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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hello and welcome to another episode of the Odd Lots Podcast.

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Speaker 3: I'm Joe Wisenthal and I'm Tracy Alloway.

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Speaker 2: Tracy, you know, there's that theory people say it from

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Speaker 2: time to time about in different contexts, different schools of thought,

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Speaker 2: and kind of gets dismissed as crankishness sometimes that higher

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Speaker 2: rates can be a contributor to inflation.

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Speaker 4: Yes.

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Speaker 3: Yes, And actually I'm hearing this more and more interestingly enough.

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Speaker 3: So you used to hear, you know, little rumblings of

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Speaker 3: it every once in a while, but I swear in

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Speaker 3: the past two or three months, a lot of people

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Speaker 3: have been talking about this, And I guess the basic

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Speaker 3: idea here is there's always been some question about the

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Speaker 3: efficacy of interest rates in the current inflationary environment. So

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Speaker 3: if you think back to the twenty twenty period, the

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Speaker 3: idea that we had all these supply disruptions, lots of

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Speaker 3: snarls in transportation and logistics, what are interest rate hikes

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Speaker 3: really going to do in that context? Right? Yeah, And

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Speaker 3: some people even argue that higher interest rates are detrimental

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Speaker 3: for that kind of inflation, because you make it harder

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Speaker 3: for people to build out capacity. Yeah, but what's happening

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Speaker 3: more recently, and I think you're hearing more talk of

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Speaker 3: this is the idea that higher interest rates in and

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Speaker 3: of themselves can contribute to the inflationary impulse through the

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Speaker 3: interest income channel.

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Speaker 4: Yeah.

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Speaker 2: Absolutely so. Right, there's a bunch of people that are

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Speaker 2: on treasuries and then they get a payment I guess

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Speaker 2: every month, and that is income into the economy, and

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Speaker 2: when you're fighting inflation, that's the more so. I think

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Speaker 2: that's one of the arguments for how higher rates can

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Speaker 2: be inflationary. But then there is this sort of like

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Speaker 2: there is the more are read upon view that you mentioned,

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Speaker 2: which is that higher rates can constrain investment and contribute

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Speaker 2: to less housing and that has an inflationary impulse in

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Speaker 2: a time of housing shortage. That seems to be a

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Speaker 2: little less controversial. The connection is clear, but I think regardless,

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Speaker 2: like I think, Okay, here we are in July twenty

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Speaker 2: twenty four. Inflation has come down a lot. There's still

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Speaker 2: many stories that could be told a lot about the

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Speaker 2: last four years, and I don't think there are any

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Speaker 2: really economists who have like nailed this cycle with some

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Speaker 2: theory or whatever that it's like, Yep, they explained how

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Speaker 2: it's all going to work. There are many this period.

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Speaker 2: Whatever we've experienced over the last four years will be

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Speaker 2: debated and argued about, and what role did higher rates

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Speaker 2: have and bringing down inflation or why the will be

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Speaker 2: debated by economists for like one hundred years.

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Speaker 4: Probably.

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Speaker 3: I find this aspect of our life right now simultaneously

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Speaker 3: exhilarating and terrifying. So it's great that we're learning about

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Speaker 3: how the world works. It's also terrifying that we still

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Speaker 3: aren't entirely sure how interest rates work and what impact

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Speaker 3: they actually have on the economy. But I am very,

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Speaker 3: very interested in digging into more of this argument the

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Speaker 3: interest income channel here and the actual like push and

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Speaker 3: pull of higher interest rates on inflation. I think we

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Speaker 3: should talk more about it totally.

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Speaker 2: Well, I'm really excited. We do indeed have the perfect guest,

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Speaker 2: someone we've never had on the show before, but he's

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Speaker 2: someone who we get a lot of requests for on

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Speaker 2: Twitter on the Outlaws Discord, someone we probably should have

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Speaker 2: had a long time ago. We are going to be

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Speaker 2: speaking to a Warren Mosler. He's he's an economist, former

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Speaker 2: investment manager. He drives fast race cars in the Virgin Islands.

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Speaker 2: Currently he's on a bike trip in Croatia, a very

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Speaker 2: cool life. He is also the originator of what has

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Speaker 2: come to be known as modern monetary theory. So Warren,

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Speaker 2: thank you so much for coming on outlaws.

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Speaker 4: Good to be here and enjoyed listening to the introduction.

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Speaker 4: How do we do at all?

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Speaker 2: How do we okay, we're done here? Why do you

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Speaker 2: give us your Yeah? Thanks, that was great. What do

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Speaker 2: you give us your summary? So someone said, people, okay,

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Speaker 2: higher rates cause inflation. I think there's even you know,

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Speaker 2: there's like a new Fisherian school that I think the

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Speaker 2: Turkish president subscribes to. How would you des characterize what

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Speaker 2: that means or what's going on?

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Speaker 4: Well, I look at what is okay, look to the numbers,

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Speaker 4: I look at the data, and I try and make

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Speaker 4: sense of it, just like everyone else. And my narrative

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Speaker 4: has been different from everyone else that's released up until

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Speaker 4: recently from listening to you, and it's nothing more than that.

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Speaker 4: Where to start? I wrote my first paper on this

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Speaker 4: and I think nineteen ninety seven called the natural rate

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Speaker 4: of Interest is zero. So it's not something new to

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Speaker 4: me and myself and my partner Cliff Viner. Back in

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Speaker 4: the nineteen eighties, we always used to muse about how

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Speaker 4: the best indicator of what M two growth would be

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Speaker 4: is live or because the interest rate itself determines the

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Speaker 4: money like growth as it was measured back then. You know,

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Speaker 4: there's been there's been institutional changes since, but this was

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Speaker 4: back in the eighties, and so the idea that, you know,

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Speaker 4: the interest rate itself was instrumental in how the price

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Speaker 4: level moves over time. I'll notice I'm going to avoid

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Speaker 4: using the word inflation rate. I may say inflation indicators

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Speaker 4: from time to time, but that is the whole word,

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Speaker 4: and term has gotten so confused by the way it's

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Speaker 4: been used. You know, if tomatoes go up, that's tomato

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Speaker 4: inflation or something, right, instead of just the price of

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Speaker 4: tomatoes going up. That I it's not informative the way

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Speaker 4: I like it to be, So excuse me for not

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Speaker 4: using that word. Maybe you know as much as you

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Speaker 4: all do. Yeah, So the interest rate itself has had

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Speaker 4: this effect on a price level, you know, for a

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Speaker 4: long time that I've observed. Okay, nineteen eighty that's forty

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Speaker 4: five years, right. Something interesting happened in this cycle compared

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Speaker 4: to prior cycles. Now in prior cycle is like in

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Speaker 4: two thousand and eight. I was saying back then that

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Speaker 4: the rate cuts, the BERNANKI rate cuts were probably not

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Speaker 4: going to do much for the economy, if anything, because

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Speaker 4: cutting the rates from five and a half to zero

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Speaker 4: or whatever it was a time removed something like four

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Speaker 4: hundred billion dollars a year of interest income from the economy,

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Speaker 4: lowered the deficit by four hundred billion from what it

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Speaker 4: otherwise would have been. And all that income and those

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Speaker 4: net financial assets were no longer being added. So I

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Speaker 4: was looking at a very sluggish recovery. I didn't see

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Speaker 4: the stimulus packages being large enough to cause a particular boom.

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Speaker 4: It was plenty large enough for decent growth, but not

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Speaker 4: any kind of a runaway inflationary boom or anything like that.

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Speaker 4: And I can recall being at the FED at a meeting,

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Speaker 4: private meeting with a guy named Dave Wilcox who was

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Speaker 4: talking about quantitative easy and how he didn't think would

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Speaker 4: be inflationary. I said, yeah, I'm not so much worried

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Speaker 4: about not being inflationary. But with the FED buying all

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Speaker 4: these securities, okay, they were buying securities that had higher yields,

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Speaker 4: they were paying for them with reserves, adding reserves, which

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Speaker 4: is fine. It was changing the duration of the government holdings.

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Speaker 4: But it went from you know, the Fed was now

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Speaker 4: earning the high interest rates and the market was earning

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Speaker 4: those zero percent or whatever they were paying on reserves.

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Speaker 4: At the time, it was very low. And I said,

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Speaker 4: you know, they're effectively taking ninety billion dollars a year

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Speaker 4: of interest in come out of the economy. That might

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Speaker 4: have been half a percent one percent of GDP at

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Speaker 4: the time. I thought, for that reason, quantitative easing would

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Speaker 4: probably slow down the economy at that point in time.

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Speaker 4: And you know, that's kind of what happened.

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Speaker 3: So initially prove it, you kind of looked at it

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Speaker 3: from the opposite side of where we are today. So

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Speaker 3: the idea that que was sucking right, rather than higher

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Speaker 3: interest rates.

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Speaker 4: Adding, and that it was based on the yield curve

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Speaker 4: at the time and the duration of government you know,

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Speaker 4: everything at the time, it was a and the data

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Speaker 4: seemed to play that. And I don't know if it's

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Speaker 4: just confirmation by some hypart, but it looked at me

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Speaker 4: like that's what happened, and we did have this sluggish economy,

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Speaker 4: and that was partially the reason that the depth SIT

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Speaker 4: wasn't large enough, partially because the interest Now I'm categorically

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Speaker 4: against using a positive interest rate policy to increase DEPSIT

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Speaker 4: spending to support an economy because it's so obscenely regressive.

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Speaker 4: When they raise rates, you know, the only thing they

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Speaker 4: do is pay interest to people who already have money

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Speaker 4: in proportion. I'mers, they already have, okay, and you increase

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Speaker 4: depths A spending that way.

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Speaker 2: Just to be clear, you may say that lower rates

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Speaker 2: or CTE or whatever, that they're not particularly stimulative, but

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Speaker 2: that's very different than saying, oh that a good form

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Speaker 2: of stimulus would be higher rates.

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Speaker 4: Yeah, I'd hather have low rates and a tax cut. Yeah,

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Speaker 4: you know, then high rates and attacks increase, right.

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Speaker 2: Sure, So let's bring it to now.

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Speaker 4: But back then, here's the point. Back then, the debt

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Speaker 4: to GDP held by the public was something like thirty

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Speaker 4: or thirty five percent, So a one percent rate hike

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Speaker 4: or in those cases, the rate cup but a one

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Speaker 4: percent change in rates, a rate hike would have added

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Speaker 4: maybe thirty five basis points of income to the you know,

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Speaker 4: percent of GDP to the economy. Because the debt to

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Speaker 4: GDP was like thirty or thirty five percent. This time

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Speaker 4: around it's one hundred percent roughly, you know, debt to

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Speaker 4: GDP held by the public. Yeah, so a one percent

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Speaker 4: increase in rates two and a half years ago ultimately

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Speaker 4: increased interest payments by a full one percent of GDP,

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Speaker 4: three times the impact of the prior cycle. So here

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Speaker 4: I am saying, look, if I thought this had an

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Speaker 4: impact before, now it's really has an impact. Okay, Now

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Speaker 4: it's three times larger than before. This is going to

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Speaker 4: be far different than anybody can imagine. And raising rates

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Speaker 4: this time around is going to have a strong supporting

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Speaker 4: effect on aggregate demand, you know, keeping unemployment down, you know,

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Speaker 4: total employment growing, that type of thing. And at the

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Speaker 4: time they increase the rate, the Fed was ranged with

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Speaker 4: criticism for engaging in policy that was going to cause

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Speaker 4: unemployment to go up to fight inflation. Remember that, Yeah,

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Speaker 4: of course. Well, and I'm going no, they've got it backwards.

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Speaker 4: This is going to bring unemployment down, This is going

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Speaker 4: to bring total employment up. This is going to cause

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Speaker 4: strong positive GDP growth, not a recession. Every forecast was

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Speaker 4: for recession for what years, right, they were just ignoring

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Speaker 4: this fiscal impact of this increase in depth at spending. Now,

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Speaker 4: the only thing I could rationalize why where they get

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Speaker 4: where they're getting this from is that they must have

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Speaker 4: had in their deep in their model somewhere, a zero

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Speaker 4: propensity to spend interest income. Right, no matter how high

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Speaker 4: you raise rais, no matter how much interest you pay, there,

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Speaker 4: nobody's going to spend a dime of it, and so

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Speaker 4: you don't have to worry about it. And that's why

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Speaker 4: they look at the primary deficit when they talk about

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Speaker 4: emerging markets. They don't even count the interest income expense, right,

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Speaker 4: That's all I could come up with this to why

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Speaker 4: they would ignore that.

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Speaker 3: Champel, can we talk a little bit more about I

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Speaker 3: guess the consumption avenue of the interest income channel, because

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Speaker 3: I will fully admit that it was very nice in

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Speaker 3: circa twenty twenty two to finally earn positive interest on

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Speaker 3: my bank account. I'm an elder millennial, so that had

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Speaker 3: basically never happened to me before. However, I wouldn't necessarily

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Speaker 3: say that because I was earning, you know, two to

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Speaker 3: five percent on my savings that I went out and

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Speaker 3: bought a bunch of additional things, and of course a

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Speaker 3: lot of that was offset by the increased cost of living,

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Speaker 3: increased price level for not using the term inflation. So

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Speaker 3: how do you see that aspect of it playing out?

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Speaker 3: People are earning more income, but does that actually translate

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Speaker 3: into more demand?

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Speaker 4: Yeah, and that's that's a good question, and that's a

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Speaker 4: micro question. You know what, you look at what all

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Speaker 4: the individuals who are getting it to pension funds get

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Speaker 4: treasury security, you know interest, How does that translate into

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Speaker 4: aggregate demand? Foreigners get a lot of interest, you know what?

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Speaker 4: I hear all this that look, none of this interest

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Speaker 4: is going to get spent, and so it doesn't matter.

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Speaker 4: You're wrong, We're going into recession. The interest rate effects

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Speaker 4: on you know, borrow wars is going to dominate, and

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Speaker 4: that's going to take down the economy. And the answer

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Speaker 4: is you can only look at the data and see

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Speaker 4: what happens. We can both come up with a narrative

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Speaker 4: of what we think the propensities to consume a ount

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Speaker 4: of interest income, but we're not going to know until

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Speaker 4: after it happens. And I looked at in prior cycles,

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Speaker 4: the data was telling me that it's not zero, that

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Speaker 4: there's a substantial amount that directly or indirectly does get spent.

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Speaker 4: But that's all it is. It's a view looking at

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Speaker 4: the macro data, looking at what GDP did versus what

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Speaker 4: it was expected to do, looking at how the rate

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Speaker 4: cuts help the economy or didn't help the economy, you know,

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Speaker 4: based on what their models expected, right, and the same

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Speaker 4: way those rate cuts didn't help the economy as expected

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Speaker 4: back in two thousand and nine, Ish is telling me

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Speaker 4: it was that four hundred billion a year of you know,

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Speaker 4: income that was cut out was having a dampening effect

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Speaker 4: on spending. Goes back to under Bush in two thousand,

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Speaker 4: two thousand and one, when we hit that recession, they

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Speaker 4: dropped interest rates to one percent and nothing happened. It

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Speaker 4: didn't help. And I was actually in a meeting with

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Speaker 4: Andy Carr Andrew Card, who was chief of staff at

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Speaker 4: the White House in two thousand and two February March.

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Speaker 4: And I'd gotten that meeting because in my car company,

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Speaker 4: two of the people on the board of directors were

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Speaker 4: ex engineers, one General Motors, one for a New Card personally,

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Speaker 4: he was an engineer at GM, and when I talked

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Speaker 4: to him about the interest income than the same way

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Speaker 4: I'm talking about it to you. They said, you got

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Speaker 4: to talk to Andy and set up this meeting. You know,

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Speaker 4: I went to the White House. Meeting was in the

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Speaker 4: West wing, and the first thing I did was just

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Speaker 4: what I said to you, and what look in the

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Speaker 4: economy itself when when they lowered interest rates. Okay, it

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Speaker 4: helped borrowers, but it hurts savers. You know, into the

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Speaker 4: penny for every dollar saved, there's a dollar borrowed in

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Speaker 4: the economy. Banks have loans and deposits and their equal

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Speaker 4: or somebody made an arithmetic mistake, you know, I assets

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Speaker 4: and liabilities, and so you know, when you lower rates,

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Speaker 4: you're just shifting income from one eneity to another. And

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Speaker 4: the only way that can have an effect is that

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Speaker 4: if there are differences in the propensities to spend interesting

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Speaker 4: income of those two. But at the macro level, because

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Speaker 4: of the public debt, when you lower rates, you're cutting

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Speaker 4: the size of the depths that you're cutting total interest

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Speaker 4: income in the economy. I said, I think that effect dominates,

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Speaker 4: and looking at what happened in the last year in

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Speaker 4: two thousand and two, you know, I wouldn't expect Race

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Speaker 4: to do anything. And Carter looks at it. He goes,

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Speaker 4: He says, yeah, why would anybody think that's going to work?

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Speaker 4: And he says and he goes, oh, look what does work?

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Speaker 4: Then I explained fiscal side, where when you spend more

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Speaker 4: than the tax that is a direct ad of income

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Speaker 4: and financial assets. And when you increase deficit spending proactively,

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Speaker 4: any economist who pays to be right it's going to

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Speaker 4: revise his forecast upward for the economy. And he says, well,

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Speaker 4: how much do we need? I said, well, I think

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Speaker 4: it's probably seven hundred billion annually back then, which was

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Speaker 4: maybe about five percent of GDP. He says, well, we

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Speaker 4: don't have much time doing it, and he said, oh,

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Speaker 4: you better get started. It was got a nice note

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Speaker 4: back from it was very nice. A week later, the

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Speaker 4: President was asked about the deficit and he said, look,

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Speaker 4: I don't look at numbers on a piece of paper.

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Speaker 4: I look at jobs which came right out of our meeting.

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Speaker 4: And after that. I don't know if you remember those days,

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Speaker 4: but they passed every tax cut you could imagine, including

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Speaker 4: retroactive tax something we never had before. People were getting

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Speaker 4: tax refunds from taxes from previous years. And they passed

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Speaker 4: every spending bill. They could get through Congress trying to

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Speaker 4: get this deficit off to save the economy, and that

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Speaker 4: included prescription drugs for medicare. So I'll take personal responsibility,

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Speaker 4: even though that wasn't disgusting meeting or you know, for

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Speaker 4: good government, spending all that money on prescription drugs definitely

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Speaker 4: got up to two hundred billion by the third quarter,

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Speaker 4: which was about my reign target number, you know, seven

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Speaker 4: hundred million for the year. The economy turned around, and

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Speaker 4: it didn't cost him the election. So you know, I've

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Speaker 4: been on this for a while, so it's all been

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Speaker 4: from a narrative and then watching the data.

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Speaker 2: So true, mainstream macro economists have this concept that they

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Speaker 2: call fiscal dominance, and yeah, that sounds like what you're describing.

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Speaker 4: We're a little bit yeah yeah h.

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Speaker 2: So basically yeah, so close enough. So I actually like,

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Speaker 2: maybe I'll try to get you in trouble with some

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Speaker 2: of your MMT friends here. But it sounds to me

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Speaker 2: that from a policy like look, if dead to GDP

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Speaker 2: were currently at ten percent right now, very very low,

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Speaker 2: and you raise rates that you have some constraining effect

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Speaker 2: on borrowers, and yes, you do have this interest increase

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Speaker 2: in the interest income channel. But it's not that big

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Speaker 2: of a deal because there just aren't many coupon payments

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Speaker 2: at all that are going.

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Speaker 4: Out right, exactly right.

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Speaker 2: But where we are right now, is it safe to

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Speaker 2: say that the size of the debt is a problem

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Speaker 2: that we are in fiscal dominance, and that the size

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Speaker 2: of the debt constrains the ability of monetary policy to

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Speaker 2: be a balancing force in a time of inflation.

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Speaker 4: More than that, I've made it backwards. It takes it

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Speaker 4: away now. I had had a discussion with Paul Krugman

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Speaker 4: a few years ago, and that's when he and Stephanie

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Speaker 4: Calton were going at it with back in dueling editor.

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Speaker 4: Remember that, Yeah, yeah, And I said to him, I said,

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Speaker 4: what's you know, what's wrong with the job guarantee? You know?

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Speaker 4: And he says, well, if you deficit spend for the

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Speaker 4: job guarantee, the deficit could get so large that if

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Speaker 4: the FED tried to raise you know, if we get inflation,

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Speaker 4: the FED won't be able to use interest rates as

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Speaker 4: a tool because the interest in you know, expense will

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Speaker 4: be so high that that itself would cause inflation. Now,

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Speaker 4: he was using that as an argument against the job

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Speaker 4: guarantee and he made my argument and I said to him, yeah,

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Speaker 4: I agree with you, I said, but I think we're

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Speaker 4: already there for all practical purposes. And the debts GP

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Speaker 4: was lower than but you know, it was at least neutral,

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Speaker 4: that that interest rates were a tool. And he disagreed

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Speaker 4: with me, and that's fine, And I said, in any case,

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Speaker 4: you know, I support, as you know, at permanent zero rate,

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Speaker 4: in which case it's moot. You know, you could spend

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Speaker 4: for job guarantee without worrying about whether rate raising rates

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Speaker 4: is going to do anything. And now, because you're not

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Speaker 4: going to do it, you're going to just leave him

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Speaker 4: at zero. But the point was he that was his

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Speaker 4: new Keynesian the position out of the new Keynesian model,

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Speaker 4: and it was a standard Nukenesian position yours, you know,

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Speaker 4: not that long ago. You remember them all talking about

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Speaker 4: anti deficit talk and how the interest payments are, you know,

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Speaker 4: are unsustainable and all this stuff. By unsustainable, they always

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Speaker 4: mean inflation shared, right, you know, say it in their

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Speaker 4: first phrase. But that's if you drill down on them,

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Speaker 4: that's what they get to. But in the last couple

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Speaker 4: of years, when I asked them again two years ago.

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Speaker 4: It's like, no, I don't think we're at that level.

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Speaker 4: I still think that FED can raise rates to fight inflation.

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Speaker 4: I said, okay, you know, we'll see. So this is

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Speaker 4: this is in the new Canesian model. You know, it's

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Speaker 4: just arithmetic that at some point the deficit gets high enough,

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Speaker 4: the public deck gets high enough so that when you

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Speaker 4: raise rates and pay more interest, you do call the

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Speaker 4: interest itself cause inflation. Now, let's look at how high

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Speaker 4: the deficit spending is. CBO's latest number shows seven percent

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Speaker 4: of GDP, right, yeah, and I think that's just treasury.

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Speaker 4: I don't think that includes FEDERI mints. So maybe it's

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Speaker 4: seven and a half or something. Okay, Now, have we

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Speaker 4: ever had anything anywhere near a seven percent budget deficit

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Speaker 4: during an expansion? With the unemployment it's like four percent,

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Speaker 4: you know, kind of record low levels. No, the only

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Speaker 4: time we've gotten anywhere near this highest countercyclically when you

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Speaker 4: have a collapse and then tax revenues fall off and

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Speaker 4: transfer payments kicking kick in because unemployment's high. You know.

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Speaker 4: Then we got to eight or nine percent in two

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Speaker 4: thousand and nine, and we got to I don't know

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Speaker 4: what the number was of COVID maybe fifteen percent, but normally,

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Speaker 4: if you look at eight the budget DEFs, it was

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Speaker 4: down to something like one percent of GDP, and that

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Speaker 4: was low enough to allow the high price of oil

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Speaker 4: and the other catalysts to trigger, you know, a major

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Speaker 4: collapse in the financial sector, not a seven percent deps.

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Speaker 4: Seven percent is like drunken sale or level of government spending.

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Speaker 4: And out of that four percent is the interest expense.

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Speaker 4: It's over one point two trillion, I think annually. We

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Speaker 4: just passed one hundred billion for the month.

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Speaker 3: So yeah, go ahead, Oh no, sorry, go on.

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Speaker 4: Yeah. So look, we're right now that the depth sit

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Speaker 4: seven percent in GDP, four percent of which is interest expense.

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Speaker 4: Without the interest expense, if they left rates at zero

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Speaker 4: would have been trending towards zero and the depicit would

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Speaker 4: have been down at you know, two three four percent

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Speaker 4: something still high, but not like it is now. And

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Speaker 4: that to me is like it's it's unthinkable that that's

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Speaker 4: not going to support a strong economy. Now, what's interesting

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Speaker 4: is in the last month we've there's been a little

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Speaker 4: bit of a bump in the numbers. Right the Fed

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Speaker 4: Atlanta is down to one point seven percent GDP, growth's

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Speaker 4: still not a reception or anything, and everybody's now looking

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Speaker 4: for this collapse and FED rate cuts and everything else.

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Speaker 4: And I'm sitting here, going, how can this be with

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Speaker 4: a seven percent pro cyclical budget depicit? It doesn't It

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Speaker 4: seems like an absurd assumption that we could have any

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Speaker 4: kind of substantial weakness or really any kind of a

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Speaker 4: sustained weakness in the price level. So but you know,

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Speaker 4: for the last few weeks, maybe a month's, a couple

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Speaker 4: of months. You know, it's certainly been plenty of indicators

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Speaker 4: around the edges that things a week in and it

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Speaker 4: may turn out, you know, I'm completely wrong, we have

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Speaker 4: a total economic collapse with a seven percent deficit, and

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Speaker 4: I can I'm seventy five this year. You'll never hear

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Speaker 4: from me again, right, Well, see what happens.

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Speaker 2: A good hedge, the age hedge in the long run?

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Speaker 4: Where right? Right?

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Speaker 2: In the short run? Out answer for any Yeah, I.

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Speaker 4: Don't know what's going to happen, but I'll bet I'll

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Speaker 4: be the first one to tell you that I'm just

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Speaker 4: totally caught out by a recession with a seven percent deficit.

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Speaker 4: You know, unless we get one hundred and fifty dollars

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Speaker 4: oil or something like that. But as in some other shock,

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Speaker 4: you know, I don't see how that much could be

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Speaker 4: spent without GDP being strongly positive, unemployment being very low,

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Speaker 4: and price pressures. Now, the other interesting thing is this

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Speaker 4: one hundred billion a month only translates into about a

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Speaker 4: three and a half percent of the Treasury debt as

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Speaker 4: interest payment, whereas FED fundraise five and a half five

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Speaker 4: and three a's, which means and T bills are somewhere

433
00:23:01,359 --> 00:23:03,040
Speaker 4: around there five and a quarter five and three a's,

434
00:23:03,359 --> 00:23:06,440
Speaker 4: which means that as rollovers continue, as time goes by,

435
00:23:06,560 --> 00:23:10,360
Speaker 4: the depthit expands, that number is going up. Okay, even

436
00:23:10,359 --> 00:23:13,679
Speaker 4: if they just leave rates alone, it will get to

437
00:23:13,760 --> 00:23:17,320
Speaker 4: five three a's, you know, asseptotically, but it'll get there.

438
00:23:17,840 --> 00:23:19,760
Speaker 4: And so that we're getting more and more of this,

439
00:23:19,800 --> 00:23:24,840
Speaker 4: and the CBO's deficit forecasts are showing deficits higher than

440
00:23:24,880 --> 00:23:28,239
Speaker 4: six percent. Put it to the future like this is

441
00:23:28,280 --> 00:23:30,760
Speaker 4: like going to be interesting. That to me is at

442
00:23:30,840 --> 00:23:34,880
Speaker 4: least six seven percent nominal growth. And if you think,

443
00:23:35,200 --> 00:23:37,360
Speaker 4: you know, price level is going to be I don't

444
00:23:37,359 --> 00:23:39,720
Speaker 4: know what you want to use PCE or something two

445
00:23:39,800 --> 00:23:42,280
Speaker 4: and a half. That's that's four and a half real, Right,

446
00:23:42,920 --> 00:23:46,320
Speaker 4: that's a pretty strong number. More likely you will get

447
00:23:46,600 --> 00:23:49,080
Speaker 4: two to three reel and the rest will be you know,

448
00:23:49,200 --> 00:23:52,119
Speaker 4: price level changes just one of the channels where the

449
00:23:52,200 --> 00:23:55,920
Speaker 4: interest rate normally are. Over time, I've just noticed over

450
00:23:56,000 --> 00:23:58,840
Speaker 4: fifty years they're changing the price level. The rate of

451
00:23:58,840 --> 00:24:05,639
Speaker 4: inflation gravitates towards the Fed's policy rate. Over time they converge,

452
00:24:05,720 --> 00:24:07,880
Speaker 4: and so with the five and a half percent rate,

453
00:24:07,920 --> 00:24:12,280
Speaker 4: five and three's rate, you'll see CPI gravitating towards that

454
00:24:12,720 --> 00:24:15,119
Speaker 4: interest rate, you know, towards that number five five and

455
00:24:15,160 --> 00:24:17,880
Speaker 4: a half. Not in day one, you can go once

456
00:24:17,920 --> 00:24:20,800
Speaker 4: without it, but over a longer periods of time, and

457
00:24:20,840 --> 00:24:24,280
Speaker 4: you can think of that something like a stock split,

458
00:24:24,440 --> 00:24:27,159
Speaker 4: you know, or a stock dividend where if you just

459
00:24:27,359 --> 00:24:30,200
Speaker 4: pay all more shares you're getting, you know, all is

460
00:24:30,240 --> 00:24:34,520
Speaker 4: equal to the value of this of an individual share goes

461
00:24:34,560 --> 00:24:36,720
Speaker 4: down by that amount. Right, So if you have a

462
00:24:36,760 --> 00:24:38,680
Speaker 4: two for one stock split, the price of the stock

463
00:24:38,760 --> 00:24:41,119
Speaker 4: falls in half. If you're paying out five and a

464
00:24:41,160 --> 00:24:44,439
Speaker 4: half percent a year on the public debt, which is

465
00:24:44,440 --> 00:24:47,280
Speaker 4: the net financial assets in the economy called the net

466
00:24:47,280 --> 00:24:50,080
Speaker 4: money supply in the economy, you're expanding it at five

467
00:24:50,119 --> 00:24:51,920
Speaker 4: and a half percent a year through a payment of interest.

468
00:24:51,960 --> 00:24:56,119
Speaker 4: There's nothing on the supply side, it's just a distribution. Then.

469
00:24:57,080 --> 00:25:02,200
Speaker 4: I've just observed that over time price level gravitates upward

470
00:25:02,240 --> 00:25:05,760
Speaker 4: by about that amount, and there's you know, plus or minus.

471
00:25:06,240 --> 00:25:09,399
Speaker 4: So those are my expectations going forward. And if you

472
00:25:09,480 --> 00:25:12,119
Speaker 4: notice CPI has leveled off at about three, you know,

473
00:25:12,119 --> 00:25:15,920
Speaker 4: a quarter percent or something. It went up with COVID,

474
00:25:15,960 --> 00:25:17,840
Speaker 4: it came down and then sort of leveled off. It's

475
00:25:17,880 --> 00:25:20,560
Speaker 4: been going sideways here and that's about at the interest rate.

476
00:25:20,720 --> 00:25:22,840
Speaker 4: You know, the effective rate on treasuries last year was

477
00:25:22,840 --> 00:25:25,320
Speaker 4: about three and a half whatever it was. So to me,

478
00:25:25,400 --> 00:25:28,399
Speaker 4: that's not a coincidence. It's not a surprise. It doesn't

479
00:25:28,400 --> 00:25:30,199
Speaker 4: have to happen. It could have been different, you know,

480
00:25:30,400 --> 00:25:33,480
Speaker 4: But it's kind of like the midpoint of my expectations

481
00:25:33,920 --> 00:25:35,800
Speaker 4: as to what's going to happen with the price level. Now.

482
00:25:35,840 --> 00:25:39,120
Speaker 4: PCE is a different thing, right, that includes substitution. If

483
00:25:39,119 --> 00:25:41,520
Speaker 4: the price of stake goes up until people eat chicken

484
00:25:41,560 --> 00:25:44,320
Speaker 4: instead but spend the same amount, you know, then there

485
00:25:44,320 --> 00:25:47,560
Speaker 4: hasn't been any increase in the PCE.

486
00:26:04,240 --> 00:26:07,800
Speaker 3: Just to be clear, we're recording this on a day

487
00:26:08,000 --> 00:26:12,640
Speaker 3: that I've incurred something of a substantial head injury, and

488
00:26:12,720 --> 00:26:14,920
Speaker 3: I was in the emergency room until late at night.

489
00:26:15,040 --> 00:26:21,399
Speaker 3: But did I just hear the godfather of MMT say

490
00:26:21,480 --> 00:26:25,359
Speaker 3: that large deficits can be a problem. Is that what

491
00:26:25,400 --> 00:26:27,679
Speaker 3: you just said? I feel like I might be hallucinating that.

492
00:26:27,800 --> 00:26:31,840
Speaker 4: Well, the deficit itself is just an accounting residual. But this,

493
00:26:32,400 --> 00:26:35,440
Speaker 4: you know what the spending in any given year, Any

494
00:26:35,480 --> 00:26:38,800
Speaker 4: spending has consequences. You know, if they decided to spend

495
00:26:38,920 --> 00:26:41,159
Speaker 4: trillion dollars to buy eggs, they're going to drive up

496
00:26:41,200 --> 00:26:43,679
Speaker 4: the price of eggs. Right. So if the government's spending

497
00:26:43,720 --> 00:26:46,720
Speaker 4: on a you know, our government spends on a quantity

498
00:26:47,000 --> 00:26:49,320
Speaker 4: constrained basis, Let's say they decide what they want to

499
00:26:49,320 --> 00:26:51,560
Speaker 4: buy and then pay whatever they have to to buy it.

500
00:26:52,080 --> 00:26:54,960
Speaker 4: That that can drive up It does drive up prices

501
00:26:55,400 --> 00:26:58,080
Speaker 4: or down price. You know, all the time. That's constantly

502
00:26:58,160 --> 00:27:01,399
Speaker 4: changing relative value in the act of all kinds of things.

503
00:27:01,720 --> 00:27:03,600
Speaker 4: You know, there's no way about that. And we have

504
00:27:03,720 --> 00:27:07,720
Speaker 4: course of taxation, right and the tax structure affects prices

505
00:27:08,160 --> 00:27:11,560
Speaker 4: and affects things. So if we have right now major

506
00:27:11,640 --> 00:27:15,680
Speaker 4: tax credits for solar for example, I think I get

507
00:27:15,680 --> 00:27:19,240
Speaker 4: a forty percent tax credit for installing solar, So I'm

508
00:27:19,240 --> 00:27:23,320
Speaker 4: putting solar panels in the USVII. The electricity is forty

509
00:27:23,320 --> 00:27:25,520
Speaker 4: five cents to kill one, so it's pretty easy calculation,

510
00:27:25,680 --> 00:27:27,800
Speaker 4: you know, so that I want to put in without

511
00:27:27,800 --> 00:27:31,640
Speaker 4: that tax inteative from the government. So I figure it's

512
00:27:31,640 --> 00:27:34,200
Speaker 4: probably not just me. So I talk to people at

513
00:27:34,480 --> 00:27:38,040
Speaker 4: accounting firms, major accounting firms. Are you seeing tax time

514
00:27:38,119 --> 00:27:40,399
Speaker 4: people doing this? They go, oh, yeah, We've got our

515
00:27:40,440 --> 00:27:43,439
Speaker 4: own partnerships and structures where you can put money in

516
00:27:43,480 --> 00:27:46,800
Speaker 4: and participate in this solar tax credit. You know. So

517
00:27:47,240 --> 00:27:50,080
Speaker 4: who knows how large is open end tax credits getting

518
00:27:50,080 --> 00:27:53,800
Speaker 4: and what it's affecting. So, yes, governments spending, but government

519
00:27:53,840 --> 00:27:59,080
Speaker 4: fiscal policy is entirely distributional between tax liabilities and spending.

520
00:27:59,200 --> 00:28:04,080
Speaker 4: It's pushing and pulling, you know, everything everywhere. It's it's

521
00:28:04,160 --> 00:28:07,720
Speaker 4: it's a major determined it's it's a it's a large

522
00:28:07,760 --> 00:28:10,960
Speaker 4: part of the command economy, and it's a command economy,

523
00:28:11,040 --> 00:28:13,720
Speaker 4: you know, to the extent that it's there. If the

524
00:28:13,760 --> 00:28:16,199
Speaker 4: government decides it wants jet planes, it's going to get

525
00:28:16,280 --> 00:28:19,439
Speaker 4: jet planes right right through the tax structure to the

526
00:28:19,440 --> 00:28:22,520
Speaker 4: spending structure. The pre market would not be producing jet

527
00:28:22,520 --> 00:28:26,760
Speaker 4: planes without the government ordering. Right. It's everything caters to

528
00:28:26,840 --> 00:28:29,800
Speaker 4: these you know, forces of government that are just on

529
00:28:30,000 --> 00:28:32,040
Speaker 4: us all the time. So it's not that I'm in

530
00:28:32,080 --> 00:28:34,280
Speaker 4: favor of them, but I'm just recognizing them and what

531
00:28:34,480 --> 00:28:34,800
Speaker 4: they do.

532
00:28:35,920 --> 00:28:38,600
Speaker 2: It sounds like, so you did you use the term

533
00:28:38,680 --> 00:28:41,360
Speaker 2: drunken sailor which you think you could. Yeah, I'll go

534
00:28:41,400 --> 00:28:44,960
Speaker 2: at the headline of this episode. It sounds like the

535
00:28:45,080 --> 00:28:48,520
Speaker 2: issue is so a lot of spending. Yes, that creates

536
00:28:48,560 --> 00:28:52,400
Speaker 2: a lot of The more spending, the more demand, prices

537
00:28:52,480 --> 00:28:54,160
Speaker 2: go up. And then it's.

538
00:28:54,000 --> 00:28:56,760
Speaker 4: Sound spend if you spend that market price. If you spend,

539
00:28:56,840 --> 00:28:59,080
Speaker 4: you spend based on a at a fixed price. If

540
00:28:59,080 --> 00:29:02,280
Speaker 4: you say, look, I'm going to spend this much for labor,

541
00:29:02,320 --> 00:29:04,760
Speaker 4: you can't drive prices. You might not get any but

542
00:29:04,800 --> 00:29:07,080
Speaker 4: you're not going to drive prices up that might get

543
00:29:07,360 --> 00:29:08,240
Speaker 4: the government order.

544
00:29:09,080 --> 00:29:13,120
Speaker 2: The government orders tanks and jets, and it also guarantees

545
00:29:13,400 --> 00:29:19,080
Speaker 2: uh social security recipients a certain a certain fixed level

546
00:29:19,320 --> 00:29:22,320
Speaker 2: of inflation or price level adjusted consumption.

547
00:29:23,280 --> 00:29:25,880
Speaker 4: And then we become agents. We become agents because I

548
00:29:25,920 --> 00:29:28,920
Speaker 4: guess SoC security of the government. You know, with no

549
00:29:29,000 --> 00:29:30,840
Speaker 4: restrictions on what we do when we spend it.

550
00:29:30,920 --> 00:29:34,360
Speaker 2: But it basically yeah, but it basically sounds like it's

551
00:29:34,440 --> 00:29:39,280
Speaker 2: that mix of sort of conventional macro thinking in which

552
00:29:39,560 --> 00:29:46,240
Speaker 2: high rates is uh deflate disinflationary plus the high levels

553
00:29:46,320 --> 00:29:49,800
Speaker 2: of government spending that seems to be the cocktail for

554
00:29:49,920 --> 00:29:54,080
Speaker 2: both higher upward pressure on the price level. And it

555
00:29:54,120 --> 00:29:57,840
Speaker 2: sounds like over time worsening higher price level because there's

556
00:29:57,840 --> 00:29:58,840
Speaker 2: a compounding effect.

557
00:30:00,040 --> 00:30:02,440
Speaker 4: Yeah, and that's the situation at the moment. It doesn't

558
00:30:02,480 --> 00:30:04,640
Speaker 4: have to be that way, but that's what I see

559
00:30:04,720 --> 00:30:06,280
Speaker 4: happening right.

560
00:30:06,120 --> 00:30:11,200
Speaker 3: Now in that context. And you sort of touched on

561
00:30:11,280 --> 00:30:13,080
Speaker 3: this before, but I would love to hear a sort

562
00:30:13,120 --> 00:30:17,240
Speaker 3: of like play by play guide here, But what should

563
00:30:17,320 --> 00:30:21,600
Speaker 3: the Central Bank be doing in the current environment where

564
00:30:21,600 --> 00:30:25,080
Speaker 3: we do have high fiscal deficits that might end up,

565
00:30:25,160 --> 00:30:26,200
Speaker 3: you know, constraining them.

566
00:30:27,280 --> 00:30:31,440
Speaker 4: So if they cut raise to zero tomorrow, then the

567
00:30:31,520 --> 00:30:35,400
Speaker 4: CBO would scored as like twenty trillion of reduced you know,

568
00:30:35,480 --> 00:30:39,160
Speaker 4: fiscal spending, budget cutting or whatever over twenty over ten years,

569
00:30:39,160 --> 00:30:43,360
Speaker 4: probably you know, like the largest spending cut in the

570
00:30:43,400 --> 00:30:46,640
Speaker 4: history of America at times ten, just by cutting rais

571
00:30:46,680 --> 00:30:49,600
Speaker 4: to zero, all right, And that's got to have a

572
00:30:50,280 --> 00:30:53,000
Speaker 4: well unless you assume none of that's kind of get

573
00:30:53,320 --> 00:30:55,800
Speaker 4: nobody's going to change their spending because of the one

574
00:30:55,800 --> 00:30:58,320
Speaker 4: point two trillion of income has been taken away. But

575
00:30:58,960 --> 00:31:01,080
Speaker 4: you know, looking at the numbers I'm looking at, that's

576
00:31:01,080 --> 00:31:04,400
Speaker 4: going to have a massive deflationary bias to it. It's

577
00:31:04,400 --> 00:31:06,400
Speaker 4: going to be taking away all that income and all

578
00:31:06,440 --> 00:31:08,640
Speaker 4: those next financial assets from the economy. It's going to

579
00:31:08,640 --> 00:31:12,160
Speaker 4: be a staggering like creation of fiscal space. Let's say,

580
00:31:12,160 --> 00:31:14,040
Speaker 4: I don't know how you want to put it, but

581
00:31:14,560 --> 00:31:17,640
Speaker 4: just a major deflationary event. And that's not even under consideration.

582
00:31:17,920 --> 00:31:20,880
Speaker 4: That's it would be considered a major inflationary event. Right.

583
00:31:21,280 --> 00:31:22,680
Speaker 4: That's why I look at all the people that have

584
00:31:22,720 --> 00:31:25,640
Speaker 4: looked at Japan with there's zero rates and forecasts like

585
00:31:26,040 --> 00:31:30,040
Speaker 4: hyperinflation or the end went through one sixty big deal, Right,

586
00:31:30,360 --> 00:31:33,000
Speaker 4: The inflation rates are lower than ours and it didn't

587
00:31:33,040 --> 00:31:34,920
Speaker 4: go up and they kept zero race the whole time,

588
00:31:35,240 --> 00:31:39,600
Speaker 4: but they're so forecasting hyperinflation, so they've got this bias

589
00:31:39,680 --> 00:31:42,040
Speaker 4: that the low rates are going to a rate cut

590
00:31:42,080 --> 00:31:44,280
Speaker 4: like that would be inflationary when it's the opposite.

591
00:31:45,040 --> 00:31:47,400
Speaker 2: Well, actually, did you brought up Japan, you know, for

592
00:31:47,520 --> 00:31:49,520
Speaker 2: all you know, I started really paying attention to this

593
00:31:49,560 --> 00:31:51,959
Speaker 2: stuff in the mid two thousand. Yeah, you know, I

594
00:31:52,000 --> 00:31:54,200
Speaker 2: heard all the tales of the widow maker trade and

595
00:31:54,240 --> 00:31:56,800
Speaker 2: everyone betting on that hyperinflation and how it never happened.

596
00:31:56,920 --> 00:31:59,720
Speaker 2: In recent years, Japan has seemed like the rest of

597
00:31:59,720 --> 00:32:04,360
Speaker 2: the world, if for a substantial inflationary impulse, still low

598
00:32:04,560 --> 00:32:08,440
Speaker 2: by international standards, but the side the stock of the

599
00:32:08,520 --> 00:32:12,200
Speaker 2: national debt in Japan is very high, as we all know.

600
00:32:12,600 --> 00:32:14,680
Speaker 2: And now they actually for the first time and forever,

601
00:32:14,920 --> 00:32:18,800
Speaker 2: have actually seen inflation again, not that high, but again

602
00:32:19,240 --> 00:32:23,840
Speaker 2: historically by Japanese standards. Is there a pump mix right

603
00:32:23,920 --> 00:32:26,480
Speaker 2: now for Japan? Is there a risk that I don't

604
00:32:26,520 --> 00:32:29,640
Speaker 2: know about hyper inflation? Kind of seems unrealistic that actually,

605
00:32:29,800 --> 00:32:33,640
Speaker 2: if they follow conventional macro thinking and could hold rates

606
00:32:33,720 --> 00:32:36,680
Speaker 2: up or move rates up to fight this inflation, that

607
00:32:36,800 --> 00:32:39,440
Speaker 2: some of these disaster scenarios might actually emerge with the

608
00:32:39,440 --> 00:32:39,920
Speaker 2: size of the.

609
00:32:39,840 --> 00:32:46,240
Speaker 4: Debt ironically, ironically, they entirely embrace conventional macro theory, and

610
00:32:46,280 --> 00:32:48,920
Speaker 4: the reason they're keeping rates down is they're worried that

611
00:32:49,360 --> 00:32:52,640
Speaker 4: they might not actually be out of deflation, and so

612
00:32:52,720 --> 00:32:55,280
Speaker 4: they've got to keep rates down to ensure that the

613
00:32:55,320 --> 00:32:59,400
Speaker 4: inflation stays. You know, somewhere towards two. They just had it,

614
00:32:59,720 --> 00:33:01,560
Speaker 4: you know, numbers from Tokyo or something that showed to

615
00:33:01,600 --> 00:33:05,200
Speaker 4: lower rate and they're all panicking about a deflation. So yeah,

616
00:33:05,440 --> 00:33:07,360
Speaker 4: they're there for the wrong reason, so to speak. But

617
00:33:07,400 --> 00:33:12,200
Speaker 4: they're there, so we have the data. But yeah, okay,

618
00:33:12,640 --> 00:33:13,520
Speaker 4: does that answer your question?

619
00:33:13,600 --> 00:33:16,200
Speaker 2: But if they were to raise at some point there's like, oh, no,

620
00:33:16,240 --> 00:33:18,400
Speaker 2: the inflation is not you know, if they were to raise,

621
00:33:18,760 --> 00:33:23,320
Speaker 2: could that create some real unfortunate dynamic feedback loops given

622
00:33:23,360 --> 00:33:24,040
Speaker 2: the stock of the.

623
00:33:25,840 --> 00:33:28,239
Speaker 4: Yeah, if they ever decided to raise rates to do

624
00:33:28,320 --> 00:33:30,880
Speaker 4: something with their debt to GDP, you know, they'd be

625
00:33:30,960 --> 00:33:33,400
Speaker 4: throwing gasoline on the fire the way we have, except

626
00:33:33,560 --> 00:33:35,040
Speaker 4: you twice as much. Yeah.

627
00:33:35,640 --> 00:33:37,560
Speaker 3: Wait, can we talk a little bit more. So we've

628
00:33:37,560 --> 00:33:42,400
Speaker 3: obviously been focused on the interest income channel for good reason,

629
00:33:42,520 --> 00:33:45,040
Speaker 3: but can we talk a little bit about the credit channel?

630
00:33:45,240 --> 00:33:46,400
Speaker 2: Yeah, this is important.

631
00:33:46,480 --> 00:33:48,560
Speaker 3: Yeah, and the impact of higher rates there because the

632
00:33:48,680 --> 00:33:52,200
Speaker 3: standard economic theory is that rates go up and that

633
00:33:52,280 --> 00:33:56,000
Speaker 3: makes the cost of credit. That increases the cost of

634
00:33:56,000 --> 00:33:58,840
Speaker 3: credit for businesses, and so they cut back on their

635
00:33:58,920 --> 00:34:03,640
Speaker 3: spending and investment. How do you view that component of

636
00:34:03,800 --> 00:34:04,640
Speaker 3: interest rate function?

637
00:34:06,000 --> 00:34:09,840
Speaker 4: Well, their clients of the businesses are getting flooded with

638
00:34:10,000 --> 00:34:13,680
Speaker 4: interesting and come and buying their output at whatever price

639
00:34:13,719 --> 00:34:16,600
Speaker 4: they need, which includes what you need to you know,

640
00:34:16,680 --> 00:34:19,880
Speaker 4: for investment, to keep up your output right and to

641
00:34:19,960 --> 00:34:21,960
Speaker 4: train your personnel and do whatever else you need. You know,

642
00:34:21,960 --> 00:34:24,960
Speaker 4: their prices are at levels where they're sustainable, where they

643
00:34:25,000 --> 00:34:28,120
Speaker 4: can pay interest expens if they need to. And so

644
00:34:28,160 --> 00:34:31,279
Speaker 4: we're seeing you know, three it's not this quarter, but

645
00:34:31,320 --> 00:34:34,240
Speaker 4: we've seen you know, three and four percent GDP numbers.

646
00:34:34,280 --> 00:34:36,319
Speaker 4: Now first and second quarter seems to be a little

647
00:34:36,320 --> 00:34:38,319
Speaker 4: bit weak. I don't know if there's something in the

648
00:34:38,360 --> 00:34:43,680
Speaker 4: seasonals that aren't quite fully sorted out, but and might

649
00:34:43,760 --> 00:34:45,719
Speaker 4: prove me wrong, but I think, you know, the first

650
00:34:45,800 --> 00:34:50,160
Speaker 4: quarter was one point four right due to inventory selling

651
00:34:50,200 --> 00:34:52,480
Speaker 4: off inventories because they believe the economy wasn't going to

652
00:34:52,520 --> 00:34:54,719
Speaker 4: be strong, so they didn't replace their inventories. Now they

653
00:34:54,719 --> 00:34:56,719
Speaker 4: have to replace them. We'll see what happens in the

654
00:34:56,719 --> 00:35:00,520
Speaker 4: second quarter. But anyway, so that's a narrative you had,

655
00:35:00,560 --> 00:35:05,000
Speaker 4: but the data hasn't. It hasn't played out because the

656
00:35:05,040 --> 00:35:07,160
Speaker 4: income of their clients has been high enough to buy

657
00:35:07,200 --> 00:35:10,759
Speaker 4: their output at a price that they like, you know,

658
00:35:10,920 --> 00:35:13,959
Speaker 4: that they're comfortable with. They've had good pricing power and

659
00:35:14,520 --> 00:35:19,720
Speaker 4: covers these added expenses from the interest expenses and interest

660
00:35:19,760 --> 00:35:22,360
Speaker 4: related expenses that you were talking about. But like it,

661
00:35:22,400 --> 00:35:25,160
Speaker 4: so if you're spending enough, is throwing enough gasoline on

662
00:35:25,200 --> 00:35:27,640
Speaker 4: the fire. Yeah, you're it's going to burn.

663
00:35:28,800 --> 00:35:31,480
Speaker 2: But like so just on the private sector side a

664
00:35:31,480 --> 00:35:34,120
Speaker 2: little bit more like as you know, one of the

665
00:35:34,200 --> 00:35:36,640
Speaker 2: key themes that you talk about is these are distributional

666
00:35:36,760 --> 00:35:39,040
Speaker 2: questions or the effects of a lot of these policies

667
00:35:39,080 --> 00:35:43,640
Speaker 2: are distributional. And you mentioned maybe economists think there's no

668
00:35:43,840 --> 00:35:46,719
Speaker 2: propensity to consume interest income, and maybe there's some good

669
00:35:46,800 --> 00:35:50,160
Speaker 2: reasons for that because it's you know, most the wealthy

670
00:35:50,160 --> 00:35:52,960
Speaker 2: people own the treasuries and banks and stuff like that.

671
00:35:53,480 --> 00:35:57,640
Speaker 2: But in there's consumer credit, there's cars. We know that

672
00:35:57,680 --> 00:36:02,200
Speaker 2: housing has slowed down. It does. Housing has slowed down substantially.

673
00:36:02,440 --> 00:36:05,560
Speaker 2: It does seem like there are many parts of the

674
00:36:05,680 --> 00:36:06,480
Speaker 2: US economy.

675
00:36:06,880 --> 00:36:09,400
Speaker 4: Yes, yes, they have there a loss that they.

676
00:36:09,239 --> 00:36:11,920
Speaker 2: Have responded to these higher rates by.

677
00:36:12,000 --> 00:36:15,840
Speaker 4: Yes, fishing their activity. Yes, there are winners and losers.

678
00:36:16,160 --> 00:36:18,840
Speaker 4: If you just look at the losers, you could maybe

679
00:36:18,960 --> 00:36:22,200
Speaker 4: conclude by projection or confirmation bias, that the whole country

680
00:36:22,320 --> 00:36:25,920
Speaker 4: is losing. But it's not. It's just shifting to different areas.

681
00:36:25,920 --> 00:36:27,840
Speaker 4: You know. Rolls Royce has like a I don't know,

682
00:36:27,880 --> 00:36:35,880
Speaker 4: two three four year backlog of sales, right, yeah you would, yeah, yeah,

683
00:36:35,960 --> 00:36:41,839
Speaker 4: I read it in the Wall Street Journal. I yeah,

684
00:36:41,880 --> 00:36:43,960
Speaker 4: in bloom I'm in Bloomberg. I read it on Bloomberg.

685
00:36:44,080 --> 00:36:44,719
Speaker 3: Yeah, thank you.

686
00:36:44,760 --> 00:36:46,160
Speaker 2: What are you driving these days?

687
00:36:46,200 --> 00:36:47,080
Speaker 4: What? What?

688
00:36:47,080 --> 00:36:49,680
Speaker 2: What race car are you in driving these days?

689
00:36:50,200 --> 00:36:53,680
Speaker 4: I've been driving a twenty fifteen Nissan Leaf for electric

690
00:36:53,719 --> 00:36:56,960
Speaker 4: car for a while, you know, because on the island

691
00:36:57,000 --> 00:37:00,400
Speaker 4: you can't thirty five mile hour speed limit. And uh,

692
00:37:00,400 --> 00:37:03,479
Speaker 4: but what do you drive on the track. I haven't

693
00:37:03,480 --> 00:37:07,360
Speaker 4: been on the track since I turned us for the

694
00:37:07,400 --> 00:37:10,560
Speaker 4: last since I turned fifty two, I think, okay, so

695
00:37:11,360 --> 00:37:13,520
Speaker 4: you know I haven't. I don't race on the track anymore,

696
00:37:13,560 --> 00:37:16,720
Speaker 4: got it. But I used to drive things at burn guests.

697
00:37:17,239 --> 00:37:18,400
Speaker 4: I have my own cars, you know. I had the

698
00:37:18,440 --> 00:37:21,200
Speaker 4: Mosler Empty nine hundred, which I would run on track days.

699
00:37:21,200 --> 00:37:24,120
Speaker 4: I never ran it real races. I used professional drivers,

700
00:37:24,960 --> 00:37:27,960
Speaker 4: you know, but in amateur racing I would drive it,

701
00:37:27,960 --> 00:37:30,640
Speaker 4: and I would drive our consotly ers. I used to say,

702
00:37:30,640 --> 00:37:33,160
Speaker 4: these cars can win races even with me driving.

703
00:37:34,040 --> 00:37:36,799
Speaker 2: We should another episode, can we Would you ever come

704
00:37:36,840 --> 00:37:39,200
Speaker 2: back to talk about when you had a race car

705
00:37:39,040 --> 00:37:41,560
Speaker 2: your car company? Sure, Oh yeah, that'd be fun, that'd

706
00:37:41,600 --> 00:37:44,520
Speaker 2: be really This looks like a sweet the Mosler empty.

707
00:37:44,719 --> 00:37:45,600
Speaker 2: This is beautiful.

708
00:37:46,400 --> 00:37:47,000
Speaker 4: How many of them?

709
00:37:47,600 --> 00:37:48,520
Speaker 2: This is a beautiful car.

710
00:37:49,120 --> 00:37:51,040
Speaker 4: There were fifty or sixty and you know I stopped

711
00:37:51,040 --> 00:37:53,799
Speaker 4: making the empty nine hundreds in I don't know, ten

712
00:37:53,920 --> 00:37:57,319
Speaker 4: fifteen years ago. But so there's still racing, So I

713
00:37:57,320 --> 00:38:00,399
Speaker 4: can the Spanish GT and the British GAT. They're still

714
00:38:00,440 --> 00:38:03,839
Speaker 4: winning races, you know, against the latest and greatest, and

715
00:38:04,000 --> 00:38:07,680
Speaker 4: you know the car is twenty years old, so there's

716
00:38:07,680 --> 00:38:09,880
Speaker 4: still a top performance car in the world where they

717
00:38:09,960 --> 00:38:10,520
Speaker 4: let them run.

718
00:38:12,440 --> 00:38:15,480
Speaker 3: So just going back to interest rates for a second.

719
00:38:15,719 --> 00:38:18,359
Speaker 2: Moving away, it seems way more boring now than I know.

720
00:38:19,080 --> 00:38:22,960
Speaker 3: I know this question is inevitably going to like fall flat,

721
00:38:23,040 --> 00:38:27,440
Speaker 3: but it does feel like we're sort of talking about

722
00:38:28,320 --> 00:38:30,760
Speaker 3: the economy is not a monolith. So you have these

723
00:38:31,000 --> 00:38:35,320
Speaker 3: interest rate sensitive portions of the economy like housing, yes,

724
00:38:35,400 --> 00:38:38,759
Speaker 3: that that are affected by rate rises, and then you

725
00:38:38,840 --> 00:38:43,240
Speaker 3: have pockets that are more insensitive and maybe we don't

726
00:38:43,280 --> 00:38:46,759
Speaker 3: have the balance of those two things exactly right, or

727
00:38:46,800 --> 00:38:50,640
Speaker 3: maybe traditional economics hasn't done a good job of taking

728
00:38:50,920 --> 00:38:54,200
Speaker 3: like those individual portions of the economy and netting them

729
00:38:54,239 --> 00:38:58,759
Speaker 3: out into a cohesive picture of the actual effect of

730
00:38:59,000 --> 00:39:00,200
Speaker 3: interest rates on them.

731
00:39:00,800 --> 00:39:01,560
Speaker 1: How do you like?

732
00:39:02,520 --> 00:39:04,880
Speaker 3: I guess this has always been sort of a criticism

733
00:39:05,000 --> 00:39:08,759
Speaker 3: of MMT, But how do you take those disparate ideas

734
00:39:08,880 --> 00:39:13,640
Speaker 3: and sort of make them into a useful theory of economics?

735
00:39:13,680 --> 00:39:14,480
Speaker 3: Does that make sense?

736
00:39:14,840 --> 00:39:18,000
Speaker 4: Yeah? Well, look, the whole composition of GDP changes all

737
00:39:18,040 --> 00:39:21,560
Speaker 4: the time, and it's driven, as I touched on before

738
00:39:22,239 --> 00:39:25,080
Speaker 4: quite a bit, by fiscal policy deciding what the government wants.

739
00:39:25,080 --> 00:39:28,640
Speaker 4: So if the government wants more solar panels, puts a

740
00:39:28,680 --> 00:39:32,400
Speaker 4: big tax credit, unlimited tax credit, we'll see how large

741
00:39:32,400 --> 00:39:33,920
Speaker 4: that is, you know, when it's smoke clears. But I

742
00:39:33,920 --> 00:39:36,360
Speaker 4: think it's gonna be a lot larger than anybody realized.

743
00:39:36,360 --> 00:39:38,560
Speaker 4: If you notice government revenues have been flat in a

744
00:39:39,000 --> 00:39:42,120
Speaker 4: booming economy, that's never happened. It's got to be tax

745
00:39:42,160 --> 00:39:45,399
Speaker 4: credits of some sort of you know, working out there.

746
00:39:45,920 --> 00:39:48,279
Speaker 4: So the composition is going to follow the money. And

747
00:39:48,320 --> 00:39:52,280
Speaker 4: if the money's going to those you know, earning interest,

748
00:39:52,400 --> 00:39:54,880
Speaker 4: then that's where the composition is going to go. And

749
00:39:54,920 --> 00:39:58,280
Speaker 4: you'll see more high end purchases, You'll see more things

750
00:39:58,280 --> 00:40:03,080
Speaker 4: that sort that group of people. There'll be you know,

751
00:40:03,120 --> 00:40:05,560
Speaker 4: all kinds of investments in that direction, and that's what

752
00:40:05,600 --> 00:40:09,600
Speaker 4: we're seeing. So again, it's about following the money, and

753
00:40:09,719 --> 00:40:13,400
Speaker 4: the government policy directs to a large extent, where the

754
00:40:13,400 --> 00:40:15,880
Speaker 4: money goes. And right now we've got over a trillion

755
00:40:15,920 --> 00:40:19,560
Speaker 4: dollars a year going to interesting, which is more than

756
00:40:19,640 --> 00:40:22,120
Speaker 4: defense and more than Social security and everything else.

757
00:40:22,200 --> 00:40:24,640
Speaker 2: Right, I just have one last question, and this is

758
00:40:24,719 --> 00:40:28,000
Speaker 2: more in the category of Warren Mosler lore rather than

759
00:40:28,040 --> 00:40:30,640
Speaker 2: it is in interest rates. But we're in the studio

760
00:40:30,719 --> 00:40:33,640
Speaker 2: right now, and I looked up and I saw on

761
00:40:33,800 --> 00:40:37,480
Speaker 2: Fox Biz, which we have on TV, Art laugherers on there.

762
00:40:37,719 --> 00:40:39,839
Speaker 2: Isn't it true like you were like friends with him?

763
00:40:39,880 --> 00:40:42,120
Speaker 2: Isn't there some story with you and Art where like

764
00:40:42,280 --> 00:40:44,800
Speaker 2: you had some important insight that led you to MMT

765
00:40:44,960 --> 00:40:46,520
Speaker 2: thinking from a chat with Art.

766
00:40:46,640 --> 00:40:49,880
Speaker 4: Well, I was looking for somebody to write up what

767
00:40:50,000 --> 00:40:53,160
Speaker 4: became soft currency economics interesting. I wrote. This was in

768
00:40:53,280 --> 00:40:57,960
Speaker 4: nineteen ninety three, and I went to my ex boss

769
00:40:58,080 --> 00:41:01,319
Speaker 4: an that Janata from William Blair, and he sent me

770
00:41:01,400 --> 00:41:05,279
Speaker 4: over to Rummy. Don Rumsfeldt was his nineteen fifty four

771
00:41:06,160 --> 00:41:10,000
Speaker 4: Princeton roommate. They were on a football team and wrestling

772
00:41:10,000 --> 00:41:13,319
Speaker 4: team something together, and they'd been good friends. So I

773
00:41:13,360 --> 00:41:16,200
Speaker 4: had a meeting. I called his office and he was

774
00:41:16,239 --> 00:41:17,960
Speaker 4: real busy. The only time he had was an hour

775
00:41:18,000 --> 00:41:21,200
Speaker 4: in the steamroom at the Racket Club in Chicago, so

776
00:41:21,280 --> 00:41:23,160
Speaker 4: I went out and met him there. So we're sitting

777
00:41:23,160 --> 00:41:26,799
Speaker 4: in our towels in the steamroom going through softcurt see economics,

778
00:41:27,320 --> 00:41:30,840
Speaker 4: and he then gave me a list of his economists

779
00:41:31,120 --> 00:41:33,080
Speaker 4: that he thought would be a good place for me

780
00:41:33,120 --> 00:41:35,319
Speaker 4: to go. And our Laugher was on that list, and

781
00:41:35,520 --> 00:41:38,200
Speaker 4: his guys were like Paul McCracken and Samuelson. I mean,

782
00:41:38,360 --> 00:41:42,040
Speaker 4: these were not anybody on my rollodecks. And I contacted

783
00:41:42,040 --> 00:41:45,160
Speaker 4: a few of them, and Laugher agreed to do it

784
00:41:45,280 --> 00:41:47,920
Speaker 4: in exchange for twenty five thousand dollars would help me

785
00:41:47,920 --> 00:41:50,719
Speaker 4: write this thing, and he assigned Mark McNairy. So I

786
00:41:50,760 --> 00:41:52,799
Speaker 4: got to know Art a little bit, and because we

787
00:41:52,840 --> 00:41:55,440
Speaker 4: talked quite a bit on these things, and it turns

788
00:41:55,440 --> 00:41:58,840
Speaker 4: out he's an ex university a Chicago professor, and he

789
00:41:58,920 --> 00:42:02,000
Speaker 4: knew all this stuff. He knew learner and functional finance,

790
00:42:02,040 --> 00:42:03,480
Speaker 4: and you know, long before I met any of the

791
00:42:03,520 --> 00:42:06,920
Speaker 4: academic and you know, he agreed with it. He signed

792
00:42:06,920 --> 00:42:08,959
Speaker 4: Tom Nugent to cover me because he was always looking

793
00:42:08,960 --> 00:42:11,319
Speaker 4: to do business. I went to a little conference where

794
00:42:11,320 --> 00:42:13,520
Speaker 4: he was and he got up to talk and he said,

795
00:42:13,520 --> 00:42:16,120
Speaker 4: I'm going to give the talk on money, and I'm

796
00:42:16,120 --> 00:42:18,680
Speaker 4: going to tell the money story. He says, And Tom

797
00:42:18,760 --> 00:42:21,600
Speaker 4: and Warren and he points to us disagree with me,

798
00:42:21,680 --> 00:42:23,600
Speaker 4: he said, and they're right, and I'm wrong, but this

799
00:42:23,719 --> 00:42:25,239
Speaker 4: is the way I tell it. And he went and

800
00:42:25,239 --> 00:42:27,400
Speaker 4: told the story about how banks take in deposits and

801
00:42:27,440 --> 00:42:30,600
Speaker 4: make loans, you know, completely backwards. And then hesus a

802
00:42:30,680 --> 00:42:34,279
Speaker 4: talk and look at him, like what was that. He says, well,

803
00:42:34,360 --> 00:42:36,279
Speaker 4: you know I told everybody you were right and I

804
00:42:36,360 --> 00:42:39,680
Speaker 4: was wrong. He said, like, what do you want? It's like, okay,

805
00:42:40,239 --> 00:42:42,000
Speaker 4: So I don't know what's going on with our laugher.

806
00:42:42,719 --> 00:42:45,320
Speaker 4: But he did say the the problem with the laughter

807
00:42:45,400 --> 00:42:47,719
Speaker 4: curve was it only worked at the very extremes. So

808
00:42:47,960 --> 00:42:50,960
Speaker 4: he was very like, you know, reasonable about everything. You know,

809
00:42:51,000 --> 00:42:56,480
Speaker 4: he's a very easy guy to talk to, and you

810
00:42:56,520 --> 00:43:00,799
Speaker 4: know self deprecating in many ways, and you know, you know, yeah,

811
00:43:00,960 --> 00:43:03,560
Speaker 4: it worked out well. Mark was very good and he

812
00:43:03,640 --> 00:43:05,880
Speaker 4: wrote and I edited, He wrote and I edited. Did it.

813
00:43:06,080 --> 00:43:09,000
Speaker 4: We came up with the soft currency economics thing, and

814
00:43:09,160 --> 00:43:11,680
Speaker 4: it didn't help. I thought having Laughter's name on it

815
00:43:11,680 --> 00:43:14,200
Speaker 4: and whatnot might give it more attention, more media attention.

816
00:43:14,320 --> 00:43:18,120
Speaker 4: But I don't think it made any difference. But you know,

817
00:43:18,280 --> 00:43:19,800
Speaker 4: they say you have to kiss a lot of frogs,

818
00:43:19,840 --> 00:43:22,800
Speaker 4: and that was just one of those, one of those times.

819
00:43:24,160 --> 00:43:27,920
Speaker 2: Lauren Mosler, so great to have you on. I swear

820
00:43:27,960 --> 00:43:30,480
Speaker 2: we will. I would honestly love to do an episode

821
00:43:30,640 --> 00:43:33,840
Speaker 2: just about Mosler Automotive and just talking about the business.

822
00:43:33,960 --> 00:43:35,560
Speaker 3: I just want to hear a day in the life

823
00:43:35,640 --> 00:43:35,960
Speaker 3: of Yah.

824
00:43:36,880 --> 00:43:39,840
Speaker 4: Well, okay, so Joe, I mean got in my FOD.

825
00:43:40,440 --> 00:43:43,279
Speaker 4: We met at a dinner UMKC maybe or some.

826
00:43:43,320 --> 00:43:44,880
Speaker 2: Yeah, I was, I was at UMKC.

827
00:43:45,040 --> 00:43:45,360
Speaker 4: Okay.

828
00:43:45,680 --> 00:43:47,960
Speaker 2: I think it was twenty fifteen. No, it couldn't have

829
00:43:47,960 --> 00:43:50,560
Speaker 2: been twenty fifteen, twenty twelve or twenty thirteen.

830
00:43:51,080 --> 00:43:53,480
Speaker 4: That sounds right. Yeah, it's long ago. I don't remember.

831
00:43:54,040 --> 00:43:57,960
Speaker 2: Those were fun days. Yeah, so great to finally have

832
00:43:58,000 --> 00:44:00,960
Speaker 2: you on the podcast and enjoy Sure you're going to

833
00:44:00,960 --> 00:44:01,920
Speaker 2: be vacationing neck.

834
00:44:03,080 --> 00:44:05,200
Speaker 4: Okay, thanks, take care.

835
00:44:19,080 --> 00:44:22,440
Speaker 2: Tracy, the godfather of MMT, says the government is spending

836
00:44:22,480 --> 00:44:27,200
Speaker 2: like drunken sailors and that it's created it's contributing to inflation.

837
00:44:27,880 --> 00:44:30,920
Speaker 3: I'm still not entirely convinced that this isn't like a

838
00:44:30,960 --> 00:44:36,720
Speaker 3: hallucinary output from your forehead from my head injury. But wow, okay,

839
00:44:37,120 --> 00:44:40,880
Speaker 3: I mean, I do think it is not hard for

840
00:44:40,920 --> 00:44:44,719
Speaker 3: me to envision a world in which companies pass on

841
00:44:44,960 --> 00:44:48,759
Speaker 3: higher interest rate costs to consumers. We've talked on the

842
00:44:48,800 --> 00:44:53,359
Speaker 3: show about companies passing on higher input costs and things

843
00:44:53,440 --> 00:44:56,960
Speaker 3: like that. So that part of it I can believe.

844
00:44:56,960 --> 00:44:59,560
Speaker 3: And the other part that does seem intuitive to me

845
00:44:59,640 --> 00:45:02,760
Speaker 3: right now is this idea of a tiered economy where

846
00:45:02,920 --> 00:45:05,759
Speaker 3: people who do have a lot of financial assets and

847
00:45:05,880 --> 00:45:09,080
Speaker 3: are earning a lot of income on those financial assets

848
00:45:09,600 --> 00:45:13,800
Speaker 3: do spend on certain things like, as Warren mentioned, luxury

849
00:45:13,840 --> 00:45:17,520
Speaker 3: items like a lot of that makes intuitive sense.

850
00:45:17,760 --> 00:45:22,160
Speaker 2: So definitely, And look here's where like I think I

851
00:45:22,160 --> 00:45:25,759
Speaker 2: would need more exploration. So there are aspects of it,

852
00:45:25,880 --> 00:45:31,680
Speaker 2: like clearly interest income is a real thing, more deficit spending,

853
00:45:31,920 --> 00:45:35,800
Speaker 2: which more interest income entails is on the net, going

854
00:45:35,840 --> 00:45:40,560
Speaker 2: to be stimulative at the margin. But rich people or

855
00:45:40,600 --> 00:45:43,880
Speaker 2: people with financial assets also just care about the price

856
00:45:43,960 --> 00:45:45,520
Speaker 2: of their financial assets.

857
00:45:45,560 --> 00:45:46,120
Speaker 3: Oh yeah.

858
00:45:46,320 --> 00:45:48,839
Speaker 2: And so when we did see, you know, they really

859
00:45:48,960 --> 00:45:52,480
Speaker 2: jacked up rates aggressively in twenty twenty two, and stocks

860
00:45:52,480 --> 00:45:58,000
Speaker 2: did decline, And I think stock prices probably influence real

861
00:45:58,080 --> 00:46:00,840
Speaker 2: estate prices. They've certainly, you know, we haven't had a

862
00:46:00,840 --> 00:46:04,400
Speaker 2: housing crash, but real estate in many realms has been stagnant,

863
00:46:04,480 --> 00:46:08,160
Speaker 2: or if you're in multifamily or commercial real estate, then

864
00:46:08,320 --> 00:46:11,680
Speaker 2: you probably have seen some price declines in the And

865
00:46:11,760 --> 00:46:14,760
Speaker 2: so I do think that like that is an offsetting factor.

866
00:46:15,160 --> 00:46:18,400
Speaker 2: And then I also think that while it's certainly true

867
00:46:18,480 --> 00:46:22,720
Speaker 2: probably that the propensity to spend interest income is not zero,

868
00:46:23,400 --> 00:46:25,959
Speaker 2: it is probably somewhat low, given that we're talking about

869
00:46:25,960 --> 00:46:27,840
Speaker 2: people who already have a lot of money and income,

870
00:46:28,200 --> 00:46:31,320
Speaker 2: Whereas the propensity to spend among people who are paying

871
00:46:31,400 --> 00:46:35,440
Speaker 2: high interest rates, either through car payments or credit card payments,

872
00:46:35,480 --> 00:46:39,200
Speaker 2: et cetera, is probably much higher and therefore impaired by

873
00:46:39,239 --> 00:46:43,120
Speaker 2: higher rates. So while I certainly get the theory and

874
00:46:43,200 --> 00:46:46,080
Speaker 2: I think there's probably something to it, I still like

875
00:46:46,239 --> 00:46:50,000
Speaker 2: would need more a little bit more convincing that the

876
00:46:50,040 --> 00:46:54,480
Speaker 2: distributional effect of this change in spending is on net inflationary.

877
00:46:55,400 --> 00:46:56,600
Speaker 2: But it's interesting ideas.

878
00:46:56,880 --> 00:47:00,160
Speaker 3: Absolutely, I think that's a really fair assessment. And I

879
00:47:00,200 --> 00:47:04,319
Speaker 3: think like the composition of wealth matters. So you can

880
00:47:04,480 --> 00:47:08,120
Speaker 3: say that there are all these treasuries in the world.

881
00:47:08,520 --> 00:47:12,400
Speaker 3: I can't remember the exact number, but like thirty trillion

882
00:47:12,600 --> 00:47:15,640
Speaker 3: dollars or something like that, and people earn income on

883
00:47:15,760 --> 00:47:19,880
Speaker 3: those treasuries, but each individual person is probably not holding

884
00:47:20,120 --> 00:47:24,280
Speaker 3: a pure treasury portfolio, as you say, like personal wealth

885
00:47:24,320 --> 00:47:27,440
Speaker 3: will be comprised of real estate, which is affected by

886
00:47:27,520 --> 00:47:30,680
Speaker 3: higher interest rates, stocks which also go up and down

887
00:47:30,719 --> 00:47:34,279
Speaker 3: depending on interest rates. And so yeah, it seems like

888
00:47:34,560 --> 00:47:38,279
Speaker 3: there's there's a sort of like net or sorry, there's

889
00:47:38,320 --> 00:47:42,520
Speaker 3: a compositional complexity there that we still need to work out.

890
00:47:42,760 --> 00:47:46,640
Speaker 2: And speaking of financial assets that go down, the treasuries themselves,

891
00:47:46,800 --> 00:47:49,520
Speaker 2: Oh yeah, because you learn the first day you joined

892
00:47:49,520 --> 00:47:52,120
Speaker 2: Bloomberg when rates go up, price goes down.

893
00:47:52,600 --> 00:47:55,839
Speaker 3: That's right. We should start adding that into all of

894
00:47:55,880 --> 00:47:58,400
Speaker 3: our news stories again, like we used to, just to

895
00:47:58,440 --> 00:47:59,960
Speaker 3: hammer the second.

896
00:48:00,320 --> 00:48:03,319
Speaker 2: Yields up price it done. I also just really like

897
00:48:03,480 --> 00:48:05,480
Speaker 2: I I do want to do an episode on Warren

898
00:48:05,560 --> 00:48:09,080
Speaker 2: Mosler lore because he kind of seems like a really

899
00:48:09,160 --> 00:48:10,640
Speaker 2: cool guy who has a fun life.

900
00:48:10,920 --> 00:48:13,359
Speaker 3: We should we should go to the island, and go

901
00:48:13,440 --> 00:48:14,240
Speaker 3: to the island.

902
00:48:15,000 --> 00:48:19,200
Speaker 2: Those the mostly Mt nine hundred looks absolutely sick. Have

903
00:48:19,280 --> 00:48:20,799
Speaker 2: you not look at that?

904
00:48:20,960 --> 00:48:21,120
Speaker 4: Up?

905
00:48:22,320 --> 00:48:24,319
Speaker 2: I'm not a car, but that's a sick looking car

906
00:48:24,360 --> 00:48:27,480
Speaker 2: that you built. Yeah, yeah, there's no joke like that

907
00:48:27,600 --> 00:48:28,680
Speaker 2: is a sick looking car.

908
00:48:28,960 --> 00:48:31,520
Speaker 3: The one on Wikipedia is a very bright greer.

909
00:48:31,560 --> 00:48:32,360
Speaker 4: It's beautiful.

910
00:48:33,440 --> 00:48:37,680
Speaker 3: Okay? Should we leave it there? Should we stop admiring

911
00:48:37,760 --> 00:48:39,120
Speaker 3: the cars and leave it there?

912
00:48:39,200 --> 00:48:40,200
Speaker 4: Let's leave it there? All right?

913
00:48:40,360 --> 00:48:43,080
Speaker 3: This has been another episode of the Odd Loots podcast.

914
00:48:43,160 --> 00:48:46,440
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway.

915
00:48:46,239 --> 00:48:49,400
Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart.

916
00:48:49,600 --> 00:48:52,960
Speaker 2: Follow our producers Carmen Rodriguez at Carman Arman dash Ol

917
00:48:52,960 --> 00:48:56,000
Speaker 2: Bennett at Dashbot and Keil Brooks at Keil Brooks. Thank

918
00:48:56,040 --> 00:48:58,560
Speaker 2: you to our producer Moses on Them. For more odd

919
00:48:58,600 --> 00:49:01,600
Speaker 2: Lots content, go to Bloomberg Odd Lots, where we have

920
00:49:01,640 --> 00:49:04,439
Speaker 2: transcripts of blog and a newsletter and you can chat

921
00:49:04,480 --> 00:49:07,319
Speaker 2: about all of these topics. Twenty four to seven in

922
00:49:07,400 --> 00:49:09,960
Speaker 2: our discord a lot of MMT fans in there, so

923
00:49:10,000 --> 00:49:12,000
Speaker 2: it'll be interesting to see how they react. Go to

924
00:49:12,080 --> 00:49:14,840
Speaker 2: discord dot gg slash out Lots and if.

925
00:49:14,719 --> 00:49:17,359
Speaker 3: You enjoy odd Lots. If you like it when we

926
00:49:17,400 --> 00:49:21,000
Speaker 3: talk heterodox economics, then please leave us a positive review

927
00:49:21,080 --> 00:49:24,319
Speaker 3: on your favorite podcast platform. And remember, if you are

928
00:49:24,360 --> 00:49:26,719
Speaker 3: a Bloomberg subscriber, you can listen to all of our

929
00:49:26,760 --> 00:49:29,800
Speaker 3: episodes absolutely ad free. All you need to do is

930
00:49:29,840 --> 00:49:33,680
Speaker 3: connect your Bloomberg account with Apple Podcasts. In order to

931
00:49:33,719 --> 00:49:36,480
Speaker 3: do that, just find the Bloomberg channel on Apple Podcasts

932
00:49:36,520 --> 00:50:01,279
Speaker 3: and follow the instructions there. Thanks for listening. Eight