Usually the reason given for austerity, or lack of government spending on services and infrastructure is that there simply isn’t enough money – we must simply tighten our belts. The typical leftist response to this is that we should just tax the rich in order to generate the money needed for such expenditures.
But what if neither of these arguments is right. What if believing that these are the only two options is what is actually stopping us from improving people’s quality of life.
Stephanie Kelton is an author and economist, and subject of the new film ‘Finding The Money’. Her work as a proponent of Modern Monetary Theory and as an advisor to Bernie Sanders has put her front and center of the debate around government debt, taxation and the potential green industrial revolution.
She sat down for a remote conversation with Ash to discuss debt, Liz Truss and whether you really need to tax the rich.
You can watch the trailer for ‘Finding The Money’ here: https://www.youtube.com/watch?v=R47h_ux-nE8
And you can learn more about the film and watch it in it’s entirety here: http://www.findingmoneyfilm.com/
Novara Live broadcasts every weekday from 6PM on YouTube and Twitch.
Episodes of Downstream are released Sundays at 3PM on YouTube.
__________________________
Support our journalism by buying Novara Media merch:
https://shop.novaramedia.com
Donate one hour’s wage per month, or whatever you can afford:
http://novara.media/support
source
Debt doesnt matter, but debt interest caused by debt does matter for a government.
aua the most wishiwashi economic MumboJumbo
inflation = fiat funny money
Ash did a wonderful job asking the right questions. Your guest is a bit of a billionnaire apologist and there's a lot of things she said that are self-contradictory. I'd love to see her have a discussion of these topics with Yanis Varoufakis
If MMT would, for example, enable us to take public services out of private hands, that would represent a loss of income for corporations and their shareholders…so that would create opposition to MMT
This was excellent. Great questions, Ash. Thank you.
I think @garyseconomics has good explanation on why Covid spending increased inequality – basically government printed money but never took the money out again, hence (asset) inflation. So the government figured out it could run a deficit but didn’t apply MMT
Quackpot theory. The magic money tree! It's a fughazi. It's a woozy it's a wazzy, it ain't real.If you thought the Liz Truss 'mini budget' set the market on fire, can you see this one going going down well. 😅
I wasn't sure about this going in, but she really changed my mind. Ash's observations are astute as always, she really got the best out of Prof Kelton.
I hope the rest of Novara watch this and take it in, and stop ranting about tax payers money
Deprogram! Smash hetero-normativity! Decolonise economics😂😂😂😂
It doesn't work in addressing inequality as fixed assets increase as you devalue the currency (houses, raw goods, gold etc) – the latter owned by the weatist in society.
should have pushed more on the outcomes of covid stimulus question, because it really does seem to contradict what she is saying. same with the fiscal hole. if the 22B is an investment somewhere else, where is it? the answer is the money went to the wealthy. how and why? that is the crucial question that her perspective doesn't seem ready to tackle. at the most fundamental level, she is making excuses for inequality and protecting the wealthy, while only symbolically paying lip service to the aspirations of the working class.
23:20 Can someone explain what she means by 'yields'?
I think that was an excellent interview with a highly relevant economist. Bravo for asking the right questions (e.g. why Liz Truss failed / impact of Covid spending on the wealth gap) and then letting Stephanie actually answer without interrupting her. Too many interviews turn into either a disrespectful tit-for-tat, or a battle of egos, neither of which were present here. I'm not entirely satisfied with some of the answers (e.g. the covid spending), but at least this I/V has provided UK citizens with the thoughts of this hugely relevant modern economist. I personally see MMT as the round world answer to the trad economists flat earth. I love her answer to why so many economists reject MMT. Similar story occurred in diet in the 1980s when Australian universities disproved theories of simple v complex carbs through actual testing, now referred to as GI. Despite the actual proof, dieticians to this day still refer to the old approach, because that's what they know and it's too much of a fundamental shift to accept that the basis of their entire education and professional work was actually wrong. To me, the biggest question is whether we, the mass public, will actually expect our politicians to act responsibly once our basic understanding of MMT is widely known and accepted. The pressure on politicians to act irresponsibly with currency creation will be huge. Everyone will want 'free money' but nobody will be prepared to accept the required taxes to control the money supply. Let's see how this plays out.
Well, hello pie. Fancy meeting you up here in the clouds.
DeFiciTs doN't mAtTer bEcAuSE 'sOmEoNe' iS bEneFitTinG FrOm tHe deFiCit.
This is brilliant stuff. And it really highlights the fundamental problem of many Western governments, they don't understand economics and are obsessed with government debt to our detriment. Or more cynically, they do understand but they are banking on the fact that the general public don't understand so they can carry on gaslighting us with austerity.
In my understanding, any spending that would increase productivity more than the spending you increase inflation you can load within reason as much of that spending pretty much irrespective of anything, because what causes inflation when it comes to goverment spending is printing more money than good and services that are created, if you increase the number of goods and service aka increase productivity you don't cause inflation by printing more money.
Now this is an ideal scenario and IRL it will take time to reap the benefits of this type of spending while in the mean time will still have the inflationary effects of the spending because these types of things are road, bridges, schools, internet infrastructure which take time to build and in the case of schools even after you have built them the students have to go through the education and then will take time even after that to get good jobs in the industries you need. So you still can't completely ignore tax policy, but also at the same time it will provide a net benefit in the long run so running a deficit to do these kinds of projects is completely justifiable as long as you are realistic about the productivity gain and how much the project will cost and keep inflation within the bounds of reason in the short to medium term.
If we spend a lot of ‘public’ money well and create more competitive products and services against other economies in the global market … we will win! If we spend the same amount of money on bailing out on-going failures and ineffective programmes that have no beneficial outcome other than keeping broken things struggling on … we will go broke?
HOWEVER … that has ALWAYS been the case in any enterprise!!! Decide what you want to do first … then produce convincing economic and investment cases to justify the venture …. THEN sort out how to finance it. THEN put Elon Musk in charge of implementation to make sure it gets delivered!!!
OLD SAYING No 1 …”don’t throw good money after bad money”
OLD SAYING No2 … "you don’t make poor people rich by making rich people poor”
Two reasons Stephanie is fundamentally wrong, and speaking from what I consider to be a very neoliberal perspective:
1. Deficits do matter – money markets place a value on government bonds – if the deficit gets too high, as it did when Liz Truss famously sought to borrow, the BoE is forced to raise interest rates, and that affects anyone with a mortgage. International investors are also put off as inflation rises and the economy becomes unstable.
2. Of course we need to tax the rich: their wealth equates to power; the more they have, the more they are able to control the political system in their interests to the detriment of everyone else's, the more the political system becomes unstable. We can see this happening most alarmingly in the US, but increasingly in Europe too.
The rich will always find ways to avoid paying their taxes.
The UK is riddled with tax loopholes.
Poor pensionsers and workers in general cannot avoid paying at least 20% of their income given to the taxman…Then of course there are many other taxes.
There is no escape for most in the UK, but the UK is rife with Tax avoidance and evasion.
MMT isn't simply a set of ideas, it's a model which describes how modern economies work and why the policy of austerity has been so damaging. It's not a theory that needs any sort of paradigm shift to adopt (like the shifts from barter to coinage to paper money), it needs to be taught because it informs us of the reactions you get to different spending decisions.
As it turns out, it's quite an accurate model. It even describes the precise mechanism of the hyperinflation which afflicted Weimar Germany, Zimbabwe and Argentina.
i still don't think enoug of MMT's basic concepts/philosophy were here explained. It seems MMT wants to say inflation is the bad guy, not deficit. But it wasn't said what kind of thing is inflationary and how one manages that, and how this intersects with the political project of redistribution/reducing inequality.
i have a feeling that the class conflict problem we sense in the pre-MMT view of economics, ie. one of money/wealth as a scarce commodity, just comes back down the line with MMT? like I assume if we keep inequality the same, print money for infrastructure projects, that is inflationary right? and surely there's no way of stopping that being inflationary other than redistributing wealth from the rich to the collective? i know i am simplifying a lot of financial shenanigans here but it does feel like MMT is just fighting a semantic battle, a worthy one for sure, but that the fight against inequality is going to continue in the same vein, just understood framed and conceptualised differently. and that this new frame may well be beneficial for the left, but one shouldn't think that its some get out of jail free card?
no
Wow! 🍿I will literally be eating popcorn as I watch this 🙏
I feel like Stephanie fell apart a bit when Ash pressed her on the fact that the wealthier got far wealthier during covid. If you run a deficit you have to look at where the money is going to end up. All furlough payments did was pay the business owners when they weren't producing/making anything, much lower outgoings, hence they got richer. However, the average furloughed worker didn't end up better off! You can't print money without paying close attention to the distribution of that money.
EDIT: just got to the part where she essentially argues for a permanent furlough scheme which we know makes the rich richer. I sense she has an ulterior motive she isn't admitting too. And if I had to guess it would be 'let's try MMT and if everything improves then the general public won't go after those nasty tax-dodging rich people anymore'.
poltical class & union leader grubs steal the money anyway it wont benefit middle class & upper class taxing the rich more private sector
You can print all the money you want, somebody is still going to have to work. And if money is worthless we end up in a barter economy.
Great interview, but would have been great if they explicitly explained whether the deficit is financed by issuing debt or printing money. Implicitly, it seems to be money printing but I now have to go check, annoying!
A couple of truths we all know if we take 5 minutes to think about it….
We use money to pay for stuff with real value, it has none of its own.
So when you acquire money (selling or working) you can only recover the value you gave up when you exchange (spend) it for something else of real value – Consequently that value has to be created (or preserved) in the future.
…..Creating money costs nothing, not creating (or releasing) it to enable the creation of assets with tangible value does.
My concern with MMT is that you can print money, but you can’t print value, you simply dilute it. If you track MMT and the S&P, very little if any actual value has been created, it’s just gone up proportionate to the money printed. Similarly house prices now are outrageous. These are symptoms of financially literate realising in a world where money has less value, they need assets that will increase with money supply. However the poor are not in a position to obtain assets and so is MMT increasing the wealth gap?
I do not buy her arguments. The fact that tax does not have political strength is just because the imbalance of power. Unfortunately our politicians and our elite are the same people.
Second. The burrowing to fill the deficit creates debt that further increases inequality. I was surprised no to hear about government debt.
Lastly. I didn't hear any meaningful element of MMT beyond renaming certain numbers.
Um, if we tax billionaires at 3% and they still accumulate wealth, then next year WE get more tax revenue (as well as the funding for social programs and public infrastructure). To be honest this women is a bit daft, and I hate say it but stands as an example of why the Left suuuucks at economics. The point of tax is not to punish wealth earners, it's to get some of that pie (back) for us.
Wealth inequality has occurred to such a rate mainly DUE to monetary policy like she is describing
We don’t exclusively pay for government expenditure through money creation as she wishes we would. But we do it ALOT and every time it makes the already wealthy MORE WEALTHY
props up stock market, that money is used to bail out companies and banks, used to fund the military industrial complex. Hell even when you give it out to people directly in the form of subsidies that money is simply spent on good and that wealth trickles up….. but now prices have gone up to compensate for the increaed in demand spending.
Not to mention artificially, lowering the interest rates, which is the secondary effect from all this money creation…. Completely destroys entrepreneurs ability to know the accurate amount of resources there are in the economy to map out sustainable growing companies.
The policies to this point have led to massive malinvestment that have come back to screw us over once Central Banks had to raise interest rates to counteract for inflationary policy.
Entrepreneurs then realized that their business wasn’t sustainable long-term, and we see massive bust within the economy because businesses started that should not have started. Or rather they should’ve started later on.
This woman saying nothing new she’s just adding caveats on top of stuff like now we need to tax to counteract for the negative effects that come about due to the policies that we incorporate. Not even taking into consideration that no matter what you have a tax rate on you about 19% of the overall GDP because there’s all these tax loopholes.
And if there wasn’t all these tax loopholes, if you actually had to have the taxation these people want to compensate for inequality or counteract the terrible policies they implement, you would directly hinder economic growth.
So their policies fuck things up,they bail shit out leading to a whole new cycle of fucking shit up … until things are so fucked up they just slowly morph into a centrally planed economy with a central absorbed into the actual functions of the government
Which is a uncontrollable amount of power for a government to obtain, and probably leads to some sort of terrible dictatorship, and future currency collapse as the power to inflate your problems away as a leader, impossible to resist
The reason to link taxation to spending policy is so that the rich can see their taxes going to improve the economy. The wealthy don't want to sit around with their wealth. They want to get richer. So their taxes have to result in economic growth. As the economy grows, they are less averse to more taxes. That's the political side of MMT.
What is she talking about when she says Banks don’t like government deficits?
Banks largely are the ones buying the bonds that the government put up to have funds .
The federal reserve cannot legally buy directly from the government in that manner , on the secondary market, the federal reserve buys up those bonds that the bakes purchased and gives those banks newly created money
So the federal reserve in a roundabout way funded the government expenditure, and the banks are the middleman profit in the middle .
Why exactly do they hate that?
Especially considering the fact that they get bailed out every time anything wrong happens within the economy after all the misallocation of resources that occurs from all of the money creation that fucked up every single entrepreneur, how many resources were available within the world . Destroying their ability to properly gauge out long-term successful investments.
Unless she’s talking about completely, just getting rid of all the banks and using the federal reserve or the bank of England to directly stimulate the economy without the banks ….. Like the other comment that I had previously that’s gonna leak to some really weird political shit as people try to obtain the power of the money printer even more so than they do today.
It’s not gonna be a good time and the inflation area effects are not going to be limited because peoples uncontrollable pursuit of power in the ability to just endlessly fund whatever they want enforce people that disagree with them to live in a world controlled by them because they own the money outright and control where it goes
Also at the end when she’s talking about UBI versus the job guarantee
They want the UBI
She purposely did not give an argument against the people saying that the de facto short term UBI with the stimulus checks was a large contributor to the inflation during a time of shock….. You should question why she would not want to counteract that in an interview if it was easily counteractable.
Here too you are thinking wrong. You have to think like this: What makes a Ford a Ford? What makes a Ferrari a Ferrari. Shut up. Yes the price but think about it, it's not just the price that's irrelevant. because they have managed to establish themselves in every area (elite). cars, houses, jewelry, watches, properties, land ownership, companies, but Mendizin is not yet under their ownership and control and the essence of all this is PRESTIGE. that only the best can afford.AND ONLY THEY. For years we as normal civilians have been able to access and receive all kinds of medicine and in recent years it has become unaffordable. PERSTIGE!!! It is only available to the ELITE and (earthworms) cannot and are not allowed to get it!
One problem is that the values she calls "real outcomes", i.e. inflation and employment, are completely bogus measures.
Most people understand that inflation is an almost infinite vector of values, one value for each good in the economy.
Collapsing the inflation into a single number is a complete fiction from economists. Inflation as a single number is what does not exist.
The same is true for employment. You can force people into non-productive work, and each job is different, so looking at employment as a single number is a pure fiction.
Both of these numbers are pure fiction.
However, the currency is a single unit and can be compared. Inflation measures are completely arbitrary, so nobody can really say what inflation is, or what number is correct.
So while mmt might be correct in looking at "the health of the economy", they are pulling wool over your head when they pretend they can measure this. They cannot. They have absolutely no idea about this.
Just look at what the Fed does and how it tries to read the economy. Empirically they have absolutely no clue. And then they have the balls to pretend that what they measure in a single value is "the real economy".
Also see Prof Richard Murphy.
No! No! No!
If MMT is true then we would have discovered it at the dawn of civilization and there would’ve been mana from heaven all this time. Excessive debt and money printing have always mattered and have resulted in hyperinflation.
Nice, but when the so-called 'fiancial surplus' ends up in the hands of Wall Street and the richest 1% we are no better overall.
this is sh*t, it is just wording game, changing thr language, the underlying pricipals are not changed and she admits too, and it just trojan horse for gov to have more control and bail themselves out more easily when they do careless spendings and actions
At last, Novramedia finally get it.