MMT Is Misunderstood | Warren Mosler

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Timestamps:
0:00 - introduction
0:59 - sponsor
2:01 - Why MMT
5:22 - Tax and Money
16:09 - MMT in Practice
26:01 - Zero is Natural Interest Rate
28:38 - Hyperinflation
31:51 - Unemployment is a Choice
35:34 - MMT in a Nutshell
39:02 - Quantitative Easing
44:50 - MMT and Turkey
1:01:17 - MMT or Myth Game
1:18:33 - Fixed Exchange Rates
1:30:30 - Norway
1:32:02 - Volcker
1:36:47 - Trade Deficits
1:42:13 - Conclusion

MAIN CHANNEL:

Guest: Warren Mosler
Host: Dr. Joeri Schasfoort @Money & Macro ​

[kyanjenkins]

Props to the interviewer here. It is rare that the interviewer actually inputs value further to just platforming the subject, and your knowledge really took this interview to the next level

[myleshungerford]

One further comment, he was absolutely right that the reason the ruble is up is because they can’t import anything. One of the most misunderstood aspect of Western sanctions is that the purpose wasn’t supposed to stop Russian exports. They were meant to, and did, stop Russian imports. This is why you’re seeing Russia scrambling to import things like ammunition from North Korea. Because any raw, intermediate, or final components are sanctioned. This is ultimately why Russia cut off natural gas exports to Europe, because they realized that all the money that they were getting from selling natural gas couldn’t actually be used to buy anything, so why sell it?

[Gotama]

Hey Joeri, it would be great if you would publish your money and macro talks as a podcast. Because I don't have YouTube Premium and I would like to do something else in these 1, 5 hours with my phone.

Also, I really like your show. Keep it up.

[afgor]

the biggest issue with MMT is it's understanding of the history of money is just factually incorrect

money did not arise with the state, nor did single currency zones arise with taxation.

[myleshungerford]

I absolutely loved this. I wish you could have pressed him more for better explanations on certain things, but obviously that’s not possible for either you or him absent significant preparation with data. I would love it if you did a series of follow up videos on some of these topics, getting more in depth with some of his claims.

[Achrononmaster]

@24:00 "No unemployment" (in buckeroos for 25 years of operation). But he took a short-cut. The imposition of the liability for students getting their grades creates unemployment for students in buckeroos. But the UMKC Dept. then eliminates all the unemployment they just generated when they pay buckeroos to students who do the hour of community service. They never refuse a student the community service if they want their grades. *_That's the lesson!_* You do not create unemployment (ethically) unless you are prepared to then immediately eliminate it, otherwise you're damaging people like a sociopath, with no need or purpose.

[ChannelMath]

these college community service "buckaroos" probably just result in rich kids paying poor kids to work more outside of classes

[Mr.Nichan]

The Buckaroo example has similarities with how school works in general: Students normally have to turn assignments in to get individual grades, and they need a certain sum of grades to pass. (It's usually expressed as an average, but the total number of assignments divided out doesn't change much, even if you don't do those assignments, so it's really more like a sum.) The individual assignments are usually very specific, but I had a (0 credit hour but mandatory) "recital attendance" class as a music major, where, in addition to having to attend the regular student recitals of music majors we had at the school, we also had to go out and attend a certain number of other performances each semester. Now, we didn't get any "buckaroos" to turn in in exchange for proving we went to a performance — they mostly just wanted us to collect the programs from the concerts we went to and turn them in at the end of the year — but getting some tokens like that alone wouldn't matter much. The main differences from the Buckaroos is that I don't think we had a regular system for saving programs from one semester to the next, and, though I'm sure it was possible, it would have been considered cheating to trade programs for money or anything else (just as with other school assignments), so no larger economy than the student-teacher relationship was supposed to, or very much allowed to, develop.

[williammcfarlane]

One of the things that comes up in this conversation that we're really bad at in our current media platforms is nuance!! Contacts always matters when talking about anything in detail and our tendency to just try to make things into a this or that is very destructive to thoughtful communication

[hourglassflipper]

I'm only halfway through the video right now, but I have to confess I don't understand where exactly MMT predicts fundamentally different outcomes from the mainstream. His examples were not very clear to me. I'll have to read that white paper and come back

[danhass]

I'm a fan of Mosler (and Kelton), and agree with a lot of their observations regarding the way macro government budgets and spending work. However, they have a fundamental flaw in their models. Governments are not the monopolists of currency. Currency/money is debt. And most debt in the modern economies are created by private entities. Fractional deposit banking in the U.S. now accounts for more money creation that any other mechanism. The money created by the federal U.S. government is probably the 3rd most prolific money creator (through deficit spending).

[sanc]

I enjoyed hearing his perspective. I am sorry you had to go through his inability to let you speak. I do appreciate your patience and you interviewed him very professionally. Please keep up the good work. I liked how people explained the theory well in the comments, like what Platypus Paws wrote below, it is from him (not me):

"Here is my understanding, not as an expert, but as someone who is pretty well informed from original sources (rather than most ppl talming about it, who don't seem to bother With that):

The main difference is that maimstream economic ideology & paradigm assumes the Currency Issuer is like a houehold that must get money from somewhere before it spends, assumes any new money is always inflationary (by strict ideology), but it also tends to ignore private bank created money ( called "credit creation process") being inflationary to the same degree.

The MMT perspective is neither a "deficit hawk" or a "deficit dove", but a "Deficit Owl" - seeing what is a self imposed restriction, rather than reality based restrictions.

So MMT Lens is to see that money is a system we created, rather than a master we must serve (that imo always seems to mean serving financial system elites).

So what actaully matters for a sane Currency Issuer is not "where will we get our own currency, we must borrow it from ppl we gave it to".
Instead it is:
(1) The amount of money supply in economy - is it too small or too big?
Currency is put in & leaked out (e.g. tax, imports)
(2) What real resources are available in the currency?
(3) various inflation issues for a Currency Issuer.

Also, Legal requirement to pay tax is what backs the value of a fiat, and taxing something is what makes it valuable as a currency.
Like The Buckaroo (in the above interview), which Mosler used as a base case for analysis, a currency can be designed to serve whatever interests we want - in the university Buckaroos case, it is serving the community that has the value (pay 10 buckaroos tax, which means either work X hours for community, or buy Buckaroos from free market from those that did).

We create the money system, it can serve us, rather than we be its slaves (or imo at least, slaves of financial elites that fund & spread economic ideology & beleifs by what they own & fund; or hire & fire)."

Platypus Paws

[myleshungerford]

I know it’s nerdy but I’m super excited for this video.

[erikeparsels]

Hmm, something strikes me as not quite right when Warren says QE doesn't affect inflation. When the government sells a bond, it is removing liquidity from the market, dollars you can actually use to buy a car, buy dinner, pay your taxes, whatever. You can't buy those things with treasury bonds, you have to first find a buyer for the bond and convert it into actual dollars. True, you can sell that bond at any time to someone else, but then THAT person has lost liquidity and parked HIS money in the time-lock money garage, and so on until the bond either reaches maturity or the government buys it back through QE. So bond sales would seem to be a way for the government to slow down the aggregate velocity of money, except I suppose that banks can use bonds as collateral for issuing loans, betting that the interest rates won't rise.

[OneEyedMonkey]

I’m mostly listening to this while walking the dog… but… Marco does need to light himself better. Unless the Dr Doom look is a style choice 😅

[mikealexander]

In the buckaroo example Mosler says there were 100 extra buckaroos left at the end of the term.These buckaroos are worthless because there is nothing left to spend them on. So why would anyone accumulate these things? My guess is a secondary market developed in which buckaroos were being exchanged for things other than discharging class obligations. Likely these things were dollars. So we can imagine a buckaroo:dollar exchange rate. Such a rate would not be constant, but rather would tend to lower near the beginning of the term, when there was plenty of time to get the needed buckaroos through volunteering. But as the end of the term approaches, procrastinating students who haven't acquired their full set of buckaroos will be willing to pay more for buckaroos, if necessary because they no longer can earn enough of them. So there is a potential for the exchange rate to rise at the end of the term. This might incent some students to acquire extra buckaroos to sell at a premium at the end of the term. Of course if too many people have this idea, then there will be excess buckaroos seeking buyers at the end of the term with nobody needed any. Mosler calls the excess 100 buckaroos left over at the end of the term "savings", but i would call them losses, since someone did an hour of work and got nothing in exchange.

Terms like "savings, " or "inflation, " cannot be applied to buckaroos because they are not yet *money*. For buckaroos to be money they (1) have to be exchangeable for all sorts of things outside of volunteering and discharging course obligations, and (2) be used to denominate credit.

In actual human societies, credit came first. Money showed up a couple of thousand years later. Money was indeed created by states that desired to access a more complex array* of goods through the imposition of taxes that were required to be paid with money. This created a need for money. Since people who paid taxes needed to have money, credit began to be denominated in terms of money rather than, say, measures of wheat or weight of silver. So right from the start of money you had it used for many more purposes than just paying taxes, which makes it different from the buckaroo example.

*Prior to money, states were more autarkic with the king producing most of everything he needed inside of his own domain.

[NjonjoNdehi]

When the British invaded Kenya in the late 1890s for 70 years, they needed labour but the locals were pretty happy in their farms tending to crops and livestock. So they introduced a tax for each home payable in the British currency. Sad.

[crocodilegamingtv]

I agree with Warren Mosler. MMT unquestionably explains the current monetary operations better than any other economic school of thought. That being said, even if we put all the policy that he has championed (not only the ones from this video), in my opinion, the financial sector has become a parasite on the real economy. It seems like everything takes second nature to the financial side. The only reason companies produce a product is to increase their financial assets. If a company can achieve their goal without hiring or selling anything, they'll gladly do it. Now I know the U.S. in particular, prides itself on a culture of harboring small business. But small business don't tank an entire economy with their financial activities.

[mikealexander]

But under QE the Fed is buying securities from entities that presumably wanted securities (which is why they had them in the first place). So it seems logical that the recipient of the cash received from the Fed will be used to acquire some other financial asset that the seller values more than the security sold. Why would they want more reserved earning them essentially a zero return. It seems to be that the money used by the Fed for QE will eventually end up in the stock market or other high-return asset. So QE should be expected to produce large rises in asset prices, which it seems to have done so.

[theodorearaujo]

People will believe, especially intelligent people will believe, whatever is necessary to justify their desires, no matter how delusional. Such is MMT.