1 00:00:10,360 --> 00:00:14,040 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,120 --> 00:00:17,240 Speaker 1: I'm Joe wasn't All and I'm Tracy. Tracy, what are 3 00:00:17,280 --> 00:00:20,160 Speaker 1: the big topics for you at We're at the Milk 4 00:00:20,239 --> 00:00:22,880 Speaker 1: and Conference out in Beverly Hills. What would you say 5 00:00:22,920 --> 00:00:25,000 Speaker 1: of like some of the big topics you've heard. I 6 00:00:25,040 --> 00:00:27,520 Speaker 1: think it's inflation. I mean, I gotta say I was 7 00:00:27,560 --> 00:00:29,960 Speaker 1: on a credit markets panel and it was called credit 8 00:00:30,000 --> 00:00:33,680 Speaker 1: Markets and Inflation, So that kind of tells you everything 9 00:00:33,680 --> 00:00:36,040 Speaker 1: you need to know. No, that's obviously a big thing. 10 00:00:36,320 --> 00:00:40,240 Speaker 1: I saw Ken Griffin of Citadel he was talking about 11 00:00:40,280 --> 00:00:42,239 Speaker 1: he was actually kind of optimistic about it, though, like 12 00:00:42,240 --> 00:00:44,360 Speaker 1: he wasn't at work. He had a lot of criticisms 13 00:00:44,360 --> 00:00:47,640 Speaker 1: about this administration and policy and all that. But of 14 00:00:47,760 --> 00:00:49,840 Speaker 1: all the things, I was actually a little bit surprised, 15 00:00:50,080 --> 00:00:53,040 Speaker 1: like he didn't seem that concerned about inflation or as 16 00:00:53,120 --> 00:00:54,800 Speaker 1: much as all the media is talking about it. He 17 00:00:54,840 --> 00:00:57,400 Speaker 1: thinks it'll moderate towards the end of the year, or 18 00:00:57,480 --> 00:01:00,960 Speaker 1: he thinks there's a chance anyway, give the had some flexibility, 19 00:01:01,080 --> 00:01:04,880 Speaker 1: so some interesting different views. Well, yeah, I mean, the 20 00:01:04,920 --> 00:01:06,560 Speaker 1: thing that I've learned from the past year is that 21 00:01:06,600 --> 00:01:10,400 Speaker 1: people feel very people have strong opinions about inflation, like 22 00:01:10,480 --> 00:01:15,000 Speaker 1: it's a very emotional topic. Sure, and it's really striking 23 00:01:15,040 --> 00:01:17,840 Speaker 1: that we've had this incredible labor market recovery, we have 24 00:01:17,920 --> 00:01:23,240 Speaker 1: sub four unemployment, and yet it appears that because inflation 25 00:01:23,319 --> 00:01:27,480 Speaker 1: is high, that explains why consumer sentiment is so bad, 26 00:01:27,800 --> 00:01:30,800 Speaker 1: although I think there's more to it than just inflation. Well, 27 00:01:30,840 --> 00:01:32,800 Speaker 1: so this is the other thing that I think we've learned, 28 00:01:32,920 --> 00:01:36,240 Speaker 1: which we've talked about before. But it feels like people 29 00:01:36,400 --> 00:01:40,680 Speaker 1: care about more. People care about inflation than people care 30 00:01:40,720 --> 00:01:43,160 Speaker 1: about the unemployment rate. That's what it feels like to me, 31 00:01:43,200 --> 00:01:46,840 Speaker 1: because inflation affects everyone, whereas the unemployment rate is this 32 00:01:46,920 --> 00:01:49,640 Speaker 1: kind of abstract thing. You can go up to people 33 00:01:49,640 --> 00:01:51,880 Speaker 1: and say, oh, unemployment is just four percent, and they'll 34 00:01:51,920 --> 00:01:54,360 Speaker 1: be like, well, I've been employed for the past ten 35 00:01:54,440 --> 00:01:56,320 Speaker 1: years and all I know is that the cost of 36 00:01:56,360 --> 00:01:59,480 Speaker 1: living is going up. Yeah, exactly right. So even during 37 00:01:59,520 --> 00:02:03,280 Speaker 1: period of high unemployment, most people hold on to their 38 00:02:03,400 --> 00:02:06,480 Speaker 1: jobs over a given cycle, but everyone kind of feels 39 00:02:06,600 --> 00:02:10,639 Speaker 1: rising prices and so there's sort of like this political asymmetry. 40 00:02:10,680 --> 00:02:11,919 Speaker 1: And you think about the FED and it has to 41 00:02:11,960 --> 00:02:14,440 Speaker 1: balance the two. But this is the first time we 42 00:02:14,480 --> 00:02:17,880 Speaker 1: really see like this, like it appears anyway that the 43 00:02:18,120 --> 00:02:21,040 Speaker 1: high inflation is coming at a cost of consumer sentiment 44 00:02:21,080 --> 00:02:22,799 Speaker 1: and so forth. Yeah, I think that's right. And of 45 00:02:22,840 --> 00:02:26,960 Speaker 1: course it's highly politicized, and people look at different policies, 46 00:02:27,120 --> 00:02:30,600 Speaker 1: and in particularly they look at you know, the FED 47 00:02:30,680 --> 00:02:34,000 Speaker 1: gets some of the blame and transitory shocks, but there's 48 00:02:34,040 --> 00:02:37,440 Speaker 1: a lot of I guess ire, directed at the fiscal stimulus, 49 00:02:37,600 --> 00:02:41,680 Speaker 1: and in particular that last round that Biden did um 50 00:02:41,720 --> 00:02:43,800 Speaker 1: after he was elected, and a bunch of people say, oh, 51 00:02:43,880 --> 00:02:46,320 Speaker 1: look it's proved it's too much. That was way over 52 00:02:46,440 --> 00:02:48,760 Speaker 1: there. There There was like there was one line and the 53 00:02:48,800 --> 00:02:50,680 Speaker 1: other line was a little bit below and that was 54 00:02:50,720 --> 00:02:53,800 Speaker 1: the outpost. Wait, but then there's they spent trillions and 55 00:02:53,800 --> 00:02:56,920 Speaker 1: it's too much. When are you going to say modern 56 00:02:57,000 --> 00:03:02,639 Speaker 1: monetary theory? Okay, so I was waiting. Okay, let's just 57 00:03:02,720 --> 00:03:06,480 Speaker 1: jump right in. So one of the biggest advocates not 58 00:03:06,600 --> 00:03:10,200 Speaker 1: of fiscal stimulus or spending per se, but in getting 59 00:03:10,320 --> 00:03:13,800 Speaker 1: us to rethink what we can do with fiscal policy, 60 00:03:13,960 --> 00:03:17,120 Speaker 1: of course, is Stephanie Kelton, who's known as one of 61 00:03:17,120 --> 00:03:20,520 Speaker 1: the foremost advocates of this way of thinking. Modern monetary 62 00:03:20,600 --> 00:03:23,800 Speaker 1: theory and she's the author of the book The Deficit Myth. 63 00:03:23,919 --> 00:03:27,080 Speaker 1: She's the co host of the Best Ideas Money podcast, 64 00:03:27,960 --> 00:03:30,959 Speaker 1: and she's a professor at stony Brook, and she's here 65 00:03:31,000 --> 00:03:33,000 Speaker 1: with us at Milkin. And so we're going to be 66 00:03:33,080 --> 00:03:35,200 Speaker 1: talking about, Actually, you know what we're really gonna be 67 00:03:35,200 --> 00:03:38,240 Speaker 1: talking about, is monetary modern monetary theory to blame for 68 00:03:38,240 --> 00:03:40,760 Speaker 1: this high inflation? Are you to blame for this high inflation? 69 00:03:40,800 --> 00:03:42,920 Speaker 1: Step he jumped it into. I'm just gonna jump right in, 70 00:03:42,960 --> 00:03:47,600 Speaker 1: are you to blame? I think so? Congratulations. No, look, 71 00:03:47,720 --> 00:03:53,280 Speaker 1: I think that you YouTube probably more than anyone to 72 00:03:53,400 --> 00:03:55,920 Speaker 1: have well no, no, no, I'm just gonna say, have 73 00:03:56,080 --> 00:03:59,360 Speaker 1: done deeper dives into this question. Over the course of 74 00:03:59,400 --> 00:04:02,400 Speaker 1: the last what eighty months, two years or whatever. You 75 00:04:02,440 --> 00:04:05,920 Speaker 1: have been chasing this story in a more sophisticated and 76 00:04:06,040 --> 00:04:08,880 Speaker 1: persistent way than I think anybody out there, and you've 77 00:04:09,280 --> 00:04:12,240 Speaker 1: I think, really forced the conversation to shift. I mean, 78 00:04:12,480 --> 00:04:15,800 Speaker 1: maybe I've helped shift the conversation on some fronts, but 79 00:04:15,920 --> 00:04:18,320 Speaker 1: on the inflation front, I really think you've helped to 80 00:04:18,360 --> 00:04:23,160 Speaker 1: focus attention on issues of pandemic related supply chain and bottlenecks. 81 00:04:23,200 --> 00:04:26,000 Speaker 1: Nobody has done more to change the conversation around those things. 82 00:04:26,000 --> 00:04:27,880 Speaker 1: So thank you. This is going to be a double 83 00:04:27,960 --> 00:04:30,480 Speaker 1: edged sword for us. I think if people start, yeah, anyway, 84 00:04:30,520 --> 00:04:32,880 Speaker 1: go ahead, Well look, I mean, so we we have 85 00:04:33,120 --> 00:04:35,479 Speaker 1: that we we've been paying a lot of attention to 86 00:04:35,720 --> 00:04:39,120 Speaker 1: the drivers of inflation and thinking about inflation in ways 87 00:04:39,160 --> 00:04:41,760 Speaker 1: that we didn't before. And frankly, we haven't really had 88 00:04:41,800 --> 00:04:44,240 Speaker 1: to think about inflation for so many decades. To the 89 00:04:44,279 --> 00:04:46,479 Speaker 1: extent that we talked about inflation, it was how do 90 00:04:46,520 --> 00:04:48,640 Speaker 1: we get it up? I appreciate that, by the way, 91 00:04:48,680 --> 00:04:51,560 Speaker 1: but to you know, the you know, the sort of 92 00:04:51,760 --> 00:04:54,640 Speaker 1: it feels like there's sort of this revenge a little 93 00:04:54,640 --> 00:04:57,960 Speaker 1: bit of the sort of the old school the New 94 00:04:58,040 --> 00:05:01,440 Speaker 1: Kansian economists, and they're like, look, here's this line that's 95 00:05:01,480 --> 00:05:06,360 Speaker 1: potential GDP. Here's this other line that's actual GDP. There 96 00:05:06,440 --> 00:05:10,400 Speaker 1: is a gap between them. Biden spent too much money 97 00:05:10,480 --> 00:05:13,520 Speaker 1: that was more than one line subtracted by the other line. 98 00:05:13,800 --> 00:05:17,320 Speaker 1: Our models work, it showed inflation. So what is that 99 00:05:17,400 --> 00:05:20,160 Speaker 1: a vindication of that style of thinking, like this sort 100 00:05:20,160 --> 00:05:23,039 Speaker 1: of like vulgar output gap thinking. No, of course not, 101 00:05:23,279 --> 00:05:27,960 Speaker 1: I mean, you know, being potentially getting the inflation stuff right. 102 00:05:28,000 --> 00:05:31,440 Speaker 1: But for the wrong reasons. It's not vindication. Okay, So 103 00:05:31,600 --> 00:05:34,400 Speaker 1: I again we go back to what is a more 104 00:05:34,440 --> 00:05:37,800 Speaker 1: sophisticated way to think about why we ended up with 105 00:05:37,839 --> 00:05:40,000 Speaker 1: the high inflation we ended up with, And of course 106 00:05:40,040 --> 00:05:41,960 Speaker 1: it's not just here in the US, but it's around 107 00:05:41,960 --> 00:05:44,640 Speaker 1: the world. You look at Europe and they're just right 108 00:05:44,680 --> 00:05:47,120 Speaker 1: on our heels at seven and a half percent or so. 109 00:05:47,120 --> 00:05:50,320 Speaker 1: So we know that that countries like China, countries like 110 00:05:50,360 --> 00:05:52,960 Speaker 1: the UK also are at forty year highs when it 111 00:05:52,960 --> 00:05:56,640 Speaker 1: comes to inflation. So it's it's a bit simplistic and 112 00:05:56,680 --> 00:05:59,479 Speaker 1: I think wrong, frankly, to to look at things like 113 00:05:59,520 --> 00:06:01,520 Speaker 1: the output gap and say this is all down to 114 00:06:01,960 --> 00:06:05,040 Speaker 1: pouring too much fire on an economy that didn't need 115 00:06:05,080 --> 00:06:07,440 Speaker 1: that much fiscal support. Can you break it down for 116 00:06:07,520 --> 00:06:10,080 Speaker 1: us a little bit more, how much of the current 117 00:06:10,320 --> 00:06:13,479 Speaker 1: inflation or price increases do you think are due to 118 00:06:13,640 --> 00:06:17,720 Speaker 1: demand versus supply issues and energy prices and things like that. 119 00:06:17,920 --> 00:06:20,960 Speaker 1: Super hard, super hard to know the answer to that, Tracy. 120 00:06:21,000 --> 00:06:22,960 Speaker 1: We were talking about that this morning on a panel 121 00:06:23,400 --> 00:06:26,640 Speaker 1: that I was on with current CBO director, former CEBIO 122 00:06:26,720 --> 00:06:30,120 Speaker 1: director and Jason Furman. We had exactly these kinds of conversations. 123 00:06:30,120 --> 00:06:33,360 Speaker 1: I don't think anybody on the panel feels really comfortable 124 00:06:34,040 --> 00:06:37,320 Speaker 1: dissecting at that at that level, you know, half a 125 00:06:37,360 --> 00:06:40,240 Speaker 1: third whatever, um. But we do know, and we have 126 00:06:40,279 --> 00:06:43,440 Speaker 1: differences of opinion to be sure. Right, Jason thinks that 127 00:06:43,600 --> 00:06:47,680 Speaker 1: more of the inflation is a result of the excessive 128 00:06:48,120 --> 00:06:50,880 Speaker 1: fiscal support, and I think I put myself on the 129 00:06:50,920 --> 00:06:54,239 Speaker 1: other side, which is that most of what we're still 130 00:06:54,279 --> 00:06:57,760 Speaker 1: dealing with is you know, pandemic related and energy and 131 00:06:58,120 --> 00:07:00,719 Speaker 1: so I think that's you know, because actually where to 132 00:07:00,760 --> 00:07:03,919 Speaker 1: put the numbers, I don't know. But when it comes to, 133 00:07:04,200 --> 00:07:06,600 Speaker 1: you know, where to lay the bulk of the blame, 134 00:07:06,920 --> 00:07:09,240 Speaker 1: I still come down on the side of you know, 135 00:07:09,560 --> 00:07:15,560 Speaker 1: pandemic and energy and now food Ukraine. Right, you know 136 00:07:16,160 --> 00:07:19,800 Speaker 1: it feels to me and again I were you're the 137 00:07:19,880 --> 00:07:22,360 Speaker 1: expert here, but you know, it's hard to to me. 138 00:07:22,440 --> 00:07:25,360 Speaker 1: It's hard to tell a story that, say, oil prices, 139 00:07:25,400 --> 00:07:28,440 Speaker 1: which we know are a huge driver of all in inflation, 140 00:07:28,520 --> 00:07:34,000 Speaker 1: headline inflation, have something to do with spending. Yeah, right, 141 00:07:34,040 --> 00:07:37,160 Speaker 1: I mean you could in reverse though, right when the 142 00:07:37,160 --> 00:07:41,360 Speaker 1: pandemic first hit and largely things were shut down, oil 143 00:07:41,360 --> 00:07:45,080 Speaker 1: prices did come significantly down, So there was some kind 144 00:07:45,120 --> 00:07:48,120 Speaker 1: of a relationship between what was happening in the economy 145 00:07:48,160 --> 00:07:50,240 Speaker 1: and that sort of thing. But yeah, you're you're right 146 00:07:50,280 --> 00:07:53,800 Speaker 1: with respect to stimulus and the fiscal support. Yes we 147 00:07:53,880 --> 00:07:57,559 Speaker 1: got a faster recovery. Thank god, we got vaccines faster 148 00:07:57,640 --> 00:07:59,920 Speaker 1: than a lot of people ever imagined. I remember when 149 00:08:00,280 --> 00:08:02,880 Speaker 1: early on we were hearing, you know, Dr Fauci's saying 150 00:08:02,880 --> 00:08:05,640 Speaker 1: maybe four maybe five years. I mean, thank goodness, that 151 00:08:05,680 --> 00:08:08,320 Speaker 1: happened much more quickly. And so the bounce back happens 152 00:08:08,360 --> 00:08:10,880 Speaker 1: sooner in the strength of demands. So some of that 153 00:08:11,000 --> 00:08:13,440 Speaker 1: is at play as well. So one of the things 154 00:08:13,440 --> 00:08:15,400 Speaker 1: that we talked about a lot on this podcast is 155 00:08:15,480 --> 00:08:20,400 Speaker 1: under investment in energy production and infrastructure, and this is 156 00:08:20,440 --> 00:08:23,440 Speaker 1: something that the Biden administration has been very vocal about 157 00:08:23,440 --> 00:08:25,960 Speaker 1: as well, and in fact, Biden has suggested a number 158 00:08:25,960 --> 00:08:30,040 Speaker 1: of times that the solution to high prices is more spending, 159 00:08:30,120 --> 00:08:34,080 Speaker 1: more investment to solve some of these bottleneck issues. And 160 00:08:34,120 --> 00:08:36,880 Speaker 1: I wonder how that fits into m m T in 161 00:08:36,920 --> 00:08:41,080 Speaker 1: the sense that my understanding is an MMT the constraint 162 00:08:41,160 --> 00:08:44,840 Speaker 1: on spending is inflation. And now we have CPI at 163 00:08:44,840 --> 00:08:47,760 Speaker 1: eight point five per cent, and we have people who 164 00:08:47,800 --> 00:08:50,079 Speaker 1: are also saying, well, the solution to the inflation is 165 00:08:50,120 --> 00:08:54,200 Speaker 1: more spending. How do you reconcile those two things. Well, yeah, 166 00:08:54,200 --> 00:08:56,800 Speaker 1: it's a good question. So if you think about it 167 00:08:56,880 --> 00:08:59,480 Speaker 1: the way I think the President Biden does, which is, 168 00:09:00,040 --> 00:09:03,120 Speaker 1: we need more capacity with respect to the labor force. 169 00:09:03,240 --> 00:09:06,040 Speaker 1: We need to bring more, especially women back into the 170 00:09:06,080 --> 00:09:08,800 Speaker 1: labor force. And so he will in a sense justify 171 00:09:08,920 --> 00:09:12,400 Speaker 1: investments in universal pre k and childcare and the sort 172 00:09:12,400 --> 00:09:14,680 Speaker 1: of thing so that you can get especially women to 173 00:09:14,720 --> 00:09:16,880 Speaker 1: return to the labor force to maybe ease some of 174 00:09:16,920 --> 00:09:21,600 Speaker 1: the um difficulties that employers have been having hiring workers 175 00:09:21,679 --> 00:09:24,680 Speaker 1: with uh computer chips. You know, he's talking about the 176 00:09:24,679 --> 00:09:29,240 Speaker 1: importance of restoring some capacity with semiconductor manufacturing and building 177 00:09:29,280 --> 00:09:32,720 Speaker 1: resiliency and all of that stuff. Now you're rightly raising 178 00:09:32,720 --> 00:09:34,520 Speaker 1: this question about how do you do that in a 179 00:09:34,600 --> 00:09:37,880 Speaker 1: supply constrained environment. You know, if they want to do 180 00:09:37,920 --> 00:09:40,720 Speaker 1: all of this infrastructure and we've heard talk about you know, 181 00:09:40,960 --> 00:09:44,400 Speaker 1: climate and the rest of it. You want electric school buses, 182 00:09:44,440 --> 00:09:46,640 Speaker 1: you want to electrify the grid, you want solar panels, 183 00:09:46,679 --> 00:09:49,040 Speaker 1: and he be charging stations all over the country. Well, 184 00:09:49,040 --> 00:09:50,840 Speaker 1: the question is, you know who's going to put those up. 185 00:09:50,880 --> 00:09:53,680 Speaker 1: Who's going to manufacture? Do you have firms that can 186 00:09:53,840 --> 00:09:56,280 Speaker 1: meet those orders in a timely manner? Do you have 187 00:09:56,360 --> 00:09:58,760 Speaker 1: the supply capacity? And to the extent that you don't, 188 00:09:59,160 --> 00:10:01,000 Speaker 1: you're gonna have back logs, You're gonna have to wait 189 00:10:01,040 --> 00:10:03,960 Speaker 1: to roll that out. So it isn't going to relieve 190 00:10:04,160 --> 00:10:06,079 Speaker 1: a lot of inflationary pressure in the short term. And 191 00:10:06,120 --> 00:10:08,440 Speaker 1: I think he keeps reminding us that these are sort 192 00:10:08,480 --> 00:10:12,400 Speaker 1: of mostly medium and longer term investments, but maybe child 193 00:10:12,400 --> 00:10:15,199 Speaker 1: care helps a bit. So this is sort of the 194 00:10:15,600 --> 00:10:20,120 Speaker 1: the emphasis on the real resource constraint within MMT, which 195 00:10:20,240 --> 00:10:22,240 Speaker 1: I will, you know, credit to m m T. I 196 00:10:22,520 --> 00:10:26,360 Speaker 1: think that real resource focus has been borne out by 197 00:10:26,400 --> 00:10:28,920 Speaker 1: the past couple of years. But I guess my question is, 198 00:10:29,640 --> 00:10:32,920 Speaker 1: does MMT have a solution to that? Like, what is 199 00:10:32,960 --> 00:10:37,160 Speaker 1: the policy recommendation in this kind of situation? Well, it 200 00:10:37,240 --> 00:10:40,040 Speaker 1: depends what you want to accomplish, right If you if 201 00:10:40,080 --> 00:10:42,720 Speaker 1: you're thinking about the kinds of things that worry me 202 00:10:42,840 --> 00:10:46,679 Speaker 1: the most in some respects, which is the climate crisis 203 00:10:46,720 --> 00:10:49,080 Speaker 1: that we're facing, then I think what you need to 204 00:10:49,120 --> 00:10:53,440 Speaker 1: do is sit down and draft a program. And it's 205 00:10:53,440 --> 00:10:55,199 Speaker 1: going to be a long term program. It's going to 206 00:10:55,280 --> 00:10:57,840 Speaker 1: be a ten year or a fifteen year or whatever. Program. 207 00:10:58,040 --> 00:11:00,080 Speaker 1: But you've got to start thinking about how you're and 208 00:11:00,240 --> 00:11:03,640 Speaker 1: resource the kinds of investments that are needed to reduce 209 00:11:03,679 --> 00:11:06,080 Speaker 1: c O two emissions over a longer period of time. 210 00:11:06,080 --> 00:11:09,600 Speaker 1: And that means investments in energy and investments in housing 211 00:11:09,600 --> 00:11:12,720 Speaker 1: and transportation and agriculture. It's a big program. And so 212 00:11:12,760 --> 00:11:15,160 Speaker 1: when you say, you know, how does mm T think 213 00:11:15,200 --> 00:11:20,400 Speaker 1: about the capacity constraints, In part, it's addressing a housing shortage. 214 00:11:20,440 --> 00:11:23,040 Speaker 1: It's addressing got to build more housing. To deal with 215 00:11:23,040 --> 00:11:26,280 Speaker 1: a housing shortage, you have to deal with the grid. 216 00:11:26,320 --> 00:11:29,120 Speaker 1: If you're going to electrify, you've got to make those investments. 217 00:11:29,160 --> 00:11:32,280 Speaker 1: And you know you're not going to get it all perfect. 218 00:11:32,360 --> 00:11:34,640 Speaker 1: You're going to try to map this out and do 219 00:11:34,679 --> 00:11:37,240 Speaker 1: it in a way that takes advantage of capacity where 220 00:11:37,280 --> 00:11:41,079 Speaker 1: it exists. That build capacity, build capacity where it doesn't. 221 00:11:41,360 --> 00:11:44,840 Speaker 1: That frees up capacity in the economy for other uses. 222 00:11:44,880 --> 00:11:47,960 Speaker 1: If something is deemed a priority and you don't have 223 00:11:48,040 --> 00:11:50,760 Speaker 1: the capacity to make the investments you want to make, 224 00:11:50,880 --> 00:11:54,240 Speaker 1: you may well have to elbow out some of the 225 00:11:54,320 --> 00:11:57,480 Speaker 1: private sector's current use of resources to freedom up for 226 00:11:57,520 --> 00:12:13,560 Speaker 1: something that's deemed a higher priority like climate. So the 227 00:12:13,640 --> 00:12:17,080 Speaker 1: way we're actually in this country attempting to deal with 228 00:12:17,080 --> 00:12:19,800 Speaker 1: inflation is through rate hikes and the federal Reserve. And 229 00:12:19,840 --> 00:12:21,760 Speaker 1: there's all you know, people like, well, what is the 230 00:12:21,760 --> 00:12:24,520 Speaker 1: federal reserve? How is that supposed to fix supply chain bottlenecks? 231 00:12:24,520 --> 00:12:27,920 Speaker 1: And everyone knows it can't and etcetera. And most people 232 00:12:27,960 --> 00:12:31,040 Speaker 1: seem to also have this view. It's like even the 233 00:12:31,080 --> 00:12:33,880 Speaker 1: advocates of monetary tightening. It's a blunt tool. It's not 234 00:12:34,400 --> 00:12:36,760 Speaker 1: the most amazing thing, but Okay, that's what we're going 235 00:12:36,840 --> 00:12:39,600 Speaker 1: to do. But at least it is countercyclical. When you 236 00:12:39,640 --> 00:12:43,960 Speaker 1: look at politicians, they're proposing things like gas rebates or 237 00:12:44,000 --> 00:12:46,680 Speaker 1: cutting the gas tax, which is a kind of arguably 238 00:12:46,720 --> 00:12:50,600 Speaker 1: putting more, trying to douce demand even further. It's not 239 00:12:50,840 --> 00:12:53,439 Speaker 1: I don't find like that very encouraging. And so like 240 00:12:53,760 --> 00:12:56,160 Speaker 1: one of the good things I think about the MT 241 00:12:56,320 --> 00:12:59,200 Speaker 1: view of thinking is I consider it to be democratic 242 00:12:59,679 --> 00:13:04,080 Speaker 1: and outsource not outsource demand management to the to the FED. 243 00:13:04,559 --> 00:13:07,480 Speaker 1: But on the other hand, I look at what politicians 244 00:13:07,600 --> 00:13:11,120 Speaker 1: their response, and I don't exactly feel encouraged by how 245 00:13:11,160 --> 00:13:13,800 Speaker 1: they're thinking about dealing with a period of high inflation, 246 00:13:14,440 --> 00:13:19,480 Speaker 1: and so should they give people pause about the MMT 247 00:13:19,640 --> 00:13:23,440 Speaker 1: political economy such that when we hit high inflation, in 248 00:13:23,480 --> 00:13:26,959 Speaker 1: many cases, the first instinct of politicians is to even 249 00:13:27,160 --> 00:13:31,440 Speaker 1: do spending or two spend more or well, okay, so 250 00:13:31,520 --> 00:13:34,680 Speaker 1: you you raise this um the gas tax, and that's 251 00:13:34,720 --> 00:13:38,040 Speaker 1: a pretty modest I mean, we're talking about a few pennies. Really, 252 00:13:38,040 --> 00:13:39,560 Speaker 1: it's like tens. You know, I don't think this is 253 00:13:39,559 --> 00:13:42,319 Speaker 1: gonna lead to a big burst of inflationary pressure. And 254 00:13:42,360 --> 00:13:45,800 Speaker 1: of course alongside that, what at least Democrats are also 255 00:13:45,880 --> 00:13:49,760 Speaker 1: talking about, are you know, trying to move another package 256 00:13:49,800 --> 00:13:55,000 Speaker 1: through where President Biden is explicitly um referring to this 257 00:13:55,080 --> 00:13:58,280 Speaker 1: as a package that would be deficit reducing and therefore 258 00:13:58,679 --> 00:14:02,120 Speaker 1: helping to bring down inflation. So you are actually hearing no, 259 00:14:02,120 --> 00:14:04,800 Speaker 1: now I may not agree with that, okay, but you 260 00:14:04,840 --> 00:14:08,520 Speaker 1: are hearing politicians say we ought to pass this legislation 261 00:14:08,559 --> 00:14:11,080 Speaker 1: because it will actually help us to deal with inflation. 262 00:14:11,240 --> 00:14:13,000 Speaker 1: So you know, you can say I don't trust them 263 00:14:13,040 --> 00:14:15,120 Speaker 1: to do it, but the truth is they are actually 264 00:14:15,160 --> 00:14:18,360 Speaker 1: trying to do exactly that, but just to broaden it 265 00:14:18,360 --> 00:14:21,360 Speaker 1: out a bit. This has been one of the classic 266 00:14:21,600 --> 00:14:24,480 Speaker 1: critiques of M. M. T, which is that, Okay, you 267 00:14:24,520 --> 00:14:27,360 Speaker 1: can you can change the narrative and make it so 268 00:14:27,400 --> 00:14:31,200 Speaker 1: that people don't think that, you know, the budget in 269 00:14:31,240 --> 00:14:35,080 Speaker 1: and of itself is the constraint on fiscal spending. But 270 00:14:35,240 --> 00:14:38,320 Speaker 1: then you still have the problem of politicians having to 271 00:14:38,440 --> 00:14:42,440 Speaker 1: agree on whatever the policy is that that we're going 272 00:14:42,480 --> 00:14:45,600 Speaker 1: to enact. And to be honest that you know, recent 273 00:14:45,680 --> 00:14:50,040 Speaker 1: history in Washington has not been conducive to consensus. You 274 00:14:50,080 --> 00:14:52,960 Speaker 1: still have to build that consensus. Even if you say, well, 275 00:14:53,240 --> 00:14:57,640 Speaker 1: the budget is not unlimited, but bigger than maybe we think. 276 00:14:58,080 --> 00:15:00,960 Speaker 1: And so I don't know, if anything, it feels like 277 00:15:01,000 --> 00:15:04,920 Speaker 1: that issue is still lingering, consensus is lacking in DC. 278 00:15:05,160 --> 00:15:08,120 Speaker 1: To sum it up, sure it is, but I don't 279 00:15:08,280 --> 00:15:10,760 Speaker 1: I don't know that this is a in recent years 280 00:15:10,840 --> 00:15:12,760 Speaker 1: kind of a thing. I mean, this is this is 281 00:15:12,800 --> 00:15:14,600 Speaker 1: the name of the game. You know, if the votes 282 00:15:14,600 --> 00:15:17,400 Speaker 1: are there, the legislation passes, and if the votes aren't there, 283 00:15:17,720 --> 00:15:21,520 Speaker 1: the legislation doesn't pass. And so MMT doesn't solve the 284 00:15:21,560 --> 00:15:23,880 Speaker 1: political gridlock and that sort of a thing. What it 285 00:15:23,920 --> 00:15:27,560 Speaker 1: does do, though, Tracy, I think is it really, as 286 00:15:27,560 --> 00:15:31,080 Speaker 1: you said, it recenters the debate. So instead of you know, 287 00:15:31,160 --> 00:15:33,840 Speaker 1: approaching something and saying, all right, we want to do 288 00:15:33,920 --> 00:15:37,280 Speaker 1: a trillion dollars of infrastructure investment, and we know we 289 00:15:37,320 --> 00:15:39,560 Speaker 1: have to pay for it. We're in the old framework, right, 290 00:15:39,560 --> 00:15:41,080 Speaker 1: we know we have to pay for it. So we're 291 00:15:41,120 --> 00:15:43,560 Speaker 1: going to couple the proposed spending with a whole slew 292 00:15:43,600 --> 00:15:47,480 Speaker 1: of tax increases to generate revenues. So we can go 293 00:15:47,520 --> 00:15:50,840 Speaker 1: to the Congressional Budget Office and say, look at our legislation, 294 00:15:50,920 --> 00:15:52,640 Speaker 1: give it a score. Tell us if we did a 295 00:15:52,680 --> 00:15:55,760 Speaker 1: good job keeping it all deficit neutral. And it turns 296 00:15:55,760 --> 00:15:58,200 Speaker 1: out and we've seen this with Build Back Better, right, 297 00:15:58,320 --> 00:16:00,520 Speaker 1: it's really hard to get the votes. You have to 298 00:16:00,560 --> 00:16:03,640 Speaker 1: convince your colleagues in the House and the Senate not 299 00:16:03,720 --> 00:16:06,320 Speaker 1: just to vote for your spending priorities, but also to 300 00:16:06,440 --> 00:16:09,280 Speaker 1: vote for the increase in taxes that you think are 301 00:16:09,360 --> 00:16:12,240 Speaker 1: necessary to keep it all deficit neutral. And what MMT 302 00:16:12,400 --> 00:16:15,080 Speaker 1: does is say, you know, sometimes you don't have to 303 00:16:15,120 --> 00:16:18,160 Speaker 1: offset the spending, maybe off set half of it, maybe 304 00:16:18,160 --> 00:16:20,760 Speaker 1: you don't need offset any of it, you know, and 305 00:16:20,840 --> 00:16:25,200 Speaker 1: so you can then maybe have an easier time gathering 306 00:16:25,240 --> 00:16:28,320 Speaker 1: the votes to make investments because you only have to 307 00:16:28,360 --> 00:16:30,920 Speaker 1: win one fight instead of win that other fight as well. 308 00:16:31,160 --> 00:16:34,720 Speaker 1: I'm a little bit confused still about the role of 309 00:16:34,920 --> 00:16:39,440 Speaker 1: taxes in UH inflation management because I one thing that 310 00:16:39,520 --> 00:16:41,400 Speaker 1: you hear is like, well, this would be a really 311 00:16:41,400 --> 00:16:44,680 Speaker 1: good time to raise taxes on the rich. That's a 312 00:16:44,680 --> 00:16:49,920 Speaker 1: politically popular thing. Maybe it UH marginally diminishes their spending 313 00:16:49,920 --> 00:16:54,000 Speaker 1: power that create eases some strains on the economy. Maybe 314 00:16:54,040 --> 00:16:57,440 Speaker 1: not just the rich, maybe the upper middle class as well. 315 00:16:57,480 --> 00:17:00,040 Speaker 1: What is is there a role for a taxation in 316 00:17:00,320 --> 00:17:03,480 Speaker 1: inflation management? And how do you think of it? Because 317 00:17:03,520 --> 00:17:07,240 Speaker 1: I feel like a little bit confused on this topic. Okay, Well, 318 00:17:07,480 --> 00:17:11,960 Speaker 1: taxes function to remove purchasing power from somebody's hands. Right, 319 00:17:12,560 --> 00:17:14,640 Speaker 1: every dollar that's taxed away from you as a dollar 320 00:17:14,760 --> 00:17:18,199 Speaker 1: you don't have and excuse me, can't turn around and 321 00:17:18,440 --> 00:17:20,840 Speaker 1: chase after some good or service in the economy. So 322 00:17:20,960 --> 00:17:25,320 Speaker 1: taxes function to diminish one's purchasing power. Um. But there 323 00:17:25,359 --> 00:17:28,800 Speaker 1: are other ways to do that as well. So the 324 00:17:28,920 --> 00:17:32,480 Speaker 1: role of taxes in MMT. First, there's an origin story, right, 325 00:17:32,520 --> 00:17:34,560 Speaker 1: there's an If you wanted to start up a currency 326 00:17:34,600 --> 00:17:37,720 Speaker 1: from scratch, taxes play an important role, and we saw 327 00:17:37,760 --> 00:17:39,679 Speaker 1: that with the Euro. The euro is a currency that 328 00:17:39,720 --> 00:17:44,359 Speaker 1: didn't exist prior to January of and then because the 329 00:17:44,400 --> 00:17:46,800 Speaker 1: government said, Okay, after this day, we're going to start 330 00:17:46,960 --> 00:17:49,400 Speaker 1: spending only in this currency, and we're going to require 331 00:17:49,440 --> 00:17:51,640 Speaker 1: taxes be paid in this currency. Will low and behold, 332 00:17:51,960 --> 00:17:54,480 Speaker 1: you switch over the monetary system and now you have 333 00:17:54,600 --> 00:17:57,840 Speaker 1: the Euro. So, you know, creating a demand for a 334 00:17:57,880 --> 00:18:03,320 Speaker 1: currency is one role of taxes. Another role is, you know, inflation. 335 00:18:03,520 --> 00:18:07,240 Speaker 1: If you simply spent the currency and never taxed any 336 00:18:07,280 --> 00:18:10,120 Speaker 1: of it back again, then you would, you know, put 337 00:18:10,160 --> 00:18:12,840 Speaker 1: too much purchasing power into people's hands, and the result 338 00:18:12,840 --> 00:18:17,160 Speaker 1: would inevitably be inflation. So one thing that taxes do 339 00:18:17,359 --> 00:18:20,280 Speaker 1: is allow the government to both spend its currency into 340 00:18:20,320 --> 00:18:23,400 Speaker 1: the economy but also recover a portion of it as 341 00:18:23,440 --> 00:18:26,040 Speaker 1: they tax some of it back. But can text policy 342 00:18:26,080 --> 00:18:30,600 Speaker 1: be used countercyclically? And is there a role for It's like, hey, 343 00:18:30,640 --> 00:18:33,200 Speaker 1: inflation is hid. Now is a good time to raise taxes? Well, 344 00:18:33,240 --> 00:18:36,040 Speaker 1: the Democrats are trying to do that now, actually, But 345 00:18:36,119 --> 00:18:41,960 Speaker 1: tax taxes are already countercyclical, right. Tax revenues increase automatically 346 00:18:42,200 --> 00:18:46,480 Speaker 1: as the economy grows, and they drop off in a recovery, 347 00:18:46,600 --> 00:18:49,280 Speaker 1: and I'm sorry, in a recession. And so I guess 348 00:18:49,320 --> 00:18:53,520 Speaker 1: you're asking about discretionary right, the discretionary use in order 349 00:18:53,600 --> 00:18:56,879 Speaker 1: to battle inflation. It's been proposed in the past. You know, 350 00:18:56,920 --> 00:19:00,119 Speaker 1: the Federal Reserve building is named after Mariner echoes. And 351 00:19:00,119 --> 00:19:01,760 Speaker 1: if you go back and you listen to the kinds 352 00:19:01,760 --> 00:19:04,280 Speaker 1: of things Equals was saying when talking about how to 353 00:19:04,320 --> 00:19:07,840 Speaker 1: bring down inflation now after the war or during and 354 00:19:07,880 --> 00:19:10,480 Speaker 1: after the war, Equals was saying, we should use taxes 355 00:19:10,560 --> 00:19:12,480 Speaker 1: to do this. So it's not a new idea, it's 356 00:19:12,480 --> 00:19:15,679 Speaker 1: not an m m T proposal per se. Um, Could 357 00:19:15,680 --> 00:19:19,280 Speaker 1: it work? Could it function to reduce inflationary pressures? Yes? 358 00:19:19,600 --> 00:19:23,159 Speaker 1: Is it practical to adjust taxes in real time to 359 00:19:23,240 --> 00:19:26,600 Speaker 1: try to battle x post inflation like after it happens? 360 00:19:26,600 --> 00:19:30,119 Speaker 1: And the answer is probably no. Um, maybe you can 361 00:19:30,160 --> 00:19:33,440 Speaker 1: get the votes to raise taxes when inflation is high, 362 00:19:33,520 --> 00:19:36,560 Speaker 1: and it may help to reduce inflationary pressures, but it's 363 00:19:36,600 --> 00:19:40,800 Speaker 1: certainly not the frontline policy prescription for reducing inflation. And 364 00:19:41,000 --> 00:19:44,120 Speaker 1: m m T basic question here, what is the right 365 00:19:44,160 --> 00:19:47,520 Speaker 1: way or the ideal way to reduce ex post inflation? 366 00:19:48,400 --> 00:19:50,679 Speaker 1: All right, So this is the way I always have 367 00:19:50,760 --> 00:19:53,880 Speaker 1: tried to say this. There is in my mind anyway 368 00:19:53,920 --> 00:19:57,159 Speaker 1: no one size fits all policy response. To inflation, you 369 00:19:57,280 --> 00:19:59,080 Speaker 1: have to look under the hood. If I were to 370 00:19:59,080 --> 00:20:01,600 Speaker 1: walk down into my baseman and find it flooded with water, 371 00:20:01,640 --> 00:20:02,960 Speaker 1: I know I have a problem on my hands, but 372 00:20:03,000 --> 00:20:05,080 Speaker 1: I don't know why. I don't know if a kid 373 00:20:05,160 --> 00:20:07,879 Speaker 1: left to sink, running of a toilet overflowed, if the 374 00:20:07,920 --> 00:20:10,359 Speaker 1: dishwashers leaking of a pipe burst. Before I know what 375 00:20:10,480 --> 00:20:12,800 Speaker 1: to do, I have to figure out where the source 376 00:20:12,800 --> 00:20:14,800 Speaker 1: of the water is coming from, what's causing the problem. 377 00:20:14,800 --> 00:20:17,119 Speaker 1: And that's how I think about inflation. If it's end. 378 00:20:17,200 --> 00:20:20,399 Speaker 1: We were talking earlier about energy. Right, is higher or 379 00:20:20,480 --> 00:20:24,120 Speaker 1: higher interest rates the right response, the right policy response 380 00:20:24,200 --> 00:20:27,920 Speaker 1: to an inflation that's being driven largely by oil prices? 381 00:20:28,000 --> 00:20:30,040 Speaker 1: And I think the answer is no. So I really 382 00:20:30,080 --> 00:20:34,040 Speaker 1: think where we're ultimately headed. I think, I guess I 383 00:20:34,080 --> 00:20:39,000 Speaker 1: hope is to a more granular, tailored policy response, more 384 00:20:39,040 --> 00:20:42,040 Speaker 1: sophisticated response to the way that we approach, you know, 385 00:20:42,240 --> 00:20:45,159 Speaker 1: combatting inflation. This is where we need. My idea of 386 00:20:45,200 --> 00:20:48,480 Speaker 1: a FED that sets the speed limit of cars and 387 00:20:48,520 --> 00:20:51,040 Speaker 1: in these days, lower the speed limit rather than raising 388 00:20:51,080 --> 00:20:53,560 Speaker 1: interest rates, lower the speed limit to get better. Guess 389 00:20:54,000 --> 00:20:56,280 Speaker 1: you know, the economists at the Center for Economic and 390 00:20:56,359 --> 00:20:59,760 Speaker 1: Policy researches came out with a kind of six things 391 00:20:59,800 --> 00:21:03,120 Speaker 1: you could do to reduce inflationary pressures today. That's one 392 00:21:03,359 --> 00:21:07,000 Speaker 1: of the six ideas they put forward. A shorter work week, right, Um, 393 00:21:07,440 --> 00:21:10,360 Speaker 1: work shorter work week sounds fine, Yeah, work from sounds good. 394 00:21:10,720 --> 00:21:14,960 Speaker 1: Every Tracy's ears always perk up work. If MMT says 395 00:21:14,960 --> 00:21:17,920 Speaker 1: everyone should work from home, that we've got you, that's 396 00:21:17,920 --> 00:21:20,880 Speaker 1: okay with me. Um. But actually, actually on that point, 397 00:21:21,040 --> 00:21:24,439 Speaker 1: can we talk about the job guarantee portion of MMT 398 00:21:24,760 --> 00:21:28,000 Speaker 1: because I mentioned this in the intro, But it feels 399 00:21:28,080 --> 00:21:32,080 Speaker 1: to me that given everything we've experienced now, that inflation 400 00:21:32,160 --> 00:21:36,320 Speaker 1: seems to be a more salient issue for people than unemployment. 401 00:21:36,359 --> 00:21:38,639 Speaker 1: And you know, maybe if unemployment was a ten percent 402 00:21:38,800 --> 00:21:42,399 Speaker 1: or God forbid or something crazy like that, more people 403 00:21:42,680 --> 00:21:45,280 Speaker 1: more people would obviously care, but a greater proportion of 404 00:21:45,320 --> 00:21:48,280 Speaker 1: those not directly affected would care. But it feels like 405 00:21:48,359 --> 00:21:52,000 Speaker 1: everyone has a stake in inflation. Everyone is impacted by 406 00:21:52,000 --> 00:21:57,400 Speaker 1: the cost of living. So how does MMT overcome that discrepancy? 407 00:21:57,520 --> 00:21:59,760 Speaker 1: How do you get people to care about the job 408 00:21:59,800 --> 00:22:03,879 Speaker 1: guarantee portion of the theory? Well, I guess you know. 409 00:22:04,200 --> 00:22:06,480 Speaker 1: One way to think about it is what if we 410 00:22:06,640 --> 00:22:10,240 Speaker 1: had a federal job guarantee in place before the pandemic 411 00:22:10,320 --> 00:22:14,159 Speaker 1: broke and instead of you know, twenty two million people 412 00:22:14,240 --> 00:22:15,800 Speaker 1: lost their jobs in the first two months of the 413 00:22:15,800 --> 00:22:19,439 Speaker 1: pandemic or whatever, and Congress sort of panicked because we 414 00:22:19,520 --> 00:22:23,919 Speaker 1: didn't have kind of institutions in place to absorb and 415 00:22:24,040 --> 00:22:27,760 Speaker 1: deal in a more focused way with the you know, 416 00:22:27,840 --> 00:22:31,280 Speaker 1: the unemployment and the you know, economic fallout. So suppose 417 00:22:31,320 --> 00:22:34,320 Speaker 1: we had a federal job guarantee in place, then there 418 00:22:34,359 --> 00:22:37,560 Speaker 1: would have been you know, less I think panic and 419 00:22:37,640 --> 00:22:40,959 Speaker 1: pulling out the bazooka, the money bazuka and just spraying 420 00:22:41,000 --> 00:22:42,840 Speaker 1: it across the economy and saying, we got to blow 421 00:22:42,840 --> 00:22:44,800 Speaker 1: a bunch of money into people's hands because we don't 422 00:22:44,800 --> 00:22:48,600 Speaker 1: know what else to do. You could have employed people directly, 423 00:22:48,800 --> 00:22:51,040 Speaker 1: and it would have been targeted as opposed to this 424 00:22:51,400 --> 00:22:54,400 Speaker 1: much more you know, untargeted, would have had the infrastructure 425 00:22:54,400 --> 00:22:57,160 Speaker 1: already in place, had it in place, and the money 426 00:22:57,200 --> 00:22:59,040 Speaker 1: would have gone right to where it was needed. You 427 00:22:59,080 --> 00:23:03,240 Speaker 1: wouldn't necessarily had to send large checks to almost everybody. Uh. 428 00:23:03,280 --> 00:23:05,960 Speaker 1: And maybe to the extent that doing those kinds of 429 00:23:06,000 --> 00:23:08,800 Speaker 1: things helped to fuel some of the inflationary pressures that 430 00:23:09,160 --> 00:23:12,040 Speaker 1: we're dealing with today. People could be persuaded by saying, look, 431 00:23:12,080 --> 00:23:14,199 Speaker 1: we don't want to end up there again. I like 432 00:23:14,320 --> 00:23:16,479 Speaker 1: the Bazooka. I thought it was great. It just sprayed 433 00:23:16,520 --> 00:23:18,720 Speaker 1: all that money around, and we went from what was 434 00:23:18,760 --> 00:23:20,560 Speaker 1: going to be one of the worst downturns ever to 435 00:23:20,720 --> 00:23:23,280 Speaker 1: the fastest recovery in history. Yeah. Actually, I mean there's 436 00:23:23,280 --> 00:23:26,360 Speaker 1: no question, right, it is true, right that we did 437 00:23:26,440 --> 00:23:30,239 Speaker 1: have the fastest economic recovery in recorded history. So you've 438 00:23:30,280 --> 00:23:32,760 Speaker 1: got to give some credit to the policy response this time, 439 00:23:32,840 --> 00:23:35,520 Speaker 1: especially as compared to two thousand, eight thousand nine. I've 440 00:23:35,520 --> 00:23:39,680 Speaker 1: seen uh, Stephen Manuchin around the conference for AD and 441 00:23:39,840 --> 00:23:42,119 Speaker 1: I keep trying to I haven't gotten close enough to 442 00:23:42,160 --> 00:23:44,640 Speaker 1: invite him on odd lots. And we can talk about 443 00:23:44,680 --> 00:23:47,880 Speaker 1: how great that was. But in all but in all seriousness, 444 00:23:48,320 --> 00:23:51,199 Speaker 1: you know, looking back, sitting aside the idea of like 445 00:23:51,240 --> 00:23:53,720 Speaker 1: it would have been nice if there was infrastructure in place, 446 00:23:54,080 --> 00:23:57,119 Speaker 1: looking back at the various rounds, and there was like 447 00:23:57,240 --> 00:24:01,160 Speaker 1: the Cares Act, right, and the America and then Biden's 448 00:24:01,200 --> 00:24:03,879 Speaker 1: airp right, Well, there was the Cares Act in March, 449 00:24:04,720 --> 00:24:08,960 Speaker 1: and there was the nine billion um Consolidated Spending Bill 450 00:24:09,000 --> 00:24:12,800 Speaker 1: in December, and then one point nine trillion in March, 451 00:24:13,760 --> 00:24:17,800 Speaker 1: five trillion in twelve months. So looking back at those 452 00:24:17,880 --> 00:24:21,199 Speaker 1: three big bills, just from what we know now and 453 00:24:21,240 --> 00:24:24,159 Speaker 1: where we are, in your view, are there lessons to 454 00:24:24,200 --> 00:24:26,920 Speaker 1: be learned about how they might have been structured differently. 455 00:24:27,880 --> 00:24:31,240 Speaker 1: So in a in a perfect world, right, you would 456 00:24:31,320 --> 00:24:35,679 Speaker 1: run legislation through a sort of rigorous scoring process, if 457 00:24:35,680 --> 00:24:37,480 Speaker 1: you want to call it a scoring process. Instead of 458 00:24:37,480 --> 00:24:40,560 Speaker 1: asking CBO tell us the budgetary impacts of what we're 459 00:24:40,560 --> 00:24:43,760 Speaker 1: about to do, you want to have somebody on the 460 00:24:43,800 --> 00:24:46,280 Speaker 1: outlook for inflation risk, and you want to have somebody 461 00:24:46,320 --> 00:24:48,199 Speaker 1: taken a look at what it is you're proposing to 462 00:24:48,280 --> 00:24:52,040 Speaker 1: spend and looking to mitigate inflation risk ahead of time. 463 00:24:52,080 --> 00:24:54,399 Speaker 1: That's the big advantage I think of MMT is that 464 00:24:54,440 --> 00:24:56,879 Speaker 1: when it comes to inflation, the goal is to preempt it, 465 00:24:56,960 --> 00:24:58,840 Speaker 1: not to chase it on the back end after you've 466 00:24:58,840 --> 00:25:03,120 Speaker 1: caused the problem, but to avoid inflationary problems, partly through 467 00:25:03,119 --> 00:25:05,959 Speaker 1: a job guarantee, but partly through changing the way that 468 00:25:06,000 --> 00:25:10,440 Speaker 1: you evaluate legislation prior to voting. Now, having said that, 469 00:25:10,960 --> 00:25:13,040 Speaker 1: you know, I said, we're in a perfect world, and 470 00:25:13,080 --> 00:25:15,840 Speaker 1: in a perfect world, you'd also have perfect information, so 471 00:25:15,880 --> 00:25:18,040 Speaker 1: you would be able to see the delta variant coming, 472 00:25:18,040 --> 00:25:19,719 Speaker 1: and you would be able to see the O macron 473 00:25:19,840 --> 00:25:22,399 Speaker 1: variant coming. So when I think about it, if you 474 00:25:22,440 --> 00:25:25,000 Speaker 1: had been able to tell lawmakers, say, let's say you 475 00:25:25,080 --> 00:25:27,080 Speaker 1: take Larry story to them and you say, the line 476 00:25:27,119 --> 00:25:28,879 Speaker 1: goes here and the other line is here, and this 477 00:25:28,960 --> 00:25:30,960 Speaker 1: is going to be too much, but also you should 478 00:25:31,040 --> 00:25:34,160 Speaker 1: know a delta wave is coming and an omicron wave 479 00:25:34,280 --> 00:25:37,160 Speaker 1: is coming, would lawmakers have wanted to air on the side? 480 00:25:37,200 --> 00:25:40,080 Speaker 1: Member Everybody originally said it's better to do too much 481 00:25:40,119 --> 00:25:43,280 Speaker 1: than too little. So maybe if you had perfect information 482 00:25:43,280 --> 00:25:46,840 Speaker 1: about what was coming, lawmakers might have still preferred to 483 00:25:47,320 --> 00:25:50,600 Speaker 1: to take the risk of going too big. We just 484 00:25:50,640 --> 00:25:52,920 Speaker 1: don't know, and this was also the criticism of two 485 00:25:52,920 --> 00:25:55,200 Speaker 1: thousand and eight two thousand nine was that we didn't 486 00:25:55,200 --> 00:25:58,480 Speaker 1: actually do enough. But so, one other thing that people 487 00:25:58,520 --> 00:26:00,679 Speaker 1: are talking about quite a lot right now is the 488 00:26:00,840 --> 00:26:05,639 Speaker 1: idea of the dollar and its place in the global 489 00:26:05,680 --> 00:26:11,720 Speaker 1: financial system and America's enjoyment of reserve currency status. And 490 00:26:12,000 --> 00:26:15,240 Speaker 1: this has also been one of the sort of tangential 491 00:26:15,359 --> 00:26:18,840 Speaker 1: criticisms of m m T, which is that it might 492 00:26:18,920 --> 00:26:23,000 Speaker 1: only work for a country like the US that enjoys 493 00:26:23,080 --> 00:26:26,400 Speaker 1: that reserve currency status, maybe it's not so well suited 494 00:26:26,640 --> 00:26:28,960 Speaker 1: to emerging markets. And I know you have strong opinions 495 00:26:29,040 --> 00:26:32,000 Speaker 1: on this, but I'm just curious, how are you thinking 496 00:26:32,000 --> 00:26:35,600 Speaker 1: about that aspect of it at the moment, And what's 497 00:26:35,640 --> 00:26:39,360 Speaker 1: your response to people who say, well, inflation, the inflation 498 00:26:39,359 --> 00:26:43,439 Speaker 1: that we're experiencing, and you know, it just proves that um, 499 00:26:44,119 --> 00:26:46,840 Speaker 1: the dollar is on its way down or that America's 500 00:26:46,880 --> 00:26:50,280 Speaker 1: reserve currency status is somehow endangered. Well, I mean, I 501 00:26:50,280 --> 00:26:53,520 Speaker 1: don't know. I'm looking at the dollar versus the Euro 502 00:26:53,880 --> 00:26:56,600 Speaker 1: versus history. Hard to make that argument right now, but 503 00:26:56,920 --> 00:26:58,560 Speaker 1: it's not I don't think Jacy, that I have strong 504 00:26:58,560 --> 00:27:01,280 Speaker 1: opinions about e M. I think that for a lot 505 00:27:01,320 --> 00:27:06,920 Speaker 1: of em countries they don't enjoy the kind of capacity, 506 00:27:06,960 --> 00:27:09,480 Speaker 1: you know, to spend that a country like the US 507 00:27:09,600 --> 00:27:12,639 Speaker 1: or Japan, or the UK or Australia, Canada doesn't. It 508 00:27:12,720 --> 00:27:14,840 Speaker 1: of course not just the US, because you look at 509 00:27:14,880 --> 00:27:18,359 Speaker 1: what even countries across Europe this time as compared to 510 00:27:18,440 --> 00:27:22,360 Speaker 1: last time. This time, European countries, even those that are 511 00:27:22,359 --> 00:27:25,560 Speaker 1: on the euro enjoyed basically the full back stopping of 512 00:27:25,600 --> 00:27:27,800 Speaker 1: the e c B. It was almost as if the 513 00:27:27,800 --> 00:27:31,000 Speaker 1: e c B restored monetary sovereignty to all of these 514 00:27:31,440 --> 00:27:33,600 Speaker 1: countries and just basically said, we have your back. We're 515 00:27:33,600 --> 00:27:35,840 Speaker 1: not going to let yields blow out. Go and spend 516 00:27:35,840 --> 00:27:38,199 Speaker 1: what you need to spend deal with the pandemic and 517 00:27:38,240 --> 00:27:41,320 Speaker 1: the economic fallout. So it's not just the US that 518 00:27:41,359 --> 00:27:45,199 Speaker 1: can do these things. Every European country could basically spend 519 00:27:45,200 --> 00:27:48,240 Speaker 1: whatever was necessary because they enjoyed the back stopping of 520 00:27:48,280 --> 00:27:50,199 Speaker 1: the e c B. The UK did a lot of 521 00:27:50,240 --> 00:27:54,320 Speaker 1: fiscal you know, Australia and and so um. But emerging 522 00:27:54,359 --> 00:27:56,359 Speaker 1: markets are definitely different. You've got a lot of dollar 523 00:27:56,440 --> 00:28:00,320 Speaker 1: denominated debt, You're dependent on energy and food and other 524 00:28:00,800 --> 00:28:04,040 Speaker 1: critical items to import. You're not necessarily going to be 525 00:28:04,080 --> 00:28:06,640 Speaker 1: able to get those things, and you're in a different spot. Right. 526 00:28:06,720 --> 00:28:10,080 Speaker 1: This was Fidel Kabob's argument when he came on here, 527 00:28:10,119 --> 00:28:13,199 Speaker 1: which is that actually MMT when applied to emerging markets 528 00:28:13,280 --> 00:28:18,960 Speaker 1: is about building up that independence, that fiscal indepacity. You know, 529 00:28:19,080 --> 00:28:20,560 Speaker 1: I mean, you know, when I think about like the 530 00:28:20,640 --> 00:28:24,919 Speaker 1: last ten years or two thousand nine, two twenty roughly, 531 00:28:26,160 --> 00:28:30,640 Speaker 1: obviously incredible ascendant m m T is around for long 532 00:28:30,640 --> 00:28:34,400 Speaker 1: before then, but the conditions were very right for that, 533 00:28:34,520 --> 00:28:38,440 Speaker 1: for the message that we're underutilizing our fiscal capacity and 534 00:28:38,480 --> 00:28:44,440 Speaker 1: we had elevated employment, unelevated unemployment. We know expos factor 535 00:28:44,520 --> 00:28:47,920 Speaker 1: that the unemployment rate could drop for far much further 536 00:28:48,000 --> 00:28:50,720 Speaker 1: than economist thought, and it's like this is full employment. 537 00:28:50,720 --> 00:28:53,120 Speaker 1: Then it just kept going lower. So like the conditions 538 00:28:53,160 --> 00:28:56,680 Speaker 1: were very good in the post grade financial crisis for 539 00:28:56,840 --> 00:28:59,360 Speaker 1: mm T to have like a big impact and for 540 00:28:59,440 --> 00:29:03,000 Speaker 1: this mess age that we're under utilizing um these policy 541 00:29:03,040 --> 00:29:06,920 Speaker 1: tools that we have available. I think like regardless of 542 00:29:07,800 --> 00:29:12,240 Speaker 1: why we have inflation or etcetera. It feels like now 543 00:29:12,320 --> 00:29:14,960 Speaker 1: it's going to be like MMT on hard mode and 544 00:29:15,120 --> 00:29:18,120 Speaker 1: it's gonna be uh, these questions about like how do 545 00:29:18,160 --> 00:29:21,640 Speaker 1: you build port capacity, how do you build sustainable energy capacity, 546 00:29:21,840 --> 00:29:25,400 Speaker 1: how do we build electrical grid capacity? These are like 547 00:29:25,640 --> 00:29:27,440 Speaker 1: these are it feels like these are gonna be the 548 00:29:27,480 --> 00:29:30,760 Speaker 1: really tough questions of the next decade. And I'm really curious, like, 549 00:29:30,800 --> 00:29:34,160 Speaker 1: from your perspective, how are you aiming to have MMT 550 00:29:34,360 --> 00:29:40,320 Speaker 1: thinking inform these conversations. Well, at least that's the proper question. 551 00:29:40,480 --> 00:29:43,080 Speaker 1: So we're now we've shifted the debate onto this new 552 00:29:43,200 --> 00:29:47,000 Speaker 1: terrain and you hear you know, Secretary Yelling going and 553 00:29:47,040 --> 00:29:51,280 Speaker 1: giving speeches before the World Bank just recently and saying, 554 00:29:51,280 --> 00:29:56,440 Speaker 1: you know what the administration's basic macro approach is modern 555 00:29:56,560 --> 00:30:00,320 Speaker 1: supply side economics and and and the ship the shift 556 00:30:00,400 --> 00:30:03,160 Speaker 1: that she's talking about there is exactly what you're talking about, 557 00:30:03,200 --> 00:30:07,360 Speaker 1: building capacity and dealing with supply side right reassuring and 558 00:30:07,400 --> 00:30:10,840 Speaker 1: building resilience and all that sort of stuff. Um. So 559 00:30:10,880 --> 00:30:15,040 Speaker 1: I think MMT can play a role in that. And um, 560 00:30:15,080 --> 00:30:17,440 Speaker 1: you know, we're not quite there in the sense that 561 00:30:17,560 --> 00:30:20,080 Speaker 1: for for Jannet Yellen and the way she's talking about it, 562 00:30:20,200 --> 00:30:23,400 Speaker 1: you still have that adherence to the idea that everything 563 00:30:23,480 --> 00:30:26,320 Speaker 1: needs to be deficit neutral and that keeping a deficit 564 00:30:26,400 --> 00:30:30,000 Speaker 1: neutralist tantamount to keeping it inflation and neutral, which it 565 00:30:30,160 --> 00:30:33,320 Speaker 1: is not. Um. But at least we're starting to focus 566 00:30:33,320 --> 00:30:35,480 Speaker 1: on things like how do we make the investments in 567 00:30:35,600 --> 00:30:38,840 Speaker 1: ports and childcare and all the rest of it, you know, 568 00:30:38,880 --> 00:30:41,440 Speaker 1: semiconductors and so forth. How do we get there? How 569 00:30:41,480 --> 00:30:43,360 Speaker 1: do we get there? Well, we do it. You have 570 00:30:43,440 --> 00:30:44,880 Speaker 1: to make You have to spend the money. There's no 571 00:30:45,040 --> 00:30:48,680 Speaker 1: there's no like secret you know recipe here. You just 572 00:30:48,800 --> 00:30:51,640 Speaker 1: simply have to spend the money. So how do you 573 00:30:52,040 --> 00:30:55,440 Speaker 1: continue to make the kinds of investments that are necessary 574 00:30:55,640 --> 00:30:58,880 Speaker 1: in an economy that is supply constraint? How long will 575 00:30:58,920 --> 00:31:01,800 Speaker 1: we be supply constraint? You know, the word recession is 576 00:31:01,880 --> 00:31:05,160 Speaker 1: everywhere at this conference. Everyone is talking about whether the 577 00:31:05,160 --> 00:31:08,080 Speaker 1: FED is going to successfully orchestrate a soft landing, and 578 00:31:08,120 --> 00:31:11,720 Speaker 1: if they don't, hard landing means a deeper recession, which 579 00:31:11,760 --> 00:31:15,360 Speaker 1: automatically means you're going to free up capacity. Right. So 580 00:31:15,880 --> 00:31:17,960 Speaker 1: I'll just come back to climate because for me, that 581 00:31:18,080 --> 00:31:20,240 Speaker 1: is the number one issue. It's not going anywhere, which 582 00:31:20,280 --> 00:31:23,760 Speaker 1: means I don't think that MMT has lost its place 583 00:31:23,920 --> 00:31:27,240 Speaker 1: in the debate. I think that you know, the weather 584 00:31:27,320 --> 00:31:32,440 Speaker 1: related tornadoes, hurricanes, fires, floods, all the rest of it, 585 00:31:32,480 --> 00:31:35,680 Speaker 1: that stuff is only going to intensify in the years ahead, 586 00:31:35,960 --> 00:31:38,840 Speaker 1: and we have to spend and we have to make 587 00:31:38,840 --> 00:31:41,760 Speaker 1: the investments, and so MMT gives us, I think, the 588 00:31:41,840 --> 00:31:44,640 Speaker 1: confidence to know that there is a path to get there. 589 00:31:45,600 --> 00:31:48,280 Speaker 1: One thing that just really strike me. I mean, obviously 590 00:31:48,320 --> 00:31:52,120 Speaker 1: there are these sort of like big macro factors driving 591 00:31:52,440 --> 00:31:55,800 Speaker 1: um the inflation we're saying, but we also have had 592 00:31:55,840 --> 00:31:57,760 Speaker 1: a lot of drought, and I like in the US 593 00:31:57,840 --> 00:32:01,280 Speaker 1: corn planting season right now is is moll and that's 594 00:32:01,280 --> 00:32:04,280 Speaker 1: a problem. And there's you know, droughts in Brazil that 595 00:32:04,320 --> 00:32:09,400 Speaker 1: have India and the heat, and so thinking about like 596 00:32:09,440 --> 00:32:14,920 Speaker 1: the connection between climate and weather and the inflation and 597 00:32:14,960 --> 00:32:30,200 Speaker 1: food that we're thinking right now, it's pretty rid. So 598 00:32:31,360 --> 00:32:33,680 Speaker 1: I mean, just on this note of of how MMT 599 00:32:33,840 --> 00:32:37,160 Speaker 1: sort of recaptures the narrative again, one of the critiques 600 00:32:37,200 --> 00:32:41,360 Speaker 1: has been that the theory itself is complex and people 601 00:32:41,440 --> 00:32:44,480 Speaker 1: tend to kind of see what they want to see 602 00:32:44,960 --> 00:32:47,680 Speaker 1: inside of it. What do you say in response to 603 00:32:47,800 --> 00:32:50,680 Speaker 1: that to people who say that the theory is is 604 00:32:50,720 --> 00:32:53,760 Speaker 1: too complicated and has a tendency to sort of like 605 00:32:54,400 --> 00:32:58,520 Speaker 1: change goals and aims over time. I'm not sure i've 606 00:32:58,560 --> 00:33:01,240 Speaker 1: heard that critique as much. You know, I think you 607 00:33:01,320 --> 00:33:03,480 Speaker 1: must have heard that m m T is complex, right, 608 00:33:03,520 --> 00:33:06,080 Speaker 1: and hard to for a lot of people to grasp 609 00:33:06,440 --> 00:33:10,440 Speaker 1: because like the goal post seems to change sometimes. Okay, well, 610 00:33:10,440 --> 00:33:13,320 Speaker 1: I've heard people make accusations about goal postings over but 611 00:33:13,400 --> 00:33:16,040 Speaker 1: I think I guess I'm used to hearing people say 612 00:33:16,080 --> 00:33:19,400 Speaker 1: it's almost too obvious and too simple. I've heard that 613 00:33:19,440 --> 00:33:21,320 Speaker 1: one too. Just to be clear, when it comes to 614 00:33:21,360 --> 00:33:24,920 Speaker 1: the complexity with UM, can you just help me by 615 00:33:25,760 --> 00:33:28,680 Speaker 1: I guess it's the idea. So for instance, it takes 616 00:33:28,720 --> 00:33:32,280 Speaker 1: like a real example from from recent history. So UH, 617 00:33:32,800 --> 00:33:36,120 Speaker 1: the Sri Lankan Central Bank governor, I think he came 618 00:33:36,120 --> 00:33:38,760 Speaker 1: out like one or two years ago, I can't remember exactly, 619 00:33:38,760 --> 00:33:44,120 Speaker 1: went and said like, we're pursuing MMT, and he thinks 620 00:33:44,120 --> 00:33:47,720 Speaker 1: he's doing MMT because it's more physical spending. But then 621 00:33:47,960 --> 00:33:50,240 Speaker 1: a lot of other people who are more closely aligned 622 00:33:50,280 --> 00:33:52,560 Speaker 1: with MMT, who are more involved with it, will come 623 00:33:52,560 --> 00:33:54,520 Speaker 1: out and say, no, no, no, this is an MMT 624 00:33:55,280 --> 00:33:58,800 Speaker 1: because he's not building up physical capacity and independence, he's 625 00:33:58,800 --> 00:34:02,680 Speaker 1: not focused on increasing productive capacity or whatever. That's what 626 00:34:02,760 --> 00:34:06,320 Speaker 1: I mean. It seems open to interpretation. I got you. 627 00:34:06,720 --> 00:34:09,680 Speaker 1: So it's I agree with you. If your takeaway, if 628 00:34:09,719 --> 00:34:13,880 Speaker 1: your if your thumbnail sketch of MMT is UM, don't 629 00:34:13,920 --> 00:34:15,960 Speaker 1: borrow in a foreign currency and you can do whatever 630 00:34:16,000 --> 00:34:19,080 Speaker 1: the hell you want, and then that's not gonna work. 631 00:34:19,120 --> 00:34:21,040 Speaker 1: But you can see how that would be attractive to 632 00:34:21,160 --> 00:34:23,920 Speaker 1: some emerging market policy. And I think you know, I 633 00:34:23,960 --> 00:34:26,920 Speaker 1: know only a little bit about the Sri Lankan UH 634 00:34:27,239 --> 00:34:30,319 Speaker 1: comments and the justification the invocation of MMT there, and 635 00:34:30,360 --> 00:34:33,560 Speaker 1: I think his his belief was as long as the 636 00:34:33,640 --> 00:34:38,640 Speaker 1: proportion of domestic debt is higher than the proportion of 637 00:34:38,719 --> 00:34:42,200 Speaker 1: external debt, then you're somehow okay, which makes no sense whatsoever. 638 00:34:42,280 --> 00:34:44,480 Speaker 1: You still have a lot of external debt that has 639 00:34:44,520 --> 00:34:47,200 Speaker 1: to be service and if you can't, you know, export 640 00:34:47,239 --> 00:34:49,239 Speaker 1: and earn for an exchange to service debt, you're in 641 00:34:49,239 --> 00:34:52,239 Speaker 1: a world or hurt either way. So there's no way 642 00:34:52,239 --> 00:34:54,880 Speaker 1: for MMT to rescue you there. But just to bring 643 00:34:54,960 --> 00:34:56,799 Speaker 1: it back to the US, for instance, a lot of 644 00:34:56,800 --> 00:34:59,920 Speaker 1: people will some people I should be careful. Some people 645 00:35:00,000 --> 00:35:03,360 Speaker 1: will say that, well, we just experimented with MMT. We 646 00:35:03,600 --> 00:35:06,000 Speaker 1: ramped up our fiscal spending at a time when we 647 00:35:06,040 --> 00:35:10,200 Speaker 1: really needed it. And some others will say, well, actually, 648 00:35:10,760 --> 00:35:13,319 Speaker 1: you know, for instance, real MMT would have told you 649 00:35:13,360 --> 00:35:15,880 Speaker 1: that we should have had the architecture in place before 650 00:35:17,040 --> 00:35:20,400 Speaker 1: pandemic happened in order to provide that kind of support 651 00:35:20,440 --> 00:35:22,759 Speaker 1: to people, or that you know, the policy should have 652 00:35:22,760 --> 00:35:26,120 Speaker 1: been slightly different. That's what I mean about the complexity, 653 00:35:26,200 --> 00:35:28,440 Speaker 1: And I think that's the aspect of it that might 654 00:35:28,480 --> 00:35:31,960 Speaker 1: be difficult for people to sort of grasp. Yeah, so 655 00:35:32,120 --> 00:35:35,080 Speaker 1: I did a post um that was I think it 656 00:35:35,120 --> 00:35:38,200 Speaker 1: was titled something like it's too late for an MMT 657 00:35:38,400 --> 00:35:41,600 Speaker 1: informed approach to budgeting. And again it was the pandemic. 658 00:35:41,640 --> 00:35:43,400 Speaker 1: It was the panic, you know, and when everybody's in 659 00:35:43,440 --> 00:35:46,600 Speaker 1: panic mode, then it just became, like I said, the 660 00:35:46,600 --> 00:35:51,240 Speaker 1: whipping out of that money bazooka and trying to do smatter, 661 00:35:51,480 --> 00:35:54,400 Speaker 1: you know, the the economy with enough cash to support 662 00:35:54,440 --> 00:35:59,640 Speaker 1: income to pull us out of the pandemic and the recovery. Um. So, 663 00:36:00,080 --> 00:36:03,080 Speaker 1: it is true though that if you're doing quote unquote 664 00:36:03,080 --> 00:36:07,680 Speaker 1: doing policy, and you're doing it consistent with MMT principles, 665 00:36:08,040 --> 00:36:12,560 Speaker 1: then you've transformed the federal budgeting process. You're evaluating legislation differently. 666 00:36:12,600 --> 00:36:17,200 Speaker 1: We just didn't have time to do that. The FED 667 00:36:17,560 --> 00:36:19,840 Speaker 1: raising interest rates seems to have some effect on the 668 00:36:19,840 --> 00:36:22,240 Speaker 1: real on the economy, and I don't know like exactly 669 00:36:22,239 --> 00:36:24,040 Speaker 1: what it is, but it seems to you know, it's 670 00:36:24,040 --> 00:36:27,719 Speaker 1: certainly mortgage rates have shot up. That's going to make 671 00:36:28,040 --> 00:36:31,600 Speaker 1: borrowing or affording a house at current prices at least 672 00:36:31,880 --> 00:36:34,799 Speaker 1: more difficult. It seems to already be uh slowing some 673 00:36:34,840 --> 00:36:39,279 Speaker 1: things perhaps in the housing market. What is in your view, 674 00:36:39,360 --> 00:36:41,759 Speaker 1: like just from your perspective, what do we you know, 675 00:36:41,800 --> 00:36:44,320 Speaker 1: let's say we're getting the fetists seems to be set 676 00:36:44,360 --> 00:36:48,480 Speaker 1: on this like very aggressive series of hikes. Um, by 677 00:36:48,480 --> 00:36:50,560 Speaker 1: the time this comes out, actually will have had the 678 00:36:50,600 --> 00:36:54,440 Speaker 1: main decision, but you know, more hikes likely on the way. 679 00:36:54,800 --> 00:36:58,440 Speaker 1: If we've given your assessment of the inflation that it's 680 00:36:58,480 --> 00:37:01,359 Speaker 1: not necessarily about demand, then that it's global and that's 681 00:37:01,360 --> 00:37:04,600 Speaker 1: about energy and food largely, which it's hard bit harder 682 00:37:04,600 --> 00:37:06,759 Speaker 1: to tell the demand story. What are you think is 683 00:37:06,800 --> 00:37:08,799 Speaker 1: going to come out of these hypes? What are they 684 00:37:08,800 --> 00:37:12,840 Speaker 1: going to do to this kind of economy? I guess 685 00:37:12,840 --> 00:37:16,040 Speaker 1: it depends how big they are and how quickly they come. 686 00:37:16,120 --> 00:37:19,960 Speaker 1: And uh, you know, I think that the likelihood of 687 00:37:20,000 --> 00:37:22,400 Speaker 1: a soft landing, you know, I think I'm on the 688 00:37:22,480 --> 00:37:26,640 Speaker 1: side of that's really difficult to pull off, and uh, 689 00:37:26,719 --> 00:37:28,799 Speaker 1: you know, you can slow things down. Housing is of 690 00:37:28,840 --> 00:37:32,040 Speaker 1: course the probably sector that is the most sensitive to 691 00:37:32,160 --> 00:37:34,839 Speaker 1: interest rates. And but you know, you've done shows and 692 00:37:34,880 --> 00:37:37,040 Speaker 1: I've listened to them where you're you've talked about the 693 00:37:37,040 --> 00:37:39,359 Speaker 1: housing market and you say, listen, you put a house 694 00:37:39,400 --> 00:37:40,799 Speaker 1: on the market and all of a sudden you have 695 00:37:40,840 --> 00:37:43,600 Speaker 1: forty bids and half of them are all cash, which 696 00:37:43,640 --> 00:37:46,839 Speaker 1: makes you go, okay, so interest rates are rising, so 697 00:37:46,920 --> 00:37:49,040 Speaker 1: maybe a few of the people who would have borrowed 698 00:37:49,120 --> 00:37:51,080 Speaker 1: and bid on that home are out, but maybe you 699 00:37:51,120 --> 00:37:53,680 Speaker 1: still have twenty all cash buyers in the mix because 700 00:37:53,680 --> 00:37:56,480 Speaker 1: they're not interest sensitive. So to the extent that you 701 00:37:56,920 --> 00:38:00,360 Speaker 1: do see housing start to cool, then of course a 702 00:38:00,400 --> 00:38:03,520 Speaker 1: fewer people buying homes and furnishing them. Maybe that takes 703 00:38:03,600 --> 00:38:06,440 Speaker 1: some strain off of durable goods and that sort of stuff. 704 00:38:06,520 --> 00:38:10,400 Speaker 1: So I don't discount that interest rates have a channel, 705 00:38:10,960 --> 00:38:13,719 Speaker 1: you know, but it's just very difficult to figure out. 706 00:38:13,880 --> 00:38:16,640 Speaker 1: In power will remind us long and variable legs. Right, 707 00:38:16,680 --> 00:38:20,440 Speaker 1: So by the time inflation starts to come down, the 708 00:38:20,920 --> 00:38:24,400 Speaker 1: interest rate increases may not really have taken hold. And 709 00:38:24,480 --> 00:38:27,239 Speaker 1: yet the fiscal tightening, which is already baked in, we 710 00:38:27,280 --> 00:38:31,480 Speaker 1: have huge reduction in deficit right now. Um, that may 711 00:38:31,719 --> 00:38:35,680 Speaker 1: do enough to help with the reduction in inflation. One 712 00:38:35,719 --> 00:38:38,759 Speaker 1: of the reasons it seems that the Fed is uh, 713 00:38:38,800 --> 00:38:42,319 Speaker 1: you know, uh inclined to do an aggressive series of 714 00:38:42,360 --> 00:38:45,040 Speaker 1: rate hikes is this idea of like, well, yes, a 715 00:38:45,040 --> 00:38:48,839 Speaker 1: lot of the inflation is still transitory factors. Maybe it's 716 00:38:48,840 --> 00:38:51,239 Speaker 1: still related to the pandemic and now of course the 717 00:38:51,280 --> 00:38:55,719 Speaker 1: war or the new lockdowns in China. But it's too late, 718 00:38:55,960 --> 00:38:59,120 Speaker 1: and we're worried about the inflation expectations Genie coming out 719 00:38:59,120 --> 00:39:00,800 Speaker 1: of the bottle, and that if you just let inflation 720 00:39:00,840 --> 00:39:03,520 Speaker 1: get too high for too long, regardless of the fact, 721 00:39:03,640 --> 00:39:07,640 Speaker 1: regardless of why, our expectations become unanchored, and then we 722 00:39:07,680 --> 00:39:10,840 Speaker 1: have a decade of high inflation just because expectations. And 723 00:39:10,880 --> 00:39:15,120 Speaker 1: I'm curious, like, do you sign any significant force to 724 00:39:15,200 --> 00:39:20,280 Speaker 1: this idea of like the expectations channel. I don't assign 725 00:39:20,400 --> 00:39:23,080 Speaker 1: a big force. I mean, I I won't say that 726 00:39:23,120 --> 00:39:27,479 Speaker 1: I discounted entirely, but the idea that there is this 727 00:39:28,000 --> 00:39:31,160 Speaker 1: dominant channel through which interest rates work, which is through 728 00:39:31,200 --> 00:39:34,200 Speaker 1: inflation expectations. You know, I'll put myself on the side 729 00:39:34,200 --> 00:39:36,600 Speaker 1: of Philip Rudd, who I think wrote that pay for 730 00:39:36,680 --> 00:39:38,440 Speaker 1: They got a lot of attention. Again it was at 731 00:39:38,440 --> 00:39:41,279 Speaker 1: the Richmond Fed. I think it was actually the FED. 732 00:39:41,400 --> 00:39:47,840 Speaker 1: I think the Bed Fed. I think a lot of 733 00:39:47,880 --> 00:39:52,000 Speaker 1: it is economists sort of hand waving because most of 734 00:39:52,040 --> 00:39:55,239 Speaker 1: the old theories seem to have stopped working. You know, 735 00:39:55,280 --> 00:39:58,040 Speaker 1: most people don't put a lot of cred in the 736 00:39:58,080 --> 00:40:01,640 Speaker 1: idea of a Nirou or maybe if Phillips curve sort 737 00:40:01,640 --> 00:40:03,640 Speaker 1: of fell out of favor when the data stopped working, 738 00:40:03,680 --> 00:40:05,680 Speaker 1: and so people just sort of turned to this other 739 00:40:05,920 --> 00:40:10,480 Speaker 1: way to explain inflation and said, well, it's mostly expectations channel, 740 00:40:10,560 --> 00:40:12,840 Speaker 1: this is what's the driver. So just on this, on 741 00:40:13,160 --> 00:40:17,919 Speaker 1: this topic, there are some people who in early or 742 00:40:18,040 --> 00:40:22,160 Speaker 1: maybe mid I'm thinking specifically of Larry Summers. But you know, 743 00:40:22,239 --> 00:40:24,520 Speaker 1: Larry Summers came out and said like, oh, this is 744 00:40:24,520 --> 00:40:27,399 Speaker 1: way too much. We're gonna get massive inflation. And he's 745 00:40:27,440 --> 00:40:31,120 Speaker 1: been doing victory laps um around that thesis. And you know, 746 00:40:31,160 --> 00:40:33,560 Speaker 1: technically he didn't actually say we're going to have massive inflation. 747 00:40:33,600 --> 00:40:36,560 Speaker 1: He said there's a one third chance of having lots 748 00:40:36,600 --> 00:40:40,480 Speaker 1: of inflation. So certainly one of the louder absolutely, And 749 00:40:40,520 --> 00:40:42,279 Speaker 1: so you know, people are giving him a lot of 750 00:40:42,280 --> 00:40:46,680 Speaker 1: credit for for seeing these price increases. What what did 751 00:40:46,719 --> 00:40:49,440 Speaker 1: he get right in that scenario or what did he 752 00:40:49,520 --> 00:40:54,160 Speaker 1: see that other people maybe didn't, Well, inflation went up, 753 00:40:55,280 --> 00:40:57,600 Speaker 1: you know, I mean it can be a case of 754 00:40:57,680 --> 00:41:01,680 Speaker 1: right for the right reasons versus right or maybe the 755 00:41:01,719 --> 00:41:05,040 Speaker 1: wrong reasons. And I'm not sure that I heard Larry 756 00:41:05,120 --> 00:41:11,160 Speaker 1: articulate back in you know, January of one or December, 757 00:41:11,920 --> 00:41:15,040 Speaker 1: when the debate was really heating up over that's one 758 00:41:15,080 --> 00:41:17,319 Speaker 1: point nine trillion dollar COVID package. I'm not sure I 759 00:41:17,360 --> 00:41:21,760 Speaker 1: heard him talk about, you know, housing and energy and food, 760 00:41:21,880 --> 00:41:24,680 Speaker 1: and you know, it was this sort of line goes 761 00:41:24,840 --> 00:41:26,839 Speaker 1: this way and the other line goes that way, and 762 00:41:27,000 --> 00:41:30,960 Speaker 1: the gap is such that we're pouring too much in um, so, 763 00:41:31,280 --> 00:41:33,959 Speaker 1: you know he I think that I had a piece 764 00:41:34,000 --> 00:41:36,960 Speaker 1: out in April of one in the New York Times. 765 00:41:36,960 --> 00:41:39,719 Speaker 1: It was a fairly long op ed and it was 766 00:41:39,719 --> 00:41:43,040 Speaker 1: all about inflation, and so it wasn't as if inflation 767 00:41:43,120 --> 00:41:47,200 Speaker 1: wasn't also on my radar and others. But I think 768 00:41:47,200 --> 00:41:50,680 Speaker 1: we were thinking about it in different ways. So maybe 769 00:41:50,719 --> 00:41:52,759 Speaker 1: just to sum it all up, you know, if you 770 00:41:52,800 --> 00:41:56,560 Speaker 1: had a wish list right now, what would be your 771 00:41:56,719 --> 00:41:59,640 Speaker 1: biggest policy recommendation or what would you like to see 772 00:41:59,719 --> 00:42:02,320 Speaker 1: the has happened right now, it has to be climate. 773 00:42:02,360 --> 00:42:07,279 Speaker 1: I don't see a bigger threat challenge before us than 774 00:42:07,719 --> 00:42:10,200 Speaker 1: climate change, and it's going to touch our lives in 775 00:42:10,280 --> 00:42:13,799 Speaker 1: ways that you know are unimaginable still for many, but 776 00:42:14,080 --> 00:42:16,520 Speaker 1: I think the scientific community is telling us. In the 777 00:42:16,600 --> 00:42:20,000 Speaker 1: latest Inner Governmental Panel on Climate change, report is pretty 778 00:42:20,040 --> 00:42:23,640 Speaker 1: scary stuff, and um, I think we're gonna we're gonna 779 00:42:23,680 --> 00:42:25,879 Speaker 1: have to deal so in a time in which we're 780 00:42:25,920 --> 00:42:30,799 Speaker 1: already strained by high oil prices and high fossil fuel 781 00:42:30,880 --> 00:42:35,320 Speaker 1: costs and also labor constrained to would appear and other constraints. 782 00:42:35,560 --> 00:42:39,400 Speaker 1: What does climate, what is acting on climate look like 783 00:42:39,480 --> 00:42:42,320 Speaker 1: from your perspective in a way that doesn't exacerbate inflation. 784 00:42:42,320 --> 00:42:44,879 Speaker 1: Because Isabel sh novel the Deutsche Bank is talking about 785 00:42:44,880 --> 00:42:48,719 Speaker 1: green inflation, I was going to ask if inflation is just, 786 00:42:49,000 --> 00:42:51,239 Speaker 1: you know, what we have to accept and live with 787 00:42:51,280 --> 00:42:54,320 Speaker 1: in exchange for healing the climate or fixing the climate 788 00:42:54,360 --> 00:42:57,640 Speaker 1: change problem. I would certainly hope that if it came 789 00:42:57,680 --> 00:43:00,480 Speaker 1: down to that and that was the trade off, that 790 00:43:00,560 --> 00:43:04,480 Speaker 1: the answer would be unequivocally yes, that it is a 791 00:43:04,480 --> 00:43:07,120 Speaker 1: small price to pay for the sake of the survival 792 00:43:07,160 --> 00:43:10,080 Speaker 1: of humanity, that it seems like a worthwhile trade off. 793 00:43:10,440 --> 00:43:13,640 Speaker 1: But voters are voters, and we know there's people are 794 00:43:13,680 --> 00:43:16,359 Speaker 1: really unhappy about the existing inflation. And if you want 795 00:43:16,360 --> 00:43:20,520 Speaker 1: to keep a durable political coalition alive in Washington, you 796 00:43:20,520 --> 00:43:23,520 Speaker 1: have to win elections every two years. And so how 797 00:43:23,560 --> 00:43:26,080 Speaker 1: do you think about when you say, you want to 798 00:43:26,080 --> 00:43:28,640 Speaker 1: see something done on climate at a time when people 799 00:43:28,680 --> 00:43:31,520 Speaker 1: are really upset about gasoline prices. How do you think 800 00:43:31,560 --> 00:43:36,520 Speaker 1: about making putting? Uh? You know, what's a policy framework? Uh? 801 00:43:36,719 --> 00:43:40,000 Speaker 1: Look like that? What's your energy bill gonna look like 802 00:43:40,440 --> 00:43:42,880 Speaker 1: when we don't deal with climate change? What is it 803 00:43:42,920 --> 00:43:44,839 Speaker 1: going to look like when your house is burned down? 804 00:43:45,040 --> 00:43:46,319 Speaker 1: And what is it gonna look like? You know, I've 805 00:43:46,360 --> 00:43:49,240 Speaker 1: ever seen people in an airport when their flights are canceled. 806 00:43:49,719 --> 00:43:53,880 Speaker 1: Climate change is going to massively disrupt life. Uh in 807 00:43:54,080 --> 00:43:57,239 Speaker 1: so many ways. Right. It is going to be an irritant, 808 00:43:57,400 --> 00:43:59,600 Speaker 1: It is going to be a hardship. People are going 809 00:43:59,680 --> 00:44:02,920 Speaker 1: to be feeling pain in ways that haven't even imagined 810 00:44:03,000 --> 00:44:05,840 Speaker 1: in their lives, in their pocketbooks as a result of 811 00:44:05,880 --> 00:44:09,960 Speaker 1: climate So um again, I think you know, the kind 812 00:44:10,000 --> 00:44:12,799 Speaker 1: of inflation we're dealing with now is mild in comparison 813 00:44:12,800 --> 00:44:14,799 Speaker 1: to what lies ahead if we don't get our arms 814 00:44:14,840 --> 00:44:18,439 Speaker 1: around this. Stephanie Kelton, thank you so much for coming 815 00:44:18,440 --> 00:44:21,279 Speaker 1: back on upload. Thanks so much, Thanks Stephanie. That was 816 00:44:21,320 --> 00:44:38,440 Speaker 1: really fun. Yeah, obviously I really enjoyed that conversation. You know, 817 00:44:38,600 --> 00:44:41,120 Speaker 1: something I was thinking about just in general with inflation. 818 00:44:41,520 --> 00:44:45,640 Speaker 1: Um more broadly is things have really started to normalize 819 00:44:45,719 --> 00:44:48,960 Speaker 1: in the United States from a pandemic perspective, there really 820 00:44:48,960 --> 00:44:52,319 Speaker 1: are like very few restrictions on anything now. Of course 821 00:44:52,320 --> 00:44:57,320 Speaker 1: there's still you know, the awful war that's happening in Ukraine, 822 00:44:57,520 --> 00:45:03,040 Speaker 1: and there is the the ongoing lockdowns that are happening 823 00:45:03,040 --> 00:45:06,600 Speaker 1: in China. But to the extent that inflation is sort 824 00:45:06,600 --> 00:45:09,920 Speaker 1: of pandemic related, I kind of think like, now is 825 00:45:09,960 --> 00:45:12,160 Speaker 1: the period where we're and then we're going to find 826 00:45:12,160 --> 00:45:16,200 Speaker 1: out like is it start to cool down as things normalize, 827 00:45:16,239 --> 00:45:18,920 Speaker 1: whatever that means, or is there some other force that 828 00:45:18,960 --> 00:45:21,640 Speaker 1: continues to push it extremely high. I think where there's 829 00:45:21,680 --> 00:45:24,040 Speaker 1: like a pretty pivotal juncture and the moment of truth 830 00:45:24,400 --> 00:45:27,200 Speaker 1: kind of I think it is, well, the other thing, 831 00:45:27,280 --> 00:45:30,880 Speaker 1: and we've spoken about this before, but in retrospect, maybe 832 00:45:30,880 --> 00:45:35,520 Speaker 1: transitory wasn't the right word to use to describe what 833 00:45:35,719 --> 00:45:40,960 Speaker 1: was actually pandemic related inflation or narrow inflation versus broad 834 00:45:40,960 --> 00:45:44,040 Speaker 1: based inflation something like that. And it does feel like 835 00:45:44,120 --> 00:45:47,600 Speaker 1: by using that word, the Federal Reserve basically put an 836 00:45:47,600 --> 00:45:49,960 Speaker 1: expectation in that this would be something that last three 837 00:45:49,960 --> 00:45:53,520 Speaker 1: months by the end, right when actually, to your point, 838 00:45:53,560 --> 00:45:56,040 Speaker 1: it's only recently that a lot of these pandemic related 839 00:45:56,080 --> 00:45:59,360 Speaker 1: restrictions are starting to go away. The other thing I 840 00:45:59,400 --> 00:46:01,320 Speaker 1: would say, and this is sort of a big picture 841 00:46:01,640 --> 00:46:05,200 Speaker 1: theoretical philosophical question, is I feel like a lot of 842 00:46:05,200 --> 00:46:09,760 Speaker 1: this MMT debate boils down to relative versus absolute gains, 843 00:46:09,840 --> 00:46:12,080 Speaker 1: and this kind of comes to the inflation point, right. 844 00:46:12,360 --> 00:46:15,720 Speaker 1: It's easier to get riled up about cost of living 845 00:46:15,719 --> 00:46:18,719 Speaker 1: than it is about employment. And on the other hand, 846 00:46:18,760 --> 00:46:20,800 Speaker 1: a lot of it also comes down to short termism 847 00:46:20,920 --> 00:46:25,319 Speaker 1: versus long termism. A lot of these policy recommendations absolutely 848 00:46:25,360 --> 00:46:29,040 Speaker 1: makes sense for big long term problems like climate change, 849 00:46:29,360 --> 00:46:32,640 Speaker 1: but sometimes it's hard to get people to think beyond 850 00:46:32,760 --> 00:46:35,120 Speaker 1: like what are my bills going to look like for 851 00:46:35,160 --> 00:46:37,960 Speaker 1: the next month. Yeah, and I thought your question was, like, 852 00:46:38,200 --> 00:46:41,360 Speaker 1: was it was really astute on that matter about this 853 00:46:41,440 --> 00:46:47,600 Speaker 1: sort of like disparate impact of employment versus inflation and 854 00:46:47,719 --> 00:46:52,000 Speaker 1: everyone experiencing inflation only some people at any given moment 855 00:46:52,120 --> 00:46:56,840 Speaker 1: experiencing unemployment. You know. The one other thing, and this 856 00:46:57,000 --> 00:46:59,239 Speaker 1: is just my personal opinion, but you know, the one 857 00:46:59,239 --> 00:47:03,360 Speaker 1: other thing is so much of the mm T message 858 00:47:04,320 --> 00:47:07,759 Speaker 1: has been co opted and then claimed that this is 859 00:47:07,800 --> 00:47:09,520 Speaker 1: always how we thought it's like, oh, we always knew 860 00:47:09,560 --> 00:47:13,440 Speaker 1: that real resources or the constraint, we always you know, 861 00:47:13,520 --> 00:47:16,279 Speaker 1: we always knew extra y. But I really feel like 862 00:47:16,320 --> 00:47:19,720 Speaker 1: that's very relevant now. And Stephanie of course mentioned Jenny 863 00:47:19,719 --> 00:47:23,120 Speaker 1: Ellen and the sort of new supply side economics, progressive 864 00:47:23,160 --> 00:47:26,080 Speaker 1: supply side economics. You have like liberal pundits like as 865 00:47:26,120 --> 00:47:29,920 Speaker 1: our client talking about, um, you know, the new supply side. 866 00:47:29,920 --> 00:47:32,759 Speaker 1: But this idea of well, if the constraint is on 867 00:47:32,800 --> 00:47:35,320 Speaker 1: the supply side, then let's build out the supply side 868 00:47:35,400 --> 00:47:38,080 Speaker 1: is like this a core like MMT idea. Then now 869 00:47:38,360 --> 00:47:41,480 Speaker 1: a lot of people are talking about my most MMT 870 00:47:42,239 --> 00:47:46,759 Speaker 1: leaning opinion or recognition this year is and we've said this, 871 00:47:46,840 --> 00:47:49,720 Speaker 1: I think we've written this, but the idea that any 872 00:47:49,719 --> 00:47:52,600 Speaker 1: problem that can be solved with money isn't actually a 873 00:47:52,640 --> 00:47:55,960 Speaker 1: big or real problem like that. It's a very MMT 874 00:47:56,080 --> 00:47:58,080 Speaker 1: thing to say, but I think that's something that we've 875 00:47:58,160 --> 00:48:00,279 Speaker 1: learned over the past couple of years. Yeah, if you can, 876 00:48:00,360 --> 00:48:02,359 Speaker 1: if you can write a check to solve it, you're 877 00:48:02,520 --> 00:48:07,200 Speaker 1: it's not not my most real MMT view. Actually I'm 878 00:48:07,200 --> 00:48:09,239 Speaker 1: not gonna say, I'm gonna wait, it's too it's too 879 00:48:09,239 --> 00:48:11,160 Speaker 1: hot for it's too hot for air, So I'll tell 880 00:48:11,200 --> 00:48:14,120 Speaker 1: you after we hit record. Wait an MMT view that's 881 00:48:14,160 --> 00:48:16,840 Speaker 1: too hot for air? Yeah, I can't say wow, Okay, 882 00:48:17,000 --> 00:48:20,799 Speaker 1: all right, sorry all lots listeners? Um, should we leave 883 00:48:20,800 --> 00:48:23,200 Speaker 1: it there? Let's leave it there. This has been another 884 00:48:23,239 --> 00:48:26,000 Speaker 1: episode of The Odd Lots Podcast. I'm Tracy Alloway. You 885 00:48:26,000 --> 00:48:28,640 Speaker 1: can follow me on Twitter at Tracy Alloway, and I'm 886 00:48:28,719 --> 00:48:31,319 Speaker 1: Joe Wisn't All. You can follow me on Twitter at 887 00:48:31,360 --> 00:48:34,960 Speaker 1: the Stalwart, Follow our guest Stephanie Kelton at Stephanie Kelton, 888 00:48:35,280 --> 00:48:39,160 Speaker 1: Follow our producer Carmen Rodriguez at Carmen Armon, Follow the 889 00:48:39,160 --> 00:48:42,520 Speaker 1: Bloomberg head of podcast, Francesco leave me at Francisco Today, 890 00:48:42,920 --> 00:48:45,719 Speaker 1: and check out all of our podcasts at Bloomberg under 891 00:48:45,760 --> 00:49:06,840 Speaker 1: the handle at podcast. Thanks for listening year to