A billion years ago, James and Jay worked together programming Perl. James was passing through town, was kind enough to offer himself up for recording a podcast episode. Turns out, James has been teaching Modern Monetary Theory (MMT) for years. Several episodes of this podcast include Jay spouting nonsense about MMT, now we have an expert!

046.mp3 (1h 47m 51MB)

If you’d like to call into the show, you can leave a voicemail at +1-402-577-0117. Consider giving us $1 a month on Patreon so we can waste your money instead of our own. :)

Thanks to Webberized! A great podcasting studio in Omaha Nebraska!

To Learn More About Modern Monetary Theory (MMT), Jim recommends:

Other links mentioned in the episode:

“Trump checks” timeline:

  • 2017-01: Trump becomes President.
  • 2020-03: Round 1: $1,200 per income tax filer, $500 per child (CARES Act)
  • 2020-12: Round 2: $600 per income tax filer, $600 per child (Consolidated Appropriations Act, 2021)
  • 2021-01: Biden becomes President.
  • 2021-03: Round 3: $1,400 per income tax filer, $1,400 per child (American Rescue Plan Act)

Transcript (via OpenAI Whisper):

We can talk about anything you want, as Jay Flaunce is ignorant. Welcome to Jay Flaunce’s Ignorance, episode 46 with James Keenan. I’ve got another intro later, so I’ll cut that short. We used Weberized Studios in Omaha, Nebraska. They’re a podcasting studio, and they’re awesome. So if you want to start a podcast, check them out. They do as little or as much as you want. You can just use their studio to get great audio recordings, or they’ll do post-production for you, they’ll do advertising, they’ll do marketing, they’ll run your tech if you want them to. Anything you want, check them out at Weberized.com. It’s exciting to be in a real studio. Let’s get into it. If you’d like to call into the show, you can leave us a voicemail at 1-402-577-0117. Are we already recording, or maybe this is being recorded somewhere? Yes, it is. Wow, that’s awesome! He’s in my ears. I’ve never had a guy in my ears before. That’s great. Gee, I thought you were like a— This is a professional studio. It’s amazing. I thought you were like miles ahead of this in your technique. In my technique? No. I mean your podcasting recording technique. No, so I own a bunch of microphones. I have various microphones I’ve purchased for interviewing people over the years, but I’ve never come to a studio to do an actual recording. Now, I have interviewed people who are accustomed to going to the local radio station to advertise their event. So my parents were raised in Mount Pleasant, Iowa, southeast Iowa, very rural. And one of the events that I was trying to bring everyone’s attention to back when I was first in the RV roaming around, because I have all these early memories of my grandparents who are both gone now, the old Thresher’s reunion in Mount Pleasant, Iowa. So there’s a whole episode years ago in my podcast feed about the old Thresher’s reunion. And anyway, I interviewed—I said, Hey, is there somebody I can talk to about this? Because I’ve got all these memories about it from years ago with my grandparents, but I don’t really know anything about the logistics or anything. And yeah, so I interviewed him, and he went into like full radio mode on me because he had done so many radio interviews in the radio studio that he was like, Okay, how structured do you want this and how quick? And I’m like, I don’t know. I just turn the mic on for as long as you’ll talk to me, and then it’s over. So that’s my structure. So when we get the recording in Dropbox or whatever, we can do whatever you want with the raw audio. Like I can leave all this in as just fun chatter, which is typically what I end up doing. Or we can cut out anything you don’t want in there or whatever. And then I can give you a final cut on the edit if you want. So like I can send you in my Dropbox when I think I’m done with an episode. I’ll send it to you, and you can review it. And if you don’t like it, we’ll cut out whatever you want. So as far as the show notes are concerned, they’re all just in GitHub, and you can change or add or delete or whatever you want to do in GitHub, if that makes sense. So is that fair? You sound great, by the way, in my headset. You know, being in my retired mode, I spend so many days speaking to no one. And so like when once a month I go out drinking with the New York deficit owls, and we have a newcomer come to the group, and it usually falls to me to be the person doing the initial explanations, similar to what we’re doing tonight. By the end of the two hours in that bar, I am utterly hoarse. So the biggest challenge I will face is having a speaking voice. I mean, it’s not like I’m teaching and I’m used to speaking for four hours a day these days. Right, right. So I did make notes today. You know, I have various topics somewhat prepared. What I suggest is that once we start, we try to go for 45 minutes. Sure. You know, on the assumption that that will be, you know, pretty much a live block. My voice is getting too hoarse, or if we’re intellectually exhausted, we can pause there. And if I still have prepared topics, you know. Jim, I’ve known you for, what, 16 years now? And I’ve been mentally exhausted the whole time. Have you not noticed? The first job we ever worked on, was that MediaMath together? Or did we run it? I’m sure we ran into each other at YEPSIs before that. I know that I met you, or at least, you know, knew of you, at YEPSI in Columbus in 2010. Okay. I definitely remember you being there. If you were at previous YEPSIs, then we were both there. I don’t have a mental picture of you before that. Yeah. MediaMath was the first place we ever worked together, isn’t it? It was also the only place we ever worked together. The only place, right? So far. You never know what things are going to happen in the future. You just start with however you want to lead. Oh, sure. Welcome to JFlunt’s Ignorance. This is episode 46. I’m here with James Keenan. And we’re going to talk about modern monetary theory and various other things. This will be later in the episode, after some chitter-chatter, whatever we’d like to talk about. So thank you so much for coming to Omaha. He traveled all the way from New York City just for this podcast episode. Right, Jim? Well, not quite just for this podcast episode. There was a little matter of a family wedding in Chicago and need to use some vacation time up before the end of the year. It seemed like heading west from Chicago and visiting three of the 48 contiguous states that I had never been in before was a reasonable use of my time. Last night, did I talk you into or out of visiting Devil’s Tower in northwestern Nebraska? That I’ve never been to, but it looks cool, and it was famous in a movie. Well, I began to plot out my route between here and Denver, which is where I have to drop off my rental car this coming weekend. I don’t know whether I’ll be going to Devil’s Tower, but I’ve planned tomorrow to travel as far west as probably North Platte. And then I make my decisions one day at a time until I have to get into the Denver area. Yeah. With me and the RV, the way the RV worked is that you had to kind of set it up for a few hours, and then you had to tear it down and it took a few hours. And so I would hop week to week, right, but I would never know where I was going the next week. I would just, you know, figure it out. So on Thursday of that week, I’m like, oh, I’m going to get kicked out of here in two days. I need to figure out where I’m traveling on the weekend in order to show up. So, yeah, I was very itinerary, itinerary, this, this just kind of heading north because it was too hot here or heading south because it was too cold here with my little dog. That was kind of my plan. So I find that freeing until, you know, you have a crunch and you’re like, oh, none of my plans are working for the next 48 hours. So that can be a problem, but I’m sure you’ll be fine. I was in Canada a couple of times without a plan, and I was like, oh, now what do I do? So it’s not always perfect. So you were telling me last night that one of the people that you know from New York is a guy that I’ve been listening to on Modern Monetary Theory podcast. He’s now running a podcast called Applied MMT Podcast. Yes. You know him, yeah? Yes, Adam Rice. So how did you meet Adam? I met Adam through the meetup.com algorithm. Once I retired or was retired, I had a lot of time on my hands. After my first two years of employment, and it became evident that I was a bit out of the age range of information technology hiring, I got in the habit of going to three or four meetups in New York City where I live per week or per month more, more to the point, because there was a point when tech companies were still wanting to hire people to work in the office. Remember those days? Yeah. And one of the things that they would do to encourage that is to allow tech user groups to hold meetups in their offices, and someone would supply pizza, and you would get anywhere from 20 to 100 geeks meeting in the office of some finance or marketing term, even where we worked at MediaMath. We did that once or twice. So I guess the meetup.com algorithm somehow directed me to a group called the New York Deficit Owls, and we can go into the origin of the term deficit owls in a little while. But when I went to it, which I believe the first time must have been in February of 2018, which was maybe only one or two months after Adam had started this meetup group, I realized right away that I was a natural for this group because 50 years ago when I was young, I was a graduate student in New York City, and I was attending the New School for Social Research, the graduate faculty, and specifically the political economy program, which was their way of marketing what we could most euphemistically call heterodox economics, and actually consisted of two major tracks, Marxist economics and post-Keynesian economics. And I earned a master’s degree in that program, and I completed all the requirements for a PhD except the dissertation. So in the parlance of the day, I am ABD, all but dissertation. But although I was always a very good student and very good in scholastic context, I didn’t really have any strong idea of what an academic career would be. And at a certain point, I realized that I didn’t really know how to play the academic game, and that I would really need to know how to do that to survive in the downsized academic market of the 1980s. And I was much more of a political activist in those days, and I found various other ways to channel my activist impulses. And so while I knew a lot about Marx and Keynes and so forth, I just sort of put that aside for several decades, until in the late 2000s when I was working at my first tech job in New York City at Experian Cheetah Mail. That was when the great financial crisis hit. And though I wrote out that crisis fine because I was working for a company that was expanding at that time, it did get me to reconsider the economics that I had studied at that point 30 years previously. There was one other fellow working for that company who had read Keynes, and we used to talk about the financial crisis from a Keynesian perspective. But that’s really as far as it went. When I joined this meetup group in New York City in 2018, the deficit owls, the first people who was mentioned was a fellow named Hyman Minsky, who was a professor of economics at a number of different schools, mostly for the longest time at Washington University in St. Louis. And he was known as sort of like a maverick Keynesian economist in the day. And he had a number of very interesting insights into the U.S. capitalist economies of the day. Unlike most mainstream economics, he did not believe that our capitalist economy inherently tended toward equilibrium. In fact, he argued that stability breeds instability. And that’s sort of like that little sort of zen koan of economics. It’s not Marxist economics, but it’s not inconsistent with some of the vision that Karl Marx or before him, Adam Smith and David Ricardo had, namely the belief that the capitalist system was not inherently stable. And it so happened that in 1980, which was the year that I had to decide whether I’m going to go forward with an academic career or not, the last economics book that I purchased before I dropped out was a book called John Maynard Keynes. It was not a biography. It was a study of Keynes’ ideas. And it was by this fellow, Hyman Minsky. And I went through it and made notations for the book, and I even cut out a clipping from the New York Times business section. The book was reviewed by their then economics correspondent, Leonard Silk. It was a review of Minsky’s book, John Maynard Keynes. And I stuck it in the book, and I put it up on my bookshelf. And 35, 38 years later, and one major apartment move later, I pulled this down from my bookshelf and began reading it again. And since this fellow, Hyman Minsky, was the doctoral advisor to a very important modern money theory economist, Randy Ray, at Washington University in St. Louis, a lot of the thinking of Hyman Minsky that I had been exposed to 40 years ago was present in modern monetary theory. And consequently, I had an edge in the discussions of the group. I could relate things that came up in our discussion to what I had studied many years previously. And so in September of 2018, a group of people organized what was actually the second in a series of conference, international conferences on modern monetary theory. The first of them happened in 2017, just about 150 miles away from here at the University of Missouri at Kansas City. And that was where Randy Ray was teaching, and it was like in the 90s and the aughts. And for most of the teens, it was the only place in the United States where you could do graduate-level and dissertation-level work in modern monetary theory. So all the MMT people tended to cluster there. So the conference was held there. I didn’t attend that year, 2017, because I didn’t know about MMT at that point. I should just note MMT can stand either for modern monetary theory or modern money theory. The latter is probably the more accurate, but modern monetary theory is how it became known, so we’ll just go with that. How are monetary and money different? Maybe we can get back to that question later. That’s too much of a fine point. So in any case, in 2018, the people who organized that group were mostly people who had been to Columbia University Law School six years previously. They organized a conference in New York City at the New School, not quite the same part of the New School that I attended, but around the corner at the original site of the New School. I attended that, and all the big names of modern monetary theory were there, mostly in person, a few by video link. I attended sessions, I took notes, and I said, yes, I’m very well prepared for this, and I’m very interested in this. What happened was that in 2019, some of the people, some of the major figures in MMT, particularly the two Australian economists, Bill Mitchell and Martin Watt, and Randy Ray, the American MMT economist who had been at UMKC and had since reached retirement age and who had then gone on to take a job at the Levy Economic Institute, which is located at Bard College in New York’s Hudson Valley, and which is a place where Hyman Minsky had also retired to when he left Washington University and spent several years there before passing away in, I think, 1996 or 1997. I was able to meet all these people in person, Bill Mitchell, Randy Ray, Stephanie Kelton, whose name I’m sure will come up again this year. Coming out of that, at our deficit hour sessions in New York City, which, just to clarify for the listeners, really means going out drinking and talking about MMT, we met a fellow who was associated with a school in New York called the Henry George School of Social Science. We basically talked our way into giving a five-week course.

based on a macroeconomics textbook from the MMT perspective that Bill Mitchell, Martin Watt and Randy Ray had just come out with because you know, in academia, one of the things you have to do at certain point if you want to prove your new line of thought is legitimate is you have to write a textbook so that people can assign the textbook. And they had done that. So we taught a course there, we- You were teaching courses? Yes, yes, this is, this I should say is in an adult education context. So even though people had this, you know, 500 page textbook that would have been appropriate for like a senior level undergraduate or introductory graduate level course in MMT flavored macroeconomics, the actual amount of advanced macroeconomics that we were able to convey to the students was really limited, especially in retrospect. So we taught this course there and then they invited us to speak several times on various panel discussions. One was a debate with a different school of heterodox economics that the Henry George people are familiar with. But the one that was actually most interesting came in January of 2020. Note that this is two months before the onset of the pandemic. And it was two months before the onset of the pandemic, but it was also like about 11 or 12 months after the Green New Deal resolution had been first introduced into the US Congress by Representative Alexandria Ocasio-Cortez of New York and by one of the senators from Massachusetts, whose name escapes me at the time. And so this was a time when all the people, all the young activists like the Sunrise Movement who were interested in the Green New Deal were also making, they were making contact with MMT for reasons that we will no doubt come to. And so I was asked to represent the MMT perspective at a panel discussion called the Green New Deal and how are we going to pay for it? And that went off very well. And I can elaborate more on that later. The pandemic hit and so the Henry George School took all its classes online only. And so in 2020, 2022 and earlier this year, I taught five or six week sessions via Zoom, which were focused on my work which were focused on modern money theory. And the pandemic meant that we couldn’t meet for our meetup in person. So there was no alcohol at our meetups for a year and a half, but we resumed in middle of 2021, had to go offline again at the end of that year because of the Omicron version of the pandemic. We came back online in 2022. And in June of 2022, I had the opportunity to attend an eight day seminar on modern monetary theory, Hyman Minsky and another economist, Wynne Godley at the Levy Economics Institute at Bard College. And this was an event that brought together MMT fans from around the world, mostly young economists at the start of their careers. Many, a dozen from Brazil, many from Greece, Italy, Europe, Sri Lanka, Mexico and the United States and Canada. And I was, I believe the second oldest person in attendance at that thing. It was the most intense intellectual experience I had had since attending the New School now 50 years earlier. And one of the people I met there, whose name is Ryan, he works for a hedge fund in New York City. So I guess he might be described as a finance bro, but he like Adam and I are very much into MMT. And so he became sort of like the third member of what we call the, what’s our sort of tongue in cheek group name, the Abba Lerner Hyman Minsky Political Economic Society, New York chapter. Okay, I need to write. Oh, good thing we have a recording so that I can play that back several times. Yes, well, that actually just means that each of us has the sign in rights to call a deficit hours meeting in the absence of the others. The three of you. The three of us. Yeah, okay, gotcha. I also started a mailing list that sort of runs parallel to that, which the Modern Monetary Theory Google group at the end of the session will give URLs for these. And so, I keep that going and post there periodically. I have a subset blog, which I’ll mention at the end of the group. Adam and Ryan, they are both several decades younger than me and turns out their wives know each other. And so now they’re, and they both have children less than three years old. So, they’re all good buddies now. And they’re working with a third guy who’s a YouTube programmer at AppliedMMT.com that you just mentioned. And at that site, the third fellow, his name is Doug, he does sort of like YouTube style analysis of market conditions, which is, I don’t really follow that at all. I’m more interested in the theory and policy sides of MMT. But there are lots of people who like MMT because they think it will give them an edge in playing the markets. And so, basically in 1918, I was able to pick up a thread that I had dropped 38 years previously. And that’s where I’ve been putting a lot of my intellectual efforts since then. Since being otherwise retired, I have plenty of time to fill. You said the Henry George School. Yes. So that’s Henry George of Georgism. Yes. Which is the land tax guy. Yes. And I listened to Georgism podcasts and I listened to MMT podcasts. They don’t seem to mention each other. Is there not a lot of overlap between Georgism and MMT in your experience? Well, I guess what they have in common is what they are not. They are not mainstream economics. They are not orthodox economics, which is based in the theory of marginal utility. The notion that human beings ought to be modeled as rational economic actors. The notion that social class plays no analysis in the economics. And certainly, Henry George in the late 19th century, I mean, if we were to turn the clock back to what, 1879 or so, he was a best-selling author known across the country. He would probably have described himself as a political economist, as Adam Smith would have. And of course, Karl Marx wrote a book called The Critique of Political Economy. And what we know as economics really emerged as a reaction to the earlier developments of classical and Marxian political economy. So they had that in common that they’re both self-consciously heterodox economics. And certainly, Henry George’s economic thinking was probably the foremost thinking about the economic inequality generated by capitalism before people in the US really knew about Karl Marx and Das Kapital. And Georgism was a very big movement. And there were many public officials who were elected as Georgists. I think, for example, I read once that when Franklin Roosevelt was governor of New York State in the period, what, 1928 to 1932, before he was elected president, the fellow who he appointed the commissioner of the power authority of the state of New York was a Georgist. And there was a lot of that sort of Georgist thinking going into the creation of public power authorities. Now, I confess myself that I haven’t read a lot of Henry George, so I won’t attempt to put words in the mouths of contemporary Georgists. One of my new school professors, Ed Nell, who is still alive, he must be 90 years old, he, at some point, became very interested in Henry George and wrote a monograph about George’s economic thinking. So, they’re both part of the non-mainstream political tradition. And if we were to get into a specific discussion of taxation, I could cite the fact that land value taxation is, how can I put this most precisely without opening a big can of worms, is not inconsistent with MMT theories of taxation, in fact, theories of the purposes of taxation. And I could cite at least one particular MMT thinker who has favorable words for Henry George and his land value tax. But since I, myself, have not really studied that in depth, I don’t want to, you know, I can’t comment further. Oh, yeah, no problem. I’ve studied nothing in depth, so you’re way ahead of me. So, but since, basically, this school is, you know, works in, it’s an adult education context. And so, they need people periodically to, you know, give courses for, well, let’s just say, less than market wages, or honoraria. So, at University of Missouri, Kansas City, there’s a Henry George School. No, no, no, no, no, no, no, no. Henry George School of Social Science exists in New York City. Oh, okay. And they actually have a building that they own because back in the day, Henry George’s Georgism was so big that even some rich people believed in Georgism, and they gave them money to buy a building. What you have at University of Missouri, Kansas City is an accredited PhD program, PhD in economics program, that has had a history of having MMT-affiliated people as part of the department. And I believe there, you have Matt Forstater, who graduated from the place that I did not graduate from, the new school in New York City, in the mid-1980s. And we had some of the same professors and have chatted about them. And also, now, I believe, retired from, you had a merit of status there, you have Bill Black, who was one of the people, I believe, in the Justice Department in the 1980s, who helped break the savings and loan scandals, and who subsequently authored a book called, The Best Way to Rob a Bank is to Own a Bank. Or maybe it was, or The Best Way to Rob a Bank is to Own One, one or the other. But it’s like a from-the-trenches study of the financial scandals of the 1980s, and sort of a muckraking book. And I’ve heard both Matt Forstater and Bill Black speak at MMT conferences, as well as people who train, who got their PhDs under Randy Ray and Forstater at UMKC, and who are now teaching at various countries, in various colleges across the US and around the world. So, it so happens that you have this little hotbed of MMT deep in the Midwest. Right, which I didn’t know. The Henry George School in New York is just economics, that’s all they do? It’s not like a part of another university or something? No, it’s accredited by the state of New York, but it doesn’t offer degrees. Oh, okay. Maybe it can offer a certificate. Yeah, I don’t know what accreditation means if it’s not the state saying, yes, you can hand out degrees. What does accredited mean? You can give certificates. Okay, okay. Excellent. Yeah, they would, they’re not a college, per se. They descend from, they originated at a time when Georgism was very big, and there would have been other, think of it somewhat similar to the Chautauqua movement, if you’ve ever heard of that, which still goes on in Lake Chautauqua, New York. What is that? Tell me what that is. It’s like summer camp for intellectuals. Really? Well, the notorious, remember a couple years ago when Salman Rushdie had a knife attack, was a victim of a knife attack, he was speaking at Chautauqua. Oh, that’s where the attack happened? That’s where it happened. Oh, okay. But the Chautauqua Institute has been there since the mid-19th century. You know, the, and in the last half of the 19th century, you had a lot of these lyceums that were popular, you know, popular education for, but outside the context of degree-granting colleges. And Henry George School is essentially a continuation of that. Yeah. So I was trying to find a Georgist to talk to in Omaha, and I did find one at the, oh shoot, which organization is it? So it’s called Reason. It’s the Rationalists, Empiricists, and Skeptics of Nebraska. Reason. And I found one Georgist who I said, oh, hey, I just listened to all this stuff, and I was wondering if there’s anywhere, you know, I can go to talk to about it. And he wrote me like a 15-page summary of his thoughts. And I. That doesn’t surprise me. I haven’t even read it all yet. That’s how dense that was. Because I took what I do, you know, several hours a day, I’m walking the dogs, or doing laundry, or dishes, or whatever, and I’m just listening to podcasts, and my brain is filling up with all this stuff, and then I have questions, and I’m like, oh, okay, who do I talk to about this? And yeah, there’s one guy, apparently, that’ll talk Georgism with me. But the next meeting I was at, he wasn’t there, so. So close. Do you consider yourself a Georgist? No. Do you consider yourself an MMT person, believer, whatever they call themselves? MMT advocate, yes. MMT advocate, yeah. So are there different schools of MMT, and you fall into one camp or another, would you say, or? Well. MMT, like any school of thought, evolves, and the people who are attracted to it, they evolve themselves. So over time, different people, they come from different places, and they arrive at MMT, and then they may go different places. The person who is probably widely viewed as the godfather of MMT is a guy named Warren Mosler, who is a couple years older than me, began working on, comes from just sort of very average middle-class background in Connecticut, not a well-to-do background, by any means. But in the 1970s, he began working on Wall Street, and began studying markets, and he worked in a bank, and became a financial trader, T-R-A-D-E-R, right? And started to ask questions about the system that he was studying, the system that he was working in. At a certain point, based on what he had read, and he was involved in,

You know, international, what do they call it, fixed income markets, in other words bonds, but on the international scale. And if we can remember a time before the European countries all had the common currency, the euro, the time when you had the Deutschmark, the French Franc, the Italian Lira, well they still have the British Pound Sterling. The Italy was viewed as the financial sick man of Europe, you know, especially compared to say Germany and the Netherlands which were supposed to be pillars of fiscal rectitude. The Italian government was going to offer a major sale of bonds denominated in Lira which was the Italian currency at that time. The financial markets did not have much confidence in the Italian economy and in the Italian government’s macroeconomic management of the economy. And so there was speculation that the bonds would have to be marketed much below their par value, that is the value for which they would ultimately be redeemed. As you probably know, the price of bonds moves inversely to the yield on the bonds so that if you have a bond that is considered risky, the bond issuer has to pay a high interest rate to encourage people to buy that bond. And the way that, you know, bond markets work, that entails a low market price for those bonds. Well, Warren Moser got to thinking, look, these bonds are denominated in Lira and it’s the Italian government that creates the Lira. Nobody else does, right? And they can always pay off, you know, make the interest payments by issuing Lira and they can also, you know, pay off the principal of the bonds by issuing Lira. So if I buy these, so if this bond issue comes to market at a very low price, I’ll buy them for my clients at that price and later as the bond nears maturity, you know, the price will rise because it will go, the bond will go up to its par value. This was considered to be such a heretical notion that he actually flew to Italy and arranged a meeting with people very high up in the Italian finance ministry and he posed this question to them saying, you know, you’re going to issue this bond in Lira, you will always be able to pay it off in Lira and pay the interest payments in Lira. And they pounded the question and said yes. So Warren Mosler went ahead and bought a boatload, we’ll try to observe the niceties of vocabulary in this podcast. He bought a boatload of those Italian bonds and made a killing, became, well, I don’t actually, I mean, I don’t really know how wealthy he is, but it’s eight figures, nine figures. I mean, he’s had, you know, 30 years to build on top of this fortune and … He should start an MMT school, bigger than the Henry George School. And that’s what he does. Oh, does he? Did he buy a building in New York City? No, but basically around 1996, now if you, I’ll admit that I was not in information technology in 1996, I was not on the internet in 1996, I was not on any mailing lists or list serves as it used to be called in 1996, but Warren Mosler was. And in fact, he got on one of the original list serves for heterodox macroeconomics, nonstandard macroeconomics. And he got on this list with academics like Bill Mitchell at University of Newcastle in Australia, Randy Ray, who I believe at that time was, maybe he was at the University of Denver at that time, but he was soon to move to University of Missouri, Kansas City. And people who were there, students such as the aforementioned Stephanie Kelton. And he got, you know, he, a finance guy, got to talking with these academics. And he laid out his theories and they said, oh yes, that’s consistent with what we have learned from Hyman Minsky, from Abba Lerner, another student, another economist from the generation right after John Maynard Keynes, and from other people, another British civil servant and economist named Wynne Godley, various people who would require a whole other podcast to talk about. And they got to talking and one of the things that happened was that those, you know, late 90s MMT academics, they were training graduate students. And they would say, well, look, why don’t we have these people, our graduate students, do internships with Warren Mosler and learn about markets directly from someone who has been very successful in the markets. That would be a very important component of their education. And so there were various people who over the years trained, you know, worked as, worked, you know, for Warren Mosler or, for example, they might have done sabbaticals at the Levy Institute at Bard College that I mentioned earlier before. And those sabbaticals may or may not, I don’t know the, I don’t really know the funding details, been funded by Warren Mosler. So he’s basically been willing to spend his ducats encouraging this. And I should say, he’s not alone in that. This Levy seminar that I attended a couple years ago was in large part underwritten by another fellow who made a killing on the internet and got interested in MMT and, you know, had the bucks to say, you know, we’ll fly in all these people from around the world for, you know, a one-week hyper-intensive seminar. So… Can I ask you a really stupid question about bonds? Go ahead. So… I’ll give you a stupid answer. Excellent. So do you remember the Silicon Valley bank collapse? Yes. So what I heard was they over-invested in super safe investments called bonds, where the U.S. government, with the full faith and credit of the backing of the U.S. government, is going to pay you back in a year, five years, 10 years, 20 years, 30 years. I don’t know what bonds they were buying, but they bought way too many of them. Yes. And then suddenly they needed fluidity, cash fluidity, or no, I’m sorry, then the interest rate changed. Yes, the Federal Reserve changed the interest rates. The interest rates didn’t just change by themselves. Yes. It was changed by the Federal Reserve. So what I was trying to understand, and no one could explain to me, is if they have all these bonds, they’re not short on money. There’s tons of money. They just don’t have liquidity of that money, right? You have to wait five years to get that back. And so when there was a run on the bank, too many people panicked too fast. They all tried to get their money back out. And in your understanding, why was there a run on the bank? Oh, how did it start? Yes. I thought it was a rumor on Twitter that started the Silicon Valley bank run. You know, it wasn’t pure, you know, rumor. I think maybe the answer to my question is that they weren’t actually holding bonds. They were invested in a bond market, and the bottom dropped out on the value of the bonds that they were invested in. Is that true? Well, actually, I don’t know the answer to that question. But what I do know is, I mean, what you led up to this is consistent with my understanding, not that I really follow that closely. Namely, that they were invested in safe instruments that would have been safe if held to maturity. Right. But if maturity is several years out, and the prevailing interest rate goes up, then the value of existing—the prices of existing bond issues has to decline. Right? So if the—so there’s two things that may have—at least one of which definitely was a factor. Namely, that they had a lot of very large deposits, deposits above the $250,000 limit insured by the FDIC, because their customers were all these, you know, rich Silicon Valley tech bros. And these rich Silicon Valley tech bros were no longer content earning the very small interest rates that banks were paying for the, you know, the 12 preceding years since the great financial crisis. And as their deposits—let’s say they were invested in CDs at Silicon Valley Bank. As those CDs matured, they would pull them out of Silicon Valley Bank and try to invest in some other thing that was now paying a very competitive rate, so that the—might be called the mark-to-market valuation of those long-term bonds fell. To meet these demands for withdrawals of deposits, they would have had to sell those bonds, but those bonds would have been—which would have been perfectly fine if held to maturity. They were selling at a loss. So when I was growing up until I was 18, my grandparents would buy us a U.S. savings bond every year on our birthday, right? So I’d get a physical piece of paper that went in a safe deposit box that said $50 on it. And if you wait 20 years, it’s worth, you know, 182 or whatever badly inflated dollars, right? So did it keep up with inflation? Sometimes it did. Sometimes it didn’t, right? Defended. But anyway, at any time, I thought you could surrender that bond back to the U.S. government for face value. I thought you could walk back in there and say, hey, give me my 50 bucks. I, you know, I know it’s worth 80—it’s, quote, worth 85, but I didn’t wait until maturity. Therefore, just give me the face value again. I thought that was part of how bonds work. I don’t know that U.S. savings bonds work that way. The way that the bonds that would have been a concern that Silicon Valley Bank or any bank would have been investing in would have, you know, been Treasury notes, which are like the two- to five-year instruments, and Treasury bonds, which are the, you know, 10-year and 20-year or 30-year Treasury debt instruments. And those, there is an active secondary market for. In fact, it’s the biggest market in the world. You know, it dwarfs the New York Stock Exchange or the NASDAQ. It’s the real backbone of the financial system. So the Fed changes the interest rates. Yes. And suddenly the market value is a lot lower because it’s like, oops, the bottom fell out on how much the U.S. government is going to pay. And therefore, the market’s like, oh, okay, these aren’t as valuable anymore because they just made this announcement yesterday, right? Well, the U.S. government will, barring some stupidity like, you know, failing to renew the stupid debt limit law by Congress, the U.S. government will never be forced into default on payments of either interest or principal of its debt instruments. Never. It’s impossible because they can create the money. Precisely. Yeah, okay. Just as in the case of the Lira in 1992 or 93, they could always create the Lira. So anyone such as Warren Moser who bought these bonds was always going to get the interest and the principal. And, you know, when the rest of the world financial market saw that these Italian bonds were actually legitimate, the price of those bonds rose and eventually Warren cashed in. And made a boatload of money. I know mostly of the bond market from Tom Wolf’s book, Bonfire of the Vanities. So I shouldn’t say much more on that subject. Oh, that’s fine. I just didn’t, I didn’t understand because I’m thinking my only experience in the bond market is my grandparents buying me a piece of paper. Yeah, no, it’s not like. Right. And so I was trying to figure out, okay, well, the only way that makes sense to me is that, oh, okay, well, the market went down on it. So they’re not actually holding the bonds. They’re holding shares in a bond market or something. And the shares in the bond market value went down because they didn’t actually want to go to the US government and actually buy the bonds question mark. And I got very confused. I didn’t understand what was happening at Silicon Valley Bank when that collapsed. So, yeah, I have only secondary or tertiary knowledge of that particular crisis. But the fact is that, you know, they, they, uh, since their, their customer base was very heavily weighted to, you know, these tech pros. Yeah. Uh, I was trying to get hired by one of them. Yeah. They got hit hard and I was like, oh, that’s not good. And they’re like, yeah, it looks like we’re going to get our payroll back. But all their payroll was sitting in there. Yeah. So of course it’s over $250,000 because they, they had to, they’re big company. Yes. They’re moving millions of dollars around and it’s sitting in Silicon Valley Bank. Yes. So, uh, yeah. So, and you know, the, uh, I don’t, I, I, I don’t, I know that there was a lot of post hoc criticism of the management of the bank as, as there would be if they weren’t in Silicon Valley, they would be a bank on the scale of, you know, a bank in, dare I say, North Platte, Nebraska. You haven’t even been there yet, right? Is this your first time in Nebraska? Yeah, it is. Welcome to Nebraska. So earlier I asked you, are you a Georgist? And you said no, and we moved on. Why are you, what is it about Georgism that you find unconvincing? Well, I would say, uh, that I have previous loyalties in that, in that, uh, And you said MMT isn’t necessarily incompatible with Georgism, like you can have land value tax and. Yes. Okay. Yes. Well, I would say, I mean, since the mid 1970s, I’ve been a Marxist, uh, and, uh, you know, that’s sort of me as like a higher loyalty. And it just means I can’t quite bring myself the patience to finish Henry George’s progress in poverty written in 1879. Uh, so, uh, uh, you know, and so while I try to be on, you know, good terms with, you know, the Georgists that I know, uh, it’s not really where I’m presenting. I mean, I’m, you know, putting my energy at this point in my life. MMT, uh, because as perhaps we, you know, can get to, uh, is, you know, a description of the financial operations of the capitalist system. And it basically says here, here’s the way that we describe the financial operations of contemporary capitalist economies. And that we can draw implications for policy from this, but with few exceptions, there’s no, there are no policies that like come as automatic one-to-one conclusions from MMT’s description of the economy. What the MMT people will say is that once you have the description of the economy down and you’re, and you believe that we describe the economy better than say, Larry Summers, former U.S. Secretary of the Treasury, former president of Harvard University, uh, U.S. Secretary of the Treasury, former president of Harvard University, uh, We meaning citizens or we meaning who? Uh, MMT proponents. Yeah. Yeah. I guess I forgot the antecedent to that sentence. Uh, once you do that, you can, you can then make your policy recommendations, but you have, at that point you have to step forward and state what your social and political values are. And it’s the combination of the insights that come from this description, MMT description of the economy with your values that leads to policy recommendations. Well, if you’re, if the people sharing more or less the MMT description of the economy have different political and social values, they’re going to come up with different policy recommendations. So what that means to me at least is that MMT in many ways is like a big tent in which all the people who participate in it do not share the same values and do not.

and therefore do not take the same stance you know same political stances but you know they have elements in common so they have their places where they can speak with one another there are people who it’s interesting of that many of the people who are prominent in MMT including Warren Moser who obviously is a great you know great beneficiary of the capitalist system unlike many Orthodox economists they do not come out and say the capitalist system is the best possible system and we need to preserve it forever you don’t really hear that from Warren Moser despite his millions you don’t hear that from Stephanie Kelton even though she’s one of the most influential economists in the world right now even people who ultimately want to see the capitalist system torn down can find something to talk about in MMT and something something to value there I forget exactly a lot of left podcasts that I listen to refer to current majority economic theory as the neoliberal economic model yeah and they mean that as a burn that’s you know that’s a terrible thing to be called and it’s a it’s a critique and it’s not a friendly critique at all is is I assume no one calls themselves a new liberal economic economic economist is that true like neoliberal is always a bad thing or do some people consider themselves neoliberal happily you’d have to ask the neoliberals that but but no one will admit to being a neoliberal I don’t think or am I wrong I don’t know I’m just curious I when MMT people are talking about the way the vast bulk of classic economics or whatever it’s called did they call it classic economics they call it neoliberal economics what do they call it well in terms of the mainstream economic theory we would probably call that neoclassical economics and neoclassical neoclassical economics okay and the the body of thought that people would consider to be neat neoclassical economics as distinct from classical political economy arose in the late 19th century as I mentioned earlier and as a reaction to Adam Smith David Ricardo Karl Marx Frederick Engels even John Stuart Mill the who they were all classical political economics so you have neoclassical economics that originated in the late 19th century is now largely represented by what in academia what you would call microeconomics focus on individual economic behavior individual preferences marginal utility all that theory and that came to dominate academic economics in the United States by around the time of World War one displacing more institutionalist economic approaches such as we might associate with Thorstein Veblen and you wouldn’t say there’s a transition around Reagan’s presidential term where we’re going down or there were 80 years before that yeah okay all right now capitalism came close to complete collapse in the Great Depression economics profession as it as it existed at a time really had no answers for it the major answers that were developed at that time were those developed by John Maynard Keynes in the general theory in 1936 in 1940 May of 1940 to be precise I understand he’s Britain May of 1940 what’s happening World War two US is not in the world yet Britain is being bombed by Nazi Germany the question would be how is Britain going to organize itself to do you know to survive the the onslaught from from not from Nazi Germany Keynes who had already for like 25 years been the most noted or notorious British economist who had been a major behind-the-scenes player in the British Treasury during World War one and then you know went on to make and lose fortunes on you know the British equivalent of Wall Street whatever that is and who also explored certain ideas that were antecedents of modern monetary theory Keynes wrote this pamphlet about a 60 page pamphlet called how to pay for the war and what was interesting about this pamphlet was that he said that if that it was not a question of finding the money to pay for Britain’s defense in World War two is it was a question of mobilizing the real resources from the economy to support the war effort and to do so in a way that validated the sacrifices that the British population was going to be it was going to be asked to make not just in terms of blood on the battlefields but in terms of economic limitations during the war and Keynes proposed a system he recognized that the wartime effort would mean that large components of production of goods for civilian consumption would have to be reduced or terminated and that production would have to shift to production for war at the same time the industry British industries would be hiring people at a rapid rate they would be drawing down the the pool of unemployed labor still left over from the Great Depression they would and as they hired people out of what Marx would call the reserve army of labor into factory jobs or whatever they would they would have to increase wages so the British workers would have increased money to spend but nothing to spend it on or you know a bit of a poor selection of goods to spend it on and that would ultimately undermine confidence in the war effort and so Kane said what we have to do is we have to encourage a policy of deferred consumption we have to get people to understand that we have to preclude people from spending their gross paychecks and Britain’s or American Britain we’re talking with the he’s talking Britain but the same thing became true of the United States and so he made proposals that it you know involved increased taxation because the government was spending all this increased amount of money into the economy it needed to draw back a large portion of that economy to avoid inflation that’s one of the purposes of taxation in the MF review he proposed voluntary savings such as you know war bonds he proposed that there might even have to be involuntary savings that we might have to say to people we’re going to deduct this deduct this amount from from your paychecks you know whether you like it or not but you’ll be able to spend this this money after after the war you know rationing he said you have to have all these policy mixes but you have to do it in a way that basically is palatable to the electorate of a democratic country so he posed this you know as sort of like the strategic battle plan for the management of the British economy during World War two and when once the u.s. entered the war Keynes communicated directly with Franklin Roosevelt and you know made his proposals here and there were people in the United States who picked up on Keynes’s idea and they went to work for the government and they started to implement programs that was not exactly the same as what Keynes was recommending but programs that were designed to because the u.s. faced the same same situation you know the as the defense production increased starting in late 1940 you know the arsenal for democracy period the pool of unemployed labor left over from the Great Depression went down people were coming back to the factories work in the factories they were being hired they were being hired at newly competitive wages but once the war started they they had nothing to they were severely limited in what they could spend on Pearl Harbor December 7th 1941 by I believe the end of January or February of 1942 the US government had ordered a halt to all production of automobiles for civilian use so the largest consumer good industry in the country was shut down and those assembly lines were converted to tanks planes whatever and so the the people working in the factories they had this money to spend but they couldn’t spend anything and you know it got more severe meat became rationed so what the United States government had to to do was to encourage people to take those paychecks and do things that caused them to refrain from current consumption deferred consumption and so the US began campaigns to sell war bonds and this became a big thing lasted even past the end of World War Two go to YouTube and in the search bar type Betty Davis war bonds and the reason you do that is the Hollywood studios competed with one another to see whose stars that they had under contract could sell the most war bonds and Jack Warner of the Warner Brothers whose contract who held contracts for Betty Davis Humphrey Bogart and many others Jack Warner was determined his studio was going to win so you can go to YouTube today and you can see these these movie shorts that would play in movie movie theaters in which you know Betty Davis Joan Crawford they would come on screen for five minutes and you know talk about the importance of you know supporting our boys overseas by warring war bonds now the point that MMT would make was is not that that that the money raised by war bonds by war bond sales to you know civilians at the Hollywood canteen financed the war effort right the you know the way M&T says government spends is Congress votes approves appropriations the Treasury is directed to spend you know it it tells the Federal Reserve issue a check to I don’t know Lockheed aircraft for bombers or fighters and the money is created in the act of spending it Lockheed pays the workers you know and it’s a factory in Long Beach or that’s Douglas sorry the workers spend it and then that money is then taxed back to the government the money is created in the act of spending it it’s destroyed actually withdrawn from circulation by the act of taxation so the the government was injecting vast amounts of money into the economy in terms of war production it had to in order to prevent the inflationary pressures on the resources that the government needed to in pursuit of the the war effort it had to make sure that a large portion of that money came back to the government which came back came back through taxation it came back through sales of war bonds and as a result the inflationary pressures in World War two though prices of course did go up during World War two the inflationary pressures were actually much less and much more manageable than they were in the United States in World War one the World War two episode really MMT years believe that that really constitutes a proof of the validity of of MMT’s insights into the way the government spends in taxes and to sort of you know bring this a bit up to date you recall that I mentioned earlier that in January in January of 2020 I was on a panel discussion at the Henry George School in New York City in which the topic was the Green New Deal and how are we going to pay for it well the talk that I gave was actually based on a paper that two MMT economists Randy Ray whom I previously mentioned and one of one of the people that he trained even narcissian who said I believe that Franklin and Marshall College in in in the state of Pennsylvania that they wrote this paper called how to pay for the Green New Deal and you can you know look this up on the Levy Institute website and I consider it to be a fundamental paper it certainly affected my own thinking tremendously and basically it takes the thinking that John Maynard Keynes presented in May of 1940 in his pamphlet how to pay for the war and adapts it to the question of the response that the United States and other countries need to take with respect to climate change because they basically argue that climate change will eventually mean a massive reorientation of the United States economy and the question of whether that reorientation will be politically palatable depends in large part on how and what the government understands its fiscal capabilities are and how best to use those capabilities to reorient to the economy to it to a you know a non fossil fuel based economy that we can survive so there’s a you know a direct line of thinking from Keynes’s response first to the to the the Great Depression then to World War two to MMT and the interest that a lot of people including myself began to show in MMT around 2018 2019 when talk of a Green New Deal in response to climate change became prevalent when I assume that the first New Deal after World War two I assume Keynes it’s pitched in his thoughts at that point as well right the the first New Deal so after World War two which president was it the Truman I’m an idiot was that after World War two or was that after the Great Depression the great to the great the Great New Deal the great crash was 1929 the Depression basically people would say it lasted from 1929 to 1939 or 40 the crash it took place under Hoover’s administration the New Deal was Franklin Roosevelt’s administration starting in 1933 when we built the Hoover Dam and all that during the New Deal Hoover administration is that right okay was Keynes also writing a bunch about that so I’m trying to try to visualize yes well Keynes’s Keynes’s major theoretical work is called the general theory of employment interest and money and it came out in 1936 and it was a strong critique of the failure of Orthodox the Orthodox economists of the day to respond to the Great Depression and the general theory demonstrated that to oversimplify it that the capitalist economy was not self-equilibrating it would not it would not it was possible for the capitalist economy to exist in a situation of massive unemployment for years at a time so the the the planet money podcast has whole series about Keynesian versus Hayek and Hayek yeah says oh no you can’t just inject more money we’re all gonna die to an immediate inflation you have to you have to leave all that alone the market will sort it out everything is gonna be fine and Keynes says no and we we need smart investment by the government to incentivize all these things at times a crisis yeah well I’ve often read you know I that’s the way these things are often posed Keynes versus Hayek yeah and of course Keynes and Hayek knew each other yeah and many of the things that subsequently were attributed to Hayek you can find quotations in Hayek that directly contradict that but but you know Hayek became the patron saint of you know the the neoconservative school of economics and of course Keynes was interpreted and misinterpreted many ways by American economics and you know one of the intellectual traditions that I studied and and MMT people have studied became known as the post Keynesian tradition which in many ways the post Keynesian would argue that they really understood what Keynes was saying and these you know people like Paul Samuelson Larry Summers even possible

Paul Krugman don’t really understand what, but that’s what that would gets us into a whole territory. And I think you said you’ve been a Marxist since the 70s. Yes. So at least you’ve never had anyone misinterpret Marx. That’s nice, right? Never had a problem with that. So help me noodle through this. Okay. So one of the point that Keynes was making in 1940 was an increased taxation for, for British citizens, right? When they’re activated in full survival war mode, right? Yes. Say 25% of the population, I’m just guessing are fighting age men, right? Because the fighting age is huge. When you’re being bombed, your, your whole country is at risk, existent existential threat. So when 25%, I’m just totally guessing I pulled that number out of nowhere. 25% of your population are fighting age men who are now working for the army, working for the government, right? The government is cutting these checks. Yes. Right. And at the time in the, in 1940 men were often the major income earners of households is my understanding of before my, before my time. When you increase taxation, when most of the money being earned by all your citizens is via the government jobs that you’re providing the paychecks you’re providing. I’m trying to understand increasing taxation on the checks that you’re handing out. Right? So the British government is cutting a lot of the checks for the whole country. Right? Yeah. And part of the, the canes strategy is to increase taxation on those checks that the immediate government checks that are going out the door, we’re going to increase taxation on those checks. I just find that an interesting part of the strategy that I’m not quite sure how that helps. So you’re burning that money back. So you don’t have inflation worries about all the new money that you’re spending. Right. Suddenly your budget for the military just went astronomical because you’re in a fight for your life. And the higher the taxation is, I guess, on that money, the more you’re immediately pulling that back to try to fight off inflation risk. Is that, is that the thought? That is, that is an important part of it. Right? The I mean, if you tax it all at 100%, then all of your fighting men are just, but then their families back home don’t have anything to eat. So that’s a problem. You’ve got to keep enough money circulating. It’s very, it’s just very new to me to be thinking about how the government has such a massive monopoly on where all the money is flowing in the entire country. Right? When all of your fighting men are working for you, you’re cutting the checks, you’re setting the tax rate. That’s amazing. What a, I find that fascinating to think of how much of a stranglehold the British government had on whatever fiscal policies they wanted to set right during wartime. Well, of course it wasn’t just the British government. The U S government was in exactly the same position. Yeah. Did they increase taxes when war broke out on they introduced withholding during world war two withholding for what? Social security? Was social security around yet? No, social security was around and social security withholding began, I believe at the end of 1936 or 1937. And of course the income tax began, you know, in roughly what 1913, 1916, because it required a constitutional amendment. But up until world war one, most people did not have to pay federal income taxes because they didn’t, they didn’t earn enough. Only the rich did. And it was only in world war two that the, that the, the, the flows of, of money from the government and the flows of money back to the government became so massive. So income tax was withhold income tax withholding was first implemented, I believe in 1943. And ironically enough, one of the economists who helped, who worked for the government and helped implement it was the arch conservative later arch conservative economist, Milton Friedman of the university of Chicago. But one thing that I would like to, an idea that I would like to interject at this point is that the question of the, of the government, or if I may speak in more political science terms of the state and its use of, of its spending, its use of taxation. This is a problem that goes back 4,000 years. The, one of the few generalizations that, that you can make or that I do make about states, sovereign states from, you know, the time of, you know, ancient Babylonia or the, the first, the first states in the Nile Valley in Egypt, the Indus Valley in the subcontinent, the, you know, the Yellow River Valley in China. Those institutions arose because their societies were transitioning from hunter gatherer tribal societies into primarily agricultural societies, agricultural societies, agriculture needs water for crops. They located in river valleys, the Nile, the Tigris and the Euphrates, the Indus, but those rivers flood and they needed an, they needed an organization that could manage the hydraulics of the, of the rivers such that they would get the water when they needed it and they would avoid floods. You know, when the, when the floods were coming and states arose for their purpose. And so when I teach, I say the, the, the simplest statement that you can make about the state is that the state mobilizes resources in pursuit of the public purpose. Say that after me, Jay. And I’m impressed. I remember that my memory is terrible. It doesn’t really matter what type of state that is. Every state has to do that. Well, hopefully, hopefully they’re pursuing the public interest and not the interest of a few oligarchs. We’re not even discussing competing interests at that point or class struggle or anything like that. Right. We’re sort of setting aside the question. Let’s we set aside for the moment. The question of how is the public interest determined? Let’s just sort of set this question aside because however that happens, whether it’s democracy, whether it’s fascism, whether it’s, you know, the Marxist movement, whatever it might be. Each of those states, you know, there’s has some sort of conception of the public purpose. And each of those states has some sort of conception of the public purpose. And each of those states, you know, has to mobilize resources in pursuit of that. If, you know, if they fail to do that, that state will not survive. So, and there are, you know, there are different ways, you know, you could, you could mobilize resources for the public purpose by plunder, you know, you think of a stereotypical image of a state, you know, and you can mobilize resources. You know, the Asian steps and terrorizing Europe or later the Mongols, you know, they’re all kinds of, you know, biased assumptions in terms of these societies. But, you know, plunder is a way of mobilizing resources for the public purpose. You can’t really do that over the long term, right? Or you can mobilize resources for the public purpose. You know, if you ever remember the movie Spartacus, you know, Spartacus is a slave working on roads, you know, or well, hey, these are the slaves of the slaves of the slaves of slavery. You know, the Egyptian state was, you know, one of their aspect of their public purpose was, you know, to build the pyramids to guarantee eternal life for the pharaohs. And they mobilized resources by, you know, enslaving the Israelites, but they also mobilized resources by, you know, hiring people who began to study hydraulics and invented geometry and trigonometry. So that they could, you know, see how the land was affected. That was, you know, that was, that’s a mobilization of public of resources, too. So, you know, you could have slavery, you could have in a later stage, you might have in a later stage, you know, a population of slaves who were enslaved by the Israelites. You know, people had to devote a certain number of hours of labor per year to the government. And that would be a way of resources. You could have taxation in kind, so that the government could say, you know, I’m going to give you a certain number of hours of labor per year, and I’m going to give you a certain number of hours of labor per year. You could have taxation in kind, so that the government could say, every family must deliver two horses and six head of cattle to the government. And that is a way of mobilizing resources for the public purpose. That’s, it’s taxation, but it’s taxation in kind. And of course, the problem is, is that that doesn’t scale very well. The resources that the state needs are likely to evolve over time. They become heterogeneous. They need some way of meeting the need for many different resources. Well, what some states discovered was that if they told the population, we are imposing a tax obligation on you, and you have to meet this obligation by providing, by coming to our offices, so to speak, and delivering over us these tokens, then you will have satisfied your tax obligation, and we will not put you in jail. The clever part is that, you know, people would say, well, we don’t have these tokens. How are we going to get these tokens? And the state would say, that’s a very good question. And the answer is that we need resources, which you in the non-government sector of the economy can supply, and we will give you these tokens in exchange for these things. And in fact, we will give you these tokens, and we will tax those tokens back, but we won’t tax all of those tokens back. We will leave a lot of those tokens in the economy, and you can do with them what you will. You know, they will be your financial assets. And so governments saw that imposing a tax obligation, which had to be met by payment in units denominated in things that the government, of which the government was the monopoly creator, the monopoly issuer, that that was a more efficient way to mobilize resources in pursuit of the public purpose than plunder, slavery, corvée labor, or taxation in kind. And hence we, you know, and the states that figured that out, most prominently the Roman Empire, you know, grew powerful because, you know, they would pay their soldiers in, say, Roman coins, and the soldiers would then go to the civilians in whatever area they were, Gaul or, you know, Lydia or Palestine, and, you know, give these tokens to the civilians there in exchange for food, clothing, whatever. And then the Roman tax collectors would come along and say, render unto Caesar the things that are Caesar’s. Taxation. Taxation. Invented it. And all throughout feudal, throughout all the feudal eras, that’s how everything went, right? Farmers were basically farming there forever, but wars would be fought and kings would come and kings would go, and there’d be a new king and a new invading army or whatever. And they would keep issuing the currency of whoever was in charge at the time, right? Yeah. And that currency to the extent that they were paid and not just, hey, we’re taking 30 of your sheep. Yeah. Right. So if they just take 30 of your sheep, that’s one kind of taxation. Taxation in kind. Or they take 30 of your sheep and give you a bunch of pieces of metal that are theoretically worth something, right? Yeah. And as all of these leaders are overthrown over and over and over again, the money keeps changing and the king keeps changing, but the system doesn’t change. The people with the swords and the standing armies are taking from the farmers who were raising the animals. Well, of course, you know, we’re talking about thousands of years. So there are ebbs and flows in this. Oh, yeah. I’m sure they got left alone for years. Yeah. Well, the collapse of the Roman Empire led to a shrinkage of the monetized part of the economy for hundreds of years. And the economy was largely non-monetized up to, what, 400 years ago or so, something like that. So, you know, these things ebb and flow. But what’s interesting, Randy Ray has a little item in one of his books, Modern Money Theory, what’s known as The Primer. When he points out that the European countries that were carving up Africa in the last half of the 19th century had a problem, that they, I mean, they were competing for, you know, the countries that we now call Nigeria or the Congo or Kenya or South Africa, largely because their imperialist rivals, France, Germany, Portugal, were in that competition. And they didn’t necessarily have a well-thought-out plan as to what was the economic motivation for setting up these colonies in Africa unless, you know, it could be like precious metals, things that were already established as targeted items. So they would like say, they would go to these, England might go to Nigeria and they would think, well, how are we going to integrate these people into the British imperialist system worldwide? Now these Nigerians and whatever, what we now call Nigeria, many of these people already had currencies, like cowry shells, right? And, you know, the British didn’t understand cowry shells. So they said, we will give you pound sterling notes, British currency for certain goods and we want to supply them. And the native population would say, what the hell are we going to do with these British notes? Sure. Right? And they would refuse. And they would keep their distance from economic interaction with the British. Then the British got the idea of imposing a tax. You might have heard of a head tax where there’s a tax on each individual person. These taxes were called hut taxes, a tax on each individual hut. And the British were the conquerors. They had the guns, you know, so they could impose the tax burden. And they built a nice hut for them. Yes. No, I don’t know. No, they did not. So they said, we’re imposing this hut tax and you must meet your tax obligation by using British currency. So all of a sudden the native populations had to get busy and figure out a way to get that native currency. Right. Right? So this is one of the important points that MMT makes, that taxation drives the currency. Right. Well, I just think, you know, in those various examples, mobilizing resources for the public purpose, was that the phrase? It doesn’t feel like the public purpose to me. When we watch the Disney cartoon Robin Hood. Yeah. And the people doing the taxation aren’t providing any services of any kind, any protection of any kind. The only protection they’re offering is that someone else doesn’t come take their castle over there. Right? Like that’s their protection. So to the extent that they’re not giving anything of value, providing any services of value to the people that are being taxed, that sucks. So that’s my economic analysis is that sucks. This is also your eight minute warning. We’re getting kicked out of here in eight minutes. Oh, okay. So let me just see. You were worried you weren’t going to be able to go 45 minutes and we’re at two hours. All societies at all times face constraints on their real resources. Hell yes, they do. But MMT’s focus is on whether a government like the U.S. federal government is financially constrained in pursuit of the public purpose. And basically MMT argues that while the United States government is constrained in terms of real resources, real resources including both materials and human resources and technologies, that it is not financially constrained. That it is because the federal government is a currency issuing level of government. And that distinguishes it from state and local governments which do not issue the currency. They use the money.

use the currency issued by the federal government, and you and I, individuals, households, corporations, firms, all are currency users. So MMT draws a big distinction between currency issuers and currency users. Currency issuers, particularly if they do not offer convertibility into gold and do not promise to exchange their currencies for those of other currencies at a fixed rate, those countries have the property that we call monetary sovereignty, and they have much greater capacity to manage their economies in pursuit of the public purpose. Now the public purpose may be something terribly awful. The public purpose of Nazi Germany was the extermination of whole populations. It was genocide. But that, at least at one point, was seen by the German population. The Nazi government was seen as legitimate, and it got to pursue the public purpose. The U.S. government created, just to speak of the current administration, the U.S. government created all kinds of funding for relief from COVID. The previous Trump administration had two rounds to, in which they just created money from nothing. All those checks you got with Donald J. Trump’s signature on it? I didn’t get one, but a lot of people did. I did. Did you? And I didn’t even vote for Trump. Oh, I’m so jealous. And I was retired. I didn’t even need it. I wanted those Trump dollars. Yeah, well, of course, he would tell you they were Trump dollars, but actually they were just dollars that, because they had been approved by congressional vote, you know, as Stephanie Kelton would say, if the votes are there, the money is there. And so the federal government does not have to amass funds from taxation or from borrowing before it can spend. In fact, when it spends, it’s creating the money that people are ultimately going to use to pay their taxes back to the government. So let’s see, any other points in my last few minutes? So the federal government’s budget and spending is not like that of an individual household. You have to amass funds before you can spend. The federal government is exactly the other way around. I’ve got a credit card, so I’m fine. But I take your point. So MMT describes the way that modern capitalist countries’ governments spend and tax, particularly as affected by their degree of monetary sovereignty. Countries which have a high degree of monetary sovereignty have what’s known as the physical space to do things which countries without high monetary sovereignty cannot. Fiscal space? Fiscal space. Okay. Right? But that’s not just, that’s not an MMT-specific phrase. Yeah, I hadn’t heard that one before, and that’s cool. But which policies such countries should pursue requires discussion of political and social values. What is the public purpose which the government tries to pursue? That discussion of values is what we call politics. MMT does not say what a government ought to do. It does say what a monetarily sovereign government can do is not financially constrained. It’s only constrained by the real resources available to it. Some suggestion of resources, read the book The Deficit Myth by Stephanie Kelton, came out in 2020. If you want to be on a mailing list, go to Google Groups and join the Modern-Monetary-Theory mailing list organized as a Google group. I started that five years ago. I have a Substack blog called, which you can reach at substack.com forward slash at sign political economy watch. One word, P-O-L-I-T-I-C-A-L-E-C-O-N-O-M-Y-W-A-T-C-H, political economy watch. Search for that on Substack. A lot of that I write from an MMT perspective, but a lot of that is my other political and social viewpoint, so it’s not just me. If you want more resources about MMT, I particularly recommend going to a website called activistmmt.org. That’s A-C-T-I-V-I-S-T-M-M-T dot org. It has a comprehensive listing of MMT resources, whether that be podcasts, YouTube videos, books, whatever, put out by one of my MMT colleagues, Jeff Epstein. Contact me. I can guide you wherever you want to go in terms of learning about MMT. Do you also want your email address in the show notes or anything like that? Well, we can discuss that later. Well, let’s let these guys get out of here because we’re keeping them from getting in. Well, thanks so much for talking to me, Jim. I hope my questions were a little more than totally asinine. That’s always my goal, is to flaunt my ignorance in a way that’s not totally embarrassing for my guests. Yeah, no, you didn’t embarrass yourself at all. Really? Oh, wow. Well, that’s a record then. That’s the first episode. I haven’t done that. So good safe travels to Denver. Thank you. And I hope you have a great safe trip all the way back to New York. Yes. All right. Take care. Thanks. Thanks for hosting. And thank you, Weberized. We’ll give Weberized a shout out too. I wonder if he’s still there back listening to us. I heard him, but I didn’t hear him through my headphones. Hopefully he hasn’t been attacked or something. I didn’t have the mic up. Oh, excellent. All right. Thank you. Thanks, Weberized. Yay. Did you want to say anything on the recording? You want to plug Weberized in the recording? If you’d like to call into the show, you can leave us a voicemail at 1-402-577-0117.