Was MMT Right About Inflation? | Stephanie Kelton (The Deficit Myth)

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Timestamps:
0:00 - introduction
1:24 - is MMT still relevant?
4:05 - Biden stimulus package
6:42 - the Covid inflation spike
19:18 - Biden's unpopular economy
27:07 - government is no household
29:10 - Northern Europe's Deficit Obsession
31:52 - MMT on Inflation post Covid
36:17 - inflation targeting government
38:57 - role of the central bank
42:10 - monetary policy induced disinflation?
46:16 - higher rates more inflation?
57:53 - government cb cooperation
1:00:14 - The UK experience
1:04:00 - MMT outside the USA
1:07:20 - wrapping up

Guest:
Host: Dr. Joeri Schasfoort @Money & Macro ​
Professor Stephanie Kelton

[IKTGWIW]

It would be great to have Stephanie Kelton debate an economist who is against MMT.

[davidl.e]

Stephanie says a lot of interesting things. But there are also many bold statements she makes that seems to be logically weak that goes unchallenged. Among some of the things I spot are:

1. British pound lost value because they are bullied by private markets. (how?)
2. Impossible trinity is not a thing. You just need enough political will. (howw?)
3. Inflation spike is mostly from a supply shock. Stimulus only contributed a very negligible role. (there are many sources that could challenge this)
4. Inflation spike can be contributed to some price gouging (how? also, the cost of "price gouging" is loss of market share so it can only be realistically done by companies with little competition).
4. There is no way inflation came down because of interest rate hikes. The lagged effect of interests against inflation is a story people tell. (many quant models would disagree, and that's how we found the lagged effect of 6-18 months historically).
5. Spending by the private sector is not sensitive to interest rates. (weak argument. consumers could use this opportunity to start saving more)

Not saying she is wrong and would be even more interesting if she got all of those right, but I would be very interested with a follow up to these strong but unchallenged arguments.

[elliottmcintyre]

Economics tries to Analyze and model economies. MMT is not really a theory it explains how money is created by Governments with a sovereign currency. This includes Government spending more than it taxes and private banks lending money or creating money out of thin air (took me a while to get that concept straight in my head). Therefore what Stephanie is trying to explain is that we as a collective can have a world we can envision depending on our collective resources and competency, that what I think she means by capacity. What we have instead is corrupt politicians who control the money tree and launder money for their mates. It comes down to how we want to live, what is important, how we organise, it never comes down to how we pay for it. How we pay for it is how the system controls the masses, we need to become enlightened.

[suddentwist]

The deficit inflates the prices of assets. The fact that it is not calculated in the CPI obscures the effects of public spending. You may call it inflation or currency debasement but it does not change the fact.

[macheteishrecords]

What’s scary is knowing that she’s involved with writing monetary policy.

[ACMFORALL]

Love these interviews! Your guests always have great insights into the economic issues of the day.

[_yossarian_]

This is my issue. I read her book when it came out, and I agree with the basic premise, that deficit spending is acceptable, and even desirable, unless you see troubling inflation emerge. I read that and agreed completely, if you can spend money and induce productivity then you have more money chasing more goods and you should achieve growth this way. But what I see is modern monetary theorists unwilling to admit when they have printed too much, which wouldn't even be a violation of their theory. Which is why I am concerned, it seems the MMT people are using their theory to support their desire to deficit spend without limit. Here's the kicker for me, at the 16:00 mark he asks, 'would you be comfortable saying that fiscal policy played a role (in causing inflation), like 1/5th or something', and she says, 'I have not taken the effort to try to sit down personally go through and try to identify how much of the inflationary pressure... I trust people with large staffs'. She seems to be unconcerned in even examining how much the fiscal stimulus caused inflation even though she helped write the bill and wrote the book about the subject. It seems she is in violation of the strategy laid out in her own book.

[Juanillo-.]

great interview. I’ve been waiting for an explanation like this for a while

[metaflight]

World historical tragedy that one of the worst communicator-presidents ended up being the first to deliver on peace-time MMT when the president he was VP to was one of the greatest communicator-presidents in U.S. history & he kept within the old way of doing things.

[TheRepublicOfUngeria]

The difference between Germans and Americans is: Germany is part of The EU Monetary Confederacy, While America is it's own Monetary Federation. The Equivalent to Germany in monetary sovereignty are US States, who do have to balance their budgets.

[banihas]

Been waiting for this one! Thanks for putting this content together.

[GreenLarsen]

To bad that you never had a chance to talk about the way we calculate inflation and what we include and more importantly what we don't. That said, good talk

[ryanbuysse]

This discussion is ignoring the Federal Reserves actions over the last few years that gobbled up private debt, the amount of private debt reversed contributed to Inflation

[lesand]

This is so exciting! I haven't listened to the entire talk yet, but the start is already great!

[mikebaker]

26:40 Can we get the source of this study that she is referencing?

[pebblepod]

I am SO THRILLED you are interviewing Stephanie Kelton!

[RitaFredsham]

*No man is too rich til you leave the earth you leave with nothing*

[clarestucki]

Neither of these people seems able to understand that in relation to "inflation" (defined as rising prices), what counts is NOT the magnitude of the deficit, but rather how the deficit is financed.

If we finance the deficit by taxing or by borrowing from individuals or foreigners, deficits have pretty much no effect on rising prices.

If however we finance the deficits by raising the ratio of the amount of money in circulation to GDP (monetary inflation), that has massive influence on rising prices, simply by the Law of Supply and Demand!

[kurtoverley]

Kelton is a court apologist for money printing. MMT is just a new name for the ancient practice of seigniorage which has perfect track of failure.

[subcitizen]

This was an amazing interview. Steph is apparently capable of running circles around people, it's probably one of the best macro talks specific to inflation and MMT I've heard, and you did a great job interviewing with good questions. Thank you so much! I will circle back to this one in the future!