I’m so happy you made this video. Thank you for making this topic that would normally be out of my reach, accessible and understandable for me. I hope you do well.
When Wolff stated mmt is more dangerous than incorrect, I believe he was saying, if the average citizen understands how the economy functions the jig will be up.
😀 The same could probably be said about democracy and our governments. Indeed they go together. We the people need to use our votes to wrest back control of our whole political economy.
As skeptical as I remain that debt-fiat currency won't fail and potentially cause some form of civilizationall collapse or other major disruption, it's nice to hear from someone who seems sincere in his beliefs that it can work..
It's taken me a long time to come around to having confidence in fiat currencies, but I think the key insight is that fiat currencies are indeed backed by specific governments and their people. The continual tax and spending of that currency keep a genuine, day to day value for that currency for those citizens and their economy. As long as the governments / countries don't fall, then their currencies will continue to have some value too (there are of course rare exceptions - but even hyperinflation is eventually dealt with by that country starting a new currency - which almost immediate has value because of the way the government and people start using it for real en masse).
i wonder if the problem between classical economics vs MMT is a lack of a definition for "resources". In classical theory gold was the defined resource. MMT seems to lack a clear definition, probably because it is made of both tangible and non-tangible elements (gold, land, etc. being tangible and labor being non-tangible, as well as intellectual property. good will, etc.). So at the heart of MMT resources is the nation's so-called GDP, a vapor type commodity. This is why it is so easy for the classical believers to find it so simple to discredit MMT.
I'm increasingly thinking that the core problem is that we don't have a good, intuitive way to understand money that is also correct. All attempts to think of it as sort-of-like-a-commodity are wrong. I think there is a sort of Newtonian vs Relativistic physics type of thing going on. For most people on a day to day basis it is reasonable to take the commodity (Newtonian) view of money, but at large, nation level scales, it behaves in weird ways that reveal that it is actually more 'bendy' like relativistic curved space-time. That people want it to be hard like gold, isn't enough to stop it having these more complex properties. MMT (and economists like Steve Keen) starts to highlight that money isn't a commodity - but I don't think we have the new ways to talk about it yet that people can intuitively grok. So there's lots of push back.
Finally! An analysis of MMT by someone who ACTUALLY understands it! Well done. I’ve read about MMT extensively, including a 400 page anthology of critical reviews. It’s not a unique economic theory. It’s just a description of how (mostly) the US monetary system actually works. The rather radical policy suggestions by some MMT proponents have nothing to do with the theory, per se. Using MMT I can just as easily argue that we need 100 aircraft carriers instead of, or in addition to, a jobs guarantee program, for example. MMT and UBI will become a necessity once AI and robotics displace the majority of our workforce.
Hi, thank you! And, yes, I agree with this distinction you're making between the MMT description of how money works and the particular policy suggestions that some MMT advocates make. And, I too am not convinced by the idea of a job guarantee, especially in the context of AI's potential impact on the job market. But it's also not clear to me that UBI can be made to work in a sensible way - although I find it a very interesting idea and I like it's simplicity and the agency that it gives to citizens.
Let's put it this way. Billionaires live off increasing debt and have no intention of paying any of it off. That's the Buy, Borrow, Die strategy. So it's hypocritical of the superrich to criticize the government on federal debts and deficits.
Which works in ZIRP. When inflation rises and interest rates rise, these people go bankrupt and countries go insolvent. US is just too big to fail. For now. At some point, the bond market dictates the market. Japan is experiencing this right now.
QE hasn’t caused significant inflation is because USD hasn’t devalued against major currencies, for reasons such as other governments deliberately depreciated their currencies (by eg following the US to QE) so as not to hurt their export competitiveness, and there’s substantial demand for USD denominated assets due to USD’s reserve currency status etc. So US’s inflationary pressure has been shared around the world rather than contained within the US. I am curious to see what will happen when foreigners stop buying US debt. My guess is USD depreciation and high inflation.
7:20 - I would be a lot less skeptical of debt-fiat if it functioned more like plain fiat, such that the number of debt-fiat banknotes the mint were authorized to produce from a treasury bond issued, were equal to that bond's maturity value rather than its face value. The top criticism of debt-fiat (as it's practiced through the world today) which I've ever heard, is that issuing only as much currency as the face value of the bond, means that the interest is compounding, not linear. (And as such the economy must grow geometrically or experience a hidden tax in the form of currency devaluation.)
Thank you for the great video. I appreciate the info very much, as it’s presented in a calm manner and with good backup data. I don’t know how I feel about all this. As an American, I’m concerned about the profligate military spending, both from a financial position, as well from humanitarian grounds. I believe that military spending is inherently inflationary as the goods are produced using tax dollars, but cannot be bought by the economic markets at large. FYI, I also believe that words are important, and the political, fiscal, and monetary lingo is jingoistic and not meant to inform, but to confuse. The prefixes like “neo-“ is emblematic. You don’t know what the user stands for, nor what he means. Again, thank you.
When I see that interest on the national debt is now the third largest government expense (after Medicaid and social security) I find it hard to believe that an ever-growing national debt won't become a problem. At some point the interest is going to become the single largest item in the government budget.
Yeah, I agree it is a worry. But I think MMT would say a couple of things about this: a) MMT is not arguing for a license to spend, spend, spend. You do need to keep a reasonable level of total debt in relation to government receipts and GDP, but: b) aiming for balanced budgets or surpluses is a mistake as it will suck money out of the private sector and reduce the growth rate of the economy and a key instrument to tackle high govt debt is to ensure high levels of growth. So, rather the govt should be doing sensible levels of borrowing to invest in ways that will stimulate growth ... but these have to be credible plans. c) government can and should more actively manage the interest rate that they are spending to service their debt, including allowing the central bank to buy up more govt debt from the market (as Japan has done massively!), as not only can this help shift the market interest rate, but also any interest paid to the central bank comes back to the Treasury as 'profit' (as far as I know) and so effectively takes the interest rate on that debt to zero! So, yes, the trend line is not great, but austerity style, unilateral cutting of spending is not a sensible way to get out of the situation. It is likely to reduce growth, thereby making the debt harder to service! But the mistake many people seem to make is to assume that MMT advocates are simply arguing for massive increases in spending. It's much more nuanced and sensible than that! 🙂
I just found this channel - gotta rewatch again to grasp what's being said here. I don't know if your title has a typo (Unpicking in place of Unpacking?) love the video and looking forward to seeing more!
Hi, thanks! As for 'unpicking' I thought that gives a hint that I'm not just being blindly uncritical of the ideas suggested by MMT. So, I'm hoping this is a video that works both for people who are supportive of MMT and those who are critical of MMT - and most of all, of course, for people who are just learning about MMT. But maybe 'unpacking' would sound better to more people. Hard to know. And, thanks again for the encouragement!
And I'm well aware of the effects of fractional-reserve banking to increase the currency supply through checkbook money, but that's another whole issue (no pun intended).
It is also worth noting that if you want growth, you have to match that with more money in the economy; otherwise, the stagnation of the US in 1930-33 and the UK in 1929-39, both cases resolved by having money pumped in by a) US FDR New Deal 1933-37 b) UK War Machine = full employment 1939-45 c) the War savings bond to tie up surplus money until after the war, when the industry could re-tool for producing consumer products rather than destructive products of war. This stopped any post-war hyperinflation due to the 250% debt-to-GDP ratio, and in 1948, Attlee and Bevan launched the NHS! So all of the austerity stuff (2010-2024) was and is boll*cks , and all of this period (1944-71/73) was under Bretton Woods (a form of the gold standard)!
"It's too easy to create a caricature and then dismantle it as a strawman" Very well said!! The problem is much deeper, however. It will be difficult to fool a room full of physicists with a base rate fallacy, but a room of 70yo Boomers in a Florida assisted living will laugh you out of the room if you mention something like a billionaire being 1000x richer than a millionaire, not 3x like they intuitively think it is, and the impact of compounding interest resulting from it. They'll just call you a commie. Yet both physicists and seniors hold equal voting power, so who do you think politicians will be trying to impress? The line where it's too easy to create a caricature passes uncomfortably low. Concerning the topic of the video, unfortunately, economists suffer from "searching under the streetlight" fallacy, they look at aggregate measures and anecdotal evidence, and sometimes even have a selection bias, focusing on oversimplified and politically impactful shortcuts more than transparency and clarity. Take, for example, the 2008 financial crisis. The majority of events of the spectacle took place in shadow banking, yet almost no economists even looked in that direction, simply because there is no data collected due to financial industry opaqueness. Another example is Ireland's inflated GDP, yet another - the Chinese tofu scrap buildings and belt and road, both serving more as capital export vessels rather than construction projects. The US budgets, currency and banking system, similarly, are not at all what they seem. But understanding them properly requires reading between the lines, building proper financial (not economical) models, networking with financiers. And even then, if such a researcher succeeds in shedding light on some aspect of the economy, the truth will be so inconvenient, unusual and even seemingly grotesque that very few will be interested in reading his paper. ~15 years ago I had a question about money mechanics. I had several textbooks from libraries and websites, put them side by side and they were all saying different things. The mainstream opinion, however, was fractional reserve, which I by then had already figured out to have been wrong. In 2014 I was shocked to see a Central Bank issuing a thin brochure clearly saying "banking does not work like you are being taught in colleges", and it was then that I realized how truly bad the situation in economics was. Just to think that I had been able to figure out by myself years prior, with not too significant of an effort, a fact which the UK central bank had to issue a brochure about! I could imagine a textbook to possibly be wrong, but maaan, a whole central bank of a G7 country issuing a brochure stating out loud that economists do not know how the economy works. It was eye opening. Thank you very much for your video! I am going to watch it again, to make sure I followed your thought correctly. And good luck with your channel!
Hi @matveyshishov, thank you for your kind words and comment! I agree that learning more about economics is quite an eye opener as your realise just how poorly basic phenomenon seem to be understood and indeed how much disagreement there is about these basics. As you say, and as I hope was clearly indicated in my video, part of the problem is that there is too much political benefit to keeping the the mechanics of economics obscure. Sadly, I don't think that this means that there is secret knowledge of some true, deep understanding, that is deliberately hidden. Rather I think the political and economic incentives probably hinder the ability of the discipline to examine clearly what is happening and certainly hinder the communication of what is learned to a wider audience. And, of course, on top of that, it should always really be called 'political economy' (as it used to be) because of the complex, dynamic interaction between the two. And this makes it a genuinely hard phenomenon to study because it is constantly changing and evolving as our society changes. But, it seems to be a crucial topic for our times. So, I'll keep exploring it! Thank you for your encouragement.
17:35 - It's only too late because no currency-supply deflation (or rather, value increase of the currency unit) is no longer tolerated. The vexation isn't the occurrence of occasional high annual inflation, but the total lack of any years since WWII (other than 1955 and 2009, according to the US BLS's CPI) of any occasional deflation whatsoever, to restrain the compounding effect of a constantly above-zero annual inflation.
Why isn't there a televised and moderated debate between Stephanie Kelton and Carmen Reinhart? Can someone please make that happen? Before it's too late? Did you watch Jared Bernstein? Unbelievable.
Inflation isn't a good measure to see the effects of MMT, but on the values of houses, stocks and other assets, as these are the primary target for all that surplus money, as are the rich people who got those printed money first. When the inflation rises, it is because it is too late, and things got out of control.
Not wishing to sound too pedantic, but I think your comment makes more sense to me if I read it as saying ".... see the effects of quantitative easing, ... " as MMT in general doesn't specify what kind of deficit spending makes most sense to do. Indeed, I agree that much of the extra money probably did end up in assets held by the rich, and it may have been a much better boost to the economy to spend the extra money in another way. But, having said, my understanding is that the real purpose of quantitative easing is/was to manage the bond markets, to keep them liquid and to make sure there was always a buyer for government debt. So, yes money went "in the top", but I guess it helped fund government spending elsewhere too. To me the interesting thing to note about inflation is that if MMT was completely wrong, in other words if it was necessary to have balanced budgets or surpluses in order to avoid inflation, then how come inflation has come down to around 2% when deficit spending has continued at pace ever since Covid?!
I'm not sure that the case for a couple of things are sound here. I'm having a difficult time understanding how spending is justified when the case was made that it's backed by labor and productivity. Wouldn't it be harmful to spend more if labor and productivity are not matched? This was always my understanding of how our monetary system works today. Also, inflation is certainly caused by higher levels of spending, by the simple principle of supply and demand. Historical data backs this up, too. Just as we can look at when the govt paid a substantial amount of debt, we can also see that inflation has largely ensued large govt spending and printing of money. There's quite a lot evidence even pre-dating America. It isn't a new phenomenon
21:25 - privatize or marketize? I recognize that attempts to privatize are often monopolies granted to specific companies, but few people seem to notice it would also be possible to allow competition to provide such services, rather than simply granting the government monopoly to a non-government corporation.
The dollar is a leader currency, other Currencies will always do what it does. For that reason the US will never face the consequences of it's frivolous spending since there will be no competitors to replace the dollar
APPLIED "ENERGY" (LABOUR & RESOURCES) ARE WHAT "WORK" IS ALL ABOUT... SHORTAGE OF EITHER ESSENTIAL "LABOUR" OR "RESOURCES", TRIGGER A POTENTIAL FOR INFLATION, REGARDLESS OF ACCOUNTING THEORY. EFFICIENCY & EFFICACY AFFECT ANY IMBALANCES, IE: BE EFFICACIOUS (APPLY TO THE RIGHT GOAL) & EFFICIENT (APPLY ENERGY & RESOURCES TO BEST EFFECT) THAT IS WHA MATTERS (HOW GOOD GOVERNANCE IS MATTERS, NOT JUST HOW BIG)
Hi Brett, thank you! And, no, I haven't read that book, just taken a look and I'll definitely add it to my list. Inflation is quite a complex phenomenon and I'm trying to get my head around it as best as possible, especially as the risk of causing inflation is one of the biggest impediments to UBI (as far as I can tell). I'm also fascinated by the so called, "Baumol effect" in which some parts of the economy see price decreases (like manufactured goods) while others see long term price rises (like healthcare services). Indeed, it looks like the book you've recommended may delve into this kind of phenomenon, so thanks for the recommendation.
@Go-Meta I wonder how much of baumol effect is related to market share, like on the cheap price side is just to grab the market with say Wal-Mart cheap prices until all competitors go out of business and then prices are raised I wonder if the cheap prices of tech are similar and when all data has been gathered monopoly phase is engaged. Another interesting book I'm reading is called: techno feudalism that might have some influence on that thought. Have a great week!
I'm reading Techno Feudalism right now too 🙂 ... probably do a video about it in a week or so! Re: Baumol effect: it's much more to do with work that can be made more productive (less people for the same or more output), versus work that can't and then the way that salaries from the more productive parts of the economy can raise the salaries across the whole economy. I'm hoping to do a video about this too ... but that's going to take a while longer to get ready! Thanks for the comments.
12:42 - Wow, I'd not seen this Kennedy quote before...he seems to be missing the concept of market signals. That's the ill which can happen even in the absence of currency devaluation.
False facts lead to wrong conclusions. Oli Sharpe has the wrong facts about the Japanese economy. The false idea that the central bank of Japan 's debt has not had a negative effect on Japan's economy is just totally wrong. The correct facts are :- The writing is on the wall with it's negative consequences which have been showing and growing for the last 30 years. The hard evidence of the situation is Japan's currency which despite trending upwards for over 25 years prior to the 1990's has trended downward over those past 30 or more years . It was 82 yen to the US dollar in 1990 and now is 161 yen to the dollar. So any talk of the massive debt not having an effect on the Japanese economy is just FALSE.
I did find the book very interesting. In general, I think MMT is correct descriptively. The problem is MMT proponents often have terrible prescriptions. Calling for spending that would way out pace the subsequent real growth in overall production (thus causing inflation). The idea that the super spending will cause the production to match the increase debt and stave off inflation is silly talk and never happens in the real world. Interestingly the debt hawk's calls for limited spending is often the right call but not for a reason they understand. It really does all come back to inflation.
You or I create money every time we take out a private loan, that's how most currency is actually created at the moment and that is a admitted fact by all accounts, although I would welcome any criticism of this statement that can prove otherwise 2:55
I agree with this statement (although I'd note a very minor quibble with the suggestion that it is us rather than the commercial lenders who are creating the money - even if they are creating it for us), but I'd also refer you (and others reading!) to the answer I gave to your other comment. Commercial lending may create the largest volume of money by scale, but not by significance. Note, for example, it is not this commercial lending of money that makes people worry about inflationary effects. They only worry about government borrowing causing inflation and, in some sense, this shows that they understand that government "borrowing" is often much closer in reality to government printing of money - as MMT advocates say 🙂
@@Go-Meta You say " Commercial lending may create the largest volume of money by scale, but not by significance.. Totally wrong again because over 90% of money in the economy is created by private banks. That is more than just significant and the major amount of spending which creates most of the tax that government collects and government then spends. Mosler himself says 'the purpose of taxes is to provision government.' - he is the originator of MMT. How is that money collected from the private sector for government to spend "not significant" ? You need to explain or admit you are wrong and have misled people?
Hi Rob, I meant "not significant" with respect to people's narratives around inflation as most commentators I have seen focus their thinking around the actions of the central bank which has huge influence over the total envelope of money that the commercial banks can 'create' through lending. As far as I know, the central bank does this through three main levers: *) The total monetary base *) The reserve requirements *) The central bank interest rates So, yes, commercial banks lend out a 'significant' amount of money, but I get the impression that most commentators think of commercial banks as being a multiplier effect, with the central bank's choices (+ Treasury) as being the main driver of the "printing money causes inflation" narrative. I guess every short comment or description of these really complex phenomenon is going to be slightly wrong or not perfectly phrased 🙂 Cheers, Oli
6:48 - Yes, I imagine centrally planned repayment can disrupt an economy (deflating of the legal-tender currency supply) as can the reverse...what's the point you're trying to make here? Moreover, all but one of the examples included in the chart are before 1913, and thus before the fourth bank of the United States (the Federal Reserve System), so were there actually any debt-fiat currency units in circulation? I'm aware there were periods of time where there would have been, including under, as it were, the zeroth bank of the United States (issued the Continental Congress itself), but do you mention any of that history? In the 1867 example I imagine there still would have been Lincoln's green-inked (and non-debt) fiat currency in circulation, but what proportion of the currency (and/or money) supply was debt-fiat vs. fiat vs. silver certificates, etc., at that time?
I think that your description of demand/supply for money (when you display the graph) is incorrect. You say as if money was demand for money, and supply were goods and services, whereas it's the opposite. Demand for money is necessity to conduct transactions (especially paying taxes, as the IRS only accepts dollars), and supply is monetary mass. Great content otherwise, glad to have found this video.
Hi @GolerGkA, I obviously didn't explain well what that graph was meant to depict, which was that the extra money being pumped into the economy would cause extra demand for goods and services. Just re-watching that section now, I can see how my sentence "the extra demand _from_ the extra money" could sound like "the extra demand _for_ the extra money" ... hmm... shame I can't redub the intonation of that sentence to be clearer! But, yeah, as you say, if there was extra demand for money (e.g. to pay taxes), that would push the 'price' of money up, which, in effect would push the price of goods relative to a fixed amount of money down! The opposite of inflation. But, I think I got it the right way around in my video, just not stated clearly enough 🙁 Thanks for the comment and I hope I've understood your concern correctly!
The reality of what the central bank of Japan has done is that it has created far too much debt to fund government spending and this has resulted in inflationary pressure that has over the past 30 years driven the purchasing power of their currency down from a previously upward path in purchasing power to a downward path. Its purchasing power had been rising from a low of 350 yen to the dollar in the early 1970's to a value of 86 yen to the dollar in the early 1990's and now has reversed its trend and is at 157 yen to the dollar and on the way down..
Hi Rob, I totally agree that inflation is a real problem to take seriously, but the last few decades of the Japanese economy is not a great example for your case. What you have pointed out is the change in value of the Yen vs Dollar over a time period, and I get why you are pointing to that as a "loss in value" of the Yen, but that is not how inflation is usually measured and often fluctuations in relative currency values often have to do with a much broader set of influences than money supply in one country. For Japanese people, living and working and spending in Yen, they haven't been experiencing inflation of prices with respect to their consumer price index for many decades. Quite the reverse, their inflation figures have been near zero or below! (look at the % change over the max timeframe in data linked below): tradingeconomics.com/japan/consumer-price-index-cpi And to try to boost economic activity and spending they have also kept their interest rate around 0% for multiple decades too (again look at the max timeline for the data below): tradingeconomics.com/japan/interest-rate And then, if Yen has a 0% interest rate, but the dollar or other currencies have a higher interest rate then, sure financial markets will move money out of Yen and into other currencies in order to get the higher returns - which pushes down the value of the Yen as you were referring to. And, in turn, this actually will make Japanese goods cheaper to sell across the world, helping their exports and therefore their balance of trade. Add in the fact that, unlike the dollar, the Japanese Yen is not the world's reserve currency and I actually think the Japanese economy is the best exemplar of why MMT is a good overall way to understand fiat currencies. But, don't get me wrong, I do agree that there is a level of creation of money that would be "too much" and would cause damaging inflation. But that doesn't mean that perfectly balanced budgets are necessary.
@@Go-Meta You say "For Japanese people, living and working and spending in Yen, they haven't been experiencing inflation of prices with respect to their consumer price index for many decades." That may be so to an extent but the greater view of the value of the currency shows there is inflation that has diminished the purchasing power of their currency. The discussion is about the purchasing power of the currency and not the internal effects of that on the population because those internal effects on their people are also dependent on the fact that their own debts of government are internal and not a massive external debt like in other countries including the U.S. The first thing that differ in Japan from most other countries is their huge amount of foreign assets that are invested overseas and this contrasts vastly with the U.S. I don't know how you can rationally use the Japanese situation now to justify the MMT. Japan has had three decades of low growth which compares very badly with their previously well reported growth in the purchasing power of their money and overseas which has now reversed and as I have pointed out and which you seem to have ignored. Additionally the massive buy up by Japan of overseas assets has declined in the past 30 years. Also the population has reduced by 15 million in the last 30 years which means greater proportional investment benefits for those currently existing. This too contrast greatly with other countries and in its absence would have negatively figured on the ability of the population to spend due to increased demand on consumer goods. MMT does not address the historical facts which I have pointed out are contrary to the MMT beliefs. MMT does not also address the fact that central banks who actually create money themselves contradict the money creation theory of MMT which says the government has to spend first before taxes can be collected.
MMT is a macro economic theory about how money works for countries that issue fiat currency. Detractors of MMT say that it is wrong because you have to (a) balance your budgets and (b) if you don't balance your budgets but instead keep printing money then you will cause high inflation *within* your economy because you are debasing the value of your currency. The last decades of Japanese economic history says, "no, you are wrong" to the detractors of MMT. They haven't been balancing their budgets, they have been printing large amounts of money, but they haven't experienced high inflation within their economy. In many ways it really is that simple.
@@Go-MetaJapan is a good example of Mosler's theory that the interest rate equals the inflation rate. Simplicity really is key to understanding MMT. Pretty obvious in retrospect that you cannot tax a population if you don't first issue them the $ to pay that tax with. It seems mainstream economic theorists always want to start their theories somewhere in the middle and pretend their foundations are solid,- then you can create your own invisible hand(s) and attribute it to Adam Smith or buy your own nobel prize category. It's really pretty entertaining to watch the same groups that accepts these and other clear myths (like using GDP as a measure for economic strength) apply their fuzzy logic to mmt so vociferously.
I think you forgot to factor in that the US$ is still the world's Reserve Currency, this keeps Inflation lower in the US than it would be otherwise. The currencies of other countries, however, do NOT have this privilege.
I completely agree that this is a big benefit for the USA (at the moment! ... and probably for quite a while to come). But, Japan has been living the deficit dream for quite a long time and is used by Kelton as a good example of a country demonstrating the power of its central bank to influence interest rates and mop up its government debt. So, it's not quite correct that only the USA can benefit from MMT style thinking. But the recent example of the UK's knock back from the markets was a (semi) counter example to MMT thinking - but even there, it's not as if the UK has moved to be operating with a fully balanced budget. But I agree that the USA is in a unique position thanks to the dollar hegemony.
MMT is nothing more than an accounting trick. The book, and this video, only hints at the reality that the only way to prevent inflation is to pull the money back out of the system from the top. You can only do that by taxing the wealthy, which they can only do so much before cut backs in jobs, innovation, capital investment in new technologies, capital flight and finally increased prices on consumer products, because businesses will always push those taxes onto customers. Worse though, the book never explains that 40% of TBills go to foreign governments and the other 60% go to the wealthy. And artificially low fed interest rates from QE make your savings accounts lose value while the cost of homes and products continue to increase, asset inflation. Money always, always trickles UP, and so deficit spending leads directly to wealth inequality, which is why Bernie Sanders (Kelton was his economic advisor) has to call for wealth taxes and seizures for anyone who tries to leave the US system. Motel 6 is motel 6 because it was $6 a night. Now it’s $80 but the room isn’t 13 times bigger or 13 times nicer, your $ is worth 13 times less.
MMT is just an ideological economic bias, it’s used to justify Big government centralizing and managing society. They pretend it’s not inflationary, they pretend they’ll be able to control it.
No inflation is caused when the money supply exceeds production. Stealing successful people's wealth doesn't help inflation as if you steal the producers money they will produce less. What we need is for the government to cut spending by 20% a year until debt is gone and nobody is paying more than 10% in total taxes. Government employees wages should be capped at 10% below median wage
@@Mikey-b1s at what point did I say that inflation wasn’t a measure the money supply outpacing production? That was never said, so your retort is wrong off the bat. I also didn’t say I agree with taxing the rich. What I said is the only way to truly keep inflation down is to remove money from circulation after it’s been printed to do the thing they printed it to do. And since the poor don’t have that excess money supply, you have to take it from the people who do have it to remove it from circulation. Which you can’t do without wrecking the economy.
The real country that needs explanation is Japan. Decades of printing money while having very low levels of inflation with a constant threat of deflation and very low interest rates. All of this while NOT being the worlds reserve currency. MMT advocates don't ignore the real risks of hyperinflation and persistent high inflation, as suffered by Argentina, but they just note that perfectly balanced budgets are not essential for maintaining a regime of low inflation. Indeed, MMT detractors have to explain why inflation in the USA has come down despite continued 'printing' of money! The point is that inflation is more of a complex beast than simply being a reflection of printing money.
@@Go-Meta You are totally wrong in saying there has been low inflation for Japan. There has been high inflation because the price of their government borrowing over the past 30 years or more has resulted in their currency falling in value by at least 60% compared with other currencies. Your wrong understanding results from looking purely at their internal CPI prices alone instead of their external and internal situation. Price of their currency has fallen from 82 yen per U.S. dollar in the early 1990's to 160 yen per U.S. dollar now.
@20:04 - the argument addressing the deficit myth is structurally incorrect. Your argument is that the government would have to run a balanced budget or run surpluses to get inflation back under control. What you are actually arguing is that you would need to have a balanced budget or run surpluses to get 'price points' back to where they were. Inflation once entered into an economy can only reach an equilibrium when all other 'price points' match. That obviously includes labour wages, insurance, individual retirement accounts, etc. That process can take years to filter through an economy, and sometimes decades. Run some models of what your retirement looks like with a 3% inflation rate compared to a 2% rate. People don't take inflation seriously. It has devastating effects on previous efforts to budget for life. If you want to run a deficit as a government, then take the prudent approach and bond the deficit to assets or a derivative of assets that can increase or at the minimum sustain assets values. I'm not sure of your background, but I don't see the discipline of economics clearly in your review of Kelton's work.
No, I really was talking about getting inflation back "under control" as in back to 'normal' levels. And, sure, there is an interesting question about what is a 'normal' level of inflation, but given that many central banks have a 2% target, my argument is that inflation (certainly in the UK, and almost in the USA) is now back to these more "normal" levels of inflation that are near or within the target zone of central banks. And this reduction in inflation has happened despite continued, significant deficit spending in the UK and USA. At a most basic level this undermines the suggestion that deficit spending inevitably leads to high levels of inflation. Now, I totally would admit that I have a generous view of MMT, but at a basic level I think proponents of MMT are trying to point out that YES high inflation is damaging for an economy and should be avoided, but, NO inflation is not simply a consequence of deficits. Inflation is way more complex. So, there are many situations when governments can continue to run a deficit without being at risk of causing high levels of inflation. Regarding pensions, many pensions are setup with some level of inflation protection. So, yeah, the difference from 2% to 3% might be significant for those whose pension protection is capped at 2% inflation. But for many well managed pensions they ought to be able to cope with slightly higher levels of inflation and no-one should be keeping their pension (or large savings) in cash under the bed! That really would be devalued by inflation over the long term. But just to be clear, I totally agree that high inflation is a real problem and, as far as I know, MMT advocates never argue that inflation isn't something to worry about. It's just more complex than blaming it simply on government deficits. And, yeah, it is true that my academic background isn't in economics, my PhD is in AI. But I've read and discussed loads of economics, and it seems fairly clear that most economics theories are interesting analysis of a subset of what happens in the real economy! For example, it seems fairly widely agreed that real economies never reach the point of general equilibrium across all sectors. Real economies are way too dynamic for that, with too many information asymmetries; and irrational actors; and external disturbances of one kind or another; and on and on. As for demonstrating the economic backing for what I'm saying, I'm thinking of writing accompanying essays for each video that can have more details for those interested. The reality is that a 20min long video is too long for most people already! So, I probably ought to keep the videos simpler and have more explanatory context elsewhere. Thanks for the comment, I hope my response covered some of your concerns.
Hi @mulllhausen, well the (TAB)S mnemonic, with tax and borrow coming 'first', came from Kelton's book. I (nor Kelton) wasn't suggesting that Thatcher had literally said this happens 'first', but she implied it by suggesting that only we the people 'make' money (through our hard word) and then the government takes (or borrows) it from us. She is suggesting that the government is just a user of _our_ money. This is politically very compelling, but it is technically not correct. We are currency users, but the government (of fiat currencies) is the currency issuer because only the government can create brand new money. And then the government can spend that money, money that it has neither taxed nor borrowed from anyone. So, Thatcher was misrepresenting how government finances actually work. It may seem like a technicality, but sometimes these subtle details matter.
@@Go-MetaI don't think Thatcher implied that at all. Pretty sure she was well aware that the government takes out loans first then only partially pays them back from the labour of the general population later. Infact I don't think MMT even disagrees with this. Do you want to know what I think I happening here? I think yourself and Kelton are using Thatcher as a common enemy to attempt to garner supporters.
Olie Sharpe -In regard to the illustration of government spending $100 and taxing back $90 you have fallen for the fallacy of this belief which ignores part of the situation to appear to be savings or surplus for the private sector. It is like going to bank and asking for a loan and then wrongly pretending that you have increased your personal assets because you ignore the fact that you have also go a debt which is that loan. The fallacy is it is as you said yourself a simple model. It is in fact too simple to portray the real situation. The reality is that illustration is so simple it ignores the reality that government spending sometimes involves spending newly created borrowed money it gets from the Federal reserve (the US central bank). It is borrowed money and like all borrowed money there is debt that in future has to be paid back by collecting money from the taxpayers who are in the private sector. Your illustration ignores this debt that the private sector incurs. It is like going to bank and getting a loan and then wrongly pretending that you have increased your personal assets because you ignore the fact that you have also got a debt which is the obligation you have to repay that loan.
This presenter is totally wrong in his understanding of the national debt and its existence and how it must be paid back. Even his example of the water in the buckets is nonsense. Private banks create most (90% or more) of the money in the economy when they lend money they have created themselves to their customers. It is like all official money (e.g. the US dollar) including that created by the Federal reserve bank a financial asset and as such has an equivalent financial obligation created at the same time as it was created. The reality is the debt has all to be paid back because it was created out of borrowing via selling treasury securities (which have finite life and mature) from either the Federal Reserve bank or the market. That treasury debt matures in time and must be paid off and the source of funds to do so are from taxation as it always has been. Anyone like this guy Oli Sharpe who thinks that it does not have to be paid off is a financial fool because the money has been borrowed from investors such as those people who bought the Treasuries initially and expect return because they saw it as an investment.
Hi again Rob, I agree that I should have at least mentioned that most of the money supply by volume is generated by commercial banks. That was a definite oversight in my script. But I guess I often just think of this as a multiplier of the underlying level of money in the system as created by the central banks. And the real confusions are around what the central banks are doing. In particular there are two legal fictions going on that most people seem to ignore, but MMT advocates highlight. The first is that the central bank doesn't lend money to the government. The only way in which this legal fiction is true is if you add "directly" into that sentence, because central banks around the world do buy up huge volumes of their government's debt through the secondary market. If I recall something like 50% of Japan's national debt is now been bought by Japan's central bank. So, yeah, they don't lend directly, but indirectly they effectively do lend money to their respective governments. The second legal fiction is that these two parts of government are separate legal entities. Again, technically this isn't a complete fiction, but in reality governments setup the legal context in which central banks exist. You could say that the governments wholly own and control the central banks, even if they have currently granted them operational independence. So, to create money, one part of the government can effectively lend money to another part of the government. Something that commercial banks cannot do. And, unlike the commercial banks, there is no regulatory limit to how much money can be lent (/created). Sure the debt sits on a spreadsheet somewhere, but it's just not the same as when one legal entity lends money to a genuinely separate legal entity (like an investor or a separate country's central bank). So, yes, when investors and other countries lend money to the US government, they can always be sure that the debt will be paid back. But the situation just isn't the same when the government debt is just owed to another part of government. And while I agree that the bucket metaphor is a very simplified way of looking at the movement of money, but it is a useful way to explain the relationships between government deficits / surpluses and the opposite effect happening on the rest of the economy. But I think "vast simplification" would be more accurate than them being "nonsense" 🙂
Ollie Sharpe - You have further misled people by saying if the government taxed back the government's debt it would put the private sector into the red. No it would not because it would return the situation to an over all balance. You have already stated that the whole economy is in balance so how would taxing decrease the balance. You also say there is never going to be time when our grandchildren are going to pay back all of the debt. That too is utterly false because all of the debt incurred over 30 years ago has been paid back due to the treasury securities whose maximum maturing date is 30 years has all been paid back and that situation will also repeat itself in future. You say so yourself and now just speculate about what you think will happen in the future. Yes the grandchildren will have to pay back that debt because nobody else and that includes government can pay it back. The reality is that the government debt has risen and also fallen at times due to it maturing and less debt being sold. There is no such thing as green dollars and yellow dollars. can I just invent names for new dollars despite the fact that there is no evidence to support it? If so then what about striped dollars that there is no evidence for. If there are yellow and green dollars then describe the difference in the economy and where one sees that difference between green and yellow dollars. You cannot just create in your head different dollar to suit some theory but Kelton does it. Theories being multiplied is the way to a dead end and that is what it has been pointed out as the biggest mistake of intelligence during WW2 where theories being multiplied led to negative outcomes. Paying off one debt with another is Ponzi scheme. That is illegal in the private sector for the very reason that it does not make for improved outcomes for the economy. If it did then it would be legal and promoted. Would you lend money you saved to a company operating a Ponzi scheme if it was made legal where debt was continually expanded without having some limit? Why not if debt can be expanded without any bad consequence ?
@@myleshungerford7784 Ahh ... I think this stylistic shortening is generally allowed when there's limited space ... I hope so as it's useful to have the text large. Also useful to have a question in the title 🙂
@@Go-Meta I can’t send this video to anyone if it has the title “Is USA Broke?” No one will take it seriously with a typo in the title. “USA Broke?” Is better. Also, “unpicking” needs to be corrected to “unpacking”.
@@myleshungerford7784 Great suggestion .... Done! And you're the second person to dislike my choice of "unpicking" (which I thought sounds more critical) as opposed to "unpacking", so I've changed that too. So, thanks for both these suggestions 👍
More false information put across by Oli Sharpe who is not across the subject. One of the most if not the entirely misleading and stupidest beliefs on the whole of internet is that the Treasury's debt is just owed to the central bank. It is Not. It is money owed by the public and which the taxpayer is forced to pay out. The reality is that it is NOT that simple as Oli Sharpe portrays because the Treasury's debt (the securities that they sold to the Central bank) and it all matures in time which requires the private sector being the pubic to pay out what was owing. The treasury securities that the Central bank originally bought from the Treasury over 30 years ago (in exchange for money created by the ecntral bank) as well as those which matured much earlier have maured and been paid out by through taxes collected from the public simply because they have matured.
@Go-Meta Oli even if it's possible to sustain that kind of monetary policy, I don't want it. Why? Because the government is too big & tyrannical. & it allows them to constantly be at war. I don't know why anybody would defend that policy. The government has gone way beyond is constitutional constraints. That's unlawful. Basically criminal. The Federal Reserve is unconstitutional too. What happens if we lose world reserve currency status?
@a A debt-based economy inherently assumes it will alway generate more value tomorrow than it had yesterday. It is THE reason why we hear so much about "a need constant growth" from politicians to CEOs. And that unrealisitc and issaciable need is often criticized by climate activists. If we ever adress the sustainability problem, it will be very hard to do it without DEGROWING the economy, but that happening would cause a major economical colapse. Even if we ignore sustainability, it will be hard enough to keep growing the economy while living through a demographic colapse we just started to witness. We've invented a shorttermist and unsustainable economic model that is bound to burst at some point, and it might just be in the near future. MMT adresses non of that because it is not a seriously considered theory. It's propaganda intended to make us keep ignoring the problem longer.
@buzinaocara It is propaganda, but sustainability is too. The green guys, are just corporate interest in disguise, wanting to get control over natural resources. They've intentionally racked up massive debt globally, because they intend on collapsing it, in order to bring in a digital currency & world government.
The impression that I get is that most economic theories depend on a psychological model of how people behave. It's a fundamental part of economics. For example, classical economics depends on the idea of rational self-interest as the driving force for human choices. And Austrian economics highlights subjective preferences of the individual in particular contexts. So, I suspect that all economic models could be talked about as a mixture of psychology and useful fictions, which are then sometimes dressed up in mathematical equations. But, I am curious which model of economics you had in mind that did NOT depend on psychology and useful fictions?
I’m so happy you made this video. Thank you for making this topic that would normally be out of my reach, accessible and understandable for me. I hope you do well.
Hi, I'm glad the video was useful and that's such lovely feedback for me to hear, thank you!
When Wolff stated mmt is more dangerous than incorrect, I believe he was saying, if the average citizen understands how the economy functions the jig will be up.
😀 The same could probably be said about democracy and our governments. Indeed they go together. We the people need to use our votes to wrest back control of our whole political economy.
Exactly
As skeptical as I remain that debt-fiat currency won't fail and potentially cause some form of civilizationall collapse or other major disruption, it's nice to hear from someone who seems sincere in his beliefs that it can work..
It's taken me a long time to come around to having confidence in fiat currencies, but I think the key insight is that fiat currencies are indeed backed by specific governments and their people. The continual tax and spending of that currency keep a genuine, day to day value for that currency for those citizens and their economy. As long as the governments / countries don't fall, then their currencies will continue to have some value too (there are of course rare exceptions - but even hyperinflation is eventually dealt with by that country starting a new currency - which almost immediate has value because of the way the government and people start using it for real en masse).
I have been following MMT for the past eleven years Thank you for making this video.
Glad you enjoyed it, thanks!
i wonder if the problem between classical economics vs MMT is a lack of a definition for "resources". In classical theory gold was the defined resource. MMT seems to lack a clear definition, probably because it is made of both tangible and non-tangible elements (gold, land, etc. being tangible and labor being non-tangible, as well as intellectual property. good will, etc.). So at the heart of MMT resources is the nation's so-called GDP, a vapor type commodity. This is why it is so easy for the classical believers to find it so simple to discredit MMT.
I'm increasingly thinking that the core problem is that we don't have a good, intuitive way to understand money that is also correct. All attempts to think of it as sort-of-like-a-commodity are wrong. I think there is a sort of Newtonian vs Relativistic physics type of thing going on. For most people on a day to day basis it is reasonable to take the commodity (Newtonian) view of money, but at large, nation level scales, it behaves in weird ways that reveal that it is actually more 'bendy' like relativistic curved space-time. That people want it to be hard like gold, isn't enough to stop it having these more complex properties.
MMT (and economists like Steve Keen) starts to highlight that money isn't a commodity - but I don't think we have the new ways to talk about it yet that people can intuitively grok. So there's lots of push back.
Finally! An analysis of MMT by someone who ACTUALLY understands it! Well done. I’ve read about MMT extensively, including a 400 page anthology of critical reviews. It’s not a unique economic theory. It’s just a description of how (mostly) the US monetary system actually works. The rather radical policy suggestions by some MMT proponents have nothing to do with the theory, per se. Using MMT I can just as easily argue that we need 100 aircraft carriers instead of, or in addition to, a jobs guarantee program, for example. MMT and UBI will become a necessity once AI and robotics displace the majority of our workforce.
Hi, thank you!
And, yes, I agree with this distinction you're making between the MMT description of how money works and the particular policy suggestions that some MMT advocates make. And, I too am not convinced by the idea of a job guarantee, especially in the context of AI's potential impact on the job market. But it's also not clear to me that UBI can be made to work in a sensible way - although I find it a very interesting idea and I like it's simplicity and the agency that it gives to citizens.
Let's put it this way. Billionaires live off increasing debt and have no intention of paying any of it off. That's the Buy, Borrow, Die strategy. So it's hypocritical of the superrich to criticize the government on federal debts and deficits.
Which works in ZIRP. When inflation rises and interest rates rise, these people go bankrupt and countries go insolvent. US is just too big to fail. For now. At some point, the bond market dictates the market. Japan is experiencing this right now.
QE hasn’t caused significant inflation is because USD hasn’t devalued against major currencies, for reasons such as other governments deliberately depreciated their currencies (by eg following the US to QE) so as not to hurt their export competitiveness, and there’s substantial demand for USD denominated assets due to USD’s reserve currency status etc. So US’s inflationary pressure has been shared around the world rather than contained within the US. I am curious to see what will happen when foreigners stop buying US debt. My guess is USD depreciation and high inflation.
7:20 - I would be a lot less skeptical of debt-fiat if it functioned more like plain fiat, such that the number of debt-fiat banknotes the mint were authorized to produce from a treasury bond issued, were equal to that bond's maturity value rather than its face value.
The top criticism of debt-fiat (as it's practiced through the world today) which I've ever heard, is that issuing only as much currency as the face value of the bond, means that the interest is compounding, not linear.
(And as such the economy must grow geometrically or experience a hidden tax in the form of currency devaluation.)
Thank you for the great video. I appreciate the info very much, as it’s presented in a calm manner and with good backup data. I don’t know how I feel about all this. As an American, I’m concerned about the profligate military spending, both from a financial position, as well from humanitarian grounds. I believe that military spending is inherently inflationary as the goods are produced using tax dollars, but cannot be bought by the economic markets at large. FYI, I also believe that words are important, and the political, fiscal, and monetary lingo is jingoistic and not meant to inform, but to confuse. The prefixes like “neo-“ is emblematic. You don’t know what the user stands for, nor what he means.
Again, thank you.
When I see that interest on the national debt is now the third largest government expense (after Medicaid and social security) I find it hard to believe that an ever-growing national debt won't become a problem. At some point the interest is going to become the single largest item in the government budget.
Yeah, I agree it is a worry. But I think MMT would say a couple of things about this:
a) MMT is not arguing for a license to spend, spend, spend. You do need to keep a reasonable level of total debt in relation to government receipts and GDP, but:
b) aiming for balanced budgets or surpluses is a mistake as it will suck money out of the private sector and reduce the growth rate of the economy and a key instrument to tackle high govt debt is to ensure high levels of growth. So, rather the govt should be doing sensible levels of borrowing to invest in ways that will stimulate growth ... but these have to be credible plans.
c) government can and should more actively manage the interest rate that they are spending to service their debt, including allowing the central bank to buy up more govt debt from the market (as Japan has done massively!), as not only can this help shift the market interest rate, but also any interest paid to the central bank comes back to the Treasury as 'profit' (as far as I know) and so effectively takes the interest rate on that debt to zero!
So, yes, the trend line is not great, but austerity style, unilateral cutting of spending is not a sensible way to get out of the situation. It is likely to reduce growth, thereby making the debt harder to service!
But the mistake many people seem to make is to assume that MMT advocates are simply arguing for massive increases in spending. It's much more nuanced and sensible than that! 🙂
I just found this channel - gotta rewatch again to grasp what's being said here. I don't know if your title has a typo (Unpicking in place of Unpacking?) love the video and looking forward to seeing more!
Hi, thanks!
As for 'unpicking' I thought that gives a hint that I'm not just being blindly uncritical of the ideas suggested by MMT. So, I'm hoping this is a video that works both for people who are supportive of MMT and those who are critical of MMT - and most of all, of course, for people who are just learning about MMT. But maybe 'unpacking' would sound better to more people. Hard to know.
And, thanks again for the encouragement!
And I'm well aware of the effects of fractional-reserve banking to increase the currency supply through checkbook money, but that's another whole issue (no pun intended).
I'd like to see some discussion of the impact & scope of profit-taking (eg stock buybacks) on inflation.
It is also worth noting that if you want growth, you have to match that with more money in the economy; otherwise, the stagnation of the US in 1930-33 and the UK in 1929-39, both cases resolved by having money pumped in by a) US FDR New Deal 1933-37 b) UK War Machine = full employment 1939-45 c) the War savings bond to tie up surplus money until after the war, when the industry could re-tool for producing consumer products rather than destructive products of war. This stopped any post-war hyperinflation due to the 250% debt-to-GDP ratio, and in 1948, Attlee and Bevan launched the NHS! So all of the austerity stuff (2010-2024) was and is boll*cks , and all of this period (1944-71/73) was under Bretton Woods (a form of the gold standard)!
Yeah, the empirical evidence linking stagnations / depressions with government surpluses is fascinating.
Excellent presentation
ThanQ
Thank you!
"It's too easy to create a caricature and then dismantle it as a strawman"
Very well said!!
The problem is much deeper, however. It will be difficult to fool a room full of physicists with a base rate fallacy, but a room of 70yo Boomers in a Florida assisted living will laugh you out of the room if you mention something like a billionaire being 1000x richer than a millionaire, not 3x like they intuitively think it is, and the impact of compounding interest resulting from it. They'll just call you a commie. Yet both physicists and seniors hold equal voting power, so who do you think politicians will be trying to impress?
The line where it's too easy to create a caricature passes uncomfortably low.
Concerning the topic of the video, unfortunately, economists suffer from "searching under the streetlight" fallacy, they look at aggregate measures and anecdotal evidence, and sometimes even have a selection bias, focusing on oversimplified and politically impactful shortcuts more than transparency and clarity.
Take, for example, the 2008 financial crisis. The majority of events of the spectacle took place in shadow banking, yet almost no economists even looked in that direction, simply because there is no data collected due to financial industry opaqueness.
Another example is Ireland's inflated GDP, yet another - the Chinese tofu scrap buildings and belt and road, both serving more as capital export vessels rather than construction projects.
The US budgets, currency and banking system, similarly, are not at all what they seem. But understanding them properly requires reading between the lines, building proper financial (not economical) models, networking with financiers. And even then, if such a researcher succeeds in shedding light on some aspect of the economy, the truth will be so inconvenient, unusual and even seemingly grotesque that very few will be interested in reading his paper.
~15 years ago I had a question about money mechanics. I had several textbooks from libraries and websites, put them side by side and they were all saying different things. The mainstream opinion, however, was fractional reserve, which I by then had already figured out to have been wrong. In 2014 I was shocked to see a Central Bank issuing a thin brochure clearly saying "banking does not work like you are being taught in colleges", and it was then that I realized how truly bad the situation in economics was. Just to think that I had been able to figure out by myself years prior, with not too significant of an effort, a fact which the UK central bank had to issue a brochure about! I could imagine a textbook to possibly be wrong, but maaan, a whole central bank of a G7 country issuing a brochure stating out loud that economists do not know how the economy works. It was eye opening.
Thank you very much for your video! I am going to watch it again, to make sure I followed your thought correctly.
And good luck with your channel!
Hi @matveyshishov, thank you for your kind words and comment!
I agree that learning more about economics is quite an eye opener as your realise just how poorly basic phenomenon seem to be understood and indeed how much disagreement there is about these basics.
As you say, and as I hope was clearly indicated in my video, part of the problem is that there is too much political benefit to keeping the the mechanics of economics obscure. Sadly, I don't think that this means that there is secret knowledge of some true, deep understanding, that is deliberately hidden. Rather I think the political and economic incentives probably hinder the ability of the discipline to examine clearly what is happening and certainly hinder the communication of what is learned to a wider audience.
And, of course, on top of that, it should always really be called 'political economy' (as it used to be) because of the complex, dynamic interaction between the two. And this makes it a genuinely hard phenomenon to study because it is constantly changing and evolving as our society changes.
But, it seems to be a crucial topic for our times. So, I'll keep exploring it!
Thank you for your encouragement.
17:35 - It's only too late because no currency-supply deflation (or rather, value increase of the currency unit) is no longer tolerated. The vexation isn't the occurrence of occasional high annual inflation, but the total lack of any years since WWII (other than 1955 and 2009, according to the US BLS's CPI) of any occasional deflation whatsoever, to restrain the compounding effect of a constantly above-zero annual inflation.
Why isn't there a televised and moderated debate between Stephanie Kelton and Carmen Reinhart? Can someone please make that happen? Before it's too late? Did you watch Jared Bernstein? Unbelievable.
Inflation isn't a good measure to see the effects of MMT, but on the values of houses, stocks and other assets, as these are the primary target for all that surplus money, as are the rich people who got those printed money first. When the inflation rises, it is because it is too late, and things got out of control.
Not wishing to sound too pedantic, but I think your comment makes more sense to me if I read it as saying ".... see the effects of quantitative easing, ... " as MMT in general doesn't specify what kind of deficit spending makes most sense to do. Indeed, I agree that much of the extra money probably did end up in assets held by the rich, and it may have been a much better boost to the economy to spend the extra money in another way.
But, having said, my understanding is that the real purpose of quantitative easing is/was to manage the bond markets, to keep them liquid and to make sure there was always a buyer for government debt. So, yes money went "in the top", but I guess it helped fund government spending elsewhere too.
To me the interesting thing to note about inflation is that if MMT was completely wrong, in other words if it was necessary to have balanced budgets or surpluses in order to avoid inflation, then how come inflation has come down to around 2% when deficit spending has continued at pace ever since Covid?!
I'm not sure that the case for a couple of things are sound here. I'm having a difficult time understanding how spending is justified when the case was made that it's backed by labor and productivity. Wouldn't it be harmful to spend more if labor and productivity are not matched? This was always my understanding of how our monetary system works today.
Also, inflation is certainly caused by higher levels of spending, by the simple principle of supply and demand. Historical data backs this up, too. Just as we can look at when the govt paid a substantial amount of debt, we can also see that inflation has largely ensued large govt spending and printing of money. There's quite a lot evidence even pre-dating America. It isn't a new phenomenon
21:25 - privatize or marketize? I recognize that attempts to privatize are often monopolies granted to specific companies, but few people seem to notice it would also be possible to allow competition to provide such services, rather than simply granting the government monopoly to a non-government corporation.
The dollar is a leader currency, other Currencies will always do what it does. For that reason the US will never face the consequences of it's frivolous spending since there will be no competitors to replace the dollar
APPLIED "ENERGY" (LABOUR & RESOURCES) ARE WHAT "WORK" IS ALL ABOUT... SHORTAGE OF EITHER ESSENTIAL "LABOUR" OR "RESOURCES", TRIGGER A POTENTIAL FOR INFLATION, REGARDLESS OF ACCOUNTING THEORY. EFFICIENCY & EFFICACY AFFECT ANY IMBALANCES, IE: BE EFFICACIOUS (APPLY TO THE RIGHT GOAL) & EFFICIENT (APPLY ENERGY & RESOURCES TO BEST EFFECT) THAT IS WHA MATTERS (HOW GOOD GOVERNANCE IS MATTERS, NOT JUST HOW BIG)
Thank you for the review. Have you read the inflation myth and the wonderful world of deflation?
Hi Brett, thank you!
And, no, I haven't read that book, just taken a look and I'll definitely add it to my list. Inflation is quite a complex phenomenon and I'm trying to get my head around it as best as possible, especially as the risk of causing inflation is one of the biggest impediments to UBI (as far as I can tell).
I'm also fascinated by the so called, "Baumol effect" in which some parts of the economy see price decreases (like manufactured goods) while others see long term price rises (like healthcare services). Indeed, it looks like the book you've recommended may delve into this kind of phenomenon, so thanks for the recommendation.
@Go-Meta I wonder how much of baumol effect is related to market share, like on the cheap price side is just to grab the market with say Wal-Mart cheap prices until all competitors go out of business and then prices are raised I wonder if the cheap prices of tech are similar and when all data has been gathered monopoly phase is engaged. Another interesting book I'm reading is called: techno feudalism that might have some influence on that thought. Have a great week!
I'm reading Techno Feudalism right now too 🙂 ... probably do a video about it in a week or so!
Re: Baumol effect: it's much more to do with work that can be made more productive (less people for the same or more output), versus work that can't and then the way that salaries from the more productive parts of the economy can raise the salaries across the whole economy. I'm hoping to do a video about this too ... but that's going to take a while longer to get ready!
Thanks for the comments.
@Go-Meta well I'm excited for those videos. gods speed!
12:42 - Wow, I'd not seen this Kennedy quote before...he seems to be missing the concept of market signals. That's the ill which can happen even in the absence of currency devaluation.
False facts lead to wrong conclusions. Oli Sharpe has the wrong facts about the Japanese economy.
The false idea that the central bank of Japan 's debt has not had a negative effect on Japan's economy is just totally wrong.
The correct facts are :-
The writing is on the wall with it's negative consequences which have been showing and growing for the last 30 years. The hard evidence of the situation is Japan's currency which despite trending upwards for over 25 years prior to the 1990's has trended downward over those past 30 or more years .
It was 82 yen to the US dollar in 1990 and now is 161 yen to the dollar.
So any talk of the massive debt not having an effect on the Japanese economy is just FALSE.
I did find the book very interesting.
In general, I think MMT is correct descriptively. The problem is MMT proponents often have terrible prescriptions. Calling for spending that would way out pace the subsequent real growth in overall production (thus causing inflation). The idea that the super spending will cause the production to match the increase debt and stave off inflation is silly talk and never happens in the real world.
Interestingly the debt hawk's calls for limited spending is often the right call but not for a reason they understand. It really does all come back to inflation.
You or I create money every time we take out a private loan, that's how most currency is actually created at the moment and that is a admitted fact by all accounts, although I would welcome any criticism of this statement that can prove otherwise 2:55
I agree with this statement (although I'd note a very minor quibble with the suggestion that it is us rather than the commercial lenders who are creating the money - even if they are creating it for us), but I'd also refer you (and others reading!) to the answer I gave to your other comment. Commercial lending may create the largest volume of money by scale, but not by significance.
Note, for example, it is not this commercial lending of money that makes people worry about inflationary effects. They only worry about government borrowing causing inflation and, in some sense, this shows that they understand that government "borrowing" is often much closer in reality to government printing of money - as MMT advocates say 🙂
@@Go-Meta You say " Commercial lending may create the largest volume of money by scale, but not by significance..
Totally wrong again because over 90% of money in the economy is created by private banks. That is more than just significant and the major amount of spending which creates most of the tax that government collects and government then spends. Mosler himself says 'the purpose of taxes is to provision government.' - he is the originator of MMT.
How is that money collected from the private sector for government to spend "not significant" ?
You need to explain or admit you are wrong and have misled people?
Hi Rob,
I meant "not significant" with respect to people's narratives around inflation as most commentators I have seen focus their thinking around the actions of the central bank which has huge influence over the total envelope of money that the commercial banks can 'create' through lending. As far as I know, the central bank does this through three main levers:
*) The total monetary base
*) The reserve requirements
*) The central bank interest rates
So, yes, commercial banks lend out a 'significant' amount of money, but I get the impression that most commentators think of commercial banks as being a multiplier effect, with the central bank's choices (+ Treasury) as being the main driver of the "printing money causes inflation" narrative.
I guess every short comment or description of these really complex phenomenon is going to be slightly wrong or not perfectly phrased 🙂
Cheers,
Oli
6:48 - Yes, I imagine centrally planned repayment can disrupt an economy (deflating of the legal-tender currency supply) as can the reverse...what's the point you're trying to make here?
Moreover, all but one of the examples included in the chart are before 1913, and thus before the fourth bank of the United States (the Federal Reserve System), so were there actually any debt-fiat currency units in circulation? I'm aware there were periods of time where there would have been, including under, as it were, the zeroth bank of the United States (issued the Continental Congress itself), but do you mention any of that history?
In the 1867 example I imagine there still would have been Lincoln's green-inked (and non-debt) fiat currency in circulation, but what proportion of the currency (and/or money) supply was debt-fiat vs. fiat vs. silver certificates, etc., at that time?
I think that your description of demand/supply for money (when you display the graph) is incorrect. You say as if money was demand for money, and supply were goods and services, whereas it's the opposite. Demand for money is necessity to conduct transactions (especially paying taxes, as the IRS only accepts dollars), and supply is monetary mass.
Great content otherwise, glad to have found this video.
Hi @GolerGkA, I obviously didn't explain well what that graph was meant to depict, which was that the extra money being pumped into the economy would cause extra demand for goods and services.
Just re-watching that section now, I can see how my sentence "the extra demand _from_ the extra money" could sound like "the extra demand _for_ the extra money" ... hmm... shame I can't redub the intonation of that sentence to be clearer!
But, yeah, as you say, if there was extra demand for money (e.g. to pay taxes), that would push the 'price' of money up, which, in effect would push the price of goods relative to a fixed amount of money down! The opposite of inflation.
But, I think I got it the right way around in my video, just not stated clearly enough 🙁
Thanks for the comment and I hope I've understood your concern correctly!
The reality of what the central bank of Japan has done is that it has created far too much debt to fund government spending and this has resulted in inflationary pressure that has over the past 30 years driven the purchasing power of their currency down from a previously upward path in purchasing power to a downward path.
Its purchasing power had been rising from a low of 350 yen to the dollar in the early 1970's to a value of 86 yen to the dollar in the early 1990's and now has reversed its trend and is at 157 yen to the dollar and on the way down..
Hi Rob,
I totally agree that inflation is a real problem to take seriously, but the last few decades of the Japanese economy is not a great example for your case.
What you have pointed out is the change in value of the Yen vs Dollar over a time period, and I get why you are pointing to that as a "loss in value" of the Yen, but that is not how inflation is usually measured and often fluctuations in relative currency values often have to do with a much broader set of influences than money supply in one country.
For Japanese people, living and working and spending in Yen, they haven't been experiencing inflation of prices with respect to their consumer price index for many decades. Quite the reverse, their inflation figures have been near zero or below! (look at the % change over the max timeframe in data linked below):
tradingeconomics.com/japan/consumer-price-index-cpi
And to try to boost economic activity and spending they have also kept their interest rate around 0% for multiple decades too (again look at the max timeline for the data below):
tradingeconomics.com/japan/interest-rate
And then, if Yen has a 0% interest rate, but the dollar or other currencies have a higher interest rate then, sure financial markets will move money out of Yen and into other currencies in order to get the higher returns - which pushes down the value of the Yen as you were referring to. And, in turn, this actually will make Japanese goods cheaper to sell across the world, helping their exports and therefore their balance of trade.
Add in the fact that, unlike the dollar, the Japanese Yen is not the world's reserve currency and I actually think the Japanese economy is the best exemplar of why MMT is a good overall way to understand fiat currencies.
But, don't get me wrong, I do agree that there is a level of creation of money that would be "too much" and would cause damaging inflation. But that doesn't mean that perfectly balanced budgets are necessary.
@@Go-Meta You say "For Japanese people, living and working and spending in Yen, they haven't been experiencing inflation of prices with respect to their consumer price index for many decades." That may be so to an extent but the greater view of the value of the currency shows there is inflation that has diminished the purchasing power of their currency. The discussion is about the purchasing power of the currency and not the internal effects of that on the population because those internal effects on their people are also dependent on the fact that their own debts of government are internal and not a massive external debt like in other countries including the U.S. The first thing that differ in Japan from most other countries is their huge amount of foreign assets that are invested overseas and this contrasts vastly with the U.S.
I don't know how you can rationally use the Japanese situation now to justify the MMT. Japan has had three decades of low growth which compares very badly with their previously well reported growth in the purchasing power of their money and overseas which has now reversed and as I have pointed out and which you seem to have ignored.
Additionally the massive buy up by Japan of overseas assets has declined in the past 30 years.
Also the population has reduced by 15 million in the last 30 years which means greater proportional investment benefits for those currently existing. This too contrast greatly with other countries and in its absence would have negatively figured on the ability of the population to spend due to increased demand on consumer goods.
MMT does not address the historical facts which I have pointed out are contrary to the MMT beliefs.
MMT does not also address the fact that central banks who actually create money themselves contradict the money creation theory of MMT which says the government has to spend first before taxes can be collected.
MMT is a macro economic theory about how money works for countries that issue fiat currency.
Detractors of MMT say that it is wrong because you have to (a) balance your budgets and (b) if you don't balance your budgets but instead keep printing money then you will cause high inflation *within* your economy because you are debasing the value of your currency.
The last decades of Japanese economic history says, "no, you are wrong" to the detractors of MMT. They haven't been balancing their budgets, they have been printing large amounts of money, but they haven't experienced high inflation within their economy.
In many ways it really is that simple.
@@Go-MetaJapan is a good example of Mosler's theory that the interest rate equals the inflation rate.
Simplicity really is key to understanding MMT. Pretty obvious in retrospect that you cannot tax a population if you don't first issue them the $ to pay that tax with. It seems mainstream economic theorists always want to start their theories somewhere in the middle and pretend their foundations are solid,- then you can create your own invisible hand(s) and attribute it to Adam Smith or buy your own nobel prize category. It's really pretty entertaining to watch the same groups that accepts these and other clear myths (like using GDP as a measure for economic strength) apply their fuzzy logic to mmt so vociferously.
I think you forgot to factor in that the US$ is still the world's Reserve Currency, this keeps Inflation lower in the US than it would be otherwise. The currencies of other countries, however, do NOT have this privilege.
I completely agree that this is a big benefit for the USA (at the moment! ... and probably for quite a while to come). But, Japan has been living the deficit dream for quite a long time and is used by Kelton as a good example of a country demonstrating the power of its central bank to influence interest rates and mop up its government debt. So, it's not quite correct that only the USA can benefit from MMT style thinking. But the recent example of the UK's knock back from the markets was a (semi) counter example to MMT thinking - but even there, it's not as if the UK has moved to be operating with a fully balanced budget.
But I agree that the USA is in a unique position thanks to the dollar hegemony.
Until China and Japan request payment in their own currency for their goods
MMT is nothing more than an accounting trick. The book, and this video, only hints at the reality that the only way to prevent inflation is to pull the money back out of the system from the top. You can only do that by taxing the wealthy, which they can only do so much before cut backs in jobs, innovation, capital investment in new technologies, capital flight and finally increased prices on consumer products, because businesses will always push those taxes onto customers. Worse though, the book never explains that 40% of TBills go to foreign governments and the other 60% go to the wealthy. And artificially low fed interest rates from QE make your savings accounts lose value while the cost of homes and products continue to increase, asset inflation. Money always, always trickles UP, and so deficit spending leads directly to wealth inequality, which is why Bernie Sanders (Kelton was his economic advisor) has to call for wealth taxes and seizures for anyone who tries to leave the US system. Motel 6 is motel 6 because it was $6 a night. Now it’s $80 but the room isn’t 13 times bigger or 13 times nicer, your $ is worth 13 times less.
MMT is just an ideological economic bias, it’s used to justify Big government centralizing and managing society. They pretend it’s not inflationary, they pretend they’ll be able to control it.
No inflation is caused when the money supply exceeds production. Stealing successful people's wealth doesn't help inflation as if you steal the producers money they will produce less. What we need is for the government to cut spending by 20% a year until debt is gone and nobody is paying more than 10% in total taxes. Government employees wages should be capped at 10% below median wage
@@Mikey-b1s at what point did I say that inflation wasn’t a measure the money supply outpacing production? That was never said, so your retort is wrong off the bat. I also didn’t say I agree with taxing the rich. What I said is the only way to truly keep inflation down is to remove money from circulation after it’s been printed to do the thing they printed it to do. And since the poor don’t have that excess money supply, you have to take it from the people who do have it to remove it from circulation. Which you can’t do without wrecking the economy.
omg that music is so annoying
Demon Thatcher still stomping around on the best dreams of us all
Have Kelton tell you what happened in Argentina.
The real country that needs explanation is Japan. Decades of printing money while having very low levels of inflation with a constant threat of deflation and very low interest rates. All of this while NOT being the worlds reserve currency.
MMT advocates don't ignore the real risks of hyperinflation and persistent high inflation, as suffered by Argentina, but they just note that perfectly balanced budgets are not essential for maintaining a regime of low inflation. Indeed, MMT detractors have to explain why inflation in the USA has come down despite continued 'printing' of money!
The point is that inflation is more of a complex beast than simply being a reflection of printing money.
@@Go-Meta You are totally wrong in saying there has been low inflation for Japan. There has been high inflation because the price of their government borrowing over the past 30 years or more has resulted in their currency falling in value by at least 60% compared with other currencies.
Your wrong understanding results from looking purely at their internal CPI prices alone instead of their external and internal situation. Price of their currency has fallen from 82 yen per U.S. dollar in the early 1990's to 160 yen per U.S. dollar now.
The problem is the banks create money too. Double whammy
@20:04 - the argument addressing the deficit myth is structurally incorrect.
Your argument is that the government would have to run a balanced budget or run surpluses to get inflation back under control.
What you are actually arguing is that you would need to have a balanced budget or run surpluses to get 'price points' back to where they were.
Inflation once entered into an economy can only reach an equilibrium when all other 'price points' match. That obviously includes labour wages, insurance, individual retirement accounts, etc. That process can take years to filter through an economy, and sometimes decades.
Run some models of what your retirement looks like with a 3% inflation rate compared to a 2% rate.
People don't take inflation seriously. It has devastating effects on previous efforts to budget for life.
If you want to run a deficit as a government, then take the prudent approach and bond the deficit to assets or a derivative of assets that can increase or at the minimum sustain assets values.
I'm not sure of your background, but I don't see the discipline of economics clearly in your review of Kelton's work.
No, I really was talking about getting inflation back "under control" as in back to 'normal' levels. And, sure, there is an interesting question about what is a 'normal' level of inflation, but given that many central banks have a 2% target, my argument is that inflation (certainly in the UK, and almost in the USA) is now back to these more "normal" levels of inflation that are near or within the target zone of central banks.
And this reduction in inflation has happened despite continued, significant deficit spending in the UK and USA. At a most basic level this undermines the suggestion that deficit spending inevitably leads to high levels of inflation.
Now, I totally would admit that I have a generous view of MMT, but at a basic level I think proponents of MMT are trying to point out that YES high inflation is damaging for an economy and should be avoided, but, NO inflation is not simply a consequence of deficits. Inflation is way more complex. So, there are many situations when governments can continue to run a deficit without being at risk of causing high levels of inflation.
Regarding pensions, many pensions are setup with some level of inflation protection. So, yeah, the difference from 2% to 3% might be significant for those whose pension protection is capped at 2% inflation. But for many well managed pensions they ought to be able to cope with slightly higher levels of inflation and no-one should be keeping their pension (or large savings) in cash under the bed! That really would be devalued by inflation over the long term.
But just to be clear, I totally agree that high inflation is a real problem and, as far as I know, MMT advocates never argue that inflation isn't something to worry about. It's just more complex than blaming it simply on government deficits.
And, yeah, it is true that my academic background isn't in economics, my PhD is in AI. But I've read and discussed loads of economics, and it seems fairly clear that most economics theories are interesting analysis of a subset of what happens in the real economy!
For example, it seems fairly widely agreed that real economies never reach the point of general equilibrium across all sectors. Real economies are way too dynamic for that, with too many information asymmetries; and irrational actors; and external disturbances of one kind or another; and on and on.
As for demonstrating the economic backing for what I'm saying, I'm thinking of writing accompanying essays for each video that can have more details for those interested. The reality is that a 20min long video is too long for most people already! So, I probably ought to keep the videos simpler and have more explanatory context elsewhere.
Thanks for the comment, I hope my response covered some of your concerns.
1:30 Margaret Thatcher didn't say "first". That's your misinterpretation.
Hi @mulllhausen, well the (TAB)S mnemonic, with tax and borrow coming 'first', came from Kelton's book. I (nor Kelton) wasn't suggesting that Thatcher had literally said this happens 'first', but she implied it by suggesting that only we the people 'make' money (through our hard word) and then the government takes (or borrows) it from us. She is suggesting that the government is just a user of _our_ money. This is politically very compelling, but it is technically not correct. We are currency users, but the government (of fiat currencies) is the currency issuer because only the government can create brand new money. And then the government can spend that money, money that it has neither taxed nor borrowed from anyone.
So, Thatcher was misrepresenting how government finances actually work. It may seem like a technicality, but sometimes these subtle details matter.
@@Go-MetaI don't think Thatcher implied that at all. Pretty sure she was well aware that the government takes out loans first then only partially pays them back from the labour of the general population later. Infact I don't think MMT even disagrees with this.
Do you want to know what I think I happening here? I think yourself and Kelton are using Thatcher as a common enemy to attempt to garner supporters.
Olie Sharpe -In regard to the illustration of government spending $100 and taxing back $90 you have fallen for the fallacy of this belief which ignores part of the situation to appear to be savings or surplus for the private sector. It is like going to bank and asking for a loan and then wrongly pretending that you have increased your personal assets because you ignore the fact that you have also go a debt which is that loan.
The fallacy is it is as you said yourself a simple model. It is in fact too simple to portray the real situation.
The reality is that illustration is so simple it ignores the reality that government spending sometimes involves spending newly created borrowed money it gets from the Federal reserve (the US central bank). It is borrowed money and like all borrowed money there is debt that in future has to be paid back by collecting money from the taxpayers who are in the private sector. Your illustration ignores this debt that the private sector incurs.
It is like going to bank and getting a loan and then wrongly pretending that you have increased your personal assets because you ignore the fact that you have also got a debt which is the obligation you have to repay that loan.
This presenter is totally wrong in his understanding of the national debt and its existence and how it must be paid back.
Even his example of the water in the buckets is nonsense. Private banks create most (90% or more) of the money in the economy when they lend money they have created themselves to their customers. It is like all official money (e.g. the US dollar) including that created by the Federal reserve bank a financial asset and as such has an equivalent financial obligation created at the same time as it was created.
The reality is the debt has all to be paid back because it was created out of borrowing via selling treasury securities (which have finite life and mature) from either the Federal Reserve bank or the market. That treasury debt matures in time and must be paid off and the source of funds to do so are from taxation as it always has been.
Anyone like this guy Oli Sharpe who thinks that it does not have to be paid off is a financial fool because the money has been borrowed from investors such as those people who bought the Treasuries initially and expect return because they saw it as an investment.
Hi again Rob,
I agree that I should have at least mentioned that most of the money supply by volume is generated by commercial banks. That was a definite oversight in my script. But I guess I often just think of this as a multiplier of the underlying level of money in the system as created by the central banks. And the real confusions are around what the central banks are doing.
In particular there are two legal fictions going on that most people seem to ignore, but MMT advocates highlight.
The first is that the central bank doesn't lend money to the government. The only way in which this legal fiction is true is if you add "directly" into that sentence, because central banks around the world do buy up huge volumes of their government's debt through the secondary market. If I recall something like 50% of Japan's national debt is now been bought by Japan's central bank. So, yeah, they don't lend directly, but indirectly they effectively do lend money to their respective governments.
The second legal fiction is that these two parts of government are separate legal entities. Again, technically this isn't a complete fiction, but in reality governments setup the legal context in which central banks exist. You could say that the governments wholly own and control the central banks, even if they have currently granted them operational independence.
So, to create money, one part of the government can effectively lend money to another part of the government. Something that commercial banks cannot do. And, unlike the commercial banks, there is no regulatory limit to how much money can be lent (/created). Sure the debt sits on a spreadsheet somewhere, but it's just not the same as when one legal entity lends money to a genuinely separate legal entity (like an investor or a separate country's central bank).
So, yes, when investors and other countries lend money to the US government, they can always be sure that the debt will be paid back. But the situation just isn't the same when the government debt is just owed to another part of government.
And while I agree that the bucket metaphor is a very simplified way of looking at the movement of money, but it is a useful way to explain the relationships between government deficits / surpluses and the opposite effect happening on the rest of the economy. But I think "vast simplification" would be more accurate than them being "nonsense" 🙂
Ollie Sharpe - You have further misled people by saying if the government taxed back the government's debt it would put the private sector into the red. No it would not because it would return the situation to an over all balance. You have already stated that the whole economy is in balance so how would taxing decrease the balance.
You also say there is never going to be time when our grandchildren are going to pay back all of the debt. That too is utterly false because all of the debt incurred over 30 years ago has been paid back due to the treasury securities whose maximum maturing date is 30 years has all been paid back and that situation will also repeat itself in future. You say so yourself and now just speculate about what you think will happen in the future.
Yes the grandchildren will have to pay back that debt because nobody else and that includes government can pay it back.
The reality is that the government debt has risen and also fallen at times due to it maturing and less debt being sold.
There is no such thing as green dollars and yellow dollars.
can I just invent names for new dollars despite the fact that there is no evidence to support it? If so then what about striped dollars that there is no evidence for.
If there are yellow and green dollars then describe the difference in the economy and where one sees that difference between green and yellow dollars. You cannot just create in your head different dollar to suit some theory but Kelton does it.
Theories being multiplied is the way to a dead end and that is what it has been pointed out as the biggest mistake of intelligence during WW2 where theories being multiplied led to negative outcomes.
Paying off one debt with another is Ponzi scheme. That is illegal in the private sector for the very reason that it does not make for improved outcomes for the economy. If it did then it would be legal and promoted.
Would you lend money you saved to a company operating a Ponzi scheme if it was made legal where debt was continually expanded without having some limit?
Why not if debt can be expanded without any bad consequence ?
Woosh...
Two typos in the title.
You had me worried 😬 ... I guess you think it should be written as "USA is broke!" ... or something similar 😀
@@Go-Meta “The USA”
@@myleshungerford7784 Ahh ... I think this stylistic shortening is generally allowed when there's limited space ... I hope so as it's useful to have the text large. Also useful to have a question in the title 🙂
@@Go-Meta I can’t send this video to anyone if it has the title “Is USA Broke?” No one will take it seriously with a typo in the title. “USA Broke?” Is better. Also, “unpicking” needs to be corrected to “unpacking”.
@@myleshungerford7784 Great suggestion .... Done!
And you're the second person to dislike my choice of "unpicking" (which I thought sounds more critical) as opposed to "unpacking", so I've changed that too.
So, thanks for both these suggestions 👍
More false information put across by Oli Sharpe who is not across the subject.
One of the most if not the entirely misleading and stupidest beliefs on the whole of internet is that the Treasury's debt is just owed to the central bank. It is Not. It is money owed by the public and
which the taxpayer is forced to pay out.
The reality is that it is NOT that simple as Oli Sharpe portrays because the Treasury's debt (the securities that they sold to the Central bank) and it all matures in time which requires the private sector being the pubic to pay out what was owing.
The treasury securities that the Central bank originally bought from the Treasury over 30 years ago (in exchange for money created by the ecntral bank) as well as those which matured much earlier have maured and been paid out by through taxes collected from the public simply because they have matured.
Modern Monetary Theory invoked: Wishful Thinking incoming.
I'm very curious which bits of the video you think are incorrect. I've tried to take a balanced view of MMT.
@Go-Meta Oli even if it's possible to sustain that kind of monetary policy, I don't want it. Why? Because the government is too big & tyrannical. & it allows them to constantly be at war. I don't know why anybody would defend that policy. The government has gone way beyond is constitutional constraints. That's unlawful. Basically criminal. The Federal Reserve is unconstitutional too. What happens if we lose world reserve currency status?
@a A debt-based economy inherently assumes it will alway generate more value tomorrow than it had yesterday. It is THE reason why we hear so much about "a need constant growth" from politicians to CEOs. And that unrealisitc and issaciable need is often criticized by climate activists.
If we ever adress the sustainability problem, it will be very hard to do it without DEGROWING the economy, but that happening would cause a major economical colapse.
Even if we ignore sustainability, it will be hard enough to keep growing the economy while living through a demographic colapse we just started to witness.
We've invented a shorttermist and unsustainable economic model that is bound to burst at some point, and it might just be in the near future. MMT adresses non of that because it is not a seriously considered theory. It's propaganda intended to make us keep ignoring the problem longer.
@buzinaocara It is propaganda, but sustainability is too. The green guys, are just corporate interest in disguise, wanting to get control over natural resources. They've intentionally racked up massive debt globally, because they intend on collapsing it, in order to bring in a digital currency & world government.
Sorry you are comming up with psycology and usefull fictions as economic arguments
The impression that I get is that most economic theories depend on a psychological model of how people behave. It's a fundamental part of economics. For example, classical economics depends on the idea of rational self-interest as the driving force for human choices. And Austrian economics highlights subjective preferences of the individual in particular contexts.
So, I suspect that all economic models could be talked about as a mixture of psychology and useful fictions, which are then sometimes dressed up in mathematical equations.
But, I am curious which model of economics you had in mind that did NOT depend on psychology and useful fictions?