An Interview with Stephanie Kelton and Ron Biscardi on MMT 2021/02/11
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Kelton：
sure so i think the best place to start
is
by saying that mmt provides an
explanation
of how um a sovereign currency works
say okay well what's a sovereign
currency right that's sort of the next
step so we would say that a sovereign
currency
is one where the government chooses the
unit of account
so you know the yen the dollar the pound
the peso the unit of account
issues a currency that answers to that
name
so issues of the dollar the yen whatever
spends in that
currency right spends its currency into
existence
taxes in the unit in which
they make their payments collects taxes
and restricts any borrowing that they
choose to
undertake um to the currency
that they issue so you know you say okay
so the u.s then
is a sovereign currency issuer japan is
a sovereign currency issuer australia
the uk canada and so forth so
where does that leave us what does that
teach us and how is it different from
many of these other schools of thought
so mmt helps us to understand that if
you are a sovereign currency issuing
government you never have to get your
currency
from anywhere in order to spend it and
in fact
the sequencing is backwards in the
mainstream or conventional way of
thinking where we think of the
government
as financially constrained as facing a
budget constraint that they need to get
money in order to spend it and the
primary ways that they do that are by
taxing and borrowing only after they
have money can they then
spend money into uh the economy mmt says
no this is actually
backwards right the mechanics of
government finance
work differently and so mmt tries to get
us
to the right sequencing to understand
the mechanics of government finance why
the federal government
is not like a household a business or
state or local government why they can
never run out of money
and why they can never be forced into
bankruptcy why
solvency isn't the relevant danger but
inflation
is the relevant risk so you said a few
things in there
that i'd like to break apart but one of
the most important i think is that
is this misconception that the
government needs to first
borrow dollars before it can spend
dollars
uh it was in as i became
more uh i guess up to speed if you will
on mmt
and and its description of the mechanics
of the monetary system
it was a light bulb for me uh to
recognize we can't uh borrow
in a currency that we haven't first
issued when we are the issue or in
essence of the currency so
uh do you think that most politicians
understand this basic concept that the
government must first deficit spend
before it can implement any borrowing
program
no i don't think most politicians
understand i think
most politicians have the other frame
right that they believe that they're
working with a budget
that in some sense it's akin to the
household budget
that there is a limit on how much you
can
afford to spend and that you've got to
come up with the money
somehow and so you know you hear this
all the time right in political
discourse where they talk about the
government needing to
find the money you know just using words
like that
suggests that the government doesn't
have it but someone else does
so where does it come from well it
either comes from the taxpayer
or it comes from the saver so you've got
to again we're back into that
thinking that the government has two
primary ways of raising
the money that it needs in order to
spend taxing or borrowing and
now most politicians haven't yet come
around
to the working of the federal budget you
know it's kind of funny because so many
members of congress
come to washington dc having first been
a mayor
or a governor and so they've got
experience where the budget constraint
is real
and where they are actually constrained
by how much they can
raise in taxes and they are subject to a
balanced budget requirement and so they
bring that
experience with them to washington and
often fail to
to you know flip the switch and
recognize that the the game works
differently now
right because the federal government is
an issuer
of the currency whereas a state and a
local government
they really are closer to a household in
the sense that they have a budget
they have to borrow in a currency that
they don't issue
but it's really the federal government
that is a different animal if you will
yeah and that's why governors and mayors
across the country have for so many
months now with coronavirus been
pointing their finger at washington d.c
and saying to congress we need your help
right
we can't do what you can do and even in
some cases you know with
governor newsom in california he has
said things like
you know we can't print money so we're
going to have to have help from the
federal government if we're going to you
know
protect essential services and so forth
so
this is i'm sure gonna sound like a
crazy concept but when you
when you think about the mechanics of
uh the system in this way it doesn't
feel to me like
the federal government actually has a
debt we call it debt i understand why we
call it debt but
i don't believe it's debt in the in
certainly not in the same sense that it
would be
for a state a city or an individual
yeah i mean there's a chapter in the
book that's called the national debt
and then in parentheses that isn't so i
completely agree i
um i think these words get you know they
come with so much baggage when we hear
the word deficit when we hear the word
dead
you're they're triggering words right
they automatically
put us on the defensive they say
something's gone wrong something's gone
awry the government is mismanaging its
finances why is it
running deficits why is it piling on
debt and you always hear people talk
about you know
um bill you know piling on trillions of
dollars of debt and borrowing and
china and all this sort of stuff and i i
think of it very differently i don't
look
at operationally what the government is
doing when it
issues treasuries as borrowing and i
don't think we should be talking about
the stockpile of outstanding government
bonds as
debt because people hear those words
borrowing and debt
and they think in terms that are most
familiar to them so we go right to our
personal finances right or maybe a
business or something and we say well
borrowing can become dangerous because
you have to pay it back
and debt you know you can get into a
situation where you can't service the
debt and then you've defaulted
and so what the government is doing
really if you think about it
is it's choosing right a currency
issuing government never has to borrow
its own currency from
anyone in order to spend so that's the
first really important point what it
does
is it chooses to match up its deficit
spending
by selling u.s treasury so if we do this
in really simple numbers
and i say the government is spending a
hundred dollars into the economy
but they are only taxing ninety dollars
back out okay we
label that a deficit i wish we didn't i
wish we just called it net spending
so the government puts 100 in takes 90
out it means somebody gets
10 which means that their deficit the
government deficit
is a financial contribution to some
other part of the economy
so when the government's budget is in
deficit it's depositing
dollars into some part of the economy
but at the same time
it's matching up the deficit spending by
selling treasury so what really happens
is this
it puts ten in ten dollars in and then
it takes the ten dollars back out and
replaces them
with us government bonds 10 right and so
we call it borrowing but in what sense
is it meaningful
to describe that as borrowing if the
government makes the money available
and then transforms it into treasuries
that's not borrowing like if i go to a
bank
and i sit down with a loan officer and i
ask for a loan to buy a car
or a home or whatever i don't plop down
the cash on the desk of the loan officer
and then ask to borrow the money
the government is making the deposit and
then
transforming its payment from one kind
currency into another kind of payment us
government bonds that's just
interest bearing dollars so i think we
should
you know we'd be a lot better off if we
looked at the outstanding stock of
treasuries as just part of the broader
u.s money supply
that's really a more appropriate way to
think about it
so i i feel like the most common
mischaracterization i hear of mmt
is the idea that uh mm tears believe
the us government can just spend without
limit right it can
it can deficit spend as much as it wants
that's clearly not
i know not a belief held by you can you
explain what
mmt really says in this regard what what
obviously there needs to be some limit
to what the government can do in the way
of deficit spending
how should we think about that so i
think
you think of it this way you're if you
are the currency issuer
then you can afford to purchase whatever
is
available and for sale in your own
unique
unit of account in your currency so it
turns out that if you're the united
states government
that's a that's a pretty big market
right you can have
access to anything that anyone in the
world
is willing to produce and sell in
exchange for your currency
now that's the upper limit right it's an
affordability question
that is not to say that because the u.s
government can afford to buy
everything that's available and for sale
in its currency it should go hog wild
and and start buying up everything
that's available
so that is the upper limit right and the
the punishment for overspending in the
mmt framework
is inflation it's not insolvency it's
not national bankruptcy
so there are limits there is a supply
constraint
right the economy has the productive
capacity that it has
at any point in time we have so many
workers we have so many machines we have
so many raw materials we have the
factories
that we have and that's what we have to
work with and
we can ask of that capacity as much as
it's capable of giving us we can demand
goods and services
up to the point that we hit a supply
constraint and at that point
any further strain on the system is
going to show up in the form
of inflationary pressures so the the
limiting factor in an mmt framework is
really inflation
versus insolvency that's exactly right i
mean if
if you said to me ron you know give me
mmt in a sentence
tell me in one sentence what it's all
about i would say mmt is about replacing
an artificial a fake a phony an
imaginary
budget constraint with a real resource
constraint with an
inflation constraint that is the essence
of
sort of the project so one of the common
questions i get asked when i i've been
in mmt discussions
is the impact on uh
foreign currency exchange so
will will the issuance of more dollars
potentially too many dollars damage the
dollar
as the reserve currency globally what's
your
response to that what is there a real
risk to that happening
in an mmt framework well when you say
the issuance of too many dollars i mean
that's really the key
right and the too many dollars should i
think
be manifest we should think of it as
manifesting itself in the form of
inflation
that would be the indication that you
are spending too many dollars
into existence but you know look at a
country like japan
which has been running budget deficits
pretty consistently for the last three
decades which has the largest debt to
gdp ratio
in the entire world which cannot get
inflation
anywhere close to the boj's two percent
target
which is looking at a ten-year interest
rate on jgbs that's right there at zero
because
the central bank pegs it there and you
know when i was in tokyo not
long ago in meeting with lawmakers and
policy makers the great concern
for everyone that i spoke with was a yen
that was too strong
so you know it just doesn't work it's
not the case
that you know a budget deficit or even
persistent budget deficits
will weaken a currency it it currency
can strengthen it can weaken
it will do both over a long period of
time even in the face of
large and persistent budget deficits so
we can't talk about mmt without
discussing zimbabwe
yeah almost every every uh
you know non-believer uh as i have these
discussions
references zimbabwe and how they had you
know hyperinflation and blew up their
currency
can you give us your take on what
happened there and
was that you know is this a legitimate
criticism
of an mmt approach to uh to running the
monetary system
yeah no it's not a criticism of mmt so
what happened we were talking about
supply constraints earlier right and so
mmt is definitely telling us
that one way to end up with an inflation
problem
is to outstrip your economy's productive
capacity so what happened in zimbabwe
not a scholar of zimbabwe but i know the
general history
surrounding the hyperinflation look
robert mugabe came to power in zimbabwe
and
as a reward to the freedom fighters to
blacks who fought on behalf of
uh you know moving him into power
he took land away from white farmers
who'd been farming the land for a very
long time and redistributed it
understandably right to the freedom
fighters said we want to reward you
so what you ended up with was a
situation where
the black freedom fighters had no
experience farming the land
and because of that you had massive food
shortages
and this is an economy that's an
agricultural economy now you can't feed
the population now you're in a situation
where you're trying to
print money to import food and yes you
can get into
an inflationary or even
hyperinflationary episode
but not because you're trying to run
your economy you know
in accordance with the sort of
principles of mmt
but because you had other problems
political and
um and supply right this was primarily a
massive
supply shortage exactly that drove that
exactly um
so how do you think we got here right
it's
this i think once you understand the
concept that
uh it's literally impossible to borrow a
currency
or tax in a currency that you haven't
first
issued it's this doesn't seem
controversial to me at all
it's only controversial i believe
because we think
in terms of debt and deficit which as
we've said are our
trigger words um how did we get here
why why is it that there is so much
confusion around this
uh these concepts i mean
you know i teach economics and i've been
teaching economics for
a little more than 20 years now and and
look as a graduate student
all the way through my own training and
then you know becoming an economist and
teaching students i can tell you it's
very hard to find a textbook
that doesn't teach things in this
conventional way that presents
government finances
as akin to those of a household that
starts with a concept of a budget
constraint
that presents the government as having
basically three choices when it comes to
paying its bills
and then you know students are taught
the government can raise taxes if it
doesn't come up with enough revenue to
cover
all of its spending then it has to
borrow if it you know wants to do this
crazy third way
thing uh it can print money and so it's
a it's a choice that government has
about how to cover its bills and mmt
comes in and says no that's not it at
all
right that there is only one way for the
government to carry out its payments and
that a sovereign currency issuing
government
makes all of its payments by essentially
giving instructions to its central bank
think about the cares act right or this
recent 900 billion dollar
rescue package that was passed that is
congress
writing a bill voting to pass it and
essentially then
sending a set of instructions to its
bank to its fiscal agent the federal
reserve
and the instructions say to the fed your
job is now
to carry out the payments that have been
authorized by congress
on behalf of treasury and the fed
carries those payments out how
by using the computer to change the
numbers
in the bank accounts the appropriate
bank accounts get a credit the numbers
go up where does how does it work
it's digital right it is a digital
spreadsheet entry
and new dollars are born each time
congress chooses to spend so there's no
other way for it to work it isn't this
menu of choices where you could have
financed it with tax revenue or you
could have
financed it with borrowing but you chose
instead to create new money no
there's only one way for it to work it
always is the case
that when congress spends it gives rise
gives birth to
new dollars so we've just inaugurated a
new president president biden
what would your advice be to the new
administration
as we try to work our way out of this
pandemic you have you know
still very high unemployment shutdowns
lockdowns
really around the country severely
hurting small businesses
what would your advice be to president
biden on how to deal with this look i
think that
the the number one priority and i think
this is clear to virtually everyone
is that you've got to get the virus
under control that until
we you know substantially reduce
transmission and get the vaccines in
people
that we're not going to have much of an
opportunity to have a fully functioning
economy and a real robust recovery
underway so
virus first i think he understands that
and then beyond that i i think he has a
pretty good handle on this i really do
i think that you know when you look at
what congress has already done
in terms of fiscal support and you have
this
incoming administration saying it ha
it's not enough and we need more
that to me is a very good sign because
it's an indication
that they're not going to repeat the
mistakes of the last
crisis and the last economic recession
withdrawing fiscal support prematurely
leaning too heavily on the central bank
to try to lay a foundation for a
sustainable recovery
so when president biden says i want
something like 1.9
trillion in further rescue right
support for the economy i think he
understands that extending unemployment
benefits through march
or mid-march isn't going to be long
enough you're going to have to go
further you're going to have to have
more support for small businesses and
incomes and so
that's good and then beyond that i think
also encouraging to me is him saying
and then when we get through covid we're
not done
that we're also going to come back and
we're going to look to make some
strategic investments in the economy we
have waited too long to shore up
infrastructure to make investments in
our national infrastructure
to put money into climate and
manufacturing and r d
and so i i like
much of what i'm hearing i don't think
he needs a whole lot of
additional advice if he if he's
successful in doing what i think
he's already told us he'd like to do i
think he's very much on the right track
i i think there's well i don't know that
there's republican support for
a lot of that spending but hopefully
there will be because i think it's clear
the country needs it how do you
what controls i guess is maybe the best
word
would you recommend be put into place to
make sure that we don't overshoot
and cause more inflation than than
is good for the economy how do we how
would we run in an mmt
framework safely uh if you will
well you know it's funny because i
actually think that running
outside of an mmt framework it opens us
up to more inflation risk than if we
run in a so-called mmt framework so when
i said earlier if i had to describe mmt
in one sentence i would say it's about
replacing this artificial budget
constraint with a real resource
constraint
i mean integrating into the federal
budgeting process itself
inflation risk and right now you know i
spent time working
as the chief economist for the democrats
on the u.s senate budget committee
and in my entire time in that job
i don't think i ever heard in fact i
know i didn't
a member of the senate or a staffer talk
about inflation risk
it's not that it's not part of the
process it's not that it's it's not even
an afterthought
nobody thinks about it and the reason is
well that's the fed's job right we don't
have to think about inflation
when we put together a multi-trillion
dollar uh
budget and we're making these decisions
and so what i feel is that we're much
more
vulnerable to uh you know an inflation
shock in the absence of carefully
integrating that
into the budgeting process so if if
president biden is going to push
congress and if they're going to work
together to do not just a 1.9 trillion
or so
for the rescue but beyond that
potentially trillions
of additional dollars of spending i want
to know
that somebody in the house and somebody
in the senate
is working to mitigate inflation risk
before authorizing trillions and
trillions of additional dollars of
spending
so what mmt would do would be to say to
lawmakers
before you move forward with any
ambitious new spending
program you need to vet those proposals
you need to have them
rigorously evaluated for inflation risk
before you vote on it because what
happens now is
congress can write a multi-trillion
dollar
infrastructure climate whatever they
want to do and they what they do is they
send it over the congressional budget
office
and they say score this bill for us and
cbo looks at it and the primary concern
from their perspective
is does it add to the deficit does it
increase the debt
long term and if it doesn't do one of
those things they give it a green light
a good score and they send it back now
congress can vote and authorize that
spending
and my concern is that you know i can
write a spending bill
that doesn't add to the deficit but that
is massively inflationary
and so cbo is not even looking at that
yet well cbo assumes that inflation will
return
to its two percent long you know the to
the fed's target
and that any gravitation away from that
would be dealt with by the fed
so yeah inflation is not currently
integrated into the budgeting process
and i think that's a
vulnerability and we've seen the fed's
frank inability to really affect
inflation in any significant way
yeah i mean we all have this idea right
that central banks are the proper
institution
to deal with any inflationary pressures
but you know where as you just suggested
where's the evidence that they have the
tools
to to deliver on that you know somehow
we've watched the bank of japan
and we've watched the ecb and we've
watched the fed now for in some cases in
the case of japan
decades trying and failing to hit its
own two percent
inflation target you have zero interest
rates massive qe
all of those sort of things that many
people believe
is are policies that will reflate the
economy
only they don't deliver and so i think
in
much the same way that the that central
banks have trouble
just turning the interest rate dial to
heat the economy up and produce some
inflation
that it's also likely that you need more
than just
interest rate policy and a central bank
to mitigate inflationary pressures
should they ever arise
so if if these concepts become
mainstream i mean i think they're
clearly in the mainstream now uh
but if if you have buy-in to this way of
thinking
on both sides of the aisle do you think
that mmt has the potential to bridge
this huge divide
between democrats and republicans i feel
like republicans are
very worried about debt and deficits
until it comes to a tax cut
and as soon as it's a tax cut on the
table they're a lot more comfortable
with debt and deficits
and on the democratic side there there
have no problem
with deficits when it comes to spending
programs
but as soon as it's a tax cut they've
got a big problem with debt and deficits
does this way of thinking create the
opportunity to
bridge this divide because you shouldn't
be taxing more than you need to if
you're not if if your deficit is such
that
you're not likely to create inflation
that becomes a problem
you shouldn't be taxing because you're
really just slowing down the economy in
an mmt
framework do you think as this becomes
more mainstream that maybe it becomes
a key component to bringing the two
sides together
i hope so i do i mean you know i think
that
outside of an mmt framework you're sort
of in
well we don't want to run deficits if
you if you have either side at any one
point in time
a verse with an aversion to the idea of
a
of a fiscal deficit then you know you're
not going to accomplish anything unless
you can win
two fights you have to pick two fights
if you want
tax cuts but you don't want to add to
the deficit then
you have to cut spending or you know
come up with another way to
offset the impact on the budget if
you're a democrat and you want more
spending
but you don't want to add to the deficit
then you have to come up with more
revenue which means
you always have to pick two fights with
your colleagues right i want you to vote
for my infrastructure
bill and i also want you to vote for the
tax increases that keep it deficit
neutral
well that that almost guarantees that
you're not going to get your
infrastructure
bill in an environment where too many
people
are not going to vote to raise taxes so
the deficit has been weaponized
there's no question about that
politically it would be much nicer
if we could agree if both if both sides
could be told let's say by some
independent third party maybe it's the
congressional budget office
hey listen guys and gals you've got
about two trillion dollars
of non-inflationary fiscal space to work
with
in other words we think you could spend
safely or cut taxes
and use up that two trillion dollars of
fiscal space that's available to you how
do you want to use it
and then lawmakers can say what do we
want to prioritize right if republicans
are in control of the house and senate
it's likely that they'll say we want to
use that fiscal space to do some more
tax cuts democrats are uh in control
it's likely they'll say we want to use
that fiscal space to do some education
or infrastructure what not
that's the thing i mean i did i did an
interview
with bloomberg and i said to them this
was before coronavirus and i said
um you know i i think and and
some independent researchers have looked
at this and they
suggest that right now in the u.s this
is pre-covered that there is probably
five or six hundred billion dollars of
non-inflationary fiscal space
available to be used up right so
if both sides could be told how much
kind of low-hanging fruit is out there
then
we could have that political debate
about what is the best way
for the country you know to use that
available space
as opposed to thinking that there's no
space and that every dollar that you
want to spend has to be fully offset and
then you're unnecessarily fighting for
tax increases and all the rest of it
so we have a few questions who came in
from folks on our platform
if i could uh run a few of these by you
government is spending heavily to offset
economic turmoil from the pandemic yet
interest rates are low
is mmt already a reality
yes because and but mmt was a reality
in the mid 90s when really this project
started when a group of
us uh you know a group of economists
came together and started
writing about the mechanics of
government finance and how the monetary
system works so
it worked in the mid 90s it was a
description
of you know how things work it worked in
the 2000s it works
you know now it's mmt is mostly a
descriptive project right and it will
work in a high interest
rate environment and in a low interest
rate environment in a no
qe environment in a qe environment
yeah it's it's always bothered me
actually that uh the word theory
is in the in the name because it has
always felt like much more of a
description as opposed to
an economic theory like uh you know the
austrian school of thought or
keynesian school of thought yeah i mean
they're
all i think you know of all schools of
thought in economics is theoretical
schools it's there's a theoretical
framework in place whether you're
a milton friedman a monetarist or a
keynesian
or an austrian they're all theoretical
in that
in in some sense but i think more than
any other approach in economics
mmt has tried to really drill down and
get
in the weeds on the operational
realities of the monetary system and so
in that way it is
so much more a realistic description
of how the mechanics of of the monetary
system and
of our economy okay assuming inflation
can be managed
can governments allocate uh new money
efficiently so in essence our
governments
do you really want to put the power to
spend
and i guess to allocate the dollars into
specific areas
in the hands of the government is that
really the most efficient way to do it
well it doesn't really
in a sense matter what i want to do
because the founders already did it
i mean it is the founders who gave
congress
the power of the purse it is article 1
section 8 of the constitution that gives
congress the ability to do what it does
and to
um to operate its budget unlike a
household or
a business or anything so they already
have that power and i think that what
you know are they always going to make
efficient use
of that power no do we want as much
transparency and accountability as
possible to
you know get them to make the kinds of
investments in our economy that don't
abuse the power of the purse sure
um ear marks you know gr they're all of
those things right lobby and tristan's
over lobbying interests
people are going to want a piece of the
pie when the budget is being put
together it's a multi-trillion dollar
thing and there are always going to be
people
who want to carve out some special
interest use of
of resources that's not going to change
and mmt doesn't i don't think
you know in any way make it easier for
people to do that if anything i think
that mmt is
shining a light on the mechanics of how
the system works and trying to get the
federal budgeting process
to transform so that we are better
protected
against abuses of the power of the purse
okay last question the stock market is
at an all-time high is mmt fueling the
stock market boom currently
well no because mmt is a description
of how the monetary system works and
mostly of government finance
right so are there things that
um congress has done that have helped to
support the economy and support incomes
that
probably transmit themselves into
you know support for for equities sure
um
but i think probably more likely that
some of what the fed has done
um is is responsible for some of that so
yeah great well stephanie thank you so
much for sharing your thoughts with us
today and joining us for our conference
we very much appreciate it
thanks for having me
英語 (自動生成)
#Modernmonetarytheory #peopleseconomics #economics
An Interview with Stephanie Kelton and Ron Biscardi on Modern Monetary Theory
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