The MMT View of the PetroDollar - Profs Kelton and Mitchell - Feb 2018

https://youtu.be/xnjMlI1Xacc

one of the things that I don't think I can find anywhere however is is kind of like a description of mmm T's view of the petrodollar since this seems to be something that comes from the ron paul world and the sound money world and quite frankly you even hear media personalities like lis camp and jimmy dore and others talk about this as well can you address what the petrodollar is what it is not and whether it's anything to be of great concern about anyone of you look at the end of the day what mit has argued is that the value of the currency is driven by its acceptability payment stay right mostly the core mechanics but other forms of payment as well does it matter whether the rest of the world prices oil in dollars in order for the u.s. to be to have the fiscal capacity to maintain full employment domestically to avoid austerity to have and the answer is no well sometimes say this right well what if the rest of the world we fuse is to take dollars what if they begin pricing will endure over some other currents or a basket Francis doesn't that them the MMT narrative which says that the government is not constrained in the way of households or private business is that it can always maintain full employment domestically by relaxing fiscal policy to the point where you're maximizing employment and production at home and so we we explain the know it doesn't matter whether the US dollar is the quote-unquote reserve currency that's not what makes mmt work in the u.s. it doesn't matter whether the rest of the world prices oil in US dollars that's not what makes mmt work in the u.s. your comment earlier i did want to just say something about this because this idea or maybe this was built talking about you know these these intense debates that we have u.s. between the deficit hawks and the deficit doves and what he characterized as in a sense shortcomings in the literature before MMT economists came into the into the debate where you know Jamie Galbraith described it as a debate between Tweedledum and Tweedledee where you know it was basically austerity now versus austerity later and the best that the deficit doves could offer was an argument that deficits are okay it would sure be nice if we could avoid them but sometimes the economy just gets out of whack and things you know aggregates a man gets so weak that you need government to step in and essentially prime the pump do a little bit of deficit spending put the foot on the gas but then recognize that as the economy begins to recover as tom hartman said just last week in peace that now is not the time to have fiscal stimulus in the form of the recent tax cuts and then the budget deal between you know the House and Senate or three billion and now topical infrastructure he said if anything right now we should be paying down debt debt which is crazy right which is to say that we the budget should actually be in surplus right now so I know I touched on your question but I tried to wrap in a little bit of comment that I wanted to get in about what bill was saying about you know this deficit Doug's don't take us very far essentially the debate is austerity now Paul Ryan types or austerity later you know the the deficit dove times and that doesn't get you very good macroeconomic policy no it does not bill what do you have on the petro dollar well it's it's sort of not much it's irrelevant look you know at the end of the day any nation ultimately is as look look the basic principle is start with is that any country is only able to achieve the prosperity with its own real resource base independent of trade that's the sort of base the limiting condition so then you if you if you've hardly got any real resources then you're likely to be poor and there's not much you can you can but you can do some trading to get some other real resources and swap them and you can perhaps improve that real resource capacity but ultimately a country that can't get access to essential resources so like energy petrol for example is going to have difficulties that's that's a reality that doesn't say anything about mmt what mmt tells us is it irrespective of your real resource endowments a national government can ensure that all of the real resources that are for sale in the currency that in the issues can be fully used in a productive way now that doesn't mean that every country can be highly prosperous it means that they can achieve whatever the limiting prosperity is that's the first point the second point is that this idea and I read it even on the progressive side that the only reason the US government can run deficits is because it's in some some way the reserve currency that's just a nonsensical statement Australian dollar isn't a reserve currency we've been running deficits 80 or 90 percent of our history and other countries who don't have any attraction to speculators or people who want to you know conduct holding trades or whatever in that particular currency they can run deficits a national government that issues its own currency can always run a deficit and never needs to. and I'm I hope you can see these these commas fund it never needs to fund it irrespective and and so this idea that the the MMT is sort of just a u.s. construction is really really wrong and and and the the corollary of that or the aunt the the related statement is that I renamed I've often heard over over the last 20 years now our mmt just applies to small clothes oh sorry large closed economies like the US well no it doesn't I happen to live in a relatively small very open economy which can have terms of trade shifts at knock out you know 10% of GDP in two quarters in value terms because of revaluing exports and imports and mmt applies to every nation that issues its currency and every nation that doesn't issue its currency like the eurozone countries it's just that the implications of the currencies urines will change across those two types of currency arrangements so I just think the whole idea that look the US might find that its energy resources become more expensive over time and it will have to make decisions but that's got nothing to do with the capacity of the national government to fully utilize all the available resources that are for sale in u.s. dollars whether they be priced at in foreign markets or just available in the US markets.