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The MMT Podcast with Patricia Pino & Christian Reilly
For currency-issuing governments, taxes for revenue are obsolete, so what *are* they for? Patricia & Christian talk to economist and author Dr Dirk Ehnts about the role of taxation in modern money systems, banking regulation, inflation, new eurozone fiscal rule proposals, and more. Please help sustain this podcast! Patrons get early access to all episodes and patron-only episodes: https://www.patreon.com/MMTpodcast Apply for Dr Dirk Ehnts' Modern Monetary Theory and European Macroeconomics course at Maastricht University (July 31st - August 4th): https://maastricht.dreamapply.com/courses/course/183-modern-monetary-theory-and-european-macroeconomics Website of the 3rd International European MMT Conference (September 9-10: https://www.mmtconference.eu/ Order the Gower Initiative's "Modern Monetary Theory - Key Insights, Leading Thinkers": https://www.e-elgar.com/shop/gbp/modern-monetary-theory-9781802208085.html Free tickets for the launch of "Modern Monetary Theory - Key Insights, Leading Thinkers", in London on 20th April: https://gimms.org.uk/event/book-launch/ For an intro to MMT: Our first three episodes: https://www.patreon.com/posts/41742417 Episode 126 - Dirk Ehnts: How Banks Create Money: https://www.patreon.com/posts/62603318 All our episodes in chronological order: https://www.patreon.com/posts/43111643 All our episodes with Dirk Ehnts: https://www.patreon.com/posts/44467243 Dirk Ehnts' website: https://www.dirk-ehnts.de/ Dirk Ehnts on Twitter: https://twitter.com/DEhnts Relevant to this episode: For more on the interplay between commercial bank money (deposits) and central bank money (reserves), listen to our Episode 126 - Dirk Ehnts: How Banks Create Money: https://www.patreon.com/posts/62603318 For more on the endogenous money view (the non-fringe, very mainstream view that bank loans create deposits, not the other way around), listen to: Episode 43 - Sam Levey: Understanding Endogenous Money: https://www.patreon.com/posts/35073683 "Is Paper Money Just Paper Money? Experimentation and Variation in the Paper Monies Issued by the American Colonies from 1690 to 1775" by Farley Grubb: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2039611 "What Are Taxes For? The MMT Approach" by L. Randall Wray: https://neweconomicperspectives.org/2014/05/taxes-mmt-approach.html "Taxes for Revenue are Obsolete" by Beardsley Ruml https://realprogressives.org/taxes-for-revenue-are-obsolete/ "COVID-19 and its economic consequences for the Euro Area" by Dirk Ehnts and Michael Paetz: https://link.springer.com/article/10.1007/s40822-020-00159-w "Completing The Euro: The Euro Treasury And The Job Guarantee" by Esteban Cruz Hidalgo, Dirk H. Ehnts & Pavlina R. Tcherneva: https://www.researchgate.net/publication/334226761_Completing_the_Euro_The_Euro_Treasury_and_the_Job_Guarantee More on Silicon Valley Bank and bank runs: Episode 162 - Warren Mosler: Anatomy Of A Bank Run: https://www.patreon.com/posts/80157783?pr=true Episode 163 - L. Randall Wray: Breaking Banks - The Fed's Magical Monetarist Thinking Strikes Again: https://www.patreon.com/posts/80479169?pr=true Episode 165 - Robert Hockett: Sparking An Industrial Renewal By Building Banks Better: https://www.patreon.com/posts/81084983?pr=true MMT founder Warren Mosler's Proposals for the Treasury, the Federal Reserve, the FDIC, and the Banking System: https://neweconomicperspectives.org/2010/02/warren-moslers-proposals-for-treasury.html Details of the Finnish translation of Dirk Ehnts' "MMT essentials": https://talousdemokratia.fi/kirjat/johdatus-moderniin-rahateoriaan/ Dirk talks about price-setting power being one of the causes of inflation, for Warren Mosler's view of the state as price-setter listen to this episode - Episode 123 - Warren Mosler: Understanding The Price Level And Inflation: https://www.patreon.com/posts/59856379 Details of t
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The idea was they will be easier for the government to spend its own money and buy the resources that the government would need to provision itself. The question is how do you get the currency accepted? So how do you create sellers of Labor sellers of goods and services and the answer to that was that you impose text liabilities in the very beginning of paper currency systems. You have governments creating tax liabilities per capita poll tax or a Hut tax this means the idea of tax liabilities is prior to spending money. So there's a very important role for tax liabilities at least at the start of the monetary system because you need to make people accept your currency you created the demand for currency, which means also that you create unemployment in the sense that we are using the concept of ever since before you have taxation in money. Yes, you have poor people and yes, you have people with no resources, but they're not unemployed because unemployment is always the situation where you want to work for money.
This is the MNT podcast with Patricia Pino and Christian Riley.
Hi, I'm Christian Reilly and welcome to the modern monetary Theory podcast. You can find us on Twitter at mmtpodcast and you could support the show by going to patreon.com/mmtpodcast. If this is your first time hearing about mmt you might want to listen to our first three episodes for an introduction, which I've linked to in the show notes along with some other things that relate to this particular episode and as ever I've linked to where you can support this podcast financially via patreon.com slash mmtpodcast support starts a dollar a month or a pound a month or whatever the equivalent is, wherever you live. We're 100% listener funded your financial support really helps keep the show going and your support in other ways, whether it's by recommending us to other people or just by listening and spreading the word about this stuff really helps too.
a big thank you to all of our supporters so far and thanks as ever for the Time you put into understanding mmt.
let's dive in welcome one and all to the mmt podcast. I'm Christian Riley.
and I'm Patricia Pino.
and we are delighted as we always are when this happens to be joined. Once again today by our friend Economist author and organizer of the upcoming 2023 European MMC conference. Yay. It's doctor Durkins. Thanks for joining us today Dirk.
Yeah. Thanks for having me always happy to be on your ship. It's borrow the title of one of your recent books Let's get straight into some mmt Essentials long time listeners to the show will know that every time a currency issuing government spends it effectively spends new central bank money or reserves into existence which causes new Commercial Bank money or bank credit to come into existence. That's our spending money, and I've linked to our episode about how that works in the show notes for this episode. It crucially a currency issuing government doesn't spend previously collected tax revenue or to quote form of Fed chair Beardsley Rommel speaking in 1946 taxes for Revenue are obsolete, but there is still a primary role that taxes play in the money creation process and Taxation performs other vital functions in our modern money systems. So Dirk, how would you describe the role of Taxation in modern monetary Theory?
D:
Yeah. That's a very good question. Let me start with natural, Texas because before we had money taxes there were of course Texas being paid in kind. So in many societies people were supposed to surrender 10% of their production directly true. Let's say the church for example, and when that happened of course text was very easy to understand it was the part of products and that you gave to the state or the church or whatever kind of institution ruled your land in return. You got normally security or something, but not much more so. Money was an introduced to provision the government. So the idea was that it will be easier for the government to spend its own money. And we set money by the resources that the government would need to provision itself. The question is how do you get the currency accepted? So how would you create sellers of Labor sellers of goods and services and the answer to that was the idea that you impose text liabilities. So in the very beginning of paper currency systems, you have governments Wellness creating tax liabilities per capita or doing something like a poll tax or a Hut tax in Germany at some point their text windows. So the more windows you had the more texts you paid which lacks to people closing down the window who's in order to pay less taxes. So they prefer to live in a dark caves rather than pay their fair share of Texas. This means the idea of text liabilities is prior to spending money. So in mmt there's a very important role for tax liabilities, at least at the Of the monetary system because you need to somehow to make people accept your currency. And that's the reason why they take it in the beginning because they know that they will have to pay taxes eventually or if they don't have to pay taxes and other people will have to pay taxes. So there's always going to be a demand for money.
So, of course in modern times, we also have private that so people who borrow money from the bank to buy a flat and then for 30 years they pay and I know a thousand pounds per month for example back to the bank that of course forces them to work for money.
And well, of course, if you go a little bit further then of course taxation is also of course important because you take purchasing power away from the people.
So if people produce something and they don't have the money to buy all their production because they have to pay some taxes and of course makes physical stay some would say or it creates fiscuit space for the government to purchase some production that nobody else can buy because the private sector the households and the company say don't have enough money. So important you see the registributional aspect with taxation. So, of course you can take money from the rich and you can give it to the poor and you can also incentivize people to to not to consume our code for example by putting on an alcohol tax in Germany. We also have a coffee text. I think it's still an operation for example, so yeah, that's a lot of reasons for taxation in mmt.
Can I just jump in and because it's very easy to say you said we can take money from the rich and give it to the poor and that is not exactly how it works. We can always spend because Is the government only spends one way by as we said before marking up bank accounts that the government can't run out of its own money so to speak and so you could we always spend on the poor and take money away from the rich. It's not the case that we're taking the money away from the rich to give to the poor. Right?
Well, it depends on what kind of level you're doing this. So if you are doing this on the federal level then you are correct so you can always spend and then of course you would have probably at some point the problem because there's not enough resources.
P:
So you need to text maybe to free up resources for the poor to consume if that problem arises at all, but at lower levels of government at the local level or it's a state level if you have Texas there then of course first you have to text and then you would have to spend because at that level then the government is also currency use it so I write something recently that said that basically at Federal level speaking all governments spending eventually ends up in the pockets of large businesses and Which I'm going to speaking. So if the government did in tax the rich it would just continue and accumulating and to come to dangerous levels of political instability and things like that. So is the action of the government as well the politically stabilizing action of removing power from the top is that an alternative way of seeing it?
D:
Yeah, I would definitely think so. So I mean if you have had fun managers in the United States and I think there's an article out there by CNBC. So in 2020 the 25 most successful hatchified managers, they had an average income in the year 2020 of more than one billion dollars. So that's roughly what it costs to finance a campaign to run for US president and they make that kind of money in one year. Of course that gives a lot of political power to those individuals and Society should ask itself. So is it possible to have a democracy where we're supposed to have one person one vote? And then we allows these kind of levels of income. Quality, I think that this is not going to work out. So so yes, if you are the government you need to ensure that you have a fair distribution of income and that's I mean John Mayerd Keynes once put it like this more or less. She said well the big question is how do you get a society where people have to work together and you have to have a fair distribution of income but you also have to have full employment. And of course you have to have the liberal Society so you have to have some Freedom so the big questions how do you get this kind of society and that's what he devoted his life for so he was always doing research and thinking about the institutions that would bring about this kind of society where you have a fair distribution of income where you're full employment and where you still have individual freedom, and that's also what we are thinking about today. But of course with the edit issue of having a sustainable economy, which is of course very urgent by now. So that doesn't exist in Kansas time as a problem at least not in the public.
C:
I'm just gonna jump in here say that the statistic that you started. About that, you know a hedge fund manager can earn a billion dollars this to me is why I tend to not lean ever so hard into the idea that taxes are going to disempower the ultra-rich because I think people are yeah, it's just maybe next year will raise that tax that all stop there being billionaires that can buy elections, but we've had taxes since the dawn of money because that's the point of taxes. Right? So we've had taxes it's the dollar of money and so far so bad I get that. It does ameliorate some wealth and income inequality and it's very important, but I don't think that they're getting to that very top Echelon of people that can buy elections. I mean, we really don't have to cast our minds back very far. Do we everybody that runs for president in the US is at least a millionaire if not a billionaire, right?
D:
Yeah. That's a problem and I mean You had this academic debate also with speaker t with traumaticity. So he says we have to have taxes in order to fix this and the mmt view Immortals as we have to regulate financial markets so that these kind of positions don't even exist because once you have a person with an annual income of more than a billion dollars that person of course will have a lot of political power to fight any proposal to cut that income in half. Let's say which would still be too much. So I mean if you are picketty, I mean how high would that have to be if you have an income and income of one billion dollars, I mean 99% maybe
C:
when you say 99% tax, well, if you say anything like an 80% tax people all of a sudden become temporarily embarrassed billionaires like oh that could be me the state's gonna come for my billion pounds that I'm about to make and so I guess that's just the psychology of people in our system right now.
P:
question is at Stop talking about tax and start talking about confiscation because it is gone really far.
C:
Yeah. Yeah, and again just in case anybody. Don't want to get misinterpreter today or we're talking about the very very top. Yeah, wealthiest individuals that could buy elections.
P:
Yeah, if you're not rich enough to sell handedly fund a presidential or political party and still remain Rich after that. Yeah and still remain Rich. You have nothing to worry about.
D:
just to give you an example. So if you make a thousand million dollars, which is a billion dollars and then I text 99% you would still have 10 million US dollars in Edward income. Okay, so it's still not so bad.
C:
So I remember at the 2021 Posner and mmt summer school, which I highly recommend and we highly recommend which is running again this year from the 58th of September quick plug there. But in this pause and MMC silver school, I remember your class you drew on the history of the early American colonies to illustrate. How fiat currency Works. Would you mind talking about that?
D: 13:00
Yeah. So this academic paper on the history of paper currency in yeah in the 1760. So Virginia was an American colony owned by the British and it is a nice example of how a paper currency works because there was no Central Bank. There was no treasury there was just the government with money printing so a cash so it's very educational to look at that and I always do some kind of roleplay. So the idea is that I take my students back was a time machine into the 1760s. We emigrate from Europe to America. And then we settle on a little items next to or it's part of Virginia, but it's a little island so that I don't have to talk about anything else but our monetary stuff and then of course when we arrive on that island, we build little hearts and we go fishing and maybe we brought some animals. We do some farming and everybody's doing something so maybe people are poor maybe some people are rich because they have more resources but everybody can gather a little bit of land and then at some point the people on that island decide. Hey, let's build a road Public Road free of charge and also public school and hire to teach us and for that you need money and when you introduce taxes in Virginia pounds, which is what they did in Virginia back then then of course you you created a demand for currency, which means also that you create unemployment in the sense that we are using the concept of ever since so it's very eye-opening for the students that they understand that before you have taxation in money that yes, you have poor people and yes, you have people with no resources, but they're not poor because they don't work for money. Nobody's working for money.
C:
So they're not by definition unemployed at that point in a free money Society.
D:
Yeah, so that maybe they have to go resources and they have nothing to do and fix it around and they don't work but they're not unemployed because unemployment is always the situation where you want to work for money. That's very clear. Then that's the government because the government has put those tax liabilities into those balance sheets of those citizens of Virginia. So the citizens of Virginia they have to pay those taxes. That means they are some self. So how do we get that money? So they offer work for money, they offer goods and services for money. They would want to deal with the government or other people who have money and that's how the paper currency of Virginia and that's how it actually worked. So the paper by Farley grab it's pretty good. Maybe you can put it into the notes of this presentation.
C:
just reminded me of the way John T Harvey likes to say, I think he says unemployment is always and everywhere a monetary phenomena is sort of slide dig at Milton Friedman.
P:
so times because Our tax system and the UK is so complex and we've got taxes for very many different things. And the way that taxes structured at the moment is that you have a minimum threshold that you can work to and as long as you don't go over that threshold you don't pay income taxes. And then if you go over that threshold, then you start paying more and more some people might say that the reason why people pay taxes is because they work and they don't work to pay taxes. So contradicting the whole Texas create an employment. How would you explain that in? What would your answer be?
D:
Well, I think the question is I mean if you ask a question, why are you willing to work for UK pounds? Then of course, most people will give you an answer which is smallest like well, I just do I really haven't thought about it or they say well everybody else is doing it and I like to buy stuff with pounds. So I do it. So of course for an economist that is not a nice answer. I mean to say that everybody's using pounds because everybody else is using pounds that's really not the bottom of it. So you have to dig a little bit deeper. And of course when you establish a currency, then you can see what's the answer looks like and we have ample evidence that historically taxes were imposed to make people accept money. I'm a Minsky also is quoted to have said that it's easy to print money. The problem is getting except. So yes, I would agree that to us. It looks like money is an invention so that we can consume stuff and pay for things. That's the money user perspective but nobody's asking the question. So why on governments using their own money so Is not the United Kingdom now use I don't know Euros or US Dollars even though they're not part of the Eurozone but I mean why not and the answers well because they would not be a currency issue anymore and they could run out of Euros, they could run out of dollars and then you would clearly see from the currency issue a perspective that it all makes sense.
C:
and another way to talk about taxes as you recently wrote on Twitter is that taxes are the price of Freedom. Can you lay out what you mean by that?
D:
Yeah. I was very mean just twittering that and not explaining it. Look the price of freedom is normally that we have guaranteed rights, okay and stride into Constitution. So nobody can hurt us. We can have property and nobody can I don't know take away our freedom like enslave us things like this and the questions, of course, so who's enforcing that so you can write it down on paper. It's a nice Constitution, but you need to enforce this you need police. You need lawyers. You need judges you need property management and also you need to have all kinds. Sing Soo, you need to state to the state has always been doing that protecting for example property rights also creating the currency. So all of that doesn't work if the state has no resources. Okay, so if you would say the state has to police people, but we don't give any money to the state. And also we do not allow the state to have its own money. How is the state going to get policeman for example, good ones, hopefully so Texas have to be there. So without taxes we don't have a government which can get resources to do its job. And that's why I said well the taxes are the price of freedom because without these institutions we wouldn't have any freedom so you can go to failed States. For example for a time. It was like that in I don't know IET Somalia Afghanistan there were some regions doing some years where no taxes were paid. But of course your freedom was very low so people could come and take away your stuff and that's what you get when you have zero taxes. So that's how amend it probably will get back to Twitter next week and maybe write a book was to explain.
C:18:50
I think it's okay. It's okay to be brief sometimes on Twitter and I do think you actually went on to on fact the sentence as well. So it was actually fired but you know, like you say you determine what the public purpose is. Hopefully democratically, obviously you could be under some sort of despotic administration and well whatever they say is the public purpose is the public purpose now, but the only way that gets achieved is by the state mobilizing resources and so far taxes and the money story as we understand it in mmt all the way that states mobilize resources. I guess is another way to say it. There's more than one type of Freedom, right? There's freedom to and freedom from right and whatever the polity decides the state as an agent of that policy needs some mobilize resources, and I mean, there's more ways of freedom. I mean, I was just talking to about individual freedom, but of course, you can also talk and should also talk about Freedom as being part of the social. That you have the freedom as a voter to also voice your concerns and make your vote count when it comes to allocation of resources. And what Society will do so that of course is also very important. So like we say we absolutely do not ignore the purpose of taxes in mmt. It's very crucial to mmt and it's in fact the beginning of the mmt money story which we talk a lot about on this podcast and I bring this up anyway, because this week in the UK the former Chancellor and the Margaret Thatcher Nigel Lawson passed away. So lots of people are reflecting on his legacy and one commentator on the BBC this week said that he felt that Nigel Lawson's revolution in policy wasn't so much the Big Bang the regulation that's quite famous that he presided over but rather it was in taxation that he lowered taxes dramatically, especially on higher earners, but he offset that with a rising vat so people were taxed more on their consumption. Rather than their earnings now that might sound Progressive when you frame it like that. But why do many economists view vat actually as a regressive tax there were the reason is that the rich people and to poor people they spend their income in different ways. So the rich people are saving quite a lot of money maybe up to roughly 40% maybe for talk about millionaires just roughly. So if you save a lot of money then of course for that part of your income vat is not going to be a problem. But if you are poor you will probably spend a lot of your income. So almost all of it and if you're really really poor you might even spend more because you go into that because you have to otherwise you will not make ends meet. So if you spend about a high share of your income on consumption goods, and of course the 80 will hit you very hard as a percentage on your income. And that is why if you shift Texas from income taxes towards the 80 that means that to society will be more in equal in the end that is something which has happened in a lot of countries. Including Germany and including probably also these Scandinavian countries are seen in Greece vat was hiked up to something like 24% in the 2010s under the austerity regime. So of course vat then hits the relatively poor households and that's not a good idea. If you already have problems with income inequality being to our would it have made a difference if the vat was only charged on luxury goods with that have been more Progressive. Yeah, that would be more Progressive and of course you could remove vat from important food stuffs. You can remove it if you're selling books for example, so so yes, I mean it's not written into stone. That's the 80 is somehow regressive tax, but it's in the devil's in the details, but normally we have vat which is roughly the same overall products and then we have some exceptions but normally to regressive tax right now, but also in Germany, there's talk about removing the at probably from foodstuffs. I don't think that the government will do it. But at least some policy debate about that so are in the Eurozone you recently noted that the German Parliament had published an update on Modern money Theory and you wrote that their paper is conditionally suitable as an introduction to mmt. I'm guessing that you're being diplomatic. And they may have missed some things tell us about the update. So yeah, I mean it's not a bad paper. So they get a lot of things right but it's also very strange because they quote very strange mmt literature. And for example, they point out that I would be the leading mmt Economist in Germany. I have two books in German and they don't quote any of my books which is really odd because that's Lomi where you would go and start and the German Parliament has a library and my book is available in that library for a couple of years. Now I checked so they had the book there. So it's a bit odd what they did there. So yeah what we can see the Eurozone is and that we already have a lot of M&T applied in a sense. So mmt insights have been used by the ECB. For example, I simply not China has also gone to the ECB for a lecture ones and they know that they have to act as a dealer of Last Resort, which means that they buy government bonds when nobody else wants to buy them and they promise to always do that. We'll see pandemic. Emergency purchase program so that all the governments could sell government bonds and ensure that the central bank account always goes back to zero or to positive which is according to the Eurozone rules. So the Eurozone rules say that you can only spend if you are the government and the central bank account is positive. So that's something which is definitely inspired by mmt because nobody else had said that the ECB should be a deal of Last Resort for government bonds and in my book, for example, I have been arguing like this since 2014 and your people who's also an mmt leaning Economist. He also made that argument in 2013 or 14. I think he said it before I said it but these are mmt talking points. And also we always said that the deficit limits are very bad ideas and there's now is a general Escape clause in the stability and gross pact and the three percent deficit limit is part of that stability and growth pact. So the general Escape cross was activated in 2020, and that meant that the government To spend whatever they wanted to spend and even if the budget deficit would be very high like 10 or 11 percent like in Spain or Italy there would be no punishment so we can see already on the Eurozone and the eurozone's institutions. We can see a lot of mmt insights being applied. We also have to debate about the reforming the fiscal framework with high ranking officials from the European Union saying that it's a current fiscal framework is not an hour code. It's not fit for purpose. Okay, so they there must be policymakers up high who have understood the problems the macrochemic problems that we have with the stability and growth for instance. But this Clause presumably was in the treaty way before officials had an understanding of MMD if indeed MMD has had any sort of influence on their activation of it, but it was always meant to be temperary. Was it not where's the stability the general Escape Clause has been added in 2011 and I sing by Tucson and 11 you have to already and knock off papers by Randy and by Stephanie about Eurozone and the way that that this is a straight jacket and so on so I think that the arguments were there so yes, they activated that in 2020 and they said it's temporary but the thing is of course that now that they've done it we now have a record low unemployment rate in the Eurozone. So once you take away the rules which are supposed to protect stability and lead to grows what you get is you get stability and grows when you remove those rules and then of course has turned a couple of hats and people have been thinking like, okay. So if this stability grows packed is the activated and what we get is stability and grows. Well why turn it back on again. So now there's this big debate which is of course Very political about what to do with the rules and the commission has already said that they want to have more individual rules so that you have not one size fits all but that you have governments which are proposing some kind of adjustment pass on the national level. And of course the Germans who are saying that no, no this car work like that. I mean their ideas of not equal rules is basically Germany can do everything at once and then everybody else has rules is that not usually the approach they take not know the idea is look it's very complicated with the Eurozone because the it's true. The Germans were breaking the rules in the beginning so they had budget deficits public budget deficits in the 2000s when the Euro started so from 2002 onwards it was 3% 4% four and a half three and a half zerosy German Finance Minister Hans eyeshadow of the social Democrats. He always started blue letter from Brussels saying that look your public deficit is too high. Please change it and then the other countries were pissed off at Germany and also the French because I had the same problem but probably in well, not really a problem. But that seat statistic. So the other countries like probably Spain and Greece and Italy they said well, we want to have stricter rules so that those countries was public deficits that are excessive that these countries are punished and then the Germans and the friends. Well, okay, let's change the rules and that was just before the global financial crisis in 2008 and 9. So those harsh rules that we have that enabled austerity they've been created by the countries who had been suffering under those rules, which has led to this complicated situation that those countries prefer to politically to suffer through the austerity that they compose onto themselves. Well, of course the Germans did it by applying the roads, which was not necessary. But yeah, it's I mean it's it was a complicated political game and I think by now it's clear that this kind of game will not be repeated. But yeah, it's a power struggle. So the Germans want to go back to the old rules because it gives them a lot of Leverage. So the other countries have public deficits which are too high then of course the Germans can tell those countries what to do and that's what they want. Okay. So the rules the public deficit limits, this is not about economics. It's about politics. It's about power distribution. Wow. We're in this topic. You recently resched a paper that you wrote in 2021 with Michael pets and that was entitled covid-19 and it's economic consequences for the euro. Area and in that paper, you pulled together quite a few mmt insights and you point them at the shortcomings of the Eurozone some of which we've just heard and as you write these shortcomings were already evident after the global financial crisis and they've prevented economic recovery in the last decade. Is there anything more in that paper that people should know for the current context? Yes. Yeah. Thanks for bringing up the paper. So the idea of this paper was to write up an mmt paper without calling it in mmt paper. So the idea was to get other Economist interested in the question of what does the pandemic mean for governance in the Eurozone going forward and Michael Pats who said University of Hamburg and it is an excellent Economist also, so we said, okay, let's write a paper in which we just present the facts and then we move on to policy insights and instead of criticizing the existing rules. Okay, we do that as well. Of course, we say the deficit limits don't work, but we propose to have different policies. So we say it's better to move from deficit targets to Full Employment targets. So countries have full employment targets and if I'm unemployment rate is not at the Target rate, then they have to go to Brussels and explain why and how are they going to fix it? Okay. So is this of course shifts a paradigm? So instead of looking at physical numbers you look at results in your economy and you have to explain again why you don't have full employment which I think is would be very good step forward. Also we suggest Cecb becomes also formally a dealer of Last Resort it informally already is but the question is what is the political price that for example, Greece will have to pay during the next Crisis so that the ECB is supportive. We think that we should have some kind of automatic regime that the ECB is always supporting all countries of the Eurozone and to take away that potential of the ECB to Blackmail other countries and to doing what they want which is what happened in Ireland and also Italy during the last crisis and the last point that we raise is to remake the New Deal the green deal of the EU and to a green new deal with government is increasing government spending by quite a lot in order to fight climate change in order to make possible is sustainable economy. So that's the idea of the paper with these are positive goals that we suggest people just policies and the paper was very successful. We a single was accessed more than 17,000 times published two years ago. So we are very happy with that paper and you share that paper in response. Do Olivier Blanchard tweeting about a recent German proposal for the reform of EU fiscal rules, which would require a 0.5% decline in the debt to GDP ratio every year and a 1% annual decline requirement for high debt countries. Can you talk about that proposal? So they seem to believe that let me quote here. I have just from EU observer.com. It says the paper states have highly in debt the country's GDP grows should always exceed the growth of expenditure a function described as you convergent margin, so there will be very strange. I mean the problem mean government expenditure. So yeah to have countries grow faster than the government spending grows. That won't mean that you would have to increase private investment at a fast pace. Of course, you can see that clearly in the United States where you have the inflation reduction act. So if the government spends lots of money then firms invest so that they can produce stuff that they can sell to the government. So I would say that private investment roughly again roughly is a function of government spending. It is very unlikely to see the private investment going up while government spending this increasing only slightly. But again this paper, I think it's again. It's politics. It's not economics. So what the German government wants to have they want to have the old rules back because then the others always Sinners they always have to come to Brussels to explain why they did not hit the target. They always have to come up with reforms and then of course the commission can tell them what to do and that's what they want. They want political power. Okay. So this is why it doesn't work to explain to Wolfgang sharply. For example, who was the finance minister of Germany in the 2010s. So if you are the Greek Finance Minister like Janice vavo fakis, yeah, you can try to explain economics to him but he understands economics. He is just a vowel Focus did not understand the politics of it. Okay. So the Germans want to rule in the European Union and the way they do this is through this stability and gross pact. We see deficit limits because they are Exporting Nations that will not have any problem with that but the others will and that means that Brussels can tell them what to do and Brussels is modest Germany's the most powerful the nation in the European Union and the largest one as well. So I think it's again it's a political game here. And I think it's of course not good for the European Union to have this kind of result where Germany is so dominating because if the Germans want to reform the other countries and turn then into net exporters as well. It doesn't work for the population because what we export we kind of consume at home, so we will be poorer and also you cannot have all countries in the global economy being that export. It's simply doesn't work that way from the numbers. Somebody has to be in that important. Also while we're on this topic to you share the story from the German press outlining how the I guess municipalities of Bremen sawland and Berlin among others are now looking for new ways to finance green investment and their bypassing the debt break, which is another fiscal rule. Was about how they're doing that. Well, we have something in Germany, which we call Xander for murden, which is like a special fund you already noticed the framing. So instead of saying it's a special debt. It's a special fund. So now it's an asset instead of a debt for some reason and this has been allowed for some years at the federal level also and at the federal level there have been using that and they used it again last year very prominently because first they gave a hundred billion euros to the German army. So that was a special fund and then they had another special funds to stop the gas price from rising for consumers. So they said okay you pay the old prices and we pay the difference between your bill the actual bill and what you used to pay and that was 200 billion. So these special funds of course and also in terms of framing they were very mmt like right. I mean the government said, okay, let's spend $300 billion more. I mean 300 billion is almost the budget of the federal government and they said, okay, let's spend the next budget inside of one year, roughly. So Of course, you wonder whether the resources are there that cmmt question of course and now the states of Germany. So Bohemian is a town. It's was a city, but it's also a state of Germany because it's used to be a Freetown and also Berlin it's a city but also a state they also have in their constitution is possibilities to create extra money these kind of special funds which say we'll have to repay at some point, of course, but if there's a political excuse for spending, let's say five to ten billion more they might be willing to do that. So supremen has said they would do it and also in Berlin's in new government set, they might want to spend five to ten billion extra to make the city Greener and that of course is also something which icing is coming straight out of the M&T Playbook and now they're using it so it was just sitting there as an idea, but now the time has arrived and yeah, I think these are good signs that we are asking different questions about money. So it's not about the question. How do we pay for it? But the questions of course, so how many of these special funds will we be able to create without running into problems of supply? Lot of chat about the federal debt break is that an EU policy as well, or is it just you need to Germany No, the Germans in the wake of the Euro crisis at everybody or all the countries should have in their constitution that break I think not all of them followed suit, but most of them but they've arrived it a bit but I think probably all of them can be turned off and they were doing the pandemic because otherwise you would have been running out of money and no Eurozone country did run out of money. So probably means that they all had these Escape Clause. So the German Coalition that we have now, which is a red party and green party. So social Democrats and Greens Plus Liberal Party. They Liberal Party has a finance minister and he has insisted in the debt break. So the debt break stands and that means that they will have less money to spend. I think the liberal party will be voted out of parliament because if you don't spend money to solve the problems that your voters have why should they vote for you again? So I think the liberal party is making huge political mistake. They're playing the party pooper, but nobody Party Poopers, they're just telling the other parties. No, you can't spend any more money, but that's very destructive. And I don't think that the voters will honor that I think probably politically it looks like a good idea for them because if they feel like they're hitting the other party's hard and they do that but that's not what the vote is want to see so probably the people who voted for the Liberal Party wanted to see for example, Texas come down but that they did not deliver and also the other things that they achieve this basically they tried not to change things but that's normally not enough. So yeah, let's see what will happen at the next German election. The next one is it's next year. I think if I'm not mistaken you mentioned earlier as well that there was some discussion about whether the rules on fiscal spending should be more bespoke per country. I want have they made I mean for us the obvious solution would be a job guarantee, which automatically gives more money to the countries that have the highest levels of unemployment have they made that connection yet? You think all will they ever get That well, the debate has been more about green investment than about unemployment. So countries like Ireland, for example, they wonder how they would be able to Green the economy. If the money that Brussels is giving the nation states is normally co-funding. So that means that when the Irish government spends a billion here a billion there then they will get from Brussels 500 million here and 250 million there. But if you have to be with within this 3% budget deficit limit, then the Irish government cannot increase government spending and they cannot afford because of the rules they cannot afford this kind of investment and that means of course that they will not have a nice economy which is sustainable and I was invited to speak at the finance committee of the Irish Parliament. I think two years ago and there were wondering how we could change the rules and one of the ideas was that countries what have individual kind of rules of the roots would apply to all of them, but you would have in the individual pass of adjustment to bring down the deficit and the public that level which of course Means that these are then political things that can be negotiated. So the roads are not so strict anymore that you have to cut spending whenever you break the deficit. So, yeah, the I mean the job guarantee is also there. We also have sisters debate now in Germany, whether it would be a good idea to have this I think in Austria whether have elections soon. There's also a debate on a job guarantee for the long term unemployed. But yeah the debate in Zero Zone when it comes to deficits it's more about public investment and in the context of Greening the economy, right? I'm just relating this back to the role of taxes in mmt and how you said the debate is more focused on investment green investment than it is on an employment and I'm thinking the way that relates to the mmt view of taxes is well to invest you've got to buy resources, right and those resources have to be either lying Idol at the moment you decide to buy them or if they're not lying idle. You've got a freedom up this Up to fiscal space so you that's the point of raising taxes on say this certain business activity or this certain real resource and to enable Investments. So they are two sides of the same coin. The problem is just that when you have to see staff is it limits you can theoretically of course, you can just increase your government spending the fiscal space in the sense that you define is there so the Irish would have the workers say what half the machines and the real estate that they won't need to get what they want. But the problem is that probably the public deficit at least after the first year will go up Beyond 3% And that's a political problem. So yes, they can build it. They can run it the resources are all there but it's a stupid political rules, which do not allows the Irish to get their green economy. And that's what they are trying to get there. So this is the fight that is going on now in Brussels where the periphery countries and also the other bigger countries like Spain and Italy where they're fighting to be able to restructure the economy because they have the resources. They would have to change the rules and the German politicians are trying to extract the high price for changing the roads. So they basically say well if you want us to change the roads, what do you give us and I don't know what what will happen. I mean Yeah, it's a political fight and I don't know what's going on in Brussels behind the scenes. So what is it that the Germans want no idea so we'll see what happens. I think we imagined them to all want the same things. Right but I bet there is some negotiation going on as well that we are not aware of. I think the German exporting sector is very strong in Germany politically and if you can hurt the other countries, I mean if in Germany you have electric cars and electric buses and electric trains, we have them anyway, but if you do some kind of green New Deal in Germany that gives a lot of employment and work to the companies in Germany. If you have another countries, probably not so much. So because the resources in the Eurozone are limited it it does make sense actually to staff other countries of money so that we either resources can be transferred to Germany to help and renew the economy there. So yeah even within mmt logic it works because the fight ultimately it's about the resources and not about the money and to cap this topic off if I may as you noted in one. Your Twitter exchanges the point is that the political rules debt breaks deficit limits as such are negotiable. Mmt makes this visible. Yeah. Yeah. I think that's very important that the people know that you can pay for anything even in the Eurozone. So all the national central banks can create Euros, but only within the monetary contract monitor set we have signed so they treat you the functioning of the European Union. So as cane said what is possible to build more less is possible also to finance that also applies to us. So it's yeah, it's a political game here about access to resources. So looking ahead to the third European mmt conference which were pleased to announce. We'll take place in Berlin on the 9th and 10th of September and I believe we can announce that Nathan tankus yeaven Association and Al Randall Ray are confirmed to speak is at this point and one of the themes will undoubtedly be understanding and navigating Financial crises and related to that you recently about how in Switzerland the Swiss Central Bank grants loans to its member banks. So commercial Banks without collateral and that's a break with traditional Central Bank Doctrine tells more about that. Well, the list says of your show, they all know that banks are agents of the state right and that they can it promises to pay the state's currency and they need the infrastructure of the government to do that. So it's access to the central bank's payment system access to the government's cash. So the question of course is how do you regulate these kind of Institutions? So you don't want to have Banks which give out lots of loans and not much is repaid. Okay. This is like trading money for free and you don't want that. So this is why the Central Bank says well, you can only borrow from us against codetro. Okay, so you have to have good assets. If you are a bank that you have to post as collateral and then you get central bank money, which means then you can give cash to your customers and you can make payments to other Banks net payments or grass payments doesn't matter. So it's part of the regulation of the banking system. That's a central bank says we only give loans against cholesterol. And if you are a bank which is becoming a bad bank, so they loans are written down because the probability of repayment is I don't know 50% then of course these loans they're not good collateral anymore and you will get a haircut which means that you will not be able to borrow something money at the full amount of the loan but only say 50% So this is why the central banks have been doing this kind of thing that say, okay, we lend out only against collateral. Of course when you have a bank which is not working. Well and Credit Suisse is one of those I have to tell you that I found lots of interesting stuff about Silicon Valley Bank and why it fail but it's least. I have no details. Yeah, whatever happened there. And of course normally you would say well if Have no eligible collateral. Well, you cannot borrow from us. And if that means you are liquid will we be closed you down? Because if you're a liquid you probably also insolvent or on the way of becoming insolvent. Meaning that liabilities are higher than assets which means that if there's a run you cannot pay out your customers. So that's art. So it's Central Bank of Switzerland and Switzerland itself. It's very conservative as a country and to open the gates like that. It's very strange to to be honest. So normally what you would want to see either the bank being closed and nationalized and they may be sold back into the private sector after ensuring that it has some kind of business concept which works but yeah, it's very ought to see this happening in Switzerland of all places Randy Ray also highlighted that during the financial crash this Central Bank. The Fed was granting loans with collateral that shouldn't have been taken as collateral and the implication was that the central banks were being quite lenient to the banks and propping them up effectively knowing that they were bad Banks and that they shouldn't really exist. So what we say it here is that the Swiss Central Bank is doing that to the max. Yeah, that is just another step on that. But I wonder I mean there is a revolving door between central banks and Commercial banks. And can we call this corruption? Yeah, I mean, this is a very big question. So is the Central Bank the patron of the banking system. Is it somehow supporting the banking system? Does it identify with the banks too much maybe I mean it should be part of the government. I mean there should be a public institution and then they should be concerned with whether the banks are working in the sense that public purposes serve but there's a big difference between the crisis of financial crisis of 2008 and 2009 and what's happening today because in 2008 and 2009 also, we see ECB for example, if all the banks assets are written down because of the real estate problem. And then also the share prices are dropping then of course, you have a full-blown banking crisis. So all of the banks are telling the Central Bank look we are running out of collateral and we know that the others are running out of collateral too. So that means we will call in all Our interbank loans and we will give no more interbank loans to anybody else because we know that our problem is also their problem. So in that situation, you have to reduce the collateral requirements and then of course, you have to take collateral that before you would not be willing to accept because if you play hard otherwise you what's basically have a banking system where all the banks are failing except maybe government tax at least in 2008 2009. So now it's more than odd because you only have credits riskers problems. UBS is fine and other banks are fine. So to change the roads just for one bank. That's a very odd move. And yeah, I mean you are right. I mean one has to wonder why is the Central Bank of Switzerland is doing that because that's I think it's not within their mandate to create this merger between those two banks credit Swiss and UBS, but I think probably more information will come out in the next couple of weeks and months about what happens there because The Regulators probably will have to justify themselves in front of these Parliament, I guess. But they only have to justify themselves because they've been found out right they do this behind the scenes and only when people look into the detail and if they had to take something like that and it was absolutely necessary for the financial stability of the country. Then at the very least we can expect is them being transparent about it, and I don't know having authorization from Parliament or something to get out of their brief in order to do something like this, but I just think it happens too often. Yeah. No, I mean this does a big debate which also wore most like jumping in there and Warren says, well, the central bank is on the writing all the assets of Bank have anyway. Okay. So how do we ensure that the banks do not have Bad Assets or bad loans? Well, we should have good banking regulation. Okay, so that ensures that they don't make the bat notes of the first place. Once we have the bad loans. I mean they will blow up anyway. Okay, so it's just a question of how they would blow up and who's gonna pay for it and we always protect the deposites. Okay. So that was also part of the conversation about Silicon Valley Bank. Why do you have this idea of protecting the positives only up to 250,000? For example, why not unlimited what's the point there? I mean if you have a limit of 250,000 then of course the risk manages of any company should just say well if we go beyond 250,000 in our bank account, we just buy government bonds. Was that money treasury Securities because they are safe just like short term three. Maybe so if you can protect your money anyway like this, then you could say well maybe you could just have Deposit Insurance up to I don't know what unlimited maybe because it doesn't really change the way that the monetary system is working except that Banks don't have this problem anymore that there's a run or something goes wrong on the asset side. So that would give Banks more time to react to asset side problems because yeah, I think that this is big big debate about whether you should have banking regulation that kind of hits the banks before they make loans or whether you have exports kind of reserve requirements capital or equity ratio is blah blah and I think that the approach that we had in the last couple of decades has failed so we should have more banking regulation and while strict banking regulation telling them they're much more detail what they can and what they cannot do one most asses proposal out. Awesome about regulating financial markets the fat and so on. I think we might have to write up a European version of that at some point to explain Detailed what that means in practice well watch this space so turning the corner and moving on to inflation to me the big inflation story. This week was oil OPEC cutting production. Would you mind talking about the link between OPEC as a price Setter and inflation? Yeah. Well, I mean the energy price is very important because it goes into the CPI is a consumer price index and if gas gets to be more expensive at the pump then of course, we pay a higher price and inflation goes up. So if we have to import a lot of energy and we use that energy in our economies, and of course, we cannot control the inflation rate because we're always dependent on the oil price and if OPEC is cutting products and the oil price goes up then it's not much you can do about it. The inflation rate will have to go up. The only thing that you could do of course is to not rely on oil anymore. So if you don't consume oil in your inside your country then of course your price will not go into the Consumer Price Index, and that means it will not influence the inflation rate. So the mid to long term strategy that protects you against this kind of a driver of inflation and OPEC, of course is modest either a monopoly or an audio policy situation. It's a cartel so you wouldn't expect that. This would be a competitive price somehow in an equilibrium of supply and demand because you can just see what they do and the price goes down they cut Supply. Okay. So this is not about supplier demand somehow settling to find equilibrium price that they want to have to certain kind of price and they adjust Supply to demand to get their price and that means that again if you're as a central bank, you will not be able to control the rate of inflation. It's gonna be impossible and if you try to crush your economy to bring down the price of oil, I mean that's a very stupid idea that's like blowing up the garden to get rid of some weeds. That's not going to work and on this topic of central banks blowing up God and interested to see this week Fabio pinata who is a member of the Executive Board of the ecv. He was interviewed by the New York Times and in the interview, he says he's concerned about a prophet price spiral. I guess this is Other people have been calling greedflation. Can you tell us what that is and what your thoughts are on that in the last couple of months. We we had some empirically evidence in the Eurozone also in Germany that significant amount of sectors which did not experience a rising costs nevertheless increased prices because they just thought well everybody else is Raising prices by about 10% So why not do it? Okay, so the consumer was probably won't notice the difference between a company which charges a higher price because costs have gone up and the companies that charges a higher price because they want to have higher profits at constant costs. So there was a piece by a conservative think tank in Munich which discusses this and also ECB also discussed that internally and then they wrote an article about this online in on the web page which was a little bit odd because it seemed like they were more afraid of a rates price Spire than a profit price spiral and they said well if profits go up then the price goes up but then wages should not go up because then you get a wage price spiral, but if you think it's through Workers would always lose from inflation because the companies they're not hindered or stopped by the ECB to increase profits. So if the prices are rising because of higher profits, then of course you lose purchasing power if you are a worker, so what's the ECB should have done is say should have said well if we have a profit price spiral caused by companies Being Greedy. Well, then we as the ECB have to work together with the national institutions that watch over Market power cartels and Monopoly situations. So The Regulators of competitive markets. I think that's what they should have done instead of telling us that only workers can lose in times of inflation. I mean, that's that was something which I was very astonished to hear that but it's good. Of course that now the ECB is getting into this topic and well at least they know it's there. They have no instrument to IT addresses, but it just helps us to see one more time. That's the central bank is more less helpless when it comes to distributional conflicts like this, which is what inflation is according to a lot of people Yep, it's interesting on the financial times. They seem to be saying that the price rise. This week was mainly driven by Traders looking to cover short positions but specs a much shorter price search later in the year. Any knowledge of that how Traders may be influencing the price rises in Saudi Arabia. Yeah. I mean there was a book about the industry of those Traders and oil Traders and raw materials. And I mean, that's something which for us as economists normally is a black box. But yes, I mean, it was all these short positions long positions. I mean this just increases volatility and that's not a good thing. So, yeah, I mean things are getting complicated also because if Russia for example sells less gas to Western Europe, there will sell more to other parts of the world. And then you get these effects that for example, India's selling liquefied gas to Germany, which because they always have had liquefied grass, but now they can get cheap gas from Russia and they make a profit. So Russia is now indirectly in the sense selling gas to Germany and this of course is very profitable for a lot of people so you have to speculators in there and not only the finances speculation but also the speculators who are trying to look at Arbitrage opportunities. Okay, so they say what's legal for Russia to export oil and gas to India and it's legal for India to export liquefied gas to Germany. So that's Arbitrage because gas from Russia is much cheaper than the lacquerified gas that the salt onto Germany. So, of course these intermediaries financial and real speculators, they create a lot of tension and they probably also create have a lot of influence on the price in both directions. So it's becoming a bit like a lottery because yeah the volatility. Yes, just increase so much I wanted. Just throw this in there as well because I think mmt's got a bearing on this and current affairs this week. I believe politically Finland moved to the right and I'm not very conversant with Finnish politics. Sorry to our finished listeners, but I believe the new leader per Terry orpo beat the old leader Santa Marin by arguing that finland's national debt or as we like say National so-called debt is too high and therefore the public spending needs to be car and austerity. Basically if you got any thoughts about that. Yeah, that's very odd just finished situation because the public debt to GDP ratio in Finland is currently yet 72% which is not high 72. It's really below average compared to other countries are things UK's level is 100% of GDP right now. So I mean public debt is really just the money that the government has spend into existence trying to pursue the public purpose and it has not text that money back yet. So that's what the public debt is it. Is nothing that has to be repaid so it can only be brought back to zero by having text revenues increase without the economy collapsing which is possible if you text the ridge but not if you text everybody increase vit or things like that. I just get the feeling that even if the public debt was negative they'd still say it's too high. Yeah. It doesn't seem to matter. How low is compared to all the countries. Yeah. I think it's probably again politics more than economics you're trying to get elected and you say what you think will get you elected and you don't say what you think will bring you forward economically, but this is why just to reinforce. This is why we like to talk about this stuff and publish about it as much as possible because obviously the public debt being too high is it's obviously a fallacy that moves politics in One Direction and a direction that I think is we don't want to go in as Humanity. So I just wanted to throw that out there. Yeah, there has been a finished translation of my book so I have to introduction into mmt So maybe we can post a link into the show notes so that the Finish listeners here or those who know people in Finland who are in favor of austerity can read the book and finish right? See what my favorite authors is finished anti-to-man and I'm gonna start I haven't pronounced that right but fantastically funny crime writer. Anyway, that was just by the way, so just to bring it back to where we started taxation. We often talk about our taxation functions to regulate aggregate demand. I this spending power of the non-government sector that's us and how this is one potential way to fight inflation. But some people interpret that as I saying the mmt's only remedy for inflation is raising taxes, and because raising taxes is politically unpopular perhaps even politically impossible the argument goes this means that effectively mmt doesn't have any real solution to inflation to watch your response to that. So mmt does say that text revenues Juice purchasing power in the private sector, so probably it also reduces the rate of inflation but it's a big if an industrial societies. We have increasing your chance to scale. That means that the more we produce the lower the costs are and also that the lower the prices are so what mmt does say is that inflation? It's a bit like when you have fever so when you have fever don't go out and fight the fever, I mean you can take some pills and try to bring the fever down but the fever has a course and you have to find the course and if you want to get rid of that fever for good you have to address the course of that fever and that's always a complex issue. Okay, so well, I think that's inflation is always phenomenon of price setting. Okay. So if you have prizes going up in a lot of sectors where you should look at the firms and ask them. Okay, so why are you increasing prices? And normally the answer will be well because cost self-increased we just talked about the fact that also sometimes they say, well, let's just increase the profit margin and add to our price without an increasing costs, but normally They say something like okay wages have increased or the price of energy has gone up or we use some raw materials and they're getting really scars and process increased by a lot. So we have to charge more. So when you get these kind of supply issues, you have to address those supplies. She's so it's maybe a little bit odd, but modern military serious not something which says at the supply side the production side does not matter that only money matters. No, it's the opposite. So if you have inflation arising because I don't know you have a scarcity of workers. I don't know driving lorries. For example, when the solution would be to have more already drivers and then to maybe have higher wages in that sector or to have I don't know more people doing apprenticeships as Laurie drivers. I don't know if you have that in the UK or we have that here. So yeah, every time you have inflation you have to look very carefully. What is the cause and if you're using Milton Friedman's lands and the course will always be a higher money supply but the numbers don't add up. So I think some of the monetary Supply numbers are now in negative. Sorry, but I don't think we will see deflation. So empirically we can say that these ideas of too much money causing and face now just playing wrong. Also 2020. We had huge government deficits and lots of money. But in 2020 is the rate often fashion was really low. So it's it seems to be caused more by by the energy price for example going up and down and sometimes again driven by profits increasing by firms exporting their Market power. So that means that mmt has a lot of different ideas about how to stabilize the rate of inflation. We have the job guarantee for instance to do that. We also think that we should Park the interest rate at Central Bank may be at 0% maybe at the inflation Target rate, which would be roughly 2% or so. We can have the automatic stabilizer strengths. And so to make sure that when the economy is running hot that then the text rates you can come tax rates go up maybe or that people who have more income than get into higher tax brackets. We can think about all kinds of policies. I think probably Patricia you are more the expert on this topic than I am. So there's many things we could do to help the government figure out. What is it that's driving inflation. And how can we make sure that the prices come back down? So I was thinking of what the best way to summarize this idea because you're right. There's so many different things that could be done depending on the situation what the best route to do. That is I still think mmt's right to say the taxes the primary thing that gives money value and therefore the primary kind of price stabilization mechanism. So I'm wondering if whether we can phrase it in this way to the extent that inflation is caused by excessive demand. Then taxation could be a good way of address in it or alternatively some sort of encouraging Savings in the population. But if inflation is caused by supply side issues, which is very often more often than people realize then actually taxation may not be the best way to deal with it and you may actually need even more Ending to activate more Supply in the economy. Is that a good summary? You think? Yeah, that's also what the federal government in Germany did last year when inflation was really high. They introduced the nine-year-old ticket for local public transport. So you could use all buses in Berlin Hamburg Munich and all the other cities for nine euros a month or so some of the inter Regional trades which was great and we had to rebate for those people who filled up their gas tank at the station. So we already live in a world where Economic Policy ignores the mainstream ideas about how monetary policy Works about how fiscal policy works. So even we see government where you have now in Germany liberal finance minister, they spend money in order to bring down the price level. Okay, so they already doing that so I always say that mmt has been completely underestimated. So in practice a lot of politicians have stopped listening to our colleagues who are saying that it's only the central bank which can deal with inflation. It's rubbish and you will not get reelected if you follow this idea because the people will vote you out of office because they say well you are responsible and in Germany the numbers for the federal government don't look good. So the majority is gone. So if we would have elections today the parties that are now in power would have a combined 42% instead of 50 plus would say that when they were elected into power so of course, we have a huge loss of purchasing power all over the Euro Zone because wages are not increasing and that's a big political problem and that needs to be fixed right now that workers of the Eurozone are carrying the burden just like in the UK where you have enough is enough we have similar ideas here about policies that we would need and about movements that are starting from like a street level. But yeah, there's no mechanisms in place that help us bring purchasing. Our backup because the energy prices have now returned to where they were in 2019, but the prices didn't and one way to stop companies from Raising prices without a proper racing costs is to raise wages afterwards. So they would say well, okay, of course, we could increase prices without increasing costs, but afterwards the workers will have a wage rise and that will of course eat up the increase in our profit so we might as well leave it. So this is a very interesting power play that we see right now all over the world where companies are trying to explore their power and the workers will have to get direct together and the unions will have to stand up and demand higher wage Rises. So yeah that will play out over the next couple of months. I guess inflation is fascinated in that it very often serves as a symptom of some underlying political games going on. I just find it interesting for that great stuff. So before we go to and this is a very leading question, Are there any forthcoming events online or otherwise, the folks listening right now can put in their Diaries and get excited about. Yeah. Well, thanks for asking me this question Kristen. It's gonna be the person and summer school in mmt which is in September and probably we will have a link up in the notes and then follow by the summer school. We have the conference in Britain, which you already mentioned and for those who want to prepare themselves for that. I will also teach this course at the master street summer school in the Netherlands from July 31st to August the 4th. So that's gonna be two and a half hours of lectures per day about the Eurozone mmt if you want so yeah, that's the stuff that I'm looking forward. I'm also gonna be in the USS gonna be a it's called the ocean osun workshop at Bard College in June, but I think it's already closed but that would be something to consider the future if you have the chance to go also last time we spoke about your Essentials book that's got to be Translated into English for the I guess the American audience any news on the day on that. Yeah. Well the publisher just taught me that they want to book which is double the size because the publisher had like, oh you call that like a book series where they just had an introduction to this and that and it shouldn't be over 50 pages and they don't have that in the US. So yeah, I will have to rework the text and make it a lot bigger. It's a new book basically and of course, I will include a lot of things that have been debated in the last couple of months. It will also have a section on the debt ceiling about paygo about Silicon Valley Bank and Libertarians who have turned into the teen little cats now. So yeah, it's will be an updated mmt introduction but it will address people who are interested in mmt and they want to read a short introduction of maybe a hundred Pages which is for the day public that's roughly the idea of the book and also people who are working with money. So I will talk also about Bank regulation and what kind of Institutions you need for the capitalist part of the economy to work properly and what kind of Institutions you need for the nonprofit parts of the government part of the economy where you can just spend your money and resourcing but where opportunity costs matter because you take away resources from the economy. So it would be different book, but hopefully it will be finished soon and then maybe out in this fall, right? So lots of forward to that's a great place to leave it. We've been speaking to Dr. Durkents we'll link to where you can stay current with his work and about all the events. We just talked about in the show notes for this episode. And also if any of the stuff we talked about here has left you with questions. I'll try to include as many links as possible to other episodes and articles which will hopefully help you further your understanding and they'll also be a link to where you can get free tickets to the book launch of the new Anthology. Mmt key insights leading thinkers that takes place in London on the 20th of April. Me and Patricia will be there. We hope to see you there. But for now Thanks so much for joining us. Once again today on the mmt podcast Dr. Durkents. Thanks a lot for having me. It was great show. Around here. That was the mmt podcast with Patricia Pino and Christian Riley. Don't forget you can support the show through patreon starting at a dollar a month and get access to Patron only episodes. You can do that by going to patreon.com slash mmtpodcast. You can also find me on Twitter at mmtpodcast and you can find Patricia on Twitter at Patricia n Pino and you can email us at mmtpodcast at outlook.com. Thanks for listening, and we hope to hear from you.
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