What is modern monetary theory

[@RichardBergson]

Thank you, Richard, for such a clear description of MMT. I'm not an economist or ever studied economics but this does make sense. What I would dearly like to hear about is what are the constraints on money creation apart from inflation? Is there an influence from the global financial markets, for example? I look forward to further videos!

[@legalfictionisfraud]

It should not be described as MMT... but MDT.... Modern Debt Theory.. They still lie within its title!!! And a professor has no business not pointing that out!!!

[@RichardBergson]

@@clementattlee6984 I guess currency value is the obvious way in which markets might express disapproval of running a high deficit although if the state is willing to endure some short term pain an improving economy would redress that in time.

[@RichardBergson]

@@RobinHarris-nf4yv That was my understanding, too.

[@alastairleith8612]

@@legalfictionisfraud you seem to not under stand that a) one person/entity’s credit is another persons debt; b) fiat money has been a way of issuing credit/debt tokens for 5000 years. The only new bit is the state taking control of this. When central governments spend into the economy, they make what’s known as vertical or high powered money, the currency tokens are exchanged for real resources in the private economy, the resources flow to the state and the new currency tokens stays in private economy until such time as any of them are used to pay as tax to the central govt, at which time they cease to exist any longer. (they literally used to burn paper notes at US Post Offices received as tax receipts at US Post Offices in the form of tax receipts, so long as the payment of tax obligation is accounted for the currency tokens no longer serve a purpose, more can be issued by the central govt any time). Another form of money creation happens in private banks and is known as credit money, or horizontal or broad money. Private banks create currency when they issue a loan to anybody. They dont go searching in the bank vaults for cash or gold or anything else to issue a loan. The mark it up as per double entry account keeping as credit to themselves, your debt is their financial asset, sometimes they’ll even package that up with a bunch of other debt assets and sell that- hello GFC! - and mark it up the cash account they made for you to the load amount as their debt, since you’re ;likely to draw against it. it balances out. And you get a loan (cash account is an asset, loan contractual obligation is a debt instrument) and these two cancel each other out.

[@alastairleith8612]

@@RichardBergson take a look at the short-position takers who took on the bank of Italy, prior to Euro - shorting the lira and betting that Italy would be forced to devalue the currency in the face of so many short traders on bonds. It was called the widow maker trade for a reason. The Italian Government understood they could continue to bury back their own bonds at whatever yield they desired it to be, short traders could never outgun the reserve bank who issue that currency they’re trading in. Warren Mosley bet against them and made his first fortune.. He went on to outline the main lines of MMT theory, not totally original in economic thought, but he wasn’t trained in economics, just finance, so he invented the understanding for himself. Impressive. Look at what the Bank of Japan has been doing for two decades with regard to setting the rate on ten year Bond trading, while the Govt fiscal position has been high for two decades and up to and above 200%to GDP for a decade.Just because you don’t understand something doesn’t mean it doesn’t make sense, just means it doesn’t make sense to you, and maybe you need to work harder to educate yourself rather than tell people MMT makes no sense. no credible economist today can raise objections to the MMT lens for macroeconomic analysis.

[@rassabossa4554]

Thank you for the fair explanation of MMT, which I define as simply how money is created and spent into the economy. What very few people have talked about is what do we do when automation (and AI) drastically reduce the need for jobs? Do we still need full employment? Do we move to a UBI? It's coming faster than we will admit but how do we adapt with the least amount of disruption?

[@OdinBarenjagerschlos]

Don't fight disruption at all and embrace creative destruction by staying/getting flexible. The 19th and 20th century's version of automation destroyed 90+% of jobs and people were scared of it, but that seems silly now. We used to require that many people just to eat and transport things, and now the horse related industries are tiny and like 2% farm iirc. People like to say the jobs making the farm and transportation equipment, making and maintaining internal combustion engines, etc replaced all those jobs, but that is a lie. If it took the same amount of labor to do the task, it would have not been profitable and nobody would have rushed to do it. Destroying the jobs was the point. What success at that point means though, is that if a 90% of labor need moves to 2 or 3, the costs of existence got massively cheaper and new jobs you couldn't imagine (unless you were an entrepreneur and got rich imagining them) sprung up everywhere because people will put all that saved wealth somewhere. Beer is less of a luxury so you become a bottler instead of a farmer, toys are things that families can afford to buy from industries now so you work at a frisbee factory instead of a stable, families start gathering in living rooms around their electronics for broadcasted entertainment so you make radios instead of farm equipment unless you were the tiny fraction moving on to making steam and gas powered threshers and tractors and stuff. Basically start removing laws that already have or give sign of becoming obsolete, make institutionally upheld status quo not an expensive or burdensome ordeal as the way things were dies anyway.

[@Tom-771]

Well said Richard. Saying MMT is hocus pocus implies MMT is a system we could move to if we wanted to. However MMT actually describes how the economy really works not some theoretical alternative. It's not a ponzi scheme, but a description of the way the economy actually functions now.

[@Law00999]

@@Tom-771 If its functional please explain the boom and bust cycles we have experienced all of my life? Please explain the wealth transfers from poor to rich? Also explain why where experiencing capital consumption! MMT is a fraudulent system, magic money tree! If that’s how the economy works why is it such a mess?

[@Alberto-k6t]

this doesn't work in the EU. We also have the "fiscal compact" limiting choices

[@oneoflokis]

​@@Alberto-k6tWell most of the EU has one single currency, doesn't it?

[@legalfictionisfraud]

So what mechanism would be used to guarantee full employment then? The government says here is a job, just do it or what? Guarantee of full employment needs to a be very specific? What would the benchmark be to measure full employment in this context?

[@cliffhughes6010]

Is that the Magic Quantitative Money Easing Tree?

[@davepubliday6410]

The barrier to full employment is not economic, it’s political. Business prefers a non-zero unemployment rate. It makes hiring easier and keeps wages lower. As long as there are lobby groups paid for by business, and politicians needing money to run for office, there will be unemployment.

[@oneoflokis]

💯💯 As Karl Marx said, "the reserve army of labour", aka the unemployed. Only really made full use of when the nation is at war, or something like that..

[@Tensquaremetreworkshop]

Full employment would require- - forcing those who do not need the income to still work - creating 'make work' jobs for those not capable of output worth the minimum wage. Not sure how society, or citizens, would benefit from this...

[@vgstb]

@@PhilipMatthewsPAEACP Bruiting clichés again?

[@Tensquaremetreworkshop]

@DewiSant-o3y It is inherent in free movement of labour systems. And there are many sorts of unemployment. 1) Benefits are an acceptable level 2) Person cannot create value of at least minimum wage. 3) Has sufficient resources that current offers are not worth the effort 4) Past record does not encourage employers and many more 'Employment' ( engaged in economic activity to a level that results in the majority of income) is not, in itself, a certain good. 'Heaven' does not, I am sure, involve employment.

[@davepubliday6410]

@@Tensquaremetreworkshop As I understand it, the unemployment number is the number of people who want a job but can’t get one. So, nobody would be forced to work in a system with a 0% unemployment rate.

[@Mitjitsu]

MMT assumes countries have full control over their currency. When in reality most of the newly created money comes from the private banking system, and since 1981 banks in the UK have no restraint on how much money they're allowed to create.

[@vgstb]

Indeed, but the privatisation of money creation is allowed because it benefits the financial elite, not because it is an economical necessity. The enormous economical development phase between 2000 and 2015 in the PRC was funded pretty much exclusively by the People's Banc of China. In fact, Japan did pretty much the same when the BoJ provided the funds to make Japan rise from its ashes after WW2 to become the second largest economy by 1980.

[@alastairleith8612]

@@Mitjitsu when the central government spends into the economy in exchange for real resources (stuff or services) it;’s known in MMT as vertical money, others call it high powered money, when they spend that currency they issue it, seemingly from thin air but it’s actually from legislated authority so called “full faith and credit”. the vertical currency stays in the private economy, being exchanged variously all over the place bw parties until such time as it is used to meet someone’s or some businesses federal/national tax obligation at which time it is accounted for and then ceases to exist. Digitally wiped from existence, other than record keeping at the tax agency. Bank issued currency is known as credit-money (also known as horizontal or brad money). and it’s different to vertical money in that it’s only around so long as the loan remains unpaid. As the loan is repaid the credit money expansion gets contracted back to the same position, so its impact on the economy is quite different in some ways to vertical money. But yes an over expansion of private credit can put the world into a financial crisis and put the global banking system into melt down… it;’s happened more than once, the most recent being the GFC.

[@alastairleith8612]

@@Mitjitsu MMT doesn’t assume anything, it observers certain realities, I assure you the credit-money you talk about, currency issuance in the private banking and derivatives instruments in the finance/shadow banking sector around bonds etc are well understood by MMT economists just as public spending being currency creation is understood. Both types of currency, vertical currency as it[‘s known by CGCB and credit-money by banks have a process that deletes them from existence too. MMT observers the nature of these creation and destruction processes and how they interact with the broader macroeconomy. Tax destroys vertical money and loan repayments retires credit-money, it’s all just accounting,double entry accounting at that.

[@AdamCiernicki]

That is a political choice.

[@santerisatama5409]

The only real pragmatic meaning of a currency is what global purchasing power it has. Countries have very limited control over the purchasing power of their currency - if China does not want dollars, they stop buying them, and imports of Chinese goods cease and dollar collapses. MMT is based on two basic assumptions. A: assume that the currency is dollar. B: assume that there is infinite global demand for petrodollars ad infinitum. Without those assumptions MMT collapses. And meanwhile, IRL the dollar empire is collapsing.

[@MengerMania]

To believe in the validity of MMT you must first have an undying faith that the government can actually "run the economy" effectively and efficiently. Britain provides a shining example of that fallacy. Money exists to facilitate the allocation of resources in an economy. Any artificial change in the quantity of money causes a misallocation of resources. Inflation occurs only after the widespread inefficient redistribution of resources by central planners. MMT contains a myriad of fallacies, but the idea that money equals debt needs correction. Debts represent money in the future (even tomorrow); money consist of a claim due immediately. Anyone viewing this video should think long and hard about the implications of MMT>

[@jasonjames4254]

Firstly, let me say I struggle to understand all monetary theory so these are only questions to help me understand what you're talking about. While I don't always have faith in the government (essentially the people) to run the economy, I have far less faith in for-profit business's ability to do it. How is a centrally managed MMT economy any worse than a Laissez-faire hard currency economy, because don't private capital and equity markets also have a backdoor method of creating money? What's the difference between buying stocks on margin and printing currency, or, investing in any obscure derivative security with multiple layers of underlaying assets stacked on top of one another so that no one really even knows what they are? How about credit default swaps? What about fractional reserve banking? Of course, I use these examples because they all caused major market crashes and recessions/depressions in the past. And regarding gold and silver, these are being mined all the time and supply is ever increasing. Plus, aside from small amounts being used in manufacturing, they no real value value and are about as fiat as paper currency. And the value of cryptos like Bitcoin are far far more unstable than government fiat currencies. Billionaire traders manipulate the value of cryptos every day to their advantage. Many traders have engaged in outright fraud and have been imprisoned. How could unregulated Cryptos ever provide for consistent medium of exchange. Most wealth is consolidated in the hands of the few. How can the poor possibly work their way out of poverty when the super rich have all the leverage? When was the last time we ever saw big business rush to the aid of starving people? In a democratic republic or democracy, the people own and control the currency through their elected officials. Governments can implement monetary policies that are good for everyone. Business will ALWAYS do whatever maximizes profits without regard for whom it hurts, because if they don't do it, their competition will.

[@MengerMania]

​@@jasonjames4254 It would require a book to answer all of your questions. I will, therefore, address only your last statement. If you assume that "Business will ALWAYS do whatever maximizes profits without regard for whom it hurts, because if they don't do it, their competition will," without the intervention of government to redistribute resources the only way to accomplish that would be to satisfy consumers (who are the producers.) MMT advocates the redistribution of resources according to their values (not those of consumers) using artificial changes in the quantity of money. Such a strategy misallocates resources and ultimately inflation (which they claim to want to control.) I suggest you ponder the definition and purpose of money in free markets. The MMT advocates do not understand.

[@adon8672]

​@@jasonjames4254Interesting. I'm no expert either but have you wondered who controls the government or who determines the election winners that go on to form the government? Doesn't Labour/Conservatives or Republican/Democrats have the same set of sponsors and controllers? Does it really matter much who's in government as far as the economy is concerned? Haven't you noticed (especially in the US) that there's a revolving door of the same individuals in government and the private sector?

[@tonywilson4713]

And anyone who reads your comment should think long and hard on what its based on and then look at the evidence of what it has delivered. 1) The claim that governments can't do anything right comes straight from the mind of Milton Freidman who for some inexplicable reason was regarded as smart. He wasn't he was an IGN0RANT CLOWN of epic proportions. There's a fantastic interview where Phil Donahue challenges Freidman on his basic claim that "greed is good." Freidman claimed that all innovation is driven by greed. The problem with that is the greatest single project in human history for driving innovation the Apollo program had been successful. In Kennedy's famous speech announcing the plan to send a man to the Moon safely return him to the Earth the end of the decade *INCLUDED* remarks about developing methods and materials not even under consideration at the time. Out of Apollo came miniaturised electronics, practical digital computers, many alloys, many other materials including Teflon... etc. By the late 80s every dollar spent during Apollo had been returned over 9 times via taxes on wages and profits from companies exploiting Apollo spin-off technologies. That came out in a report following the Challenger disaster. I know about that because I'm an aerospace engineer. Other than that there's the incredible success of public education programs, public health care systems, road, bridges and other infrastructure all of which has enabled the private sector to grow and make money. Simple fact governments can do great things and can run economies. Its a matter of electing people who are competent rather than the clown brigades to many nations elect. 2) The claim that modern economics has delivered tremendous growth, wealth and prosperity is also bunk (to say the least). The correct way to describe neoliberal economics is that it has *_delivered tremendous growth, wealth and prosperity FOR SOME while leaving large slabs of society broken._* In late 2022 Bernie Sanders had a report commissioned by the Congressional Budget Office on family wealth. It clearly showed that the Top 10% of America have done well, the Middle 40% of America have done O.k. while the bottom 50% have been utterly smashed and pulverised economically. If you extrapolate that information to the rest of the developed world where there are approximately 1.2 Billion people then what neoliberalism has done is throw around 600 million people under the economic bus like ahs happened to most of the other 6.8 Billion people on the planet while around 120 million people (~1.5% of the human race) has made enough money and gained enough wealth to afford to pay for the environmental damage they have done making that money. Those 2 things alone should get people like yourself to SHUT UP or WAKE UP, but your so called correction of money and debt is one of the stupidest explanations I have seen yet. Anyone who's read this far please go and watch Gary Stevenson's video on "What is Money."

[@OdinBarenjagerschlos]

​​​​​@@jasonjames4254That's not the dichotomy, we don't let a business create as much money as they want, buy whatever they want, and not pay it back. We arrest people in the criminal enterprises that try this, like counterfeiters. The real dichotomy is either people doing this would always be eligible for prison, or whether a select few have the legal authority to practice this theft of the value of dollars. What you mentioned is just the credit system and can't create permanent inflation (unless it is already written, secretly, that they will be bailed out with new dollars if the credit system collapses). They all have to pay it back, they have to service their debts, they have to deleverage in the end - absent a central authority it's just a net neutral pulse of inflation and deflation to the same sets of benchmarks. The businesses are given rope by the credit system but they don't control it -- the federal reserve MMTers want to make into almighty daddy warbux, controls this via interest rates. Judging by the Austrian street cred the other commenter showed I'm guessing they already agree the actual causes of the recessions you mention were irresponsible uses of the Fed levers -- free candy is more popular than buying vegetables so they kept the money supply too high and interest rates too low, which causes misallocation and malinvestment as alluded. If it sounds like in a way it doesn't matter then, the fed will fuck us over with inflation that hyper rich people actually like and get richer off of, you're right, MMT is kinda just like hyper-keynesianism, they both subscribe to borrowing our way out of debt, MMT just probably would see it done with even less constraints on inflation from a (now openly politically controlled) fed and government spending that necessitates it. We ought reject the economics status quo since Nixon said we're all Keynesians now, but not by doubling down on its worst parts. And not by focusing on taxation like Republicans and monetarists. The big deal is there is only a certain amount of real productive wealth to go around, savings capital investment and production is a cycle that grows the pool, and government spending doesn't create and only hijacks part of that pool instead of it's free ordered preference uses (read: most wealth producing uses), so regardless how you 'pay for' it we need to be able to tighten our belts in a crisis again, and learn to stop going right back to getting on heroin every time things are stable and good. Lower spending is more real wealth for everyone else, "austerity" was a concept made to confuse the two but countries that did it by lowering spending got real recoveries and those that just raised taxes failed, and you can not actually stick it to the super rich guy by spending a shitload of money on the hundreds of millions of little guys -- this inevitably creates inflation, the rich guy has the cheapest debt and the tiniest cash balance, so he just gets richer faster when the rest of us feel the pain of letting the nonproductive big spenders loose.

[@leighgoodwin1726]

And low interest rates have increased inequalities by inflating asset prices

[@ricmorris9758]

Only in tandem with a lack of political willingness to take money back out through tax, clearing the debt to the issuing bank.

[@edeastburn3614]

​@@ricmorris9758indeed. And if those with assets coordinate with those in government, then a lack of political will to tax becomes profitable for both at the expense of those with fewer assets. In other words, modern western democracies.

[@m2useinu]

MMT is a description of how the economy works. The people who rule economics these days do not want to accurately describe how it works so that they can manipulate it to their own ends. Video is pretty straightforward and simple to understand. Thank you

[@joemancini2988]

Thank you for this clear presentation on how MMT works. I believe that the first government to effectively establish such procedures will lead the way to others.

[@davideyres955]

The big problem with MMT is that its entire validation is that money is created to balance what is in the economy. Ie if you create more money than stuff to buy you create inflation. Not a massive problem but it relies on the people running the system to adhere to that. Where it will go wrong is that it relies on politicians to behave and not create money to prop up their failed policies. Chance of politicians to behave is zero. So MMT won’t work.

[@alastairleith8612]

politicians in Australia and UK, Labor parties in particular - those same parties Tories always are telling us you can trust to run the economy - are already obsessed with achieving budget surpluses. so if such politicians who were always told by extreme neoliberals can be trusted to "run the economy" understood MMT and understood the need for deficit spending where is the evidence that they'd overspend to create hyper-inflation? apart from the fact that hyprerinflation is usually not associated with overspending by govts int eh first instance, thats a reaction. If you look at the always talked about the post-WWWI Weimar Republic, Venezuela and Mugabe's Zimbabwe in al three cases, it the sheer collapse of productive capacity in the economy that drove price escalation, Zimbabwe's Agricultural production fell off a cliff because he chased out most of the white farmers and killed or disappeared most of the skilled, indigenous farm-workers and gifted much of the farmland to higher ranking army veterans and cronies. Some MMT economists say the "natural rate of inflation" should be zero. Why do you assume deficit spending raises interest rates when there is so much evidence to show it can reduce inflation, as is the case today in USA under the Inflation Reduction Act putting billions into clean energy solutions and the like which will reduce the cost of power in USA and improve crumbling national infrastructure. If Biden or Harris introduced medicare for all, think of the cost saving to American business owners not having to run medical insurance schemes for their employees! If they waived high-ed fees and made university study free or extremely low-cost, think of all the extra income people would have to spend elsewhere in the economy. We need to governments to deficit spend into the economy not just to keep economies out of recessions, but to redirect economic activity towards climate change solutions which are not being deployed fast enough to save us, and to redirect away from elites who give zero shits about climate change; want as much war as possible; and control out economies and politics through finanicalisation of everything.

[@garryallison4716]

Please get your terminology right when it comes to this important issue. The guy even told you that it’s a debt based system. Only gold and silver is MONEY!

[@alastairleith8612]

@@garryallison4716 clearly you have no idea what money is to say that only silver & gold are Money. You probably dont even understand how the gold Standard created the geopolitical tensions that resulted in WWI. You also dont understand why USA could no longer maintain a gold Standard.

[@garryallison4716]

@@alastairleith8612 yes I do. Go and read a couple of books on it and stop spouting all this MMT shit

[@alastairleith8612]

@@garryallison4716 LOL, depends what you mean by reading books. You read Austrian economics books and believe that nonsense. even thought it's demonstrably wrong. MMT has the evidence of predictive power on its side, while Austrian and neoclassical economists have consistently failed to predict economic collapse, recessions and so on. The Federal Reserve didn't even see the GFC coming or know it was happening as the world banking and shadow banking system was melting down around them. Because NCE doesn't consider money and banking to be relevant to macroeconomics. Their assumptions about money and finance are why the didn't see the GFC as it was happening around them. There isn't enough silver and gold in the world to backstop the scale of global finance as a reserve currency, so apart from not understanding that money is always a debt/credit relationship and always has been, your proposed solution is a fantasy. Read Karl Polanyi about why the gold standard used by the European empire states directly created the geopolitical tensions that precipitated World War One. I've read more credible macroeconomics papers and book chapters than you've even heard of it would seem. MMT has its theoretical roots in some of the greatest work on century economics in the 20th century, names that mainstream economics has shunned for obvious reasons, the myths of orthodox economics are exposed. Names like Hyman Minsky, Wynn Godley and current economists like Bill Mitchell, (and non-academic co-founder of MMT Warren Mosler), Scott Fullwiler, Randal Wray, Stephanie Kelton, many others.

[@jeffholden2369]

I am attracted to the concept of MMT but this video made no mention of the country's trade abroad. If the British government printed lots of money to fund high government borrowing wouldn't the exchange rate for foreign currencies fall and so the cost of exports wouild increase and the value of exports would decrease? Haven't we seen this in Turkey where the government resolutely resisted raising interst rates and the value of the Turkish lira plumetted? I can see how MMT could work well in a closed system but not in an international one... but I'd love to be convinced.

[@laurietaylor8982]

Thank you Richard….just what I’m needing in my ongoing understanding. I’m ok with a lot of it…but I’ll be listening to this again…and again I suspect to try to clarify it for me. So…following on from that….a bit about what is wrong with what the government’s economic processes as they are. Thank you again

[@derendohoda3891]

Thank you for the clear presentation. Unfortunately I disagree that full employment should be an aim, and furthermore I disagree that the government should define wants and needs through tax policy. Free markets determine what people will pay for, which is not a great proxy for what people want and need, but it is miles better than government decree, especially since tax policy is itself open to capture. That said, it certainly explains the state of the western world.

[@MargaretDeakin-d6m]

More people would work if training was provided and acute health issues were treated ( investment in uk business too)before becoming chronic. Modern governments prefer short term goals instead, which requires a stick to beat workers into submission, rather than long term strategies that would work, and create wellbeing.

[@kevoreilly6557]

No they wouldn’t

[@Daniel-pu6pl]

MMT is exactly what governments are doing nowadays, and it’s probably the biggest scam and short term policy out there, prosperity doesn’t come from money market manipulation nor demand policies (Keynesian), it comes from allowing people to make business with the least government intervention, and by preserving solid institutions (central bank independence, simplified and low taxes system, minimal regulations, legislative stability, internal and external security, …)

[@MargaretDeakin-d6m]

Banks only give to the big Corporations to pay shareholders,thereby bankrupting their business eventually, then justifying their need to lay off workers, reduce wages, make work conditions inhumane.....

[@georgemartinez-vi5yi]

Thanks for a clear and concise description of the workings of MMT.

[@iancarrington7324]

Thanks for the clear explanation of MMT. I still have a couple of questions with regards to using tax to control inflation (or rising prices generally). Price rises can be caused by increased demand, and increasing taxation will certainly dampen demand, I get that. Prices can also increase after a supply shock (eg grain and energy recently). Finally, prices can increase when a fiat currency devalues. All three of these situations result in rising prices, but increasing taxation clearly only helps the first scenario. Isn't it likely to cause stagflation in the other two? How can you tell which of the three has caused the price rises? Finally, surely there's a limit on how much tax you can apply to the productive economy to try to control inflation, before you start to destroy it?

[@SteveHannah-h5w]

Something I don’t understand is why was the UK bailed out by the IMF in the 1970’s after allegedly running out of money? MMT suggests that this shouldn’t happen.

[@helenheenan3447]

Good question

[@Goldmangun]

@@SteveHannah-h5w I believe Richard addressed this in a previous video. My recollection is that the UK did not, in fact, need to seek a bail out from the IMF. Or at least it would not have needed to do so if it had understood MMT!

[@Tensquaremetreworkshop]

@@Goldmangun Yeah, right!

[@theenglandyoda]

Interesting explanation of MMT but it still sounds like a system that can be made to work in theory and not in the real world. Politicians have an incentive to overspend (borrow from central bank) while minimizing tax levels. This creates conditions for prolonged higher levels of inflation. The public will be unhappy with high levels of taxation coupled with high inflation and low economic growth. Just look at the 1970s in the West. Money creation in this way has lead to asset prices booming due to the Cantillion effect and helps drive inequality. It also creates an over financialised economy with less emphasis of the creation of goods & services in the "real economy".

[@hughjorgen30]

I like this channel. He's a good teacher. I can't help think of how much he sounds like Lord Varys 😅

[@IshtarNike]

Just because he has a British accent doesn't mean he sounds like Varys lol.

[@LawOfOpposites]

This is fascinating and confirms what my intuition told me about the nature of money

[@davidmcculloch8490]

Resistance of MMT is motivated by keeping power in the hands of banks for the imposition of austerity. No politician (in office) in Britain is brave enough to embrace it.

[@vgstb]

Yes, but also by the rich elites that ride the gravy train of the private loan business.

[@legalfictionisfraud]

Why does nobody ask the question? If the government is creating debt on everybody's behalf? Why don't we all just create the debt ourselves individually? be far more efficient no? I Promise to pay!!! The government then becomes the surety and administrator and book keeper? What's the problem?

[@gordonwilson1631]

@@legalfictionisfraudWe each have the right to issue IOUs. Allowing private commercial banks to issue their IOUs as the nation’s money supply is highly irresponsible and has led to where we are and can only get worse with time. The Bank of England Q1 Bulletin explains how money is now created. Private banks are way ahead in this game of power play and politics.

[@legalfictionisfraud]

@@gordonwilson1631 Allow me to correct your post! We each have the right to issue IOUs. Allowing private commercial banks to issue their IOUs as the nation’s DEBT supply is highly irresponsible and has led to where we are and can only get worse with time. The Bank of England Q1 Bulletin explains how DEBT is now created. Private banks are way ahead in this game of power play and politics.

[@GonzoTehGreat]

This such an important comment that it should be pinned. The current narrative around government spending is manufactured by the financial sector, to ensure their continued wealth and influence. It's not in their interest to educate the population a out how the monetary system actually works, because they won't profit if this happens. It's not a coincidence that Hank Paulson and Rishi Sunak worked for Goldman Sachs (a corporate investment bank). There's a revolving door between politics and the banking sector...

[@Metsa25]

Excellent video. I would love to show this to American voters. When over I would ask how long it had taken for them start day dreaming about something else. I'd try to explain to them that an understanding of this subject, and a hundred others, is needed to be an educated voter. We have to stop voting based on a vibe, and start based on an understanding of policies that actually affect their lives.

[@Allastrology]

Amercian voter here. Between blissful ignorance and a lack of using brain power I dont know if it would even help.

[@vgstb]

The only problem I have with the abbreviation MMT is the last letter, T which stands for theory. Given that MMT is a description of factual (real world) monetary operations in a fiat currency economical system, MMT transcends the theory stage and should be abbreviated as MMP, for Modern Money Principles.

[@MentalLentil-ev9jr]

In science, a "theory" is a much stronger term than when used in general conversation. It's use in MMT seems fine to me.

[@colin_e]

In science, "Theory" is the highest level of authority that can be assigned to a model of the real world. The theory of Relativity for example is one of the most heavily tested and proven models in modern science. An untested idea would be called a proposition or a postulate. "Theory" is as good as it gets.

[@Tensquaremetreworkshop]

Do you think Darwin's theory of evolution is not factual? The meaning of the word differs from your expectation...

[@vgstb]

@@colin_e It is "Philosophiæ Naturalis Principia Mathematica", not "Philosophiæ Naturalis Theoria Mathematica"

[@shaahin6818]

It is exactly a theory, as a theory is about a precise description of a phenomenon and its mechanism People tend to understand the term theory as an "idea". They should learn how to discern

[@colinhiggs70]

I'm not an economist and I'm in no position to either agree with or criticise MMT but this was a very clear and useful introduction to a way of thinking about money that I hadn't heard of before. Thank you for posting.

[@sakttan]

Thank you. A very thorough explanation of MMT.

[@travis1759]

Great summary. What does MMT have to say about a future economy where a significant portion of the population is permanently unemployed due to automation? Would it advocate for a government funded UBI?

[@alastairleith8612]

@@travis1759 most MMT informed economists caution about a UNIVERSAL Basic Income because for one thing (of many) the universal part of it means it is likely to be hugely inflationary, rentier ca;italians already control the food supply for us all and rental accomodation for many people, prices are determined by the ability to pay and very single adult gets a minium wage that is liveable and sustainable to a healthy life, then what we’ve seen with property prices and rents will happen across every sector of the economy where businesses think they can raise prices to help sponge up some of that massive e injection of new currency. there’s all kinds of social contract issues with it, and our social order is already under strain and polarisation around ideas about the share of wealth and distribution of incomes. I can see a UBI being used to heighten inequality not restore equality, there’s not much empowerment in a system of Lords and Serfs. They tried a similar thing in the middle ages with the local magistrates setting the value of labour around cost of bread etc to feed a family. It backfired terribly and had to be abandoned. read more about it from the brilliant polymath chemist/economist Karl Polanyi in The Great Transformation, i asked ChatGTP two summerise here and you can read about the introduction and subsequent abandonment of the Poor Law here: chatgpt.com/share/67015ae1-c5c0-8006-b8bb-0ae77447f567

[@flakieflake9616]

Thank you for explaining MMT in pretty much the same way as I'd understood it, but you fail to see the enormous flaw in the whole thing which would be evident if you were of the Austrian School. It's as logical as perpetual motion but the flaw is this, that you can never tax people enough to keep up with the squandering rate of spending of a Socialist government which if allowed to would spend a billion times its tax take ! We saw how crazy the Left became under Wilson Callaghan to know the spending is limitless. I take issue with governments which run consistent defecits being called Keynesian because Keynes only advocated defecit spending during recessions, our governments continually run them every single year with the US currently running $8Bn a day! Try cancelling the printed money through tax at that rate and the tax burden needs to be greater than 100% ! This has been attempted before, read "Fiat Money Inflation in France" by Andrew Dickson White to see the murderous effects when Socialism was born and how closely the economy is mirroring what happened in revolutionary France.

[@trymbruset3868]

I don't believe most criticism of MMT are about it's accuracy in describing fiat money systems of today, but rather about the sensibility of such a system, which I would argue is by far it's biggest struggle. If you're not ideologically aligned with big gov/nanny state management, it's really not a good way of handling people's medium of exchange.

[@NathanGrawesh]

I really like this summary explaining in 20 minutes what MMT is, what it isn't, what are its key assumptions and implications.

[@msbealo]

Which changes does the UK government need to fully implement Modern Monetary Theory (MMT)? Fiscal control is necessary to manage inflation, but can the UK government react or respond quickly enough? It seems that more frequent budget adjustments would be necessary, as acting only once or twice a year would be insufficient.

[@marksimmonds2893]

I cant be the first to notice that MMT can also be short for Magic Money Tree

[@davidmcculloch8490]

Then you have missed the point. World markets and inflation are always present and relevant

[@hashburystumble8808]

​@@davidmcculloch8490Nevertheless it still produces money out of thin air. 🧙🌳

[@Phil_D_Waller]

Yeah ,unfortunate but not a description of MMT

[@jeff__w]

I would suspect that Magic Money Tree is, in fact, a not-so-veiled slam at MMT. I doubt very much that it’s a coincidence, even if there is the phrase “money doesn’t grow on trees.”

[@Phil_D_Waller]

@@jeff__w if creating bank reserves are leaves and trees are the central bank then yes it does i guess with regards to your metaphor

[@OneAndOnlyMe]

But why does the government provide a safe savings vehicle? Why does the government take on the cost of doing so? What's in it for the government?

[@shantiescovedo4361]

Government is the collective decision making process of the people. The people want consistency and predictability.

[@dr.rationalist9669]

Thank you very much for this clear and easy to understand explanation of MMT and especially the core role of taxation. So the easiest way to understand the role of government fully applying MMT is a situation where the taxation is 100% for everyone. Every pound earned by anyone is guided through the government, who is therefore 100% in control of the economy. The biggest catch in my opinion is the idea that low interest rates in such a system would promote investment, innovation and growth. Borrowing money would be promoted by low interests, but spending of money isn't necessarily an investment. The few people that would still invest and take risks would do so to please the government. Since everyone eventually gets payed by the government, the latter would be the only customer. So it all comes down to a perfectly efficient and wise government who always knows what's best for its citizens, more than they themselves do and which can organize a whole economy by planning years ahead. And you are right, it's not completely new, as far as I can see it just leads to another socialist dystopia.

[@Rob-fx2dw]

Yeah - Sure ! Your idea of 100% tax would mean nobody would have any money to spend because Government would have 100% of the money. Next time try thinking before you post such idiotic statements and wasting others time who happened to read it.

[@dr.rationalist9669]

@ If your advice is to think before posting, then why don‘t you take that by heart? As explained by the video the main idea of MMT is to justify more government spending which is generally desirable according to them since the government always knows better what‘s good for us. To avoid inflation they can‘t just print money, they have to collect it back from the market. In MMT this is done by taxation. Thinking of the extreme of 100% taxation is nothing that MMT supporters would promote, but it demonstrates in which direction this idea leads.

[@Rob-fx2dw]

@@dr.rationalist9669 Were just born yesterday ? I suppose not but your answer shows you either can't understand mathematics or are ignorant of an understanding of the nature of the whole economy. Taxes do not take money out of the economy because they are re spent by government. All they are is monetary transfer from the private sector to the Treasury department of government. Government is not some institution external to the whole economy. Government is largest single entity that spends money collected from taxes spending money and collecting it in the economy which is notionally divided into the private and public sectors. What do you think a federal budget is ? It's record of spending compared with revenues from taxes. It taxes were not re spent by government the deficit would be as big as the whole of government spending. Some year there is not even deficit but a surplus. What do you think happens when that is the case ? No money spent by government ? Or just taxes that are not as big as the spending?

[@dolphiner1376]

This is kinda a stupid question but would the tax rate be better set with colaboration or even oversight by the federal reserve since it plays such a large role in economic growth and control of the economy it seems like it would make for a. useful tool to the federal reserve to have

[@brianmurphy636]

Thankyou for the explanation about NMT, Richard. Interesting. My immediate thought is the government must have an efficient and reliable tax collection ability. HMRC, currently anyway, is inefficient so this could impact / weaken the NMT process?

[@MAGH1O1]

Thank you for your explanation. Can it therefore be concluded that MMT explains why governments all over the world, esp. the big ten, are encouraging inward migration (as a mechanism to ensure the dependency on its currency in as many foreign countries as it can)?

[@coolbanana165]

Could this be why Rachel Reeves increased employer national insurance? 1) Directly decrease the private demand for labour. Also private companies might invest in productivity technology instead, which the UK needs. 2) So the government can then use builders for infrastructure and houses, and also employ more public sector workers.

[@MrTagoe-xw8yg]

I did think similar at the time. Thank you for confirming I'm not alone lol

[@DrOktobermensch]

If that's the case then she explained it poorly. The issue with taxation at this level is that it deflates the economy by forcing allocation with government and discourages external investment as well by telling the economy that aggregate demand will fall since people will have less money in their pockets to spend. If you really want to spur growth you need to improve demand and make investing easier, what she did was the total opposite.

[@Peterhartill]

Spot on as far as it goes but a country like the Uk which has a persistent propensity to consume more than it consumes needs foreigners to buy pounds to balance the books. Here lies the problem of MMT. Insufficient demand for pounds by foreigners means pound depreciation means imported inflation.

[@sjosko]

Great video. There's something I'd like to comment on, but I'm not sure if it's a topic of MMT. Full employment is desirable if the employees are productive, i e. beneficial to the society. Otherwise, it will generate inflation. Employing people to public sector just to have them rolling fingers is money for nothing, therefore inflationary. Supply of products and services might not increase while the additional wages might drive the demand higher. Interest rates can be the productivity filter where businesses that can't generate long term profits above the interest rate, eventually fail and make space for the more productive ones.

[@72golfcrazy]

I’m from Canada, and I’m wondering if everything you’ve said also applies to the way our economy works. After the pandemic, we had a period of high inflation. The Bank of Canada increased interest rates, and gradually, inflation fell. Was that intervention unnecessary? Our tax rates didn’t really change that much, except a capital gains tax increase, but I think that was introduced well after the initial interest rate hike.

[@Ps119]

What if a country has no central bank as has been the situation for centuries; how does that work out? And what if a country, Argentina for example, adopts another currency such as the USD?

[@2ndviolin]

Very informative. I have always been surprised that the supermarket allows me to take away some of their food, as long as I hand over this bit of paper my employer gave me. Cashless payment with a card is even more abstract.

[@IIC-GusBadran]

Richard what would be the correlation between MMT and Credit Rating could you please expand? Thanks in advance. My guess if we get a higher return than cost of capital then the debt ratio would be reduce (very simple view) . Hence, the rating would be increase.

[@peterbedford2610]

Nice explanation. Thank you

[@MargaretDeakin-d6m]

What if there has been some secret use of money? E.g. corruption or damaging use of Bank Of England money? My question is, is it possibly that deals have been done, in secret, that affect UK finnancial stability? Do you or anyone know the whole truth about what is going on between government and the BOE?😊

[@andygunawan9727]

Can emerging countries are implementing the MMT? As i know if government borrows money from central banks and the central banks should take their money from their foreign reserves to give loans to the government after that the impact is the weakening of that emerging countries' currency against hard currency such as USD, GBP, JPY, and etc.

[@krautsky]

I studied Agriculture in the mid 1970s and our economics prof asked us how the government creates money. The typical answer was issuing bonds, foreign borrowing, taxes etc. To our surprise he said none of those. The government, (in some countries with the needed approval of the parliament) just creates money out of thin air, by issuing a demand to the central bank. This is the way the Deutsch Mark was created after the war: The Government issued a demand to create enough money to pay to every adult citizen in the recovering Republic 60 DM, and enough to permit conversion of Reichsmark at a rate of 1DM to 10 RM.

[@dougwhiting7631]

Yes MMT describes a lot of econ things, that debt doesn't have to be repaid and that over time more debt has to be created to increase the money supply. But the MMTers always skip over what happens when small countries go crazy printing money. Yes that would be hard of a country like the US but not so hard for the UK or Canada which are trading nations. MMT has happened in the US for decades , huge spending on war and defense while at the same time tax cuts or low taxes. The question is how far can it go. Can gov't spending be limitless? MMT states that when you have inflation then you reduce the money in circulation by taxes or reducing spending. Can or would any democratic country do that? What we have seen is the opposite. High inflation people are suffering so lower consumption taxes, carbon taxes, boost benefits to seniors etc. Interest rates are the only policy option left.

[@peterbaxter8151]

How does MMT explain how the waning interest in the American dollar due to its economy failing to produce product for export and its use of the dollar to achieve political interests in other countries?

[@AlunParsons]

Another tour do force! Outstanding!

[@valentesouza4582]

Question M. Murphy, In your opinion, the Minister of Finance of Mexico, Ramirez de la O is pursuing MMT currently? I perceive he is, what is your take.

[@shaydza]

So increase the money supply with no increase in the volume of goods or services. Gee what could go wrong... All MMT seems to do is move the government's cashflow requirements from it's citizens to it's Central Bank at the cost of inflation. So the government stops being accountable to its people and becomes accountable to it's Central Bank. Not sure that's a good idea

[@mik_sor-x9p]

Relying on taxation to control inflation is impractical in a democratic government. A government will try to avoid at all costs extra taxation when the country is suffering inflation for political reasons. This is why they rely on the pseudo-independent central banks to try to control inflation for them. Technically you could try to give some pseudo-independent organization the ability to adjust tax levels (VAT) in response to inflation but that wouldn't be very popular.

[@jimf671]

Yes, the two most important things you need to know about Modern Monetary Theory are that it's not modern and not a theory. 🙄 So much more than a theory. Can we start calling it Evidence Based Economics instead? 🤔 Thank you for a particularly clear and thorough explanation. Everybody in the UK should be sending a link to this video to their MP.

[@jimf671]

WARNING. Scammers in the comments!!!

[@johnelferink9685]

Dear Richard, thank you for your explanation. Frankly not too difficult to understand. If I understand it, the order of any MMT approach is to reverse the order of things. Create the tax liability first, then a currency issued by the state, and a monopoly rule that the only way to meet the tax liability is to pay in the issued currency. My (very dry) liberal brain however, is still extremely cautious of "trust me I'm from the government", thinking. If the printer is no longer the boogie man, that it has been in the past, governments with a high time preference (democratically elected or not), may well become too tempted to hit the print button to excess. Governments are not historically known for their fiscal restraint when under pressure. Finally, I remain cautious of coercive monopolies, which MMT governments must be by definition. If they're elected they're answerable to the people, but in the MMT world there is no "outside", there is only the state hands on the levers. If it does go wrong it will do so calamitously.

[@АлександрСоловьев-п5р]

There is no point being wary of that. It already exists and has existed in most countries for decades. Even if your country's central bank has nominal independence, in practice government has more than enough options to make them do what is needed at any time. So any sovereign state with own currency anywhere in the world already has full control over print button even if officially they do not exercise it

[@OneAndOnlyMe]

Aren't gilts (government bonds) effectively borrowing from money markets?

[@expelleddux]

What if taxes are very high and inflation is really high? What does an MMTer do? Increase taxes more?

[@ramprakashan]

Even more important issue, is the facility of creation of credit by banks on which premise MMT is based.

[@robertblue3795]

It makes sense in a closed system but issues arise when one closed system trades with another. The Chinese system with 2 currencies is one option where one currency is asset backed with say gold.

[@MotherFarquhar]

Liz Truss tried telling the financial markets they couldn't influence government policy look how that ended, back to the drawing board.. some theory

[@AnandMore]

I am from India and many states here are using the new found ability of direct benefit transfer due to advancement in Banking and telecommunications. These benefits are transferred to poorer or weaker sections of society and specially to women in the form of monthly allowance directly transferred in their bank account. The earlier governments had tried to give employment guarantee at higher wages which resulted in non availability of workers to private sector at earlier level of wages. I am not sure now how far the present government and its successors will go in direct benefit transfer and whether such use of direct benefit transfer will achieve full employment as free cash will further reduce the willingness of workers to get employed.

[@andrewharrison8436]

Clear introduction to macro economice - thanks. I am still not clear on how MMT differs from Keynsian economics or on how it incorporates velocity of circulation.

[@andrewwebb9426]

I’ve two important questions I don’t understand after that (to me) rather challenging video: - was Gordon Brown correct in giving BoE independence over interest rates and controlling inflation? - can the present (now Labour) govt simply reduce the amount of interest it pays to BoE as some commentators claim?

[@santerisatama5409]

The definition of "money" is a matter of political ideology, at least for those who insist on defining money as A) Debt and/or B) Means of taxation. In common sense meaning and practice we have no ideological blinders against a means of exchange, a distributed information network that informs participants about supply and demand, about needs and how to satisfy those, "money". In that common sense synergetic meaning, money is also called a market platform. MMT is indeed just a political manifestation of neoliberal monetarism of Central bank tyranny of monopoly money aimed to prevent fair competition between market platforms, which is absolute necessity for an even playing field with self-correcting dynamics. What makes MMT "speshul" is that it can only work for a central bank fiat that does not need to care about trade imbalance with other currencies, but has access to global market of goods and services by just printing more numbers - and backing those numbers with biggest meanest army which the central bank tyranny regurarly uses to murder and maim millions of people around the globe. Without such enforcement of a MMT, your fiat currencly loses quickly it's purchasing power on the global market, and unless the real economy of a MMT nation is self-sufficient, the people go hungry.

[@nicksutton7377]

How does this work when the individual government does not control the central bank, as in the EU?

[@RichardJMurphy]

@@nicksutton7377 It’s harder - but actually, these governments do still have their own central banks, so it’s ultimately much the same.

[@helenheenan3447]

​@@Vroomfondle1066He's a regular here. A bit like the drunken bore who's always droning on about something irrelevant when the adults in the room are talking.

[@200405InVision]

@@RichardJMurphy Yanis Varoufakis still disagrees and he knows a thing or two about these matters. You know the ex-Greek Finance Minister? Who to believe?

[@RichardJMurphy]

@@200405InVision Simple answer to that one….

[@200405InVision]

@@RichardJMurphy I think we've discovered Richard's Achilles Heel here?

[@foxmoongaze]

Thank you for confirming to people that creating too much money causes inflation. Too many people believe inflation is caused by prices rising, when in fact that is just a consequence of inflation devaluing the currency. Using taxation to control inflation seems to have been implemented in a very unfair way, and what happens if all, or much, of the credits issued are called in by the lenders domestic and foreign? Is this when taxation shoots to the moon as per the 1960s?

[@foxmoongaze]

@@Vroomfondle1066 Inflation by definition refers to inflating something, in this case the volume of money, nothing else. If you are talking about prices rises, they nearly always rise as a consequence of inflation, sometimes for other reasons such as a temporary supply shortage for a specific thing.

[@legalfictionisfraud]

@@foxmoongaze You have used the word money? We don't use money...?

[@foxmoongaze]

@@legalfictionisfraud I've only done that because Richard was using the word "money" and sometimes people get confused otherwise. But, you are correct, it is a fiat currency, a credit note, a promissory note .. of nothing. Money is specie.

[@legalfictionisfraud]

@@foxmoongaze YES! Perfectly said and described!!! I bow to you!🤩

[@kardy12]

Great talk and explanation. Just one thing I disagree with - neither the government nor the Bank of England create most “money”, most of it is created by banks as they lend money.

[@advisorsandy2068]

Wow, what a wonderful idea; didn't they do this in Zimbabwe.

[@Rob-fx2dw]

Yes, - and that worked so brilliantly !! . Everyone was Millionaire and then Billionaire .- Not to mention the price of loaf of bread.

[@davidrayworth3196]

A very good explanation of the theory: But It raises the question do the banks or the government create more money? Its appears to be a simplified theory for part of the economy

[@Softcushion]

Depends if you have a fiat currency or not. In Europe it will be the European central bank that decides for the likes of France, Germany etc.Somewhere like the UK, my understanding is it's the government through the bank of England.

[@adon8672]

​@@Softcushiondoes the government actually own the bank of England?

[@Softcushion]

@@adon8672 It does not, in theory the bank of england is independent. In practice though.... I'm not so sure. The bank's role is to manage fiscal policy and try and balance the economy. However the government decides expenditure through the treasury and the bank will have to accommodate that. So in essence the treasury drives the bus. That's my understanding.

[@UKtoUSABrit]

This analysis came from a person obviously "all-in" on its use. Would like to hear him debate w opponents of MMT

[@philipoakley5498]

(~5:30-6:40) It's not clear what 'Inflation' means in terms of money/currency availability such that taxation is the answer to the problem. Is it a micro/macro/whole system problem? In particular, does (modern example) the hoarding of money by non-domiciled 'rich' individuals who aren't paying tax help cause the very 'inflation' that their zero taxation won't solve? I.e. money being taken out of reach of the very government that's meant to control it (hence folks wanting a return to asset based money that is traded)

[@robjoe1]

does tax avoidance invalidate mmt?

[@nickbarton3191]

So why does the BoE increase interest rates to supposedly control inflation?

[@helenheenan3447]

A good question. The BoE is following neoliberal economic policies, as is Rachel Reeves and all Tory Chancellors and Prime Ministers back to Margaret Thatcher. It is a failed policy, but does make a lot of wealthy people even richer.

[@karlkerr7348]

Interest rates are the cost of capital, so if that goes up so does cost of private borrowing, so demand drops off and in turn price increases ie inflation. Costly mortgages brings a decrease in housing demand and prices.

[@nickbarton3191]

@@karlkerr7348 I understood that, but it's not what was said in the video.

[@legalfictionisfraud]

@@nickbarton3191 Allow me to interject? Interest rates are the cost of DEBT, not capital? So if that goes up so does the cost of PUBLIC DEBT, so demand drops off, government instructs the Bank Of England to create (Not Print) more debt which causes inflation, eroding the value of government DEBT and our DEBT based currency that you depend on to survive. The government then taxes even more...They call this austerity, but really it is called trimming the heard, putting people into penury and poverty because they can? All because of climate change? There is no such thing as private capital, just privately held DEBT

[@marcusmoonstein242]

Congratulations, you're the first person to convince me that there might actually be something to MMT. (And I've watched several videos on the subject). I didn't fully appreciate the implications of a government using a self-created fiat currency as opposed to using a fixed resource like gold as money. I particularly like the idea that taxation is better for controlling inflation than interest rates because it directly ties the amount of taxes people have to pay to government spending. If the government runs too big a deficit and inflation goes up then people will either have to pay more in taxes to "balance" (cancel out) government overspending or government will have to reduce the deficit. (And as you point out, low and stable interest rates are good for everybody). The only downside would be that tax rates and/or government spending would have to change as often as interest rates do now under such a system of inflation control. (I also don't understand why so many Leftists seem to think that MMT means that government can just spend as much as it wants without consequences when this is clearly not the case). I also like knowing that governments don't need to borrow from capital markets when they can just borrow from their own central banks instead. This is good because it means that governments can also pay 0% interest on their debt if they need to. Therefore the national debt can just go on increasing forever without causing any problems. The most important comment I can make about a jobs guarantee/full employment is that this will ONLY work if the wage that people get is commensurate with the real economic value their work produces. Paying people more than the new economic value their work creates would mean that value is being siphoned off from elsewhere in the economy (and from a more efficient economic use at that). So minimum wages would have to go and wages would have to be determined by market forces alone.

[@briskyoungploughboy]

@@RobinHarris-nf4yv Realistically it's the asset price bubbles that are more of a problem. Tax on 'high-enders' needs to be high enough to stop them speculating up real estate and stocks, which ought to rise in value at about the same rate as CPI inflation, not massively outstrip it as they have done for many years. Reason being: Owners of assets expect (say) 8% yield on the book-price of assets, so if the book price increases faster than CPI, so does profit share of the total economy. Rich get richer, poor get poorer- simple. Also, it looks like inflation, but the standard remedy- using interest rates to crush consumer demand- has no effect on the real cause- because the real cause isn't demand, it's pure profiteering 'greedflation'.

[@alastairleith8612]

@@marcusmoonstein242 your JG comment is a bit disingenuous and/or naive. how do we determine the value of someone’s labor? who determines what ten hours of brain surgery is wroth c.f. ten hours of driving a street sweeping vehicle or caring for your partner as they become senile in a care facility? or teaching your child to do art or walk with a disability? I ask this because one of the central defining myths in neoclassical economics is that we can a) reduce human values to an eequivalent money index values all the time in some kind of invisible and magical way that is somehow invisible but objectively true or accurate all the time. from here the Neoclassical economist assumes that markets are the perfect way to find that money index value, that supply and demand of goods and services are best mediated by prices, that money is a proxy for solving the complications of batter (Metal-theory) and thus has natural scarcity and competition for money lending will see money and resources flow to the most optimal areas of the economy. All of this is completely nonsense, read the book Steve keen is writing at the moment chapter by chapter on. Patreon for as little as A$2 a month or a bit more on Substack, or any of the academic papers, books and other resources that show how empty the neoclassical theoretical claims to reality are. Price theory alone is completely backwards to how forms really set to your original point, the value of labor, that is determined by how it is priced and that is determined by legislation and other institutional factors. There’s not correct value, only subjectively argued value. The big take away you need to get past your confusion is that the government effectively sets the minimum wage through their purchasing power for labor and goods requiring labor to produce and also their tax regime. The central government determine the value of labor in terms of what they are prepared to pay to remove resources and labour from the private economy into the public economy. a JG would be a much fairer and better way to set minium wage that what exists today, because the pantomime of Monetary Policy at the Reserve Bank pulling their overnight cash rate lever is that they attempt to make more people unemployed in a vain attempt to slow or reverse interest rate increases. that;s just cruel, why do the most marginally employed deserve to be made destitute just because the government can figure out that they can manage interest rates and the economy through fiscal powers and taxation powers way more effectively than the reserve bank can (and reserve banks around the world while maintains the pretence of neoclassical nonsense have been hinting that fiscal policy ways the only way out for the covidé economic disaster). The USA and UK came out of the GFC ten times faster post-covid and it did far more damage to the real economy than the GFC ever did.Because governments have finally woken up (again, the new deal politicians knew it) to the power of fiscal policy. now we dont even have a global gold standard so it frees the hand of governments even more, one of the several important reasons it was abandoned first by USA then nearly all nations.

[@alastairleith8612]

@@marcusmoonstein242 paying interest on loans is just more currency creation, not a problem, but it’s also means the wealth is distributed to the wealthy, rather than spending directly into the economy at the grassroots roots with Universal Basic/Public Services ;like education services, health services, national parks and public gardens, legal aid for people caught up0 in the justice system, where money (and racial/gender privilege) buys justice every day of the week.Bill Mitchell calls Government Bonds Social Security for the Rich.

[@marcusmoonstein242]

@@alastairleith8612 I'm really struggling to understand your argument. Let me see if I've got you correctly. You seem to say that free markets are a bad way of determining wages (especially minimum wages), and that a better way would be for the government to have a jobs guarantee. This government JG would guarantee anybody who asked a minimum wage government job. The specific minimum wage would be determined by whatever the government feels it needs to pay to clear the labor market and produce full employment. Since anybody could get one of these government jobs, the government wage would effectively become the national minimum wage because nobody would work for a private business that offered a lower wage than the government. Is this a fair summary of your argument?

[@alastairleith8612]

​@@marcusmoonstein242 not quite, you seemed to add some of your own thoughts into that. Firstly I'll provide some historical context: the commodification of human labour into labour markets for the convenience of employers was not something that just happened naturally. there's a lot of propaganda esp. in the "socialist fearing" USA suggesting it is natural sate of things that it be this way. its completely unnatural and very much organised by elites for centuries to have it this way. Labour markets were constructed through means of legislation so that they could exist. For e.g., movement between cities and towns by labourers was not even permitted in England until the desire to pull labour from the land to these new human powered factories of the early ind. rev. meant industry owners (classical capitalist era) changed the laws to allow it. they also enclosed the land labourers were living a free existence on feeding themselves as crofters and local workers. enclosure both privatised the commons and removed free people from the commons, not for any failure of the commons as is often alleged, but for the sole purpose of indenturing a great labour force in the industrial revolution and giving land in commons to aristocrats and the new aspiring bourgeoisie who wanted aristocratic lifestyles without the responsibilities of maintaining the lives of their subjects.

[@Aircooledflat4bug]

Good video, and easy to understand the principles of MMT. What I would like to see is an explanation of how a country's trade balance impacts on issuing of currency. Clearly the UK imports more than it exports, so more currency (sterling) is flowing out of the country to pay for products/imports, than currency (foreign) flowing in. Some of those pounds sterling flow back to the country by foreign central banks buying UK government bonds, but how does that money get cancelled? i.e. through taxation? Its not clear.

[@royellis1909]

I agree that this is his the system works. The more important question, is that the way we want it to work? Just because you can, does not mean you should. 🤔

[@mervynhyde1]

Guess why you will never see Richard Murphy on BBC question time?

[@williambrister9524]

Thank you for a very clear but none the less complicated explanation of MMT for an untrained mind like mine. How does MMT work in the Eurozone where there are theoretical restrictions on national deficits? ( The deficit limit was 3% at one stage. I don’t know what it is now). And when different countries in the Eurozone may have different economic policies depending on their political outlook? And what is the relationship between the Central Bank and individual countries since individual countries have no control of their Central Bank since it is a supra national entity?

[@seb-1166]

Excellent video. Always heard about mmt but never really understood it till now.

[@ADAMPETERS-eu7md]

Very helpful video. Thank you. But I think that these ideas would be even better communicated via animation. Mike Booth, who had done many of the ‘School of life’ films would be perfect.

[@scottprice4813]

It’s the experiment currently being carried out in almost all developed countries . The recent hiccups in England and France are a bit worrisome. It will work until it doesn’t .

[@foxmoongaze]

My understanding is that MMT developed as an idea in the mid 90s and was perhaps adopted by the UK 20-25 years ago. If this is true, on the face of it, things have not gone well.

[@helenheenan3447]

You have not understood that MMT simply describes how the economy actually works when a government, like the UK or the US, has its own currency. It is not an idea to be debated, or experimented with. It is a fact that needs acknowledgement by those in charge of our economy. It makes a nonsense of the claim that there's no money, that we have maxed out the credit card, or that we need fiscal rules to balance the budget. All of those ideas are political gambits to give the government a rationale for austerity. And why do they do that? Because they are in hock to the city, the wealthy, and the plutocrats, who always benefit from austerity.

[@legalfictionisfraud]

@@helenheenan3447 Agree with all that... One word you missed out tho.... has its own "DEBT" based currency...🤐

[@foxmoongaze]

@@helenheenan3447 Your comment is rather patronising, MMT is one way an economy with a fiat currency can work, and is easily abused as shown by the deep financial doo-doo the UK and other countries are in. Of course MMT should be debated, all theories and ideas should.

[@conscious_being]

Central Bank is _not_ the only source of new money creation; all commercial banks create new money when they give out new loans. MMT completely ignores the role of commercial banks in new money creation. Interest rates play a key role in controlling inflation because they impact demand for new loans by private parties and hence new money creation by commercial banks.

[@twhelostl61]

Love the movie "Seabiscuit" Charles Howard, at his job says "They ought to make a better spoke" and his boss says "Yeah, then what would you do" It then turns to Charles and his son bantering about the future. What are parents saying to their children now? They after all are the future.

[@markburton5318]

Your earlier video on obsession with inflation appeared to downplay inflation. It would be better to add some of this context to that earlier video. However, this video downplays the role of private debt which also creates money. Taxation does not easily stop high inflation of asset prices which are inversely linked to interest rates. High tax on trade can drive people towards holding assets for capital gain instead which delays tax and increases asset prices. Interest rates do play a crucial role. 5% and 0.25% both seem utterly crazy.

[@dp3455]

that is why I subscribed. Bravo

[@jayjack2046]

The game is QE Infinity, keep devaluing the dollar and play the debt off as dilution of money

[@SydBaron]

Thank you, Major Douglas.

[@andybrice2711]

My sense is that printing money is somewhat similar to borrowing money: You can do it to fund productive investments. Or to tide the country over during a temporary crisis. But if you try and use it to patch fundamental holes in the economy, you'll pay for it with inflation.

[@SamsonShuttle]

So how would this work in the EU? The EU central bank isn't controlled by one country like Greece? So how would this effect EU countries?

[@ronstoneman4766]

Good question, SS. All of those countries forfeited their sovereign currencies when they joined the EU, including Greece. Big mistake, in my opinion. In a nutshell, MMT does not really apply to them anymore. I hope that makes sense.

[@mikenewey3949]

As well as governments creating money, don't banks also create money when they give a loan? Is that money/debt also cancelled by taxation or does the government have to cancel it by interest rates?

[@Goldmangun]

@@mikenewey3949 You are correct about retail banks creating money when making loans (under licence from the central bank). I believe this money is cancelled by taxation and/or when the loan is repaid by the borrower.

[@got2bharmony]

@mikenewey3949 Governments, certainly UK and USA, do not create the vast majority of money. Most money is created by private banks when they make loans. For a clear explanation, seek out the Werner Economics video on the subject. I'm not entirely sure who actually issues new notes and coin currency, maybe the central bank, but it only represents about 5% of the total money supply. The debt is cancelled out when the borrower pays back the loan, and the bank, of course, captures the interest for their own profit after covering the small cost of administering the loan. What an amazing privilege the banks are given, especially if they get bailed out when they make imprudent loans. Interest rates are said to control spending, though there is no empirical proof they do any such thing. Their main purpose is to encourage people to purchase the government debt in the form of gilts and to prevent the sovereign currency from devaluation. They also generate the profit to oil the machinery of the banking system. The global monetary system is based on debt, and providing there is always a demand for money, the system will keep running. The national debt will never be repaid and will almost certainly keep increasing. It is nothing more than a legalised Ponzi scheme, but people are powerless to do anything to change it, and the elite have no desire to do so because they get more wealthy precisely because of it.

[@ralphmcnall5066]

Does taxation, taking money out of the economy, require Monetarism being valid in order for it to be a mechanism for avoiding inflation ?

[@ThomasVWorm]

I don't think so. Money is a bookkeeping system of debt. If you don't require the debtor to settle the debt, debt is no debt at all. The government creates debt and debtors by demanding a tax. So the debt does already exist before the money is created and spent. This construct would not work without really collecting the money later. The citizens now owe to the state to accept the money the state spends and to produce and sell for it to the state. Without collecting the money, they just could ignore the state. Only thinking in terms of quantities fails to understand what money is all about. Since money is debt and since it also origins in private debt, we are talking about the plans of the debtors and the plans of the savers and the timespans of their plans. Both must match each other. This is far more complex than thinking only in quantities.

[@physiocrat7143]

Yes. Unfortunately we have a toxic tax system.

[@ThomasVWorm]

@@physiocrat7143 toxic?

[@JoinTheTemple]

So under MMT what is the need or justification to increase internet rates? Why not just have them low the whole time? What is the role of interest rates at all?

[@legalfictionisfraud]

To keep the old duffers happy as they have been brain washed all their lives into thinking they get paid with MONEY not debt, and they expect to earn interest on their hard earned money/savings... Save a pound and the pennies will look after themselves?

[@legalfictionisfraud]

Why delete that response? lol

[@michaelgaynor1382]

So why does the government talk about “balancing the budget”, why do we acknowledge deficits and national debt?

[@Toasty27-q6w]

Because most members of Congress still do not understand MMT, and instead think of things in terms of classical economics.

[@musiqtee]

I agree that heterodox pundits may confuse MMT for (failing) incumbent politics. A dialectic is that incumbent politics refuse to let MMT reveal policies’ practical outcomes or more importantly - the possible economic agency of government. So, we’re back to how fiscal arguments go in our parliaments, our “non-government national bank” monetary policy, and how media doesn’t help us at all. I.e. by not putting MMT to work (!) for understanding and describing what already happens.

[@yaseral-saffar7695]

In our current system though government deficits do not create money because gov debt is issued. In a system where debt wasn’t issued we would create a system where some money is created without debt. This would undermine the value of money, turning money from a gold standard to a debt standard to a standard based solely on trust in the gov to tax and control inflation.

[@islandmonusvi]

MMT was fundamental to accomplishing the goal of winning WWII against very clever and resourceful adversaries who also utilized MMT but replaced the taxation requirements with governmental barbarism and resource confiscations from all those vulnerable to exploitation by militarism rather than Capitalism. Keeping I mind that Anglo-American Industrialist flocked to take advantage of the relatively high interest offered by the Third ‘Thousand Year ‘Reich to make up for lack of opportunities during the GreatDepression. FDR managed to flip the script with the New Deal Public Spending which transitioned into wartime procurements.

[@MrSocrates7]

And what happens to the idea of a government seeking full employment when, very soon, if not already, such a thing will not be possible with the growing application/s of AI? Does MMT have any theories about how best to control the money supply going forward with AI?

[@Jesus-o7v9x]

You have push full employment by shrinking the work week. In the next century you could be looking at a 10 hour work month, quarter, year.

[@MrSocrates7]

@Jesus-o7v9x that's helpful. Thank you

[@jimcraig6523]

For MMT to work as described and as the theory posits requires the government to create at least 90% of the fiat currency in circulation however private banks effectively generate 90% of fiat money through loans ie debt on which they charge interest. Such money then disappears when the loan is repaid. From a utility point of view it makes little difference who creates the money but from an adequate control perspective it is vital that money creation should be in the hands of government but historical vested interests will no doubt continue to block that.

[@discovoid5357]

So under MMT the more the government borrows from its central bank the more it has to tax the population to stop inflation, meaning its citizens either have less money from devalued currency if they dont pay enough tax or they lose money through taxation ?

[@ThomasVWorm]

​@Moving2Winyou cannot slow inflation this way. The money, the gov spends, is the income of somebody. If with gov spending all resources are in use, when those, who got the money start spending the income, you will have inflation. Money does not vanish after being spent. What limits inflation in this case is demanding a tax. So the income generated this way into the private sector will be planned by the private sector for paying the tax but not for spending.