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

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

[@MoneyMacroTalks]

If you appreciate my work, consider buying me a 'coffee' at ko-fi.com/moneymacro or supporting long-term for membership benefits via: www.patreon.com/moneymacro

[@ShinobiShaman]

Here's the thing though, the progressive politicians around the world were pushing the pandemic hysteria. Therefore, they were most responsible for the supply chain issues. I agree with here about the corporations. That's why oil companies were having record profits during the pandemic, because they were trying to hide price gouging in inflation. But again, it's because of progressive hysteria over the so called pandemic, that caused inflation. In addition to that, the pandemic lockdowns, destroyed hundreds of thousands of small businesses in the U.S.

[@Madronaxyz]

The problem with discussions of inflation is that people are not taking into account how monopolize the US economy has become. Ronald Reagan stopped enforcing the Federal antitrust laws 50 years ago. Every major industry in the United States has add a steadily decrease in number of corporations participating. There are the maximum of four or five players in every major industry. This sort of consolidation allows price-fixing without any actual communication between the companies. When inflation was first announced after the onset of the covid pandemic, I looked up what was happening with corporate profits. Corporate profits were rising steadily. That is when I knew now what they were calling inflation was not actually inflation. Inflation occurs when the cost of producing goods rises so the price for the finished good has to increase as well. But if profits are soaring, clearly the cost of producing the good is not increasing. So it look like most companies were using the excuse of the pandemic to increase prices. There is no effective competition to prevent this.

[@macheteishrecords8419]

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

[@IKTGWIW]

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

[@downtownxmastree6074]

She used to be skeptical and investigated to debunk it before becoming it’s champion according to Mosler.

[@Phil_D_Waller]

MMT is a description , it isnt a policy , i just describes the plumbing , reserve adds / reserve drains etc

[@IKTGWIW]

@@Phil_D_Waller The problem is that in reality no government is willing to raise taxes for fear of losing voter support. Therefore, the government will use inflation to deal with the debt/deficit. Printing more and more money increases asset prices which greatly benefit the top-tier wealthy people. Thus the wealth gap has widened tremendously in the recent years.

[@Phil_D_Waller]

@@IKTGWIW Thats the thing , taxes are already an automatic stabiliser . No one is saying inifinite money creation, they are saying that we have the ability to create an economy for all , not for a few. I really dont know where this all got lost tbh. If sticking a few extra quid in peoples pockets to help them pay back huge debt, pay off bills, rents , mortgages etc or we could just continue to cripple people with debt and expect a booming economy with a lack of aggr demand , i dont know how you reconcile those two. thats why european countries economies are stagnating.

[@IKTGWIW]

@@Phil_D_Waller The problem is no government will follow MMT properly. Money printing inflates asset prices and massively enriches the top-tier rich peoples while inflation causes more hardship for the middle-class and poor. The wealth gap has widen tremendously since the introduction of QE.

[@l4m41987]

As a German I can only cry 😢

[@nicoruppert4207]

Yes, high inflation + no extra government investment. Truly the worst of both worlds.

[@WhichDoctor1]

same in the UK. Austerity already very visibly fucked us over after one financial crisis, and now everyones talking like doing the same thing again is the only possible solution to this new crisis.

[@001sander2]

What happened in Germany

[@Dr.RiccoMastermind]

Feel the same 😱😭🇩🇪especially since Germany IS de facto souveteIgn enough, despite the EZB, since it has a major weight

[@affinity1]

​@001sander2 they gave up their monetary sovereignty and now use the Euro

[@suddentwist]

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

[@briskyoungploughboy]

...then the asset holders demand extra profit from real goods and services as rents and dividends based on the inflated values- that's how it manifests in the CPI.

[@pebblepod30]

*the so called deficit would only inflate assests is it was spent on those assets (eg housing) to bid up their prices. Which happens.

[@MrBekliyom]

Right! Thanks mate🤜

[@bassmanjr100]

Did the prices go back down to pre-Covid levels? Did I miss that???😂

[@erniekeller1093]

No one claimed we had deflation. If inflation hit zero prices wouldn't go back.

[@jerryware1970]

The Dollar lost 25% of its purchasing power in a few years…the effect of monetary expansion is very real.

[@robm9113]

The dangers of mixing fantasy and fact together.

[@expelleddux]

I would really like to see push back on what shes saying.

[@livingmombirth4005]

Absolutely! She just asserts and asserts ideas and her main support seems to be that politicians love to spend money to accomplish their noble and righteous objectives so it is all good.

[@RaRd8z]

Just listen to the austrian school economists, they've completely debunked MMT

[@chrissolutions]

@@RaRd8z It appears that the Austrians are debunked by MMT.

[@dererik9070]

​@@livingmombirth4005 With what statements do you have a problem/would like to see her pushed?

[@dererik9070]

​@@RaRd8z Can you name me an austrain school economist that debunked it, their approch to taxes hasnt seemed to have workered very well in modern times.

[@gsbetthedoom]

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

[@_yossarian_]

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

[@jacksonwinter5110]

Did you watch moments after that where she cited central bank analysis on how much the stimulus is likely to have contributed to inflation?

[@gregbrauch]

The government now issues a trillion in debt but only gets a increase in gdp of half that amount. I have a difficult time figuring how this works other than a huge increase in inflation.

[@thebreadtable4880]

She said she trusted the numbers Central banks released previously, which, fair lol

[@thebreadtable4880]

​@gregbrauch not all govt spending ends up circulating and contributing to inflation. Some of its saved, not spent.

[@thebreadtable4880]

She literally says she didn't do the research herself, the central bank did, and she trusts them. And they said it contributed very little, much less than what he was suggesting. She's sharp and experienced.

[@lesand5484]

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

[@TheRepublicOfUngeria]

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

[@psychocybernetics1347]

The United States don’t balance budgets mate.. where is the evidence for that 😂🤣

[@TheRepublicOfUngeria]

@@psychocybernetics1347 The continued solvency of most of our states? Most States in The United States balance their budgets most years. There can be a small deficit some years as long as there is a surplus next year. But the point is: for state governments, they can't just print money like The Federal Government can get The Federal Reserve to do for them. At best, they can get grants from The Federal Government, through their representatives.

[@Jesus-kt5dc]

​@@psychocybernetics1347The federal government balances the economy not the books. He's not wrong saying the equivalent of states balancing their budgets, known as currency users.

[@mensrea1251]

The only thing negative about this brilliant talk was that it was actually too short, there was so much more to explore! Please consider inviting Kelton back onto the show for a part 2!

[@Juanillo1-1.1]

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

[@banihas22]

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

[@GreenLarsen]

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

[@kurtoverley6560]

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

[@M0stlyHarmless9]

Excellent conversation! Thank you

[@markepstein6670]

Thank you - really interesting. Prof Kelton mentions an article by Narayana Kocherlakota re. the Liz Truss 'event'. Do you have a link to that article you might be able to post?

[@subcitizen2012]

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

[@MoneyMacroTalks]

I am very happy to hear that!

[@wasdwasdedsf]

shes a mental patient...

[@bitcoindaddy1]

The Wealth of Nations by Adam Smith

[@mountainman9145]

Prof Kelton claims that 1.9 Tr covid package had no effect on the ensuing inflation and that the inflation was already in place prior to this package. So where did this inflation arise - how did this inflation occur after 40 years of declining interest rates? Surely this fundamental question needs to be addressed before you implement any other economic models (e.g. MMT). If the key restraint on MMT is inflation surely you must have a full understanding of the drivers. In addition if the inflation was already in place prior to the pandemic then it was not driven by supply side constraints. Many contradictions in this chat.

[@josephmcmahon7470]

MMT is the only school of economic thought which directly identifies the source of the price level: the prices government is willing to pay when it spends. All other schools can do is discuss relative prices. The source of the price level does not fully define the full prices of 'things' but acts as a base case for analysis. Sam Levey has mathematically modelled this point successfully.

[@jacksonwinter5110]

Did you not watch the video? She plainly discussed this and cited empirical analysis.

[@ericdane7769]

Huh? she clearly stated stimulus packages have had an impact. There's just many factors involved. Plenty countries without (major) stimulus packages still suffered inflation spikes, and much higher than the U.S.

[@mountainman9145]

@@ericdane7769 If they were stimulus packages - that clearly implies post pandemic or during the pandemic. However the Professor claims the inflation was in place prior to the pandemic. Which, in turn, clearly negates the supply side inflation cause - as if the inflation was there before the pandemic there were no supply side effects in operation at that time. Yet Prof Kelton clearly sheets the blame of the inflation to supply side - however before the pandemic these supply side effects were not in place. But clearly yourself (ericdane) cannot comprehend this basic concept.

[@mountainman9145]

@@jacksonwinter5110 Yes I did. But you failed English comprehension 101. Her explanation is the whole point of my reply. She emphatically claims that the inflation was in place prior to the pandemic - yet she sheets the blame to supply side inflation. Therefore if the inflation was there prior to the pandemic (before the stimulus packages) there was no supply effects at that time - so this a clear contradiction to her analysis. So at least try and understand before you make stupid comments.

[@mikebaker2436]

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

[@adamdymke8004]

+

[@diogolopes3395]

+

[@LordSesshaku]

Narnia. Nobody was happy in Argentina with low unemployment and 200% annual inflation.

[@davidtrescatorce]

​@@LordSesshakuArgentina has a weak economy full of oligopolies in each sector. Companies basically set prices at will, while the people with money just exchange any pretty cash for a foreign currency (dollars), and that's a recipe for debacle.

[@JohnTovar-ks8dp]

Let's see. 10% inflation for one year is $2.5 trillion, which is more than $1.7 trillion. There is literally no free lunch.

[@clarestucki5151]

Neither of these people seems able to understand that in relation to "inflation" (defined as rising prices), what counts is NOT the magnitude of the deficit, but rather how the deficit is financed. If we finance the deficit by taxing or by borrowing from individuals or foreigners, deficits have pretty much no effect on rising prices. If however we finance the deficits by raising the ratio of the amount of money in circulation to GDP (monetary inflation), that has massive influence on rising prices, simply by the Law of Supply and Demand!

[@DerekRoss1958]

Sure, but if we finance the deficit by taxing, there is no deficit because the deficit is spending minus taxation. And if the Ukrainian wheat harvest fails for some reason, say Russia invaded for instance, then the global wheat price is going to rise no matter how perfectly domestic governments balance their budgets. And thus the prices of all products made from wheat will rise too. That too is the Law of Supply and Demand.

[@clarestucki5151]

@@DerekRoss1958 Absolutely correct.

[@PeterChan-vk7kb]

More the fact that the law of supply and demand has 2 sides. If we increase supply as we increase demand there's no problem. And basically, if people can afford things they used to not be able to afford (could be a car or food, or anything else) prices will go up with more people competing for the same thing. However, there is the question of whether sustained high demand would increase manufacturing capacity and thus there would be more supply and your problem would largely go away.

[@enjoythedreamlife5658]

you have no clue how finance work, nonsense talking

[@borikero1]

Taxing and borrowing from individuals, etc has limits... You can only tax up to 100%, and then what? Increasing the money supply has theoretically no limit...only inflation and political destabilization can keep them from pushing too much either one of those strategies. MMT is nonsense in the end anyways.

[@metaflight9495]

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

[@tradeprosper5002]

As a rare fiscal conservative democrat, I think that Obama left us with a path out of the debt trap by reducing the deficit to a reasonable amount. Unfortunately, the Trump tax cuts blew up the deficit and Biden didn't increase revenue much and increased spending substantially. I currently don't see a path or candidate that provides a viable future. Sigh!

[@davidl.e5203]

Stephanie says a lot of interesting things. But there are also many bold statements she makes that seems to be logically weak that goes unchallenged. Among some of the things I spot are: 1. British pound lost value because they are bullied by private markets. (how?) 2. Impossible trinity is not a thing. You just need enough political will. (howw?) 3. Inflation spike is mostly from a supply shock. Stimulus only contributed a very negligible role. (there are many sources that could challenge this) 4. Inflation spike can be contributed to some price gouging (how? also, the cost of "price gouging" is loss of market share so it can only be realistically done by companies with little competition). 4. There is no way inflation came down because of interest rate hikes. The lagged effect of interests against inflation is a story people tell. (many quant models would disagree, and that's how we found the lagged effect of 6-18 months historically). 5. Spending by the private sector is not sensitive to interest rates. (weak argument. consumers could use this opportunity to start saving more) Not saying she is wrong and would be even more interesting if she got all of those right, but I would be very interested with a follow up to these strong but unchallenged arguments.

[@tradeprosper5002]

3. Price gouging doesn't lose market share in monopolies/oligopolies. Look at companies where corporate profits massively increased. Saw one food wholesale that increased 7 fold. 4b. Reagan/Volcker would disagree that rate hikes can break inflation.

[@Bradm027]

Agreed! good comments.

[@Bradm027]

@@tradeprosper5002 all companies maximize their profits through pricing. What is "gouging"? Apple is the worst "gouger" of them all. That simply means they have the highest margins. The point is "inflation" happens when prices go up. You can call it "gouging" or "inflation" or whatever, but its all the same.

[@PeterChan-vk7kb]

​@@Bradm027 With apple there is a choice, people choose to buy from them for crazy prices. In an oligopoly, there are a couple companies who control the market. They all kind of realize that they can all collectively raise prices. If you have 4 people its easy to get all of them to do something, this becomes much harder the more people there are. One case of this is with airline junk fees. Another example is meat processing, like 4 companies control 80% of the market. If one of them raises prices, there literally isn't enough capacity that exists for all of their customers to change to their competitors (because their competitors do not have that much excess capacity). And building a factory takes years, and even longer with covid supply disruptions. Vs. if there were more players, then you wouldn't control 20% of the market in the first place, so your customers could all go somewhere else, which keeps prices low. So if you have relatively few competitors, you are much more comfortable raising prices because there is literally nowhere else for customers to go. Inflation is when prices go up, but why are they going up? Is it because you have no competition so you can charge more, anti-trust laws exist for this very reason. It is a market distortion and unhealthy.

[@jpjeon3143]

@@Bradm027 Why would inflation and gouging be equivalent? By definition, gouging is when prices are raised beyond the inflation levels of a given industry. There is empirical evidence which suggests that plenty of star firms have taken advantage of COVID-related supply shocks in order to gouge prices.

[@KevinWhite-jy8wt]

Very stoked on this talk!

[@pebblepod30]

I am SO THRILLED you are interviewing Stephanie Kelton!

[@therationalist234]

Thank you! I didn't realize my view on covid inflation had a lot of assumptions and was not well-thought out

[@pebblepod30]

Not sarcasm, it is actually impressive to me when people realize that bc i see so many people who seem have formed views on that based on fears aroubd money alone.

[@Q-154]

What kind of assumptions?

[@Madronaxyz]

What was your view on covid inflation?

[@therationalist234]

I thought pumping money into the system from the stimulus would just devalue the currency, but it's more complicated than that

[@Q-154]

@@therationalist234 it does, ideally, devalue the currency, which is one of the reasons for inflation. The problem is people only use their sides talking points, which is why things will never be solved. One side says money printing causes inflation, no more no less, the other side said corporate greed, just stop them and fix inflation, when in reality there’s a lot of nuance. Many different factors cause inflation, and it’s not necessarily an easy fix, especially with how us Americans are accustomed to a certain lifestyle, and our govt. is addicted to “printing money.” I also find it funny that people talk about corporate greed like it’s something new. I’m like, ok so they just barely started being greedy?

[@arepabuena]

Great information as always. Loved your Guest! Have you thought about doing a piece on Ingo Sauer's recent paper on the influence of the central banks assets on inflation?

[@ianchui7711]

Excellent interview questions and pace

[@gregorydearmond6817]

11:30 on inflation “it’s largely gone today, since the supply side has healed” 😂😂😂😂😂

[@surreal6643]

Yeah, it's gone up every month since the interview.

[@_yonas]

@@surreal6643 During the pandemic, the US had a peak MoM inflation rate of over 9%. The current rate of inflation is nowhere near that and around ~3.3% which is above pre-pandemic levels but way below pandemic levels, and prices will never come back down, no matter what, because while you would ideally run your economy at exactly 0% inflation, you have to overshoot slightly because deflation is actually super destructive to your economy, so you have to avoid it as much as possible.

[@surreal6643]

@@_yonas 2 years AFTER the pandemic it was 9%. It's now at 3.4% and the last time it was that high before the pandemic was in 2011.

[@surreal6643]

@@_yonas And don't forget in the year 2021, Joe Biden said "it is going to pop up a little bit and then go back down. No one is talking about his great... great... great... big. y'know." Which means they were wrong this entire time.

[@rutessian]

@@surreal6643 The rate at which prices rise might have slowed down, but prices are still much higher than before the pandemic. All the mainstream "economists" said that inflation is transitory, that it's mostly a supply issue due to lockdowns and the Russian war. If it were a supply issue, prices would have come down to levels before the pandemic since most supply issues have been solved. What also happened since 2020? Governments printed a lot of money and continue to operate with budget deficits which means more money printing, more inflation..

[@IllIl]

You're such a good interviewer, man. Great questions and exploration of the concept. I don't often listen to podcast style stuff, but really enjoyed this one. Thanks!

[@MoneyMacroTalks]

Thank you so much. Very happy to hear that

[@Rob-fx2dw]

@@MoneyMacroTalks How is it that you only reply to those who flatter you? It is so revealing of your thoughts.

[@MoneyMacroTalks]

@@Rob-fx2dw I am also happy to reply to constructive criticism. But, I indeed tend to ignore negative comments that don't contain any arguments or are rudely formulated. This comment policy has been inspired by the academic tradition in the Netherlands where criticism is encouraged, but only it it is constructive.

[@Rob-fx2dw]

@@MoneyMacroTalks I asked simple straight question. You have not replied to it. You say ypu are happy to reply to constructive criticism but who decides what is constructive ? You or some independent body? Isn't that rather arrogant if it is you by pretending your motives are morally superior ?

[@MoneyMacroTalks]

@@Rob-fx2dw i should add. Sometimes I simply miss a question. I'm only human

[@stevengordon1424]

This is one of the best mmt interviews I've come across. Incisive questions and well nuanced answers. Thank you

[@samkonto7849]

Just wanted to notify Joeri that Stephanie Kelton is featured in a documentary called "Finding the Money," which is available on demand on May 3rd.

[@MoneyMacroTalks]

Thank you Sam

[@bronchial1]

Thanks samkonto!

[@THNKKY]

Here’s my theory for modern economics. Each administration started cooking the books to make their work look good. You wrote a book trying to understand the nonsense. Then policy started steering into the madness citing your book. Then the system burnt down.

[@Rob-fx2dw]

Kelton's comments at 51.53 about te national debt - " At some point the debt is large enough... there is a risk ." That is despite her previously often repeated statement that the government can quote:- 'never run out or money' and 'never go broke' and 'pay for whatever is for sale in U.S.dollars.' The two statements contradict each other which is an all common thing in MMT that shows it is poorly thought out and largely just a wishful fantasy designed to support a political grab for power.

[@wanderingfido]

Stephanie Kelton needs to be in a moderated and televised debate with Carmen Reinhart.

[@nonexistent5030]

She talks about how monetary policy is blowing out the deficit but ignores what inflation will occur when demand spikes if rates drop before more stress is placed on the labor market. Very selective attention.

[@detectiveofmoneypolitics]

Economic investigator Frank G Melbourne Australia is following this very informative content cheers Frank 😊

[@robertlan222]

She talks about the media creating inflation expectations as a way to deflect away from the effects of government spending but doesn’t acknowledge how government spending helps feed into the narrative of inflation expectations.

[@user-is9uy6kg9c]

MMT gives emancipation to some people only consuming but not laboring in exchange of taking enslavement of some people only labouring not consuming. Max Weber depicted "Ancient Greek, Athens became pensionopolis with consuming citizens". goods and services were produced by slaves and foreigners. In the globalised world only political factions who have violent power to make money out of nowhere are mattered, whereas economics is reduced to slavery like ancient Greek.

[@sins1367]

If the Fed had done nothing when inflation reached 9%, inflation expectations would've exploded and not be as well anchored as they are today.

[@difigfs]

I enjoyed your push back line of questioning

[@ryanbuysse8867]

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

[@Rob-fx2dw]

Exactly - Government creates debt and passes it on to the public because government is net borrower of the public's money - taxation and deficit spending and more of that tax to pay for the debt.

[@MoneyMacroTalks]

You are right that I would have loved to talk to her more about the effects of QE. Most research indicates it contributed only a little to inflation because it created money,(reserves) that could only be spent on financial assets, potentially contributing to asset price inflation.

[@RideReport]

The deficit is excess spending. Excess spending leads to high levels of debt. High levels of debts lead to high interest expenses. High interest expenses lead to fiscal dominance and less productive debt/deficits. The US has three options: 1) Increase GDP: growth faster than government spending 2) devalue the currency and allow the debt to burden to inflate away 3) Continue servicing old debt with an ever growing issuance of new debt.

[@donkeybus]

Unfortunately #1 is outside the ability of our political system, its too easy to spend more and too hard to go the other way.

[@lonecandle5786]

If supply shocks are the main cause of inflation, once those shocks are over, shouldn't we get major deflation back to close to where prices levels started? Once the factory and logistics problems are fixed, shouldn't these costs go back to close to normal and then prices follow that deflation?

[@jacobjones630]

Deflation only occurs when there is overproduction. Production would need to explode and that is not likely with geopolitical, climate and demography problems. Although there is deflation in china because europe can't buy enough of their stuff.

[@hajihajiwa]

no

[@Madronaxyz]

There is no competition in the American marketplace. Ronald Reagan stopped enforcing Federal antitrust law. Every industry has been monopolized to the point where there are only three or four large corporation dominating every industry. They don't even have to talk to each other to coordinate pricing.

[@Empowerman]

We wish!

[@Empowerman]

@@Madronaxyz Yup!

[@tijmen-vm9lq]

Very insightful!

[@JohannBBravo]

good one! i am not a pro and i have not understood it all, but stephanie seems like she knows what she is talking about.

[@davenchop]

maybe maybe not.. most economist give the impression they know what they are talking about but you could easily find 100 economist who would argue she is completely off base with your analysis.. so the question is what good are economist.. the answer.. no good

[@steveeuphrates-river7342]

This was an excellent discussion- considering multiple viewpoints on stimulus and deficits!

[@joela.4058]

Good content! I’ll have to come back to finish it tho

[@greatamericanbrocast]

Underrated moderation here. Well done sir. Subscribed!

[@tropics8407]

Good one…lots to think about and observe going forward. So deficits can work as long as the spending is into a productive asset. What happens when the asset is a non productive boondoggle ? Hopefully we don’t go there 🙏 Note inflation is coming down but the prices have not come back down they are just rising less. How can this be a good policy ?😳 The stimy money went into housing and the stock market also both of which went up up up. Seems to me the stimy worked for those who held assets and stocks. Mainly the rich. Not so much for us working class folk who now have to struggle for pay rises or worse still if we are on fixed income pensions. 😤 these people understand what was done and are mad.

[@jimsummers487]

Savers officially subsidized financial markets in the 1980’s with the accords that were negotiated by so called conservatives….. workers do best right before the Wall Street rugpulls

[@hajihajiwa]

the entirety of the economy is run for the benefit of the rich. ironically to your beliefs, it is actually investment in non profitable ventures, like mass housing or free/affordable child care which benefit real human beings. the profit incentive and a profit based economic model bars this from happening

[@tropics8407]

@@hajihajiwa agreed but these things are not free and must be paid for. They should at least be able to cover their investment cost and operating cost.

[@livingmombirth4005]

No need to worry about boondoggles because we all know the the US federal government is incredibly capable at making sure that the money that they allocate goes to only the most worthiest of causes that will ensure the well being and prosperity of the economy, the country and the ordinary citizen.

[@informer9111]

Really loved this

[@wilhelmvanbabbenburg8443]

9:11 sorry, not an economist but isn't too much money always relative to the amount of goods? What would have hapoened without the stimulus?

[@MoneyMacroTalks]

Yes absolutely. Without the stimulus there would likely have been a contraction of goods and money. So, in that case you would expect more stable prices. But, a very deep recession.

[@wilhelmvanbabbenburg8443]

@@MoneyMacroTalks but this is talking about two extremes right? Is there no stable middle ground? Would the system always run into one of those extremes or it is clear in hindsight that the stimulus was too large and it should have been smaller/slower delivered?

[@weirdblackcat]

@@wilhelmvanbabbenburg8443 I mean you're implicitly assuming that these are both extremes - you need to ask if the stimulus is an 'extreme' before asking this question. At 16:10 "the $1.9 trillion package probably added 0.3% (ppt) to the inflation", which seems to indicate it was not a very extreme approach.

[@wilhelmvanbabbenburg8443]

@@weirdblackcat true... My definition of extreme was a little lose... But 'strong' increase of inflation due to a 'small' impulse sounds still like the impulse was not small. By extreme I meant the state of recession (if nothing is done) or high inflation (if a stimulus is given)... I guess this shows the complex dynamics of an economy 😂

[@BrianShh]

@@weirdblackcat she side stepped the question there with that answer, his question wasn't how much affect did Biden's spending package increase inflation, it was how much did the fiscal spending as a whole lead to inflation. either she consciously lied by omission or didn't understand his question. but there were many times that she didn't really answer his questions and answered a different question that was never asked. she came off negatively to me

[@shiner8375]

Remember, she is one who gets special lines at airports, sporting events, dining, elite like her don’t even need to see you unless you’re serving them.

[@elliottmcintyre9092]

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

[@alexobrien3890]

YES, yes, yes. You understand.

[@elliottmcintyre9092]

Just need to keep promoting the message

[@dwood2010]

Interesting that Stefanie thinks that the consumer is resilient. Debt is at all time highs, loan delinquincies are up, bankruptcies are exploding.

[@STG113]

Yes. But Capital accs can also cause bankrupcy, not only the public sector.

[@joshuamendez9959]

She’s referencing consumer confidence which has returned to normal rates.

[@dwood2010]

@@joshuamendez9959 Confidence does not equal reality.

[@surreal6643]

@@joshuamendez9959 No, it hasn't. It's almost back to the point it was when covid hit. And I mean at the end of the shutdown. When it dropped down below 90.

[@tspark1071]

Is it worth naming it with an acronym MMT?

[@52darcey]

There were several surreal movements in this …Kelton going on about interest revenue as an inflation channel before finally getting on to the far more obvious channel of interest expense per se, almost as am afterthought…no talk of the bank money creation mechanism which is the whole reason for monetary policy (but which is always entirely missing from MMT analysis) and finally most amazingly, no mention of oil price hikes after the Ukraine invasion which was surely one of if not the major contributor to inflation, which if I’m not mistaken was noted as such by warren Mosler when he was interviewed on this channel.

[@MoneyMacroTalks]

Very sharp observations. I really wanted to get into private bank money creation at the end. However, we were almost at the end of the agreed upon time and so I chose to give a nod to my hosts (being in the UK) and therefore opted to talk about the UK Gilt crisis instead. Didn't we mention Ukraine at all? I thought it was mentioned... otherwise I think it was implied as 'other shocks.'

[@marshalldonnelley7667]

Yes, overall I thought she made a lot of sense and I learned a lot, up until she started talking about how the Fed raising interest rates doesn't slow the economy (around the 45-minute mark). That part I disagree with. Also, the policy recommendations where the CBO and Congress would control inflation instead of the Fed doesn't make much sense to me. Congress moves too slowly, is too political, and the fiscal tools are a lot blunter and more imprecise. Monetary/credit policy may not always work, depending on the situation, but it's a lot quicker, more precise and more flexible than trying to pass legislation through Congress. Also, in some extreme situations, fiscal policy will work better than monetary/credit policy but sometimes, fiscal policy won't work and monetary/credit policy will. Different tools for different situations. Anyway, great interview and it was very nice of her to sit down with you for an hour, so thanks to her.

[@bradleywalsh8571]

With all due respect, but it'd be questionable in terms of what you've read if you're making the argument that MMT leaves out bank money creation. Description of the monetary system, including banks, is up front and center of MMT's analysis. One of it's major proponents, Randall Wray, was a student of Minsky, co-authored the Macroeconomics text book and there's a whole chapter dedicated to the banking sector.

[@MoneyMacroTalks]

@@bradleywalsh8571 that could be for sure. But, it isn't talked about much in Kelton's book. So, I would have loved to talk about it with her.. Maybe next time

[@thebreadtable4880]

They can't go over everything you want lmao they touched on a lot here.

[@jeffreywenger281]

This is an EXCELLENT discussion, and reminds me of a counter-intuitive fact about economies: a wealthy economy where everyone can afford lots of stuff is consistent with low prices. A poor economy where very few people can afford stuff is consistent with very high prices.

[@stevenmorse6133]

I would suggest looking up NBER and there information on the causes of inflation.. First, all the MMT people said inflation was transient. Here we are years later and inflation is still hear. The reason for this is the early stages of inflation were do to supply issues. Over time inflation stayed because of demand issues. The reason the MMT people were not able to predict lingering inflation is because they dismiss the 6 trillion dollar stimulus. NBER states "The contribution of tight labor markets to inflation was initially quite modest. But as product market shocks have faded, the tight labor market and the resulting persistence in nominal wage increases have become the main factors behind wage and price inflation. This source of inflation is unlikely to recede without macroeconomic policy intervention." The MMT can not accept the truth because it contradicts their theory. If you theory cannot predict what will happen then it is useless. They failed to predict inflation and now we are stuck with the negative consequences of people who deny reality.

[@davidwestwater2219]

Inflation was higher than 9%. That is a manipulated figure not taking in account the increase in energy rent housing in general. It also does not measure food. It is ridiculous to take away the three most important things that a person needs to exist.

[@mcs131313]

To the convo around 26:00 - i think one thing missing is that high inflation it typically followed by worse times. So people’s current happiness might not be the best metric. Like 5% inflation for a year or two is chill. But significantly higher inflation or 5% inflation for 10 years is less chill. And usually the measures required to reduce inflation also cause unemployment. So inflation isn’t the root of all evil, but fear of it isn’t unfounded.

[@Keiranful]

I recently saw a two part interview Professor Christian Rieck (a mathematician focusing on game theory) did with Ingo Sauer (an economist). They were discussing Ingo's research into hyperinflation. Both parts are in German, so most people won't understand them, but the research paper is in English. Can you look into this and give us your thoughts? Because Ingo has some pretty compelling evidence of why the text books are wrong on the mechanics of hyperinflation and why both MMT and it's critics focus on the wrong data points. Would love to have a third party viewpoint on that stuff.

[@aaronb8698]

It would make my day to have a federal reserve board lackey debat Peter Schiff On MMT, gold, and who will pay for ssi and 34t usa debt at intrest.

[@heinzbongwasser2715]

more government spending leads to more allocation of ressources to unproductive ressources with ultimately kills groth

[@livingmombirth4005]

Exactly and makes sure that buying a house while being just an average citizen and family man becomes nearly impossible. The American dream dies with all of these shenanigans. It is interesting to me that even the founding fathers like Benjamin Franklin (who did literally print currency) knew exactly the relationship between creating too much currency and inflation. This stuff is not rocket science. Obfuscating the truth only helps those trying to get power and money temporarily that then the successful powermongers always go too far and we all suffer.

[@mcs131313]

Interesting point around 55:00 - she’s arguing that to solve housing shortages we need rates to stay lower so that housing costs and rent can increase? I haven’t heard others say this and curious - is that a common viewpoint that to make housing more accessible we need housing prices and rent to INCREASE?

[@JCResDoc94]

*if china had a minimum wage in line w inflation, wouldnt that fix any defltn spiral home mkt concerns?* or indeed any country? _JC

[@KevinWhite-jy8wt]

Thanks!

[@jackofnone500]

Just want to start a discussion, if countries phase out USD on their trade and currency reserves, can we really say don’t worry about the deficit and increasing money supply?

[@Iandar1]

Mmt applies when a country has money sovereignty meaning it issues debts in its own currency, and has control of its currency.

[@Rob-fx2dw]

It does Not matter if a country has no foreign debts because it's money will continue to fall in purchasing power if too much is created to fund governrment spending. What will happen is the price of imports will continue to rise (like the price of local goods) due to the increasingly adverse exchange rate when the economy has more money nut no more goods to match.

[@Iandar1]

@@Rob-fx2dw unfortunately prices of goods and services will rise regardless if the currency is in a state of inflation or deflation, inflation is just a easy scape goat for justifying price increases because under capitalism line must go up (personally if you think the government creating money increases in prices you must also believe there is a fucking Jewish cabal running everything) If you want evidence look at the Yen which has been under a state of deflation for 25 years and prices have only increased during that time, also your forgetting or ignorant of the role taxes which is to control inflation.

[@Q-154]

⁠​⁠@@Iandar1money “printing” will lead to inflation. It’s not the only component, but it is a big piece of the puzzle. The market wants deflation, the fed wants inflation. And inflation is a tax in itself.

[@budi_bravo_9]

Cool stuff marco

[@JCResDoc94]

29:00 or military. no one ever blinks at triln dollar military spending. _JC

[@wasdwasdedsf]

no problem with that. it could be argued to be too small. the real problem is the rediculous ineffeciency of the millitary industrial complex

[@davidl.e5203]

There is a theory that says military spending is "an investment at stabilizing currency volatility" or "price you pay to maintain reserve status". Indeed, if you looked into history, Dutch & British used to hold reserve currencies. There are also highest military spenders during their tenure of reserve status.

[@richhenry7540]

This theory assumes government spends money responsibly.

[@buddypalomo]

Wow … awesome interview! Didn’t know she worked with the Biden administration - thanks!!!

[@wuldntuliktonoptb6861]

Imagine if I said wait you mean writing rubber checks could have consequences.

[@musiqtee]

49:43 I’m not in a position to point out “right and wrong”, but that’s also the point. There’s NO automatic ’trickle down’ beyond the corporate economy, both nominal and real. GDP is not revealing much for non-owning wage earners, who by any numbers are most people. We need to understand this top-down, not only bottom-up - and seriously redefine where ‘people’ meet financial and macro forces. After all, ‘people’ have very little influence - or education - around this. The danger is that this unevenness IS exploited by political squabble, making voters run towards a “strong leader” and nationalism. We can’t isolate “economy” to the complex between the known players, and keep externalizing the non-incorporated ‘consumers’. People are NOT always rational, as our economic models take for granted. Neither are leaders or large enterprise boards - which is why we keep getting surprised or ‘shocked’. Those shocks hit people who can’t handle them, and don’t cause them - especially in our globally interdependent noisy ‘anarchy’ between governments. Freedom doesn’t exist without relations to constraints. It’s not ‘absolute’, and this cost should be included in GDP. 👍

[@danz1182]

Look at spending patterns for credit cards since 2020. Stimulus money absolutely drove purchasing and you now see people complaining about corporate profit margins. All that money sloshing around unleashed demand which allowed sellers to command higher margins. Free money absolutely was a driver behind inflation getting out of control.

[@Ayresplastering]

Ok so I'm only part way through but I have a question Stephanie Kelton just remarked about how much better we could have done after 2008 if we'd had the courage, if that's the case how does this fare with the idea that there are zombie companies that shouldn't exist because they're not competitive but have gotten by on cheap credit, now we're getting higher interest rates we should be seeing a recession right? This is all a bit confusing for a layman and I live in the uk where we seem to be in a second of two lost decades of stagflation similar to Japan, speaking of which how does that align with what Japan saw, they have a massive debt ratio yet little growth and little inflation, are they rife with zombie companies? Is it the targeted nature of the US investments? I also saw something about increase of 560 billion dollars in irs tax collection due to the American ira. Like I say very confusing but very interesting

[@Ayresplastering]

This is all very high level and well above any understanding I have of economics, after all I'm just a Plasterer but thank you for doing this work it let's the cogs in my brain turn and try to understand

[@Ayresplastering]

Ok so this is kind of addressed towards the end but not about zombie companies and why if low interest rates are good we've had such an uncompetitive country vs the USA. I can't agree that Liz truss and the gilt crisis was down to a.lack of resolve I think it was clearly borrowing to allow for tax cuts, this doesn't in my eyes go against what she's saying but actually agrees with it in that earlier she was talking about the need for good management essentially and this was a bit of a banana Republic way of thinking. So if I'm following correctly how does this.line up with the idea that in say the uk the bank of England doesn't need to be independent, I mean it wasn't unto the 90s as far as I know.

[@nonexistent5030]

I think you should keep in mind people like her don't seem to consider profits to be an important part of the equation in assessing the economy. Just "spending." Efficiency altogether gets kind of squeezed out of their discussions.

[@twhelostl61]

Stimulus as a descriptive does not resolve the issues caused by the shutdown. Velocity of money in the economy is a normal measure for setting Fed policy. Normal spending was not disrupted entirely. Meanwhile you have manufacturing paralyzed and our ports closed. A large amount of stimulus was placed into savings as many were collecting unemployment. Hospitality business went dark while hospitals were staging sick in hallways. The stimulus effect really was to stave off deflation. Real estate is struggling with materials shortages and skilled labor. That is going to take a long time to sort itself.

[@rickavory]

The biggest problem I see with MMT is the fact that you’re shifting a lot of the influence over inflation to the fiscal authority, which is a super political entity. The fed is a very independent and autonomous entity, and make their decisions with little influence over third parties. A fiscal authority is super influenced over their constituents and the political party their associated with.

[@GreenLarsen]

You are not moving the influence, you simple realise where the influence have been all the time. It is like saying that the theory on gravity stopped us from being able to jump and not fall back down, it simply explained why you fall back down. But I might have misunderstood what you meant, if so mb

[@danangelakov7247]

I see the issue (which remains unsolved in all other economic schools) with taxation. MMT recognises that taxation reduces the money supply and cools down inflation. Via fiscal policies, the poor and the working class (should?) benefit more than the rich. But over a longer period, these benefits crawl up to the land/productive asset owners. Unless we have a working mechanism of taxing the rich effectively (be it land, wealth, or other taxes), in the long term the rich will always benefit from inflation and hurt the working and "middle" class. Fiscal policies and cash handouts, without a tax mechanism to give those at the top a periodic haircut, will always remain a temporary survival solution to barely keep the people from revolting. This is not a statement against government spending, but a statement FOR better taxation mechanisms.

[@effexon]

I dont disagree with those things.... how about interest rates... as too cheap money (Some argue previous some administrations deliberate gave that knowing it would flow to richest group) allows buying more assets while banks as gatekeepers normally prevent that from poor(working class). It is also a subsidy to richer group. Also inflation or interest rates force undeemed zombie companies to fall down and risk to realize (unless bailouts are too easy to get, nullifying this again). In financial example, other bank can buy that fallen company pieces say 10cents a dollar, thus assets dont get destroyed. This makes sure also those with lot of assets need to work on them, not just sit on them causing stagflation risk(underinvestment in economy). Some sign of this cheap money for "rich" is how predatory lending as business model has exploded, while not adding anything more to economy, just ripping a cut from working class salaries(based on cheap lending to some companies, while taking a big cut delivering that money to retail). Another example is rentier class explosion with ungained value gain (which you sideline in that comment how to tackle). @@danangelakov7247

[@DerekRoss1958]

The Fed was created by the "fiscal authority" and it could be closed down by the "fiscal authority" just as easily. In fact there are members of Congress who would like to do just that.

[@livingmombirth4005]

@@DerekRoss1958 Shutting down the fed could be done as easily as passing the law that created it?

[@JSeydl1788]

Nice job. Much much better than the mosler interview

[@steveeuphrates-river7342]

The Covid relief that occurred DURING Covid was absolutely needed. It's the continued stimulus after the crisis which is highly questionable.

[@user-tw2oe6zi6q]

Great show. What's never talked about is if the stimulus money was not pumped into the economy. Would the economy have come rebounding back as quickly and as strong as it did. Instead of dealing with inflation the problem would of been continued double digit decline in GDP and unemployment.

[@effexon]

She talks a lot of "supply management", supply constrained economy.... dont know US that much but in europe we have one aspect of this which is often in imbalance and nobody seems to account it: if you bring more immigrants to do work (understandable from business side), that puts demand in housing. Idk how this applies to more complex examples but I take whole economy is complex web like this with lot of moving parts.

[@Andredias164]

Yep, this immigration phenomenon is happening all over Europe and there are some people who still deny it.

[@hajihajiwa]

i love this point because the answer is so simple in common sense but impossible under a profit based economic model. in a sane world, you simply build more houses and expand public transit in a smartly planned way which incorporates the new communities into existing local economies. this is however incongruent with profit, it is not profitable to build smartly planned cities which are economic drivers long term because they hurt short term profit and because migrants are poor, thus undeserving on anything in todays neoliberal global economy

[@thebreadtable4880]

​@hajihajiwa and thus we need social governmental investments in people, that still allow them to be free.

[@allenaxp6259]

Another Excellent video on "Was MMT right About Inflation? Kelton argues that the inflation we are currently experiencing is not caused by government spending, but by supply chain disruptions and other factors. She also argues that MMT can be used to address these supply chain disruptions by investing in infrastructure and other productive capacity.

[@effexon]

companies did that during covid already when they found weaknesses in their suppliers... but are you talking in general level pre covid and how tightly competed those margins were that nobody would invest in supply chains.... Also as supply chains are global, how can MMT(I take she speaks from government viewpoint, not private company) help with bottlenecks eg in asia some location , some part for a product is having issues lets say in japan that producer.

[@zafiroshin]

She is insane. There's a general consensus about massive stimuli as being one of the primary causes of inflation. She is either lying or ignorant. Proposing MORE MMT to solve the problems that MMT policies created in the first place is complete madness.

[@effexon]

@@zafiroshinit can help somewhat.... 0% inflation or deflation and 0% interest rates are toxic for economy despite look good.... though not many mention how many trillions was given to wallstreet and regular people got peanuts ion stimcheck and also 6-9months later when inflation and shortages had already hit. Some economists suggest stagnation, halted economy it helps to give regular people stimchecks, but ofc it doesnt help if same time companies get stock market boost and can hoard houses and other products out of market or raise pricelevels substantially for people. Although housing market is somehow not good now, they need to find targeted fixes for that. What you says suggests they deliberate made inflation+supply shock, coz it flows back to companies profits(many company did record results 2021).

[@mensrea1251]

@@zafiroshinConsensus doesn’t mean truth. Consensus under kne set of circumstances may prove to be untenable under different conditions. Kelton and MMT acknowledges what the “consensus” baseline is and then sets about debunking it. Kelton started off being an MMT sceptic, so it’s not like she was this rabid MMT lifer. You say she’s “insane” but tell us what exactly about her views you find so objectionable? If it’s simply “well, it’s against the consensus” then that isn’t persuasive at all.

[@wasdwasdedsf]

"Kelton argues that the inflation we are currently experiencing is not caused by government spending, but by supply chain disruptions and other factors. " so as long as those dont move, we can print infinity money and inflation wont happen!

[@telluwide5553]

There's something to what she said about "seller's flation". Europeans forget that when the Euro replaced national currencies, prices actually went up overall as sellers got away with simply rounding up prices. Why? Because they could easily get away with it, many had already expected it beforehand.....

[@milo-qh7cv]

what about the inflation of over estimulating the economy with nowhere to go?

[@timrichardson518]

It happened to the Asian tigers, it happened to Greece, Portugal, Spain. All of them were told by the IMF, that the only way they could restore their economy was through austerity. But, when it happened in the USA, politicians decided that fiscal stimulus was the appropriate program.

[@quixomega]

I'm hearing justifications for why the administration did what they did, but not much that supports the concepts of MMT.

[@andresuazo6129]

Great interview. Really cleared up a lot of misconceptions about current inflation.

[@jaymills1720]

Yay Stephanie

[@ShamanBill]

It’s almost like this lady doesn’t know that recessions are a great time for young people to buy assets.

[@Rob-fx2dw]

Putting interest up does Not put more moeny into people's hands because higher interest is an additional cost to people. Even if it did that would not push up the inflation rate because no more money is in the hands of the private sector when interest rates are raised but people are less inclined to buy consumer goods they can do without. They also have to pay more off any of their loans which restricts their spending on other goods.

[@HumanAction76]

Inflation has slowed, it has not gone down. Gaslighting at its finest.

[@ow5229]

No mention of the mass retirement from the boomers and the dissavings fueling inflation.

[@aelfredrex8354]

The only way to pull infinite profit from a finite market is to continuously devalue the money. Looks good on the books and that's all that matters, right?

[@jacksonwinter5110]

Where does the market get the money that constitutes its profit?

[@aelfredrex8354]

@@jacksonwinter5110 Debt creating mountains of digital cash out of thin air.

[@mitchellbunnell7448]

She seems to be way more of a politician than economist

[@RealProgressInAction]

This is the Reagan economy