167 00:10:03,800 --> 00:10:05,840 Speaker 1: are saying. You know, all the analysts that I was 168 00:10:05,880 --> 00:10:09,120 Speaker 1: talking to in Tokyo, they were saying, Cullen, this thing 169 00:10:09,200 --> 00:10:13,000 Speaker 1: does this program quantitative easing, it does the exact opposite 170 00:10:13,000 --> 00:10:15,120 Speaker 1: of what all of you Americans seem to think it does. 171 00:10:15,520 --> 00:10:18,920 Speaker 1: It is more likely to cause deflation, cause interest rates 172 00:10:18,960 --> 00:10:22,439 Speaker 1: to stay low, rather than cause interest rates to rise 173 00:10:22,480 --> 00:10:26,839 Speaker 1: and cause hyperinflation. And so the theoretical framework matched up 174 00:10:26,840 --> 00:10:31,000 Speaker 1: exactly with the practitioners accounting and explanations of how these 175 00:10:31,000 --> 00:10:33,679 Speaker 1: things actually work. And so that was around the time 176 00:10:33,720 --> 00:10:38,080 Speaker 1: when I was becoming a very vocal proponent of you know, 177 00:10:38,120 --> 00:10:40,600 Speaker 1: in retrospect, I wasn't, you know, to be fair to 178 00:10:40,640 --> 00:10:43,440 Speaker 1: the m m T people, I wasn't exactly explaining their 179 00:10:43,480 --> 00:10:47,120 Speaker 1: theory correctly. I was explaining components of it correctly, mainly 180 00:10:47,160 --> 00:10:51,440 Speaker 1: the endogenous money component and the the sovereign money component 181 00:10:51,480 --> 00:10:53,520 Speaker 1: of it. To me, was also very attractive because the 182 00:10:53,800 --> 00:10:57,040 Speaker 1: flip side of this is, well, okay, if the if 183 00:10:57,040 --> 00:10:59,840 Speaker 1: the government might not cause inflation, couldn't it cause us 184 00:10:59,840 --> 00:11:03,120 Speaker 1: to go bankrupt? And that also was something that to 185 00:11:03,280 --> 00:11:06,160 Speaker 1: me didn't make a lot of sense. And so the 186 00:11:06,280 --> 00:11:08,640 Speaker 1: m m T people seem to have a better explanation 187 00:11:08,760 --> 00:11:12,240 Speaker 1: of Hey, yeah, we can print our own money, but 188 00:11:12,320 --> 00:11:14,720 Speaker 1: we also can't go bankrupt in a money that we 189 00:11:14,760 --> 00:11:17,560 Speaker 1: can print. You explained this, So this is where I 190 00:11:17,600 --> 00:11:20,679 Speaker 1: was gonna go. So in the intro I mentioned that 191 00:11:20,720 --> 00:11:24,600 Speaker 1: I think most people when they think of MMT, either 192 00:11:24,679 --> 00:11:27,560 Speaker 1: whether they really have no idea or some idea, they 193 00:11:27,640 --> 00:11:31,079 Speaker 1: really think a lot about this idea of rethinking deficits 194 00:11:31,080 --> 00:11:34,480 Speaker 1: and rethinking fiscal sustainability. And of course, the other thing 195 00:11:34,520 --> 00:11:37,680 Speaker 1: that happened post crisis is our deficits in the US 196 00:11:37,760 --> 00:11:41,640 Speaker 1: and elsewhere exploded because tax revenues dropped. There was a 197 00:11:41,640 --> 00:11:45,640 Speaker 1: physical stimulus, automatic stabilizers kicked in, and there was a 198 00:11:45,679 --> 00:11:48,760 Speaker 1: lot of handwringing about the size of the deficit and 199 00:11:48,800 --> 00:11:52,960 Speaker 1: can we afford stimulus, and some countries adopted austerity and 200 00:11:53,000 --> 00:11:57,600 Speaker 1: we kind of did too after in But that's the 201 00:11:57,679 --> 00:12:01,160 Speaker 1: other component besides the banking system. A sort of explained 202 00:12:01,200 --> 00:12:06,400 Speaker 1: to us that link between the endogenous money characterization of 203 00:12:06,400 --> 00:12:10,280 Speaker 1: how the banking system works, and also the MMT view 204 00:12:10,600 --> 00:12:15,240 Speaker 1: on UH deficit or death sustainability. Well, there are almost 205 00:12:15,280 --> 00:12:18,400 Speaker 1: two different components in m m T. They really are 206 00:12:18,440 --> 00:12:20,840 Speaker 1: and mean the mm T people describe it as basically 207 00:12:20,960 --> 00:12:24,600 Speaker 1: vertical and horizontal money, and so the there are really 208 00:12:24,640 --> 00:12:28,440 Speaker 1: two different money systems in the in the MMT world, 209 00:12:28,480 --> 00:12:32,240 Speaker 1: where the government issues what is essentially the real stuff, 210 00:12:32,280 --> 00:12:37,120 Speaker 1: the stuff that you settle your taxes in basically reserves, currency, coin, 211 00:12:37,760 --> 00:12:41,720 Speaker 1: um and even treasury bonds to some degree are I know, 212 00:12:41,760 --> 00:12:43,920 Speaker 1: the MMT people don't like to use the word money, 213 00:12:43,960 --> 00:12:48,359 Speaker 1: but they they are essentially what what a mainstream economist 214 00:12:48,400 --> 00:12:51,280 Speaker 1: would think of as money in the MMT world, and 215 00:12:52,000 --> 00:12:54,920 Speaker 1: so you have kind of two different money systems where 216 00:12:54,960 --> 00:12:59,239 Speaker 1: the banking system is basically using it's issuing an IOU 217 00:12:59,520 --> 00:13:05,360 Speaker 1: for the real thing, and so households and basically the 218 00:13:05,440 --> 00:13:09,440 Speaker 1: non government sector they can create money like instruments that 219 00:13:09,520 --> 00:13:13,280 Speaker 1: are denominated and say dollars, but they're not the real thing. 220 00:13:13,520 --> 00:13:16,839 Speaker 1: They're not what you ultimately settle your your tax payments with, 221 00:13:17,000 --> 00:13:19,760 Speaker 1: or or what you basically what you have to pay 222 00:13:19,800 --> 00:13:21,640 Speaker 1: the government at the end of the day. With and 223 00:13:21,679 --> 00:13:26,040 Speaker 1: so that is important because the government can't run out 224 00:13:26,040 --> 00:13:30,160 Speaker 1: of the thing that it actually issues, so whereas the 225 00:13:30,200 --> 00:13:32,839 Speaker 1: rest of us we can. You know, a household can 226 00:13:32,920 --> 00:13:35,400 Speaker 1: run out of out of income, it can run out 227 00:13:35,440 --> 00:13:37,480 Speaker 1: of money, it can run out of people who are 228 00:13:38,120 --> 00:13:42,600 Speaker 1: basically a willing counter party in the relationship. I mean, 229 00:13:42,640 --> 00:13:45,200 Speaker 1: I can't always find a bank that I want to 230 00:13:45,240 --> 00:13:49,400 Speaker 1: be my counterparty in a loan, whereas the government A 231 00:13:49,640 --> 00:13:52,440 Speaker 1: and M M. T uses this the word sovereign and 232 00:13:52,480 --> 00:13:53,720 Speaker 1: what I would say is a little bit of a 233 00:13:53,760 --> 00:13:56,920 Speaker 1: slippery way, but in general it's a for a developed 234 00:13:57,200 --> 00:14:01,000 Speaker 1: and diverse economy that doesn't borrow in a in a 235 00:14:01,040 --> 00:14:03,880 Speaker 1: foreign currency, it's a generally accurate term to call it 236 00:14:04,000 --> 00:14:08,280 Speaker 1: a sovereign currency, basically meaning that they can't run out 237 00:14:08,320 --> 00:14:11,320 Speaker 1: of the money that they alone can create. And so 238 00:14:11,400 --> 00:14:15,040 Speaker 1: there I think Stephanie Kelton has said before that the 239 00:14:15,360 --> 00:14:18,719 Speaker 1: government's deficit is essentially self financing, in the sense that 240 00:14:19,240 --> 00:14:24,360 Speaker 1: the government doesn't need to find sources of financing to 241 00:14:23,800 --> 00:14:45,560 Speaker 1: to basically issue new money. So um, this is probably 242 00:14:45,560 --> 00:14:48,640 Speaker 1: where the policy implications start to come in. But before 243 00:14:48,680 --> 00:14:52,080 Speaker 1: we get to that, I want to ask a question 244 00:14:52,400 --> 00:14:54,520 Speaker 1: that you often here or you know, make a point 245 00:14:54,560 --> 00:14:57,080 Speaker 1: that a lot of people often bring up, and that's 246 00:14:57,160 --> 00:15:01,640 Speaker 1: the idea that yes, okay, a governments are in some 247 00:15:01,720 --> 00:15:06,880 Speaker 1: way self financing, and their deficits can sort of go 248 00:15:07,680 --> 00:15:09,600 Speaker 1: as high as they want them to go, and the 249 00:15:09,640 --> 00:15:14,120 Speaker 1: only upper constraint on that is the inflation rate. But 250 00:15:14,200 --> 00:15:16,520 Speaker 1: then a lot of people come in and ask, well, 251 00:15:16,720 --> 00:15:21,640 Speaker 1: our governments that already have high deficits de facto mm T. 252 00:15:21,960 --> 00:15:23,640 Speaker 1: So if you look at the US, I mean, I 253 00:15:23,640 --> 00:15:26,480 Speaker 1: think the budget there is supposed to get to one 254 00:15:26,480 --> 00:15:29,520 Speaker 1: trillion in the next year or two. Japan has been 255 00:15:29,600 --> 00:15:32,480 Speaker 1: running sort of persistent budget deficits for a long time. 256 00:15:33,160 --> 00:15:36,880 Speaker 1: Are those countries, those systems already m m T or 257 00:15:36,960 --> 00:15:40,120 Speaker 1: is there something people mean about mm T as an 258 00:15:40,120 --> 00:15:44,040 Speaker 1: economic theory that is different to just a big deficit. Yeah, 259 00:15:44,120 --> 00:15:49,480 Speaker 1: So I think that the the MMT specific theory of 260 00:15:49,520 --> 00:15:54,160 Speaker 1: the world is very different than the the world that 261 00:15:54,200 --> 00:15:56,720 Speaker 1: we see in most of these economies. So running a 262 00:15:56,760 --> 00:15:59,360 Speaker 1: big deficit is I mean, to me, that's just sort 263 00:15:59,400 --> 00:16:04,000 Speaker 1: of it. It's basically mainstream macro canesie and econ. I mean, 264 00:16:04,480 --> 00:16:06,560 Speaker 1: most of what you see with the deficit is sort 265 00:16:06,600 --> 00:16:09,600 Speaker 1: of an EBB and flow in a countercyclical way. So 266 00:16:10,240 --> 00:16:12,760 Speaker 1: you know, we've all kind of become Canesians in the 267 00:16:12,840 --> 00:16:18,920 Speaker 1: sense that you always see countercyclical deficits. Nobody becomes an 268 00:16:18,920 --> 00:16:22,440 Speaker 1: advocate of budget surpluses during periods like two thousand and eight. 269 00:16:22,440 --> 00:16:24,320 Speaker 1: It just doesn't happen. In fact, we've set up our 270 00:16:24,360 --> 00:16:28,520 Speaker 1: policies so that we basically automatically have larger deficits because 271 00:16:28,560 --> 00:16:32,040 Speaker 1: of automatic stabilizers that are in effect automatic spending programs 272 00:16:32,040 --> 00:16:35,000 Speaker 1: and automatic cuts and taxes that cause the deficit to 273 00:16:35,040 --> 00:16:39,160 Speaker 1: expand when the economy contracts. But MMT is much more 274 00:16:39,240 --> 00:16:41,680 Speaker 1: specific in that, and I think this is the thing. 275 00:16:42,080 --> 00:16:44,640 Speaker 1: The thing that I misunderstood about MT when I first 276 00:16:44,640 --> 00:16:47,920 Speaker 1: came across it was this fact was that MMT is 277 00:16:48,040 --> 00:16:52,280 Speaker 1: specifically different from mainstream macro in that it is a 278 00:16:52,320 --> 00:16:56,440 Speaker 1: buffer stock of employment theory. And what that means is 279 00:16:56,480 --> 00:17:00,520 Speaker 1: that basically, the way that mainstream macro use things, in 280 00:17:00,560 --> 00:17:03,560 Speaker 1: the way that a capitalist economy essentially works, is that 281 00:17:03,920 --> 00:17:06,800 Speaker 1: you have a buffer stock of unemployed people, and that 282 00:17:07,359 --> 00:17:11,760 Speaker 1: in mainstream macro is the it's the buffer through which 283 00:17:11,800 --> 00:17:16,240 Speaker 1: you control inflation. Basically, the the number of unemployed people 284 00:17:16,320 --> 00:17:19,879 Speaker 1: to some degree is the thing that keeps inflation low, 285 00:17:20,480 --> 00:17:23,800 Speaker 1: so you always have a certain number of I mean, 286 00:17:23,840 --> 00:17:26,440 Speaker 1: for instance, today people are saying we're at full employment, 287 00:17:26,480 --> 00:17:29,720 Speaker 1: and the unemployment rate is you know what, By some measures, 288 00:17:29,720 --> 00:17:32,959 Speaker 1: it's it's seven eight percent, by other measures it's you know, 289 00:17:33,359 --> 00:17:39,480 Speaker 1: three to you know whatever, five, depending on which number prefer. So, 290 00:17:40,480 --> 00:17:42,880 Speaker 1: but there are still a lot of unemployed people out 291 00:17:42,880 --> 00:17:46,120 Speaker 1: there by any measure. And you have mainstream macro economists 292 00:17:46,119 --> 00:17:48,440 Speaker 1: who are saying that the economy is operating out or 293 00:17:48,520 --> 00:17:50,600 Speaker 1: near full employment, which is a weird thing to think 294 00:17:50,600 --> 00:17:54,120 Speaker 1: of because really what they're saying is that we're operating 295 00:17:54,359 --> 00:17:58,960 Speaker 1: at a rate of employment where inflation is not high 296 00:17:59,200 --> 00:18:03,080 Speaker 1: or or worrisome to a large degree. So there's a 297 00:18:03,119 --> 00:18:06,680 Speaker 1: buffer stock of unemployed people in the way that mainstream 298 00:18:06,760 --> 00:18:09,600 Speaker 1: macro works and m m T is very specific and 299 00:18:09,680 --> 00:18:14,600 Speaker 1: that they prefer, and they explicitly say that you should 300 00:18:14,960 --> 00:18:19,520 Speaker 1: use a buffer stock of employed basically to not only 301 00:18:19,560 --> 00:18:22,840 Speaker 1: reach full employment, but to control inflation. So that's where 302 00:18:23,400 --> 00:18:27,399 Speaker 1: the job guarantee that they advocate. It's not just a 303 00:18:28,640 --> 00:18:33,760 Speaker 1: theoretical aspect of their view. It is an essential descriptive 304 00:18:33,800 --> 00:18:36,680 Speaker 1: component of how they view the world, because they basically 305 00:18:36,720 --> 00:18:40,320 Speaker 1: say that the government is the cause of unemployment. Therefore, 306 00:18:40,960 --> 00:18:45,600 Speaker 1: the government is the only entity that can solve unemployment, 307 00:18:45,640 --> 00:18:48,560 Speaker 1: and they're they're the only ones that And I should 308 00:18:48,560 --> 00:18:50,840 Speaker 1: be clear, when I say unemployment in the MMT world, 309 00:18:50,880 --> 00:18:55,040 Speaker 1: they mean zero involuntary unemployment. So there's always some level 310 00:18:55,119 --> 00:19:00,159 Speaker 1: of involuntary unemployment in mainstream macro basically. So MMT is 311 00:19:00,240 --> 00:19:03,440 Speaker 1: using a little bit of a different definition. And they're 312 00:19:03,560 --> 00:19:08,040 Speaker 1: very specifically saying that they want to control the economy 313 00:19:08,119 --> 00:19:11,800 Speaker 1: and prices and employment through maintaining a buffer stock of 314 00:19:11,960 --> 00:19:16,400 Speaker 1: fully employed workers. Yeah, let's let's dive into this, because 315 00:19:16,440 --> 00:19:18,240 Speaker 1: I think this is sort of the crux of our 316 00:19:18,240 --> 00:19:21,399 Speaker 1: A lot of different disagreements come out, and it also 317 00:19:21,680 --> 00:19:24,480 Speaker 1: gets to some of the difficulty that I think people 318 00:19:24,560 --> 00:19:27,919 Speaker 1: have in defining m m T. Of course, critics of 319 00:19:28,040 --> 00:19:30,520 Speaker 1: mm T will say, oh, they keep changing the goalpost. 320 00:19:30,640 --> 00:19:32,880 Speaker 1: But what we have, let's say, if we can break 321 00:19:32,880 --> 00:19:34,919 Speaker 1: it down, So what we have is this sort of 322 00:19:35,400 --> 00:19:40,159 Speaker 1: pure descriptive characterization of how money and banking works. But 323 00:19:40,320 --> 00:19:44,560 Speaker 1: the financial system, the vertical uh, the horizontal money, the 324 00:19:44,640 --> 00:19:48,800 Speaker 1: government uh self financing deficits. It doesn't sound like you 325 00:19:48,880 --> 00:19:51,840 Speaker 1: have much of a disagreement with that. So that's the 326 00:19:51,920 --> 00:19:55,760 Speaker 1: pure descriptive aspect of how mm T says the existing 327 00:19:55,880 --> 00:20:00,280 Speaker 1: economy works. It's not a policy prescription. Then they have 328 00:20:00,359 --> 00:20:03,120 Speaker 1: these other aspects, and a lot of mm tears are 329 00:20:03,160 --> 00:20:09,760 Speaker 1: associated with sort of fairly radical or aggressive economic proposals. Lately, 330 00:20:09,840 --> 00:20:13,679 Speaker 1: we've seen a lot of mm tears advocate for the 331 00:20:13,720 --> 00:20:18,520 Speaker 1: Green New Deal. Um you mentioned the job guarantee, this 332 00:20:18,640 --> 00:20:22,639 Speaker 1: idea that the government would guarantee full employment, and it 333 00:20:22,800 --> 00:20:26,159 Speaker 1: sounds like to me that the crux of the issue, 334 00:20:26,280 --> 00:20:29,520 Speaker 1: or one of the key questions, is is the job 335 00:20:29,560 --> 00:20:33,800 Speaker 1: guarantee component, which some people would say sounds like, you know, 336 00:20:33,880 --> 00:20:38,400 Speaker 1: big government socialism, is that part of the descriptive aspect 337 00:20:38,440 --> 00:20:41,040 Speaker 1: of mm T or is that part of the prescriptive 338 00:20:41,240 --> 00:20:45,359 Speaker 1: aspect of mm T. So I there seems to be 339 00:20:45,480 --> 00:20:48,840 Speaker 1: some disagreement with within some of the m m T 340 00:20:49,080 --> 00:20:52,480 Speaker 1: people over this, but I think Bill Bill Mitchell is 341 00:20:52,520 --> 00:20:54,800 Speaker 1: really the clearest on this, and the way that he 342 00:20:54,960 --> 00:20:59,439 Speaker 1: describes it essentially is that the government is the in 343 00:20:59,440 --> 00:21:03,600 Speaker 1: the theory eddical MMT world, the government causes unemployment. So 344 00:21:03,640 --> 00:21:07,720 Speaker 1: when they start the money system, they basically they invoke 345 00:21:07,960 --> 00:21:12,280 Speaker 1: rules and regulations and taxes that basically require people to 346 00:21:12,400 --> 00:21:14,960 Speaker 1: obtain state money. So you have to obtain money to 347 00:21:15,000 --> 00:21:17,560 Speaker 1: pay your taxes. And if you can't obtain money to 348 00:21:17,600 --> 00:21:19,760 Speaker 1: pay your taxes, then you don't have a job and 349 00:21:19,760 --> 00:21:23,680 Speaker 1: you don't have an income. So and if there's involuntary unemployment, 350 00:21:23,720 --> 00:21:27,120 Speaker 1: then the MMT people would say basically, well, the government 351 00:21:27,160 --> 00:21:29,280 Speaker 1: caused this, so the government has to fix it. And 352 00:21:29,359 --> 00:21:34,920 Speaker 1: so if you understand that descriptive component of the MMT 353 00:21:35,119 --> 00:21:39,600 Speaker 1: world and their view, then your logical conclusion is the 354 00:21:39,680 --> 00:21:43,640 Speaker 1: job guarantee. There is no alternative basically, um And I 355 00:21:43,680 --> 00:21:46,680 Speaker 1: think I think they're on a little bit of slippery 356 00:21:46,720 --> 00:21:51,040 Speaker 1: ground there. I I do not necessarily think that you 357 00:21:51,080 --> 00:21:54,960 Speaker 1: can say definitively that the government is the cause of 358 00:21:55,040 --> 00:21:58,919 Speaker 1: unemployment in the monetary system. So there there does seem 359 00:21:58,960 --> 00:22:03,600 Speaker 1: to be at least some theory slipping into the description 360 00:22:03,680 --> 00:22:07,240 Speaker 1: there and the and that leads to their big policy proposal, 361 00:22:07,320 --> 00:22:11,880 Speaker 1: which you know, that's part of why although I I 362 00:22:11,960 --> 00:22:14,600 Speaker 1: like a lot of what MMT says, I think they 363 00:22:14,640 --> 00:22:16,960 Speaker 1: tend to get, they tend to overreach, and they tend 364 00:22:16,960 --> 00:22:21,000 Speaker 1: to find themselves in in positions that are not empirically sound, 365 00:22:21,000 --> 00:22:23,280 Speaker 1: that aren't really supported by a lot of evidence, and 366 00:22:23,640 --> 00:22:26,920 Speaker 1: this is one of those positions um and it weirdly, 367 00:22:26,920 --> 00:22:31,320 Speaker 1: it goes against a lot of sort of basic Kansian principles, 368 00:22:31,359 --> 00:22:36,680 Speaker 1: mainly the the idea that really unemployment is the result 369 00:22:36,720 --> 00:22:41,280 Speaker 1: of a lack of investment and so you know government. 370 00:22:41,280 --> 00:22:43,320 Speaker 1: They MT people would say that, well, yeah, that's just 371 00:22:43,400 --> 00:22:46,040 Speaker 1: related to a lack of effective demand, which is the 372 00:22:46,119 --> 00:22:48,800 Speaker 1: result of people, you know, needing an income and the 373 00:22:48,800 --> 00:22:50,920 Speaker 1: only way they can get their income is from the government. 374 00:22:51,000 --> 00:22:54,840 Speaker 1: So you know, they're pretty the MT people are very 375 00:22:55,000 --> 00:22:59,000 Speaker 1: very smart, and they're they've constructed a very sound and 376 00:22:59,119 --> 00:23:03,520 Speaker 1: cohesive sounding theory that I think is especially intuitive to 377 00:23:03,600 --> 00:23:07,919 Speaker 1: people who don't have a professional background, and actually is 378 00:23:08,160 --> 00:23:11,160 Speaker 1: even more confusing for people who have a professional background, 379 00:23:11,200 --> 00:23:13,560 Speaker 1: because they use a lot of these words in a 380 00:23:13,640 --> 00:23:17,119 Speaker 1: sort of alternative way, words like unemployment and sovereignty in 381 00:23:17,160 --> 00:23:19,879 Speaker 1: ways that they don't have a meaning to uh, you know, 382 00:23:19,920 --> 00:23:22,359 Speaker 1: Paul Krugman or Larry Summers, they read those words and 383 00:23:22,359 --> 00:23:25,320 Speaker 1: they have a very specific meaning in mind when they 384 00:23:25,320 --> 00:23:28,200 Speaker 1: think of those things, and but they're they're speaking right 385 00:23:28,240 --> 00:23:30,119 Speaker 1: past each other when they're talking to each other. So 386 00:23:30,160 --> 00:23:32,119 Speaker 1: I see a lot of these articles and I'm like, oh, well, 387 00:23:32,119 --> 00:23:35,000 Speaker 1: I understand what Paul is saying, but I also understand 388 00:23:35,040 --> 00:23:39,080 Speaker 1: what Warre Mosler is saying. And they're saying the things 389 00:23:39,119 --> 00:23:41,520 Speaker 1: that in their own world there are right, but they're 390 00:23:41,520 --> 00:23:44,520 Speaker 1: talking right past each other because they're speaking a different language. 391 00:23:45,320 --> 00:23:48,840 Speaker 1: So you know, if you if you set aside that 392 00:23:48,920 --> 00:23:53,520 Speaker 1: empirical criticism that maybe unemployment isn't caused by the government, 393 00:23:53,560 --> 00:23:57,160 Speaker 1: maybe it is caused by that lack of investment. Even 394 00:23:57,200 --> 00:24:00,800 Speaker 1: setting that aside, if you believe in empty and you 395 00:24:00,840 --> 00:24:04,879 Speaker 1: believe that the government should be fulfilling this sort of 396 00:24:04,920 --> 00:24:09,560 Speaker 1: full employment mandate, I can imagine that that on its 397 00:24:09,600 --> 00:24:15,280 Speaker 1: own has certain political connotations. Um certainly in America, right, Like, 398 00:24:15,320 --> 00:24:17,360 Speaker 1: a lot of people will hear that and think that 399 00:24:17,480 --> 00:24:22,440 Speaker 1: is a very slippery slope on the way to socialism. Yeah, well, gosh, 400 00:24:22,480 --> 00:24:24,840 Speaker 1: I mean, you could argue in a sense that it 401 00:24:24,880 --> 00:24:28,080 Speaker 1: isn't even consistent with the way that a capitalist economy 402 00:24:28,400 --> 00:24:32,399 Speaker 1: actually functions. I mean, America is very specifically a capitalistic 403 00:24:32,960 --> 00:24:36,639 Speaker 1: type of economy. And this is consistent more so with 404 00:24:36,720 --> 00:24:41,360 Speaker 1: the mainstream view that basically the way capitalists manage their 405 00:24:41,400 --> 00:24:44,920 Speaker 1: own risks is through managing the unemployed. They don't hire 406 00:24:45,000 --> 00:24:48,120 Speaker 1: everybody because they want to retain some profits, they don't 407 00:24:48,119 --> 00:24:51,199 Speaker 1: want to pay out all of their profits. And so capitalists, 408 00:24:51,200 --> 00:24:53,679 Speaker 1: to a large degree, they manage and try to optimize 409 00:24:53,720 --> 00:24:57,959 Speaker 1: the economy by managing that buffer stock of of unemployed 410 00:24:58,000 --> 00:25:00,680 Speaker 1: people in essence. And so I think you could argue 411 00:25:00,720 --> 00:25:02,840 Speaker 1: to some degree that that is sort of the natural 412 00:25:02,960 --> 00:25:07,480 Speaker 1: case of capitalism, that capitalism results in some degree of 413 00:25:08,080 --> 00:25:12,080 Speaker 1: unemployment because capitalists, you know, going back to Kines, capitalists 414 00:25:12,080 --> 00:25:15,560 Speaker 1: never invest enough um, and so you need some other 415 00:25:15,680 --> 00:25:17,800 Speaker 1: entity that is going to come in if you're gonna 416 00:25:18,000 --> 00:25:21,400 Speaker 1: mop up all of that the rest of that involuntary unemployment. 417 00:25:21,440 --> 00:25:23,920 Speaker 1: And I think you could make an argument that you're 418 00:25:24,000 --> 00:25:27,639 Speaker 1: kind of you're kind of veering off of the base 419 00:25:27,720 --> 00:25:30,920 Speaker 1: case of capitalism into something you know, I don't want 420 00:25:30,920 --> 00:25:33,840 Speaker 1: to call m m T socialist, but um, it is 421 00:25:34,000 --> 00:25:38,840 Speaker 1: more along those lines than it is arguably along the 422 00:25:38,920 --> 00:25:42,280 Speaker 1: natural base case of what a capitalist economy produces. And 423 00:25:42,320 --> 00:25:44,560 Speaker 1: I think that's the thing that kind of gets a 424 00:25:44,560 --> 00:25:47,080 Speaker 1: lot of people riled up about this is, you know, 425 00:25:47,119 --> 00:25:50,080 Speaker 1: the government is so involved in the economy to some 426 00:25:50,160 --> 00:25:53,720 Speaker 1: degree in the MMT world that I think people view 427 00:25:53,760 --> 00:25:56,119 Speaker 1: that as a slippery slope, and you know, honestly, I 428 00:25:56,160 --> 00:26:00,560 Speaker 1: don't know how justified that is. The thing to about 429 00:26:00,720 --> 00:26:03,640 Speaker 1: m MT I think that maybe worries me more than 430 00:26:03,680 --> 00:26:07,000 Speaker 1: anything else is that it really hasn't been tried anywhere. 431 00:26:07,040 --> 00:26:10,960 Speaker 1: You haven't really seen a true MMT regime anywhere with 432 00:26:11,080 --> 00:26:15,720 Speaker 1: a full job guarantee, persistent deficits. Some of them advocate 433 00:26:15,760 --> 00:26:20,640 Speaker 1: a zero interest rate policy in uh perpect perpetuity. So it's, 434 00:26:21,200 --> 00:26:23,160 Speaker 1: you know, that's never been tried, and so I think 435 00:26:23,160 --> 00:26:26,159 Speaker 1: the uncertainty of it to me is something that because 436 00:26:26,200 --> 00:26:29,280 Speaker 1: there's no real empirical evidence supporting whether or not all 437 00:26:29,320 --> 00:26:32,360 Speaker 1: of this works, to me is uh something that I 438 00:26:32,400 --> 00:26:37,720 Speaker 1: think is worthy of of criticism to some degree. But again, 439 00:26:37,840 --> 00:26:40,000 Speaker 1: I don't know. There's also a part of me that 440 00:26:40,040 --> 00:26:42,200 Speaker 1: looks at a world with a job guarantee in certain 441 00:26:42,200 --> 00:26:45,080 Speaker 1: countries where I mean, for instance, if the United States 442 00:26:45,080 --> 00:26:48,080 Speaker 1: started a job guarantee, do I think that the U. 443 00:26:48,160 --> 00:26:50,960 Speaker 1: S economy would suddenly go to hell in a handbasket? No. 444 00:26:51,320 --> 00:26:54,920 Speaker 1: In fact, I kind of wonder if it actually wouldn't 445 00:26:54,920 --> 00:26:57,320 Speaker 1: be a lot better in a country like the United States. 446 00:26:57,400 --> 00:26:59,639 Speaker 1: But you kind of get back into the question of 447 00:26:59,640 --> 00:27:03,280 Speaker 1: Soba and te there where the United States is so sovereign, 448 00:27:03,600 --> 00:27:07,679 Speaker 1: our economy is so big, so diverse, and so productive 449 00:27:07,720 --> 00:27:10,000 Speaker 1: that we can afford to do things like that in 450 00:27:10,080 --> 00:27:13,840 Speaker 1: my view, which makes MMT kind of interesting in specific 451 00:27:13,880 --> 00:27:17,800 Speaker 1: cases like the United States, whereas in you know, a 452 00:27:17,840 --> 00:27:21,159 Speaker 1: place like Brazil, you know, they probably have no business 453 00:27:21,200 --> 00:27:24,480 Speaker 1: adopting something like an mm T mentality because they quite 454 00:27:24,520 --> 00:27:27,480 Speaker 1: literally can't afford to do it because there it would 455 00:27:27,520 --> 00:27:31,520 Speaker 1: probably result in runaway inflation or at least the risk 456 00:27:31,560 --> 00:27:35,000 Speaker 1: of it, or so so big picture and we've got 457 00:27:35,000 --> 00:27:39,040 Speaker 1: to wrap it up soon is that it sounds like 458 00:27:39,119 --> 00:27:41,520 Speaker 1: listening to you and reading you over the years that 459 00:27:41,560 --> 00:27:46,639 Speaker 1: at least on the pure descriptive side, MMT gets us 460 00:27:46,680 --> 00:27:50,600 Speaker 1: a lot closer to understanding how the world actually works 461 00:27:50,880 --> 00:27:55,600 Speaker 1: than almost all of these sort of mainstream economics or 462 00:27:55,680 --> 00:28:00,159 Speaker 1: economism is James Quack uh the professor uses the term 463 00:28:00,160 --> 00:28:03,760 Speaker 1: to sort of describe economic economic sounding things that aren't 464 00:28:03,760 --> 00:28:07,199 Speaker 1: really rude with anything. MMT gets us closer than a 465 00:28:07,200 --> 00:28:11,240 Speaker 1: lot of other framework to do, but that there are 466 00:28:11,240 --> 00:28:15,840 Speaker 1: certain prescriptions that they offer that in your view, just 467 00:28:16,000 --> 00:28:19,760 Speaker 1: aren't nearly as solid and as sort of grounded and 468 00:28:19,880 --> 00:28:25,080 Speaker 1: empirics Uh as the advocates would claim yeah, I mean, 469 00:28:25,160 --> 00:28:29,080 Speaker 1: I think they take certain liberties with explaining some things 470 00:28:29,119 --> 00:28:31,879 Speaker 1: that are in my opinion, kind of sloppy. For instance, 471 00:28:31,920 --> 00:28:34,440 Speaker 1: they tend to consolidate the central bank with the treasury, 472 00:28:34,440 --> 00:28:38,120 Speaker 1: and they argue that the the government is uh, it 473 00:28:38,200 --> 00:28:41,760 Speaker 1: doesn't need funding because it it can't basically accept its 474 00:28:41,760 --> 00:28:45,040 Speaker 1: own liabilities, which is what happens when the government pays taxes. 475 00:28:45,120 --> 00:28:49,240 Speaker 1: But the that to me is sort of an arcane 476 00:28:49,280 --> 00:28:53,480 Speaker 1: discussion because it gets into really specific reserve accounting in 477 00:28:53,480 --> 00:28:55,640 Speaker 1: the way that you know, the debate over why the 478 00:28:55,680 --> 00:28:58,360 Speaker 1: reserve system even exists and things like that, which is 479 00:28:59,200 --> 00:29:01,800 Speaker 1: I think, you know, for someone like me who's kind 480 00:29:01,800 --> 00:29:03,520 Speaker 1: of a nerd about all of this, I get kind 481 00:29:03,520 --> 00:29:06,520 Speaker 1: of nitpicky about stuff like that. But in general, yeah, 482 00:29:06,560 --> 00:29:09,280 Speaker 1: I would say that the the MMT description compared to 483 00:29:09,840 --> 00:29:12,800 Speaker 1: the way that the mainstream models of all this stuff works, 484 00:29:12,840 --> 00:29:15,600 Speaker 1: I mean, especially on the you know, the central banks 485 00:29:15,600 --> 00:29:18,520 Speaker 1: and banks are such an essential component of the economy 486 00:29:18,560 --> 00:29:21,400 Speaker 1: that if you can't describe how those things work, then 487 00:29:22,000 --> 00:29:24,600 Speaker 1: you really are going to have a hard time describing 488 00:29:24,600 --> 00:29:26,640 Speaker 1: how the system works. And m MT does a really 489 00:29:26,760 --> 00:29:29,360 Speaker 1: nice job of describing those things. So you know, well, 490 00:29:29,400 --> 00:29:32,240 Speaker 1: I disagree with some of the maybe specifics and whether 491 00:29:32,360 --> 00:29:34,480 Speaker 1: or not the government is the cause of unemployment and 492 00:29:34,520 --> 00:29:37,440 Speaker 1: descriptive aspects like that. I would say on the whole, 493 00:29:37,520 --> 00:29:40,000 Speaker 1: they definitely do a much better job of getting us 494 00:29:40,000 --> 00:29:44,960 Speaker 1: closer to reality than a lot of mainstream schools do. Well. 495 00:29:45,000 --> 00:29:47,560 Speaker 1: I think this was a I'm sure the We're gonna 496 00:29:47,560 --> 00:29:49,680 Speaker 1: get a lot of hate from the MMT crowd on 497 00:29:49,720 --> 00:29:51,640 Speaker 1: Twitter for having you on, because I know you fight 498 00:29:51,680 --> 00:29:54,080 Speaker 1: with a lot of them, but you're very polite, you're 499 00:29:54,120 --> 00:29:57,200 Speaker 1: talking person. I like them a lot more than I 500 00:29:57,240 --> 00:29:59,920 Speaker 1: think they think, and I think I sometimes come across 501 00:30:00,080 --> 00:30:02,480 Speaker 1: is more critical than I really am. So I hope 502 00:30:02,520 --> 00:30:05,200 Speaker 1: I provided somewhat of a balanced of you here. Yeah. Well, 503 00:30:05,240 --> 00:30:06,800 Speaker 1: I was gonna say, you know, Tracy mentioned in the 504 00:30:06,880 --> 00:30:09,920 Speaker 1: intro we hadn't really done an MMT episode yet, but 505 00:30:10,000 --> 00:30:14,360 Speaker 1: I think this was a good balanced introduction for our listeners. 506 00:30:14,360 --> 00:30:17,520 Speaker 1: So Colin, roach really appreciate you coming up. Thanks for 507 00:30:17,560 --> 00:30:34,960 Speaker 1: having me. I'm actually really happy Tracy that we started. 508 00:30:35,000 --> 00:30:38,720 Speaker 1: We had our first MMT episode with Colin. Like I said, 509 00:30:38,720 --> 00:30:41,080 Speaker 1: I'm sure some people are going to get really angry 510 00:30:41,160 --> 00:30:44,160 Speaker 1: or say he mischaracterized something, because that's always how things 511 00:30:44,200 --> 00:30:46,920 Speaker 1: are on the Internet. But I thought that was a 512 00:30:46,920 --> 00:30:49,640 Speaker 1: good balanced take. What's that quote from a street car 513 00:30:49,920 --> 00:30:52,840 Speaker 1: named desire. I feel like you know, we we've had 514 00:30:52,880 --> 00:30:55,760 Speaker 1: this date from the beginning or whatever, Like you knew 515 00:30:55,800 --> 00:30:59,920 Speaker 1: the MMT episode was coming, it was only a matter 516 00:31:00,000 --> 00:31:02,480 Speaker 1: of time. We'll definitely have to do more because we 517 00:31:02,520 --> 00:31:06,480 Speaker 1: can get some of the more hardcore m M tears 518 00:31:06,480 --> 00:31:09,120 Speaker 1: who could come on and disagree with him. But I 519 00:31:09,160 --> 00:31:12,040 Speaker 1: think that this sort of the spectrum of what mm 520 00:31:12,040 --> 00:31:14,760 Speaker 1: T means is sort of the source of a lot 521 00:31:14,840 --> 00:31:18,240 Speaker 1: of the fighting and confusion because it does have this 522 00:31:18,440 --> 00:31:21,400 Speaker 1: very descriptive aspect that's like, this is how it works. 523 00:31:21,720 --> 00:31:25,200 Speaker 1: And then they're also these follow on prescriptions of like, Okay, 524 00:31:25,200 --> 00:31:26,600 Speaker 1: we know how the world works, so this is what 525 00:31:26,640 --> 00:31:30,040 Speaker 1: we should do. And the question is always how much 526 00:31:30,120 --> 00:31:34,440 Speaker 1: does the latter necessarily spring forth from the former and 527 00:31:34,480 --> 00:31:37,400 Speaker 1: how much does the description of the world lead you 528 00:31:37,480 --> 00:31:40,280 Speaker 1: to automatic policy conclusions or is there sort of a 529 00:31:40,400 --> 00:31:43,400 Speaker 1: range of options we then have. And it feels like 530 00:31:43,480 --> 00:31:46,360 Speaker 1: that's where a lot of the uh, the fighting and 531 00:31:46,440 --> 00:31:49,320 Speaker 1: disputes really happens. Yeah, I would agree with that, but 532 00:31:49,400 --> 00:31:54,440 Speaker 1: I would also question the usefulness of an economic theory 533 00:31:54,480 --> 00:32:00,240 Speaker 1: that is, you know, apparently self evidently so unclear to 534 00:32:00,360 --> 00:32:03,640 Speaker 1: so many people and seems to mean so many different 535 00:32:03,680 --> 00:32:07,160 Speaker 1: things to different people. So MMT has done a fantastic 536 00:32:07,240 --> 00:32:11,560 Speaker 1: job of capturing a lot of political interest and discourse 537 00:32:11,760 --> 00:32:15,120 Speaker 1: and also a lot of economic interest, but it probably 538 00:32:15,200 --> 00:32:19,400 Speaker 1: hasn't done as good a job in simply defining itself. 539 00:32:19,720 --> 00:32:22,680 Speaker 1: You know what's interesting, there hasn't been and I suspect 540 00:32:22,760 --> 00:32:25,480 Speaker 1: it will change, but there hasn't been like the definitive 541 00:32:25,560 --> 00:32:28,120 Speaker 1: mm T book yet. I mean, there have been written 542 00:32:28,160 --> 00:32:31,080 Speaker 1: on it, but like the real mainstream one that everyone 543 00:32:31,160 --> 00:32:34,200 Speaker 1: can read, Like, I feel like that's still coming Bloomberg. 544 00:32:34,720 --> 00:32:36,400 Speaker 1: We actually ran a really good piece a couple of 545 00:32:36,400 --> 00:32:37,800 Speaker 1: weeks ago that I think it is one of the 546 00:32:37,880 --> 00:32:41,000 Speaker 1: fairest descriptions yet. So I feel like the mm tears 547 00:32:41,040 --> 00:32:44,080 Speaker 1: do recognize this and say, like, Okay, there is a 548 00:32:44,080 --> 00:32:46,640 Speaker 1: lot of confusion out there, and some people think that 549 00:32:46,840 --> 00:32:49,960 Speaker 1: MMT just means print money forever. And so it will 550 00:32:50,000 --> 00:32:52,360 Speaker 1: be interesting to see if the people have brought it 551 00:32:52,440 --> 00:32:54,840 Speaker 1: this far, and you know, they've they really just sort 552 00:32:54,880 --> 00:32:57,880 Speaker 1: of in the last ten years gone from commenting on 553 00:32:58,000 --> 00:33:01,960 Speaker 1: blogs and some obscure academic x two entering the mainstream, 554 00:33:02,000 --> 00:33:07,520 Speaker 1: whether they can actually start to help people understand what 555 00:33:07,560 --> 00:33:09,760 Speaker 1: it is they say it will be interesting to watch. Yeah, 556 00:33:09,800 --> 00:33:12,960 Speaker 1: there's a book deal in there for someone somewhere. But 557 00:33:13,000 --> 00:33:16,000 Speaker 1: the the other thing that really interests me about MMT 558 00:33:16,240 --> 00:33:19,200 Speaker 1: and Cohen touched on this towards the latter end of 559 00:33:19,200 --> 00:33:22,840 Speaker 1: the show, but how useful is it actually for a 560 00:33:22,960 --> 00:33:26,600 Speaker 1: country that isn't the United States, or that doesn't have 561 00:33:26,800 --> 00:33:30,280 Speaker 1: a global reserve currency or a currency that's somehow viewed 562 00:33:30,440 --> 00:33:33,160 Speaker 1: as a safe haven. And you know, he mentioned Brazil, 563 00:33:33,240 --> 00:33:38,920 Speaker 1: And I really wonder the opportunities that MMT proponents are 564 00:33:38,960 --> 00:33:42,960 Speaker 1: talking about full employment and you know, various other things. 565 00:33:43,720 --> 00:33:47,600 Speaker 1: Could those ever apply to emerging market economies or developing 566 00:33:47,640 --> 00:33:52,720 Speaker 1: market economies that do not have the luxury of printing 567 00:33:52,760 --> 00:33:55,840 Speaker 1: money without inflation. Yeah, the M M tears would say 568 00:33:55,880 --> 00:33:59,200 Speaker 1: that they do, and that there's nothing specific to the US. 569 00:33:59,240 --> 00:34:00,960 Speaker 1: But I do think it's an open question. Don't we 570 00:34:00,960 --> 00:34:03,120 Speaker 1: have an episode coming up kind of about this question 571 00:34:03,480 --> 00:34:07,720 Speaker 1: MMT in the context. Yes, we did get a suggestion 572 00:34:08,040 --> 00:34:09,839 Speaker 1: from someone on Twitter, so we are going to talk 573 00:34:09,880 --> 00:34:14,439 Speaker 1: about it. Uh So, Yes, plentymore MMT episodes to come, 574 00:34:14,680 --> 00:34:17,920 Speaker 1: for sure. All right. Well, on that note, people can 575 00:34:17,960 --> 00:34:20,319 Speaker 1: look forward to that this has been another episode of 576 00:34:20,360 --> 00:34:23,920 Speaker 1: the Odd Lots Podcast. I'm Joe Wisenthal. You can follow 577 00:34:23,960 --> 00:34:27,120 Speaker 1: me on Twitter at the Stalwart and I'm Tracy Allaway. 578 00:34:27,160 --> 00:34:29,719 Speaker 1: You can follow me on Twitter at Tracy Alloway. And 579 00:34:29,800 --> 00:34:32,680 Speaker 1: you should definitely follow our guest Colin Roach on Twitter. 580 00:34:32,800 --> 00:34:35,120 Speaker 1: He fights with a lot of m M tears all day. 581 00:34:35,560 --> 00:34:38,879 Speaker 1: His Twitter handle is at Colin Roach. And be sure 582 00:34:38,960 --> 00:34:42,839 Speaker 1: to follow our producer Topur Foreheads. His Twitter handle is 583 00:34:42,920 --> 00:34:46,480 Speaker 1: at foreheads T and follow the Bloomberg head of podcast, 584 00:34:46,560 --> 00:34:50,480 Speaker 1: Francesca Levy at Francesca Today. Thanks for listening.