L. Randall Wray -- MODERN MONEY: the way a sovereign currency "works"

Economics Professor Randy Wray answers the questions:
What is Money?
Why is at accepted?
What is the relationship between money & government?
What backs up our money?
Can the US government run out of money?
You may be surprised by the answers!
From the first seminar of the "Modern Money and Public Purpose" series at Columbia Law School.
To watch the full seminar, including Q&As, and for a list of suggested readings, please visit the Modern Money & Public Purpose website:
www.modernmoneyandpublicpurpos...
SPEAKER BIO:
L. Randall Wray, Ph.D. is a Professor of Economics and Research Director for the Center for Full Employment and Price Stability at the University of Missouri-Kansas City. He is also a Senior Scholar at the Levy Economics Institute of Bard College. Dr. Wray was a student of Hyman P. Minsky, whose work on financial instability has received significant attention following the global financial crisis. He is the author of Understanding Modern Money: The Key to Full Employment and Price Stability (Elgar, 1998), and currently blogs at New Economic Perspectives and at Great Leap Forward.

[@yamahantx7005]

Wow! "Taxes drive money: state imposes obligation". Not my words( 11:34 ), but I couldn't have said it better myself. It's not about my money being able to support my family, it's about my money being able to support the state. No matter what the cost.

[@mojorhythm]

More people need to learn about Modern Monetary Theory, as well as Circuit Theory and the Financial Instability Hypothesis. If these ideas were mainstream for the past 50 years, the GFC never would have happened.

[@GenghisVern]

Good to see this lecture picking up views.

[@alexkampa1355]

Re question 5: "Persistent budget deficits will burden future generations with inflation and higher taxes." The answer to that is not simply "FALSE". It should rather be a more nuanced: "FALSE UNLESS such deficits are excessive." Money issued by the government is essentially a "promise to tax" - even though the government has the capacity to issue a certain, rather large volume of money that can circulate indefinitely without need to be redeemed by tax. But "rather large" is not the same as "anything goes".

[@TheRealTUFFY]

Dropping this class.

[@timalp3680]

Imagine the people around 45 years old or older in the audience, and they've spent all their free time in the past with their friends/colleagues talking about money and balancing the budget and all the other myths that they had been taught to believe...and then learning the truth...realizing everything they thought they knew had been one big lie... wow

[@Rob-fx2dw]

This MMT is the big lie which relies on not so smart people being told stories that deem to right but on closer examination don't fit reality Just see their idea that the government doesn't need taxes but their other idea is taxes are to provision government. It cannot be that both ideas are true. So they are either both wrong or one is wrong. There are many other fallacies in MMT like their claim that taxes put value into and get money accepted. This demonstrated to be wrong simply by the fact that in economies where massive inflation made the money worthless there were also taxes. That proves the theory is wrong again.

[@MrNetbacker]

Is there a way to get hold of the slides? Especially the initial True or False questions. thanks

[@mrzack888]

it's a shame this video only has 11k views while stupid Austrian conspiracy videos have millions.

[@86blackberrywhite]

The Federal Reserve is to libertarians and many progressives what radical Islamic terrorism is to conservatives and Russia is to Democrats. It seems as though all sides of the political spectrum need to create some sort of ultra-evil boogeyman in order to inject purpose into their lives. Unfortunately fear appeals to the uninformed masses more easily than reality does.

[@bashful228]

It's how the rich get richer and the poor get children!

[@Userkzb20253]

When deficit is high, it may trigger inflation. What is too high? How to spot too much deficit? Is it quantifiable?

[@bashful228]

Is the Powerpoint file available?

[@user-ox6kf1gt6u]

I guess Obama didn’t know our monetary policy when he said we don’t have the money for stuff.

[@jackthelad6137]

i wonder how this fits with the fractional system where it is not the central bank who creates the money, and especially never is the government institution that creates it but the system itself. and how this system creates debt. how will this impact the system considering the monetary value is around 9 to 1 for actual values of capital versus amount of fictional money. not to mention it is itself adding to both inflation and causing policies for low or even negative interest rates.

[@fanuvgamez]

It doesn't matter whether a currency "can default". You can always print more "money"...the question is, what is the value of money. If the world market deems the US dollar as valueless...you can print all you want, but they have back handedly defaulted you regardless.

[@jordanzhou4915]

Dr. Wray’s money theory is developed through the observation of the behavior of the real economy over the decades, which the orthodox wisdom can’t explain to common people. Thanks for sharing

[@dennissalisbury496]

Monetary System mobilizes resources, taxes drives money, the state spends its currency into existence.

[@bms2070]

try a screen grab (print screen function assuming windows).

[@ymkamara420]

But where did the points come from? Think about it. If you are to slow to understand the analogy. Think of it this way. If the government allows anyone to print money then the currency is no longer sovereign. MMT only deals with sovereign currency.

[@BeNNzuFG]

The price of gold (value) and the gold price (fiat) are different things. The gold price is, but the value of gold is never set by an issuer of fiat. The Romans didn't have fiat and only traded on the basis of gold value. The gold standard was nothing else. The value of one ounce of gold was tied to one price ($23). So under the gold standard the value, not the price, was still traded. Today however, the gold price is manipulated at the COMEX via unsound paper delivery promises of phyical gold.

[@bms2070]

Inflation is not created by just printing money. It has to be created by printing money in excess of the productive capacity of the nation's factories and its people. Currently in the US there is a massive amount of surplus, unused productive capacity. Therefore its towns and cities will be able to absorb hundreds of billions of additional cash with minimal additional inflation.

[@Dgfrmxon]

25:50 "It's possible the dollar could devalue" Sounds like a physicist saying if you drop a ball it's POSSIBLE it could fall due to gravity. If we introduce more money into the market then it will go down in value, which is inflation because that value is relative to the market prices. Is inflation not simple supply and demand? I get that we have low inflation, and that means there's really high demand for the dollar - in SPITE of printing. There should be no question that printing devalues

[@BeNNzuFG]

Just one more thing. There are two main differences between an individual household and a gov. 1) a gov can have $ created out of nothing (no crime). When you try this, you go to jail (private printing of $ is a crime). 2) When you are broke, the REPO squad comes and takes your stuff. When a gov. is broke it simply declares bankrupcy, The creditor (i.e. China) then can either send in the national REPO squad (the military) and open WW III to consficate the gov. national assets, or do nothing.

[@ArtificiallyIntellegent]

Money only holds values because there are goods and services available to be bought with that money. This is THE FUNDAMENTAL concept of money. Now tie the State's Tax restriction. Govt can spend as much as it wants but with diminishing returns. We reached that limit in the mid-80s (read flow up funds Z1 archives).

[@BeNNzuFG]

The problem is much more fundamental. The more you print, the less your currency becomes worth; simple as that. Then Gresham's law comes into play. At a certain point, you will have your bundles of worthless paper dollars and no one will take them, but ask for gold coins, silver coins, commodities or credible currency (i.e. with a gold standard). This is what China is currently doing. They get the physical gold of this word transferred from West to East and dump US treasuries. Others follow

[@tiki2188]

Very interesting stuff! And just from my observation QE seems to have been a failure (at least at "doing" anything) but I never got an answer why..finally it's explained why QE hasnt worked and cant. Shame im in NJ, Id like to do my masters in Econ at UMKC!

[@BeNNzuFG]

An "accounting debt"? What shall this be? Originally, you had the exchange of created work (I created a belt and I want a bread you created). With currency, you had the exchange of created work for a promise that some desired work is or will be created (My belt for an ounce of gold. I accept this gold, as there has been common agreement that it can be exchanged for all commodities; including bread. Acceptance of money is based on trust of exchange value, not taxes.

[@JonathanSchattke]

So... confidence is all that any currency has and was the entire reason behind the great inflationary episodes ... right. Tell me another one.

[@Notecrusher]

+Jonathan Schattke Whaaaa???? Who said anything about "the great inflationary episodes"?

[@bammbamm12]

But the score keeper "gives" nothing. He records. I think you need a revised analogy.

[@BeNNzuFG]

A country is like a single household on a global economic scale. Of course the US could always print and require the US economy to accept payment in $. And yes, you would probably be able to still buy all the stuff that was produced in the US. Problem is that the US could not buy foreign commodities anymore - hence no oil from the middle east, no BMWs from Germany etc, - if no gold or credible currency is put up. This leads to limited FDI. And this is exactly why East Germany went broke.

[@BeNNzuFG]

The benefit of gold is that it is sure that you can trade it for whatever you want. Our different approach here is that I see gold and silver as real money, because I know I can always buy stuff with it. The price of gold and sivler are not determined by the market; unfortunately, but manipulated at the COMEX. The Central Banks do their best to keep it that way by stacking most of the golal gold and selling it to the market whenver they feel that gold gets too high and trust in fiat vanishes.

[@CosmosPrivateer]

I said create not print. Very little is printed these day's. You even create money when you take out a loan. Where do you think it comes from? It sure doesn't come from other peoples savings because funds in savings account are never removed.

[@ArtificiallyIntellegent]

Reason why the MMT reasoning is still hanging around is because dollar has International currency stardard i.e. Foreign central banks willing to accept dollar to settle their exports of real goods. Oil sells in dollar, adding value to the dollar money supply. And thirdly, 3rd world countries need to pay off their "bridged loans" issued by IMF in SDRs and Dollar. In 1971, Nixon said "We are all Keynesians now". In 2008, we Americans said "We are all Japanese now"

[@bms2070]

Macabre points out the current system of US money creation, which relies on the creation of debt (Treasury bonds). That is not the system of sovereign money creation that Wray is talking about. In Wray's system no debt would be generated along side the money created.

[@CosmosPrivateer]

Zimbabwe always Zimbabwe. The only way we can not pay our bills is if they cut off the money supply and that's what their doing to the people as I type this. I say create more dollars and remove all debt while retaining all property. All our problems would go away at least for a few days anyway.

[@BeNNzuFG]

I would disagree that Roman coinage was 'fiat money'. Fiat money is defined as an object of trade without any inherent value. Roman gold coins surely had and still have inherent value. But it is true that some of these coins were debased over time. The greeks i.e. mixed copper in the coins to pay for the second peloponnesian war. This was probably the first time of a recorded inflation; no different than printing 2 $ bills, even though only one bill is backed by one ounce of gold.

[@Dgfrmxon]

That's not productive capacity you're referring to. You're talking about the private demand for dollars - and not just the demand, but the demand growth. Inflation will not happen when private demand growth for dollars is equation to the new issuance rate.

[@bammbamm12]

I know this game. 1. Immediately exploit your advantage over the audience by disarming them right off the bat. 2. Take advantage of their ignorance. 3. Brow beat the shit out of them. 4. Make them feel "archaic". 5. Do not address the 500 weaknesses of your theory. 6. Never, ever, take on an opponent on a level playing field.

[@BeNNzuFG]

As for 2), I humbly disagree. I think that the gov. de facto does not owe you anything. They would, if your $20 were still backed by gold or silver or anything else valuable that the goverment had; just as it was in the past ($ backed by a gold standard while the gov. gold was sleeping in Fort Knox). In that case, indeed you could go the gov. and demand your gold/silver for your $20; just as France did in the 1960s. But today? What sort of material debt should the government have towards you?

[@WilhelmDrake]

bammbamm12 bammbamm12 "You said, "because it's illegal". 2) No kidding? Then how come the government can? 3) Keep your snobbish comments to yourself." 2. Where else would government money come from? The dollar is a debt of the government, the debt in which other debts are denominated. You can issue your own IOUs at will. You can even denoninate your IOU in YOUR IOU. I can issue my IOUs in "Vilhelmos" Instead of a "10 dollar IOU" it would be a "10 Vilhelmo IOU" The problem is getting them accepted.

[@johnsgyimah3602]

didn't you see the two guys be hide him one with the string's the other with the knife in his back lol

[@jwkelley]

A deregulated market causing a debt deflation bubble/ spread sheet recession is Keynes fault?

[@gnolhsobners]

"What Gresham's law has to do with this I do not know." Nothing at all.

[@mojorhythm]

Almost every intellectual is like that.

[@bammbamm12]

1) You answered exactly as I forewarned you not to. You said, "because it's illegal". 2) No kidding? Then how come the government can? 3) Keep your snobbish comments to yourself.

[@ymkamara420]

Part 2. American has been printing hard since 2009. google"St. Louis Adjusted Monetary Base (BASE)" Where is the hyperinflation you people keep crying about?

[@Rob-fx2dw]

If the long standing tradition of budget balancing is not a desireable criteria of an organisation then why does government through LAW reauire all institutions to either present a budget balance or dissolve the organisation and sometimes jail the directors simply because they went out of balance. That is a fact. The other fact is government wants to be the sole organisation in the community to go out of balance because politicians want the financial power to do what they wish without the financial responsibility of balancing their budget. In essence they want unrestrained use of finances without responsibility at the expense of everyone else in the community. Absolute financial power with absolute corruption of all financial principles. We have all heard the expression - Power corrupts and absolute power corrupts absolutely !!

[@GeoffCoventry]

Rob, simply understand the difference between sovereign currency-issuing nations and all other organizations. No business or household issues a currency. Budgets are to balance incomes & expense (+borrowing). Currency-issuing nations don't have income or debt - they issue money. MMT simply explains how best to use such a system for the good of all. It can be applied from any political persuasion, but a proper understanding of modern money will challenge most current fiscal policy approaches of both the left and right. itsthepeoplesmoney.blogspot.com/p/how-money-works.html

[@Rob-fx2dw]

Geoff Coventry I understand that but the inference that MMT makes is that MMT theory will work to improve any economy. There is absolutely no evidence that this is so and the reason for that is it is diconnected from reality. Reality that is the test of any theory and the result of that test is either improvement or failure. The consistent failure to answer questions of how MMT works leads me to believe that it is a belief based on theory alone which has no credibility in the market place and fails credibility tests because it's logic is faulted. And theory alone is worthless. You could have atheory that fairies make wealth but it would be useless in my opinion since no credibility in the real world exists in my opinion. Perhaps you can explaning some things I have asked others about MMT. One of them is why the reality test of a model or example of a small economy is not relevant to MMT. Why do you believe sovereign currencies are different from any other currencies from an economic perpective. There is nothing special about sovereign cueencies as a form of money. Where is the difference from a sovereign currency and a form of money issued by a bank or financial institution ora company which issues bonds or notes. In my view there is nothing other than the government tax authorities accept them as payment for what one owes the goverenmnet. That is the answer MMT theorists often give.. But don't issuers of bank or company bonds accept them as payment? Yes they do !! Do private people accept their promisory notes as payment - Yes they do. Sometimes they go broke and their money is worthless after issuing notes or bonds but they are not alone in this. Sovereign currency counties do and have done the same. There is nothing other special about them apart from the fact that in many countries they have been printed by government money expansion to the extent that they are often worthless. Just read the history of countries that have defaulted and expanded their currency units to the extent that it has become worthless. You will have to provide answers to these questions to convince people to join your MMT Theory otherwise it is just a fairies in the garden belief bereft of real tests or reason and application to reality.

[@GeoffCoventry]

Rob Mews It seems you have brushed up against MMT but perhaps not dived in to the scholarship in-depth as these issues have been written about quite extensively. Here are a few thoughts: 1. MMT is first and foremost a description of how modern monetary systems actually function, down at the balance sheet and operational level of the Fed, Treasury, banks, private sector, foreign trade, and foreign central banks. 2. As such, MMT "works" in every economy since it explains much about what is going and, and therefore, what is not working and what is. (For example, why the current Great Recession didn't become another Great Depression). MMT scholars have written extensively and convincingly about macro-economic outcomes using this framework. 3. Despite its poor name, MMT isn't so much a theory as a description of operational realities and accounting identities. 4. That said, MMT does provide policy direction, and suggests a different approach that focuses on the health of the economy and not on irrelevant accounting metrics such as debt-to-GDP and balanced tax-to-spend ratios. 5. To your questions: i) "One of them is why the reality test of a model or example of a small economy is not relevant to MMT." I'm not sure I understand what you are asking here. MMT principles can certainly be applied to any sized economy, and models have been developed that test the assumptions (see Steve Keen's work) ii) "Why are sovereign currencies different?" This gets to the heart of MMT. Sovereign nations issue their own currency. Nations that peg to another currency, peg to gold, or simply use another currency (e.g. Euro) lose the ability to issue on demand under any circumstance. They have made promises they can't guarantee and hence can get in financial trouble (or default). The US can always pay any debt or obligation in US$ since it is the monopoly issuer. Hence, Japan is not Greece despite 250% debt-to-GDP. iii) "Where is the difference from a sovereign currency and a form of money issued by a bank or financial institution" The main difference is the liability. All bank debt creates an equally sized claim on private sector incomes, which can become unsustainable (un-payable) - i.e. 2008. When banks create money they also increase the burden on incomes. When Governments inject new money into an economy, it is a positive flow that increases incomes in the private sector. There is no claim on incomes. It is akin to exports - goods are produced & sold and $ flow in to the business from "outside" the domestic private sector. iv) "Sovereign currency countries go broke" Not so. As discussed, only if the give up sovereignty (peg, fixed exchange, currency-user) or denominate significant debt in another currency, or have a complete political or military failure. Your concern is really one of inflation. Can nations issue too much money? Yes. Does issuing money always create inflation? No. When there are underemployed resources, issuing money just puts them to use, it doesn't create inflation (in the same way a bank loan puts them to work). Hyperinflation is a unique occurrence usually associated with the destruction of a nation's productive capacity. itsthepeoplesmoney.blogspot.com/2014/04/money-myth-10-persistent-government.html I hope this helps a bit. I encourage you to stick with it and read the literature. It can take a while to grasp the fundamentals as we've been taught the wrong stuff for so long. (Wray's book Modern Money Theory: A Primer is a good overview www.amazon.com/Modern-Money-Theory-Macroeconomics-Sovereign/dp/0230368891/).

[@Rob-fx2dw]

Geoff Coventry I understand that your MMT is largely about how many governments have worked in the recent past. The fact is that the more they work like MMT the more the failures of the economy will proliferate. You might ask why. Well most of it is staring one in the face. So much that it is often missed. That is what you seem also to have missed. MMT assumes many things. Firstly the theory is based on an assumption that the controllers of the money (government or it's agent) have some sort of superior knowledge to those who want to use it. That is a wild and inaccurate assumption. Do you know how best to use any amount of money rather than the many users? I would think Not. Does government know how best to use an amount of money. No. If so then it would be best to give government use of all of the money in the economy. That would mean giving all of your money to politicians most of whom are only interested in appeasing a significant number of voters in their electorate no matter what the level of expertise members have. The other assumption you make is that there is some superior knowledge that the MMT theorists have about the level of unemployment and it's relationship to the wealth of an economy. This is a wild simplistic theory based on further assumption of superior knowledge which in fact does not exist. It looks at the unemployment level and assumes increasing employment numbers alone will increase wealth even though that unemployment rate may be relatively small and caused at times by frictional matters such as disasters, changes in resources like depletion of minerals or agricultural disasters or may other factors. You also fail to distinguish between bank loans so called putting people to work and credit exppansion by government. They are not the same and you should not confuse them. Some important differences are:- Bank loans are not handed out by government officials for political reasons like appeasing an electorate. They and the interest are based on relative ability to repayinterst and the capital which is reviewd over time by the bank . That does not occur with credit creation money. there is no review or retraction of the facility. There is no default by the recipients. Another difference is they are in the most part repaid which is what your MMT theory totally ignores. The debt is extinguished reducing the created money unlike that of governments who do not extinguish that debt. If you could create money yourself and never extinguish it you would have ultimate financial power. But you cannot and nobody other than the government can according to the law. If you did issue counterfeit currency despite the fact people would not know and act as if it were legitimate payment. It would enable you to distort the money supply to your own desires. The government would jail you since you would be distorting their plans yet they do it themselves. But by your argument you would be doing everyone a favor by 'taking up the slack in the economy' !! You say "When Governments inject new money into an economy, it is a positive flow that increases incomes in the private sector. There is no claim on incomes. " You must be able to see that is categorically wrong. It is wrong since it ignores the fact that government creating new money competes with existing money in the marketplace. It must since if it didn't there would be nothing it could buy in any marketplace. You must be aware that there is a demand supply curve which affects prices and availablity. It is basic . Yet your statement of yours ignores that fact. For example if one goes to build a house and the builder has a higher paying contract by government then he or she will most likely not sign up your contract because of that. If you go to buy a car and the prospective supplier has a higher price offered by government then you will miss out on the purchase at that price because of the competition by government. Your statement about Japan is also wrongly thought out since Japan has huge foreign holdings all over the world which it built up in the 1960's and 1970's. They include Norwegian shipping companies, Australian real estate and industrial, New Zealand property and industrial, Malaysian investments, US investments, and European financial investments. Greece has little of those overseas assets and huge foreign debt to European countries alone. That is why they are asking today for their debt to be halved. It has also defaulted on debt in the recent past. Not so Japan. Even then it's currency has dropped by 30% over the past ten year largely because of debts. In the 1960's and 1970's it was rising. In fact it rose some hundreds of a percent in a ten year period agaist many first world currencies including big rises against the US dollar. You say countries with soverign currency cannot go broke. Yes than can and have. Look at Brazil as an example. Their currency was going broke without a complete military or political failure. Have you not heard of the Brazilian Cruzeiro which fell to a miniscule value late in the 20th century. So much that it was replaced. As did many others in the later part of the century. You say that when banks create debt they create a 'burden on incomes'. How do they do that since they facilitate a contract that would otherwise not exist and this would stifle investment or trade. You ignored this. Without lending by financial institutions there would be virtually no purchases. It is a paramount part of the understanding of activity which you have ignored. You could not have a business since you could not transact exports or imports or internally trade. Have you not heard of financing a letter of credit (LC) for trading which is an everyday occurrence for traders? There must be a trillion or more of those ocurrences every month in the USA alone. Much more than the total expenditure of some governments. You clearly notionally seperate the domestic economy from the impact of government activity. Yet it is government activity in the domestic economy that interst rates, money expansion and taxes operate on. Ther is no real seperation of government activity fromthe domestic economy. Government activity uses resources from the frivate sector every day otherwise it could not operate at all. Goods such as transport, real estate, computers, power, vehicles, professional and trade services. You are blindly ignring this which is a conveniet way of promoting something taht does not stand up to scrutiny.

[@GeoffCoventry]

Rob Mews, That's a whole lot of *blindly ignoring* you're claiming ;) I'm not sure where you're getting these ideas but there's a lot of straw man and not much MMT substance in your comments. - MMT is not about how governments have recently worked, it is a description of how monetary systems work. Yes, when modern money is understood, there are logical policy implications if you care about people and prosperity. - MMT does not assume any superior government knowledge, and does not advocate government control of the economy. In fact it seeks a more robust private sector economy. It simply recognizes the critical role government net money flows have on the private sector economy, just as net foreign trade does also. It is simple balance sheet accounting. Every government money action has a corresponding entry: crediting a SS recipient's account (private sector increase); crediting military supplier account (private sector increase), taxing (private sector decrease); issuing a bond (debit bank reserve account at Fed and credit securities account at Fed). - A common policy recommendation flowing from the MMT framework does seek to end unemployment; whether that unemployment is frictional or structural doesn't really matter. Do you have an issue with offering work over welfare? Why not offer paid employment until the private sector picks up or new skills are learned? - Of course MMT distinguishes between bank loans and government fiscal actions - that's at the core. - No one is saying bank lending should be eliminated or that it is bad; only that *excessive* private debt creates a form of instability that government "debt" doesn't. Yes, bank debt is very helpful when used productively in the economy. - Government "debt" is simply money added to the economy that has not yet been taxed back, and is issued to remove excess reserves from the banking system. It is never unsustainable. - Yes, Government spending *can* compete with the private sector, but not when it is employing the unemployed (that the market has discarded for now) or deploying underutilized resources and productive capacity. That's the point: MMT advocates using gov funds to "pick up the slack", not to compete with the market. In doing so, it both employs unemployed resources, but also the added incomes and sales cause the private sector to grow. I'll leave it there. Most folks from a more conservative perspective that hear of MMT will struggle with the fact that government can and does play a helpful role in the macro economy. There is nothing inaccurate about the MMT description of our monetary system. What we do with that knowledge is up to our political process. But ignoring it won't help us learn how to use it better to improve our economy and lives. Keep working through the logic!

[@pgpeachess]

US of A has no control over their currency, the federal reserve does.

[@BeNNzuFG]

No. what happened in Zimbabwe was simply uncontrolled excessive money printing; the causes (civil war, corruption etc) don't matter here. The US is doing exactly the same, just like Japan and the EU. Only a bit more sophisticated. Instead of printing paper money and then buy stuff (tanks, food stamps etc) with it, the US Gov. sells 'credit' via bonds that are "secured" by US controlled Rating Agency AAAs to the FED and receive $ in return from which they then fund Obamacare etc. Zimbabwe 2.0.

[@ymkamara420]

" No kidding? Then how come the government can" That is like a basket ball player asking. "If the score keeper can give out points why can't I."

[@joebhed1]

So, as proof that the sovereign needs neither taxes nor borrowings to spend, Randy posits a paper by the SL Fed, purporting to show that proof. But it does no such thing .... merely to say that as purveyor of DEBT instruments for which there is no substitute, the GUV can always BORROW to never never go broke. So can you. Interestingly, there being "quotes" around the SLFED saying, it might have included the footnote No 6 thereto. (Jeezum, Can you NOT 'cut and paste' with YT anymore?) "6. Technically, the debt ceiling could render the government unable to pay its Bills, but the law has little credibility because enforcing it would almost certainly cause more harm than good.". Get it? The Guv can go broke. Indeed. And the Guv's only defense against default comes not from issuing "Dollars", but from issuing "DOLLAR-denominated DEBTS'. The old shoe-horning Masters fro MMT, doing their best work.

[@Notecrusher]

+joe bongiovanni "merely to say that as purveyor of DEBT instruments for which there is no substitute, the GUV can always BORROW to never never go broke." This is not the claim in any way, shape or form of Prof Wray, MMT, the SL Fed or any other economist. Sovereign governments need never borrow. It is mind-blowing the level of disinformation posted by no-nothings about MMT on youtube.

[@joebhed1]

+Notecrusher Actually, what's even more amazing .... to me ... is that you never read the SLFed paper, or else, you are denying reality here. Where in that paper does it say ANYTHING about the Guv not needing to borrow?...... like It stated above, the paper says Guv's do need to borrow. Amazing, no? Shoe-horning, stylizing and anecdotes do not a modern monetary theory make. I made videos about what's wrong with MMT five or six years ago, attended the 2010 MMT "Fiscal Responsibility Teach In" and just returned from listening to Wray's latest missive at the Levy Institute. You can ask him or any of them, maybe excepting Mike Norman, if they care to debate me on modern monetary science and monet systems, as I am forced to be the gatekeeper on MMT disinformation. So, do you believe the government creates money when it spends???? Since when, exactly? Nor crushed a bit.

[@r.salisbury133]

So your evidence against MMT, which is a general theory of how money works everywhere through time, is that the US in particular has a certain constraint on it? Okay...

[@joebhed1]

Ryan, Apologies that I never received notice of your comment that appears to be ignored. Why do you say that my 'evidence' against MMT is that the US has a 'certain constraint' against how money works elsewhere? MMT purports an understanding of things that have no special relation to nation's money systems. ALL nations have "privatized" the issuance of their monies --- to private international banking cartels. ALL nations have. The only 'extra' constraint against 'Guv-spending' is the US Debt ceiling. I have made over a half dozen videos on what is wrong with MMT, going back to '09, after a nearly 40 year study of monetary systems . I see egghead accuses me of being an Austrian, when nothing is further from the the truth, AND since Austrians consider "public money" a bigger threat than fractional-reserve banking (which some of them accept). Gawd.

[@joebhed1]

From where do you presume that I ascribe to Austrian economic thought? Any proof? Even any inkling of substance to make such an accusation? You can 'ignore him', but never presume that will not stop 'him' from speaking truth to ignorance on money matters. Made my first video on MMT in '09, attended the April 2010 MMT Counter-Conference on Fiscal Sustainability, read every MMT book ever published (that I'm aware of),....... (also all the Austrians as well). Get yer head out and show me what you've got, money-wise. For the Money System Common. (Does that sound like Rothbard? Like Hayek? Like vonMises? Like ANY of them, being the EXACT OPPOSITE of The Denationalization of Money.) Gawd.

[@bammbamm12]

"If the government allows anyone to print money then the currency is no longer sovereign" So what. It's just a word.

[@Achrononmaster]

Tell the IRS or FBI that, or act on it you idiot.....soon find yourself in jail.

[@CosmosPrivateer]

I doubt 1 percent know anything about Bretton Woods or a petro dollar in America.

[@BeNNzuFG]

There is a big misunderstanding here between "money", "currency" and "credit". Money is described as "a record of credit". This is blatently false. Money is a store of value. Currency is a mere proxy for money AS A STORE OF VALUE (gold standard) unless it is debased via inflation. Credit is a mere PROMISE for re-payment. A promise can be valuable, but there is the risk of non-repayment. This is why credit cannot be equated to money. Money (gold, silver) always had value in human civilization.

[@dimitristsagdis7340]

Money is what it is. And it can be all sorts of things; e.g. a demand for obedience. You choose to use it as a store of value is your choice (your imposed meaning on what money is) and in all likelihood if you insist your are creating your own downfall :-) There is nothing in money that gives it the ontological status you or anyone else claims. Credit too always had value in civilisation otherwise people wouldn't ask for it and it wouldn't exist. What kind of tautological rationality (like the rest of the Austrian economics) is this?

[@bammbamm12]

Re: MMA-ers - I can't take is their molly-coddling; the "mother knows best" role - as if we're lovable babies who sob when we see the medicine spoon coming.

[@bammbamm12]

Ah yes - mother knows best, trying to give the crying baby (me) his medicine. I know that game too.

[@zorro149]

0:58 "...the national gov't issues its own currency, such as the United States..." The U.S. does NOT issue its own currency. The last time the U.S. gov't issued its own currency was under JFK. Those dollars said "United States Note" at the top instead of "Federal Reserve Note". Four months later, he was dead and we went back to borrowing Federal Reserve Notes.

[@steve13565]

We control how many views this video gets. If we disseminate it widely on social media, it will get viewed a lot. If we just bemoan the fact that nobody is seeing this, then it won't get viewed a lot. I only became aware of this video almost 5 years after it was made.

[@HokShunPoon]

Go on - print infinite dollars! Great! Solve all your societal problems! Small issue: an apple will cost $infinite. Because each dollar will be worth nothing.

[@steenjacobsen1474]

Germany post WWI................

[@stevenhail2837]

Do you have any idea of the causes of that hyperinflation, or of the extreme rarity of hyperinflation in modern monetary systems?

[@Rob-fx2dw]

@@TheTazzietiger Stop fooling yourself about the causes of hyperinflation. You have no idea of what causes hyperinflation because you ignore the facts and ignore the history of hyperinflations and have not applied any rational sense of proportion that is required in any understanding of the matter.. If you did know and it wasn't excessive monetary expansion you would be able to explain why that excessive monetary expansion was the most common and sole factor in all of the inflations of the last 60 years. You have also ignored any sense of proportion and the fact that in Zimbabwe where there was hyperinflation the loss of productive capacity occurred over a number of years, sometimes 10% or a little more per year but hyperinflation did not occur until government expanded the money supply to pay for budget deficits by thousands of times in the same year.

[@takashimurakami6420]

Where the money comes from? 97% of all money is created by commercial banks and only 3% is by Central banks. So, conveniently Government borrows money and pays interest. The issue is not about creating money but how and who allocates the money and to whom. It is the velocity of money in hands of who use the money and not the quantity itself. If allocate to the hands that will spend on financial speculation and real estate speculation then increases income inequality, bubble and bust cycles from which the financial money gets real goods from many to few. If allocates to the hands of production, it creates jobs and GDP growth. If allocated to the consumer spending as credit card and as proposed UBI, it will create price inflation if production of goods and services will not go along. Who decides where to allocate? Who creates the money. Economist Richard Werner is the person to explain all this matter. MMT is just a false belief. Financial and the Real has a profound different reality.

[@HakuCell]

he wants full employment of the population?? does he want people to go to work and just sit around and maybe keep pretending that their work is needed or what? many jobs are already socially useless, and technological unemployment will keep taking over.. "basic income" might be the way, while transitioning towards a healthier system like a resource-based economy (www.nlrbe.org)

[@Rob-fx2dw]

Lets just look at two of the claims that Wray puts forward as truth and the real implications of them and reasons why they are totally incorrect. Firstly:- The US government HAS to finance it spending out of income or through borrowing. Yes, that is True NOT false. It is only false if you are naive enough to believe new currency creates more wealth and that borrowing through money as a concept is only occurs by two independent parties exchanging money and that borrowing wealth does not happen when such people as counterfeiters don’t borrow other peoples wealth by making new currency units and spending them to get goods and services which they of course do . That is why government itself outlaws anyone creating new money and jail them if they do. - Because it is a way to take people’s goods and services and creates more currency when only working to produce goods and services creates new wealth. What Wray is doing in answering No to this is confusing differing concepts to come up with and answer which favours his MMT argument. Those two concepts are the concept of wealth which is expressed in monetary unit terms and the concept of wealth which is expressed in goods and services. Goods and services can only be created by work. Currency units can be created by keystrokes. Creating more monetary units out of thin air does not create wealth which is in this case represented in a monetary unit (e.g. US dollars). When money is created either by printing more currency or by computer keyboard strokes in an accounting ledger become something of worth only by introducing those new monetary units into the private economy. Yet he leaves this distinction entirely out of his example question to deceive. If you are not worried that creating new monetary units is making more dollars and not more wealth then ask yourself if as a US citizen you would in the future be happy being paid in the currency of some hyper inflated economy like Zimbabwe where government continually ‘ created excess money” , by borrowing though excessive currency expansion (monetary printing) to finance their spending. Or the same hyper inflated currency of Brazil where the government had financed its spending from excessive money printing instead of it’s income. If you are happy for this to occur you are welcome to swallow his theory but beware he himself is not happy that the concept of his “borrowing” through monetary expansion. He is not happy for State or Local governments to have the power to do the same or people themselves because it is a SHAM and exposes the shallownes of thought and hypocracy of the MMT theory.. Secondly:- The argument that taxes put some value into money. That is again total rubbish and Wray doesn’t even believe it himself since the reasons he puts are arguments that are just as good as reasons AGAINST what he is arguing for. He reasons that government taxes and that makes the currency worth more than it otherwise would be. You just have to ask yourself if it is true that government taxes make the currency worth more then why the government would not just issue money to people free of charge and make it law for the people to pay back that money at a very low rate of tax to government which would make their government money so much more valuable ? Of course government doesn't and he doesn't argue that. If this principle actually worked you would think Wray would argue for this to make the government’s money more valuable, but he DOESN’T since his argument is totally FALSE.

[@deficitowls5296]

There's a whole chapter in Wray's book about the difference between financial wealth and real wealth, so I'm not going to touch that one, but You've got the "taxes drive money" part wrong. There is no claim that taxes give money "more" value. The claim is that taxes cause money to be accepted, because it creates a demand for the money. The tax could be for $1 or for $1 million, it just means that people will need either $1 or $1 million in order to meet their tax obligation. $1 million tax obligation could be imposed as $1 on 1 million people, or as $1 million obligation on 1 person, but either way there is a demand for $1 million in the private sector, meaning that the government will be able to spend at least $1 million, before people stop having a need for the currency. The "value" part comes in from how the government declares you may get those dollars to meet that obligation. Since the government is the monopolist of dollars, it can declare what you have to do to get those dollars, or in other words, it could set the prices for everything that it buys. That would determine how hard people have to work to meet their tax obligation: if you owe $1 million, but the government will give you $5 million for 2 hours of labor, then the tax burden is met very easily. On the other hand, if you owe $1 million, but the government will only pay you $20/hour, this creates a massive burden, possibly unmanageable. Since most governments today choose to pay market prices rather than set prices, this means they must carefully set the quantity of taxes and goods purchased, or else the private sector won't have enough currency to meet its tax obligations and savings desires, and the result will be involuntary unemployment.

[@r.salisbury133]

Inflation is not caused by government overspending. If that were true, we would have seen massive inflation thanks to QE which massively increased the money supply. We do not see that. Inflation is a redistributive process where capitalists raise prices on their goods. In Zimbabwe, you can observe the CPI inflation vs the money supply, and the growth in money supply _follows_ the increases in CPI. It also follows a long period of industrial decline, a highly conflictual attempt at land redistribution, and a growth in outstanding debts. In other words, the government tried to fight rising prices by printing money, which did not work, because it only caused people to be able to pay these inflated prices, which makes those who engage in inflation able to inflate even more. The currency wasn't "devalued" because the government printed too much money--the government printed too much money because of rising prices (and debts, failing industry, and large-scale emigration). Currency doesn't have a "value"--you are the one confusing concepts here, because a currency does not measure "value" at all. Currencies are a tool to mobilize humans, and what they measure is the pressure to mobilize humans. The reason inflation "devalues" currency is because currency's value to a person is in its ability to mobilize people--to pay wages, to pay for services, and to pay for commodities. When prices everywhere are raised, the currency is "devalued". However, actual measures of inflation do not measure the "value" of currency--they measure the prices of a basket of goods, because inflation is nothing more than an increase in prices.

[@deficitowls5296]

Ryan Acumen Quick correction: QE is not government spending. It's just an accounting swap: the government swaps one liquid government-issued asset (bonds) for another (reserves). Nobody has any additional savings or income. In competitive markets where demand is less than the supply capacity, capitalists can't raise their prices. Otherwise their competitors would undercut them. Price hikes can only start when either there's collusion, or there's a change in supply or demand. The reason this becomes inflation is because of class struggle, where the workers fight to maintain the same share out output, causing the price increases to lead to wage increases, which leads to more demand and further price increases, etc. But government spending (actually exchanging government assets (cash) for goods and services), can cause inflation. This is because a larger government deficit is an increase in demand. If this pushes total demand beyond what supply is capable of producing at the given price (due to resource constraints or other supply-chain bottleneck, often the supply of skilled workers) then the price will rise.

[@Rob-fx2dw]

Ryan. The facts are against you. You may not have seen that since the way inflation is currently being measured does not take into account all of the sectors which have risen. It is only done by looking at CPI which are some consumer prices but not all consumer prices. It also does not take into account the fact that there is a massive amount of money ( debt) that is sitting in the Federal Reserve and banks have high reserves that will eventually flow down to the market. The additional factor is the deflationary forces of a lack of comparative growth in output. With the Zimbawe example you stated that "the CPI inflation vs the money supply, and the growth in money supply follows the increases in CPI. " But you have that around the wrong way. You are essentially arguing that the tail wags the dog. Prices do not rise to cause inflation. It cannot be so since in assuming that you have left out the adjusting factors of the interest rate and exchange rate. No private person or company can raise prices to cause inflation since they are limited by competition which results in people going to another supplier whose prices are lower. Even if what you aid were so (which is wrong) the sellers rising their prices only would redistribute the amount of money from one sector to the other. From the buyers to the sellers. New base money is not created by this process. The way prices rose so much was an availability of that newly created money being spent by government first. You also argue that there was a long period of industrial decline in Zimbabwe. But you have left all sense of proportionality out of this part of your argument since prices resulting from the inflation rose by many thousands of a percent and the loss of output was large but in proportion not even a fraction of that. That was the Zimbawe situation. You say currency does not have a "value" . I agree that Fiat currency does not have an intrinsic value. But you are wrong in saying it does not measure value. It is a measure of comparative values of goods and services. Without that measure there would be no such thing as a "Price". That it was you do when you measure prices of goods at a supermarket or elsewhere. It is comparison of values based on prices. You say "when prices everywhere are raised" But that is sheer fantasy when applied to the private sector since nobody and no corporation can raise all prices at once. Only government can do that by expanding the money supply.

[@Rob-fx2dw]

Deficit Owls. Agreed. There is nobody in the private sector who has the power to raise all prices to cause inflation. The QE action has not found it's way into consumer prices yeat m but may do any time soon and will do in the future since it lits the power of government to take future corrective actions. The expansion of money available in the form of cheap loans to certain indistries and banks has however lead to increased share prices as a result of buy backs. Confusion often arises by people believing that the proverbial tail can wag the dog. The only institutions who can cause all prices to rise in response to their action is the government in concert with reserve banks and this is done by increasing the supply of new money (new fiat debt money) . Randall Wray and others like Mosler, Mitchell and Kelton leave this out of the equation when they pushes their MMT economics. They ignore all sense of proportionality when they try to explain the Zimbabwe or the Weimer republic situation by claiming it was mainly caused by loss of output rather than government money printing.

[@BeNNzuFG]

There are so many faults in the presentation; it is unbelievable. Let's just talk about thie issue that the US government can allegedly create its own currency and therefore cannot go bankrupt. Yeah, ever heard of distanst place called Zimbabwe and what happened there? The idea that countries cannot default is just arrogant. At a certain point, the people will loose trust in a heavily debased paper currency. Then this currency will not buy nothing as it is not accepted by anyone anymore.

[@bammbamm12]

This man is dangerous and destructive. Tell me, Professor. What criminal harm am I doing by counterfeiting $100 bills in my basement? If the govt. can print willy-nilly, why can't I? Don't say "because it's illegal" - only a loser would give that response. 2. I have to dig ditches for 8 hours a day to make $100. Am I a complete fool? Am I being hustled? Why doesn't the gov print 50 trillion and make us all rich?

[@dimitristsagdis7340]

Because you are deceiving (stealing) value from those selling their goods and services to you. Dah !!! If the gov printed 50 gazillion dollars we still be poor cause the 1% will the 49.99% of them and the rest will still have to dig ditches 8 hrs a day for the change :-)

[@dudeman209]

This is a completely crackpot economic theory. He completely ignores FX and doesn't understand how FX markets work at all. Taxes don't drive money and money is created in the banking system. The central bank basically acts as a clearinghouse. Government spending doesn't create/destroy money since Treasury bonds/bills aren't money. Taxes/government spending redistribute money. He also ignores the nonlinearity of debt service costs to tax revenues when government debts become very large, which creates major risks when governments run up large debts. Wray also doesn't understand that the value of a currency is the sum of the discounted PV of the future real interest rates, so when government debts are high and the only way to service the debt is to keep the short end rate near zero for longer and longer periods of time, the currency HAS to collapse. He's completely wrong on the historical aspect too.

[@WilhelmDrake]

Are you saying the US government doesn't create the US Dollar? Who does?

[@dudeman209]

***** No, I never said that. I'm saying real resource constraints matter with regard to budget deficits. Just because the government won't run into cash flow problems due to a central bank doesn't mean that there are no budgetary constraints on running deficits and massive government debts. Money exists without the government as well. The biggest issue is the nonlinearity of debt servicing costs to tax revenues when government debts are very large.

[@WilhelmDrake]

dudeman209 MMTers repeatedly state that spending can cause inflation without the availability of real resources. But it is always ABLE to spend. There is no deficit too big to fund & no obligation too large to pay. Even absent tax collection & bond issuance the Federal Government remains able to pay. The only money the government spends is government money. It is government money in which virtually all debts are denominated, in which virtually all accounts are kept & in which, most importantly, all taxes are made payable. Non-government issued money may exist but the government's money is the only money that matters.

[@dudeman209]

***** It's not the government's money. Money starts in the private sector and is created by the private sector (and the central bank)! The government just redistributes the money in the form of taxes/government spending. I'm well aware of how the monetary system works. It's not a system that starts from the top down; it's a system that starts from the bottom up. Only banks are allowed to create money when they expand both sides of their balance sheet. Inflation isn't the only issue with large government debts. Any form of debt involves a transfer of real resources and debt servicing costs must always be paid (in the case of liquidation, debt servicing costs are borne by the lender). If the transfer isn't productive enough to cover the costs of servicing the debt, the debt will weigh on growth (see Japan today). We all know governments can run out of money--that's not the issue with large government debts.

[@WilhelmDrake]

dudeman209 "Money starts in the private sector and is created by the private sector (and the central bank)!" No. 1st - The Federal Government creates & issues government money & which it also sets as the national unit of account. 2nd - Central Banks are part of the government. In the US this is the Fed. It is not private. What private institution remits its profits to the US Treasury & has its Board of Governors appointed by the US President? 3rd - Private banks do NOT create government money. They create private bank credit & promise convertibility into government money. It is this private bank credit that composes the vast majority (~93%) of the money supply, although netting zero. Government money enters the economy only from the government, usually through Federal spending. The US Private Sector can only net save USD financial assets if, ignoring the foreign sector for simplicity, the Public Sector runs a deficit. Public Sector + Private Sector + Foreign Sector = 0 In a nation such as the US with large trade deficits, the Private Sector can only net save USD financial assets if the Public Sector runs a budget deficit larger than the trade deficit. No deficit no private net savings. Any nation that issues its own floating currency, that denominates all its debts in its currency & that imposes taxation payable only in its currency, can NEVER "run out of money" or "go broke". Such a nation cannot involuntarily default. It is always able to pay. The only constraint on Federal spending is inflation. The most devastating type of inflation & one that is not the result of Federal spending but of private bank credit creation, is called Asset Price Inflation. Banks do not lend savings, instead it is loans that create deposits. Private bank lending creates credit which is why the vast majority (~93%) of the money supply is composed of bank credit. Banks do not lend to fund tangible capital formation but mainly to buy existing assets (property & financial securities). The effect of lending against assets already in place is to bid up there price. Private credit creation coupled inevitably with fraud are the primary causes of Asset Price Inflation. Asset Price Inflation of the kind that created the Housing Bubble, wreaks devastation far beyond what even the most extreme commodity price inflation can inflict. See: Saving, Asset-Price Inflation, and Debt-Induced Deflation by Michael Hudson