Professor L Randall Wray | The History and Nature of Money | January 2024

thanks very much Gabby uh yeah welcome everyone like Gabby said um this is the third or six talks in our summer series if it doesn't seem strange to talk about a summer series if you're in the northern hemisphere if you miss my interview with Stephanie Kelton or Josh Farley's lecture on ecological economics you can find recordings on our playlist modern money lab is a registered charity which among other things runs an online Global master's degree in modern money Theory and ecological economics in partnership with torren University I'm sure a relevant link will pop up in

the chat and I'd love you to join the many part-time students on the program if if that would suit you Randall Ray is a professor of Economics at the levy Institute of Bard College a visiting or honorary professor at various institutions and has done in my opinion more than anyone else to identify the intellectual roots of M m in the history of economic thought and other disciplines he's published a multitude of journal and other articles the first book length discussion of mmt understanding modern money in 1998 is modern money Theory primer the Third Edition of

which I believe is about to be published making money work for us in 2022 the companion illustrated book money for beginners in 2023 of course is macroeconomics Tech which was co-authored with Bill Mitchell and Martin Watts and I won't go through all the others except to say that one of my favorite books is why Minsky matters which Randy published in 2015 finally I should say he won the 2022 Vin Commons award for Lifetime contributions to institutionalist thought which in my opinion is the only academic economics award worth winning with no exceptions and I think from

my introduction alone you can see he was a very worthy winner I always learn things from listening to him and it's a great privilege to have him with us today so thanks very much Professor Ray over to you okay thanks a lot for the opportunity and um for mentioning those books and I'm actually working on an integration of my first book which is 1990 um money and credit and capitalist economies with understanding modern money to have a have them in one single volume fle out in a year two so I will um share the screen

and I'm um I think pitching this uh fairly at a basic level um I think we will have plenty of time for questions questions and answers after the presentation so I'm happy to go into detail where I can I'm going to be talking about the origins of money which includes um ancient history and I'm I'm not an expert on that I'm a consumer of that literature um and I have tried to use that to help us understand the nature of money so let me begin um the way that most economists and I think in in

intuitively this is the way most people begin when um they're asked what is money uh they are going to focus on the functions of money uh what can you do with money and so of course the most obvious one is that you can spend it so that's the medium of exchange you can pay bills with it and I have put here in bold and taxes now that's not usually included but but of course mmt um includes that as an important function so this is the means of payment you can save it you can hoard it

and saving is good but hoarding is bad so there there's a good side to it and also a bad side to it and then finally I have also bolded uh you can redeem it uh now I'm going to argue this is one of the really fundamental uh functions of money but this also is usually not emphasized uh by mainstream um money is an institution so I'm glad you mention institutional economics um Dudley Dillard who was a bridge between post canian and institutional economics argued that money is the most important institution of a capitalist economy and

uh Jay Foster who was an important institutionalist who also OD canes very early on uh argued that the very word institution canotes patterns of correlated human behavior it does not pertain to nonhuman phenomena so what that means is that money cannot be a thing things are not human behavior and most of the time when people are thinking about is well money is that thing I use as a medium of exchange well that's not an institution okay so money cannot be a thing what's the nature of the institution that we call money and um I this

has been uh written about by mmt um people in the past I think Jeff Ingam is the best on this topic um one commonality is that all monies are measured in a money of account but the nature of money has to amount to something more than a unit of account if money is an institution the most obvious shared characteristic is that there are evidence of debt debt is an institution uh it's a behavior um what we have is a socially created and generally accepted money of account and debts that are denominated in that money of

account so that is what I'm using as the nature of money here very simplified that institution has evolved over the thousands of years uh that money has been around KES uh was spurred by reading a Mitchell Enis in 1913 and perhaps by George Frederick knp uh whose book had come out earlier than that although it wasn't uh translated to English until 1924 so we can't be sure that canes had read the book um but uh anyway can speculated during his the period that he called his period of Babylonian Madness uh when he was trying to

figure out the um Money Records in Babylonia he speculated that uh money had existed for 4,000 years at least money's Origins are lost in the mids of time well we imagine that the use of credit is a modern invention when we look back through those 4,000 years what we find is that to the extent that money was used in purchases uh those purchases were mostly based on credit not on a medium of exchange meaning that someone had to keep track of the debts there had to be be a way to record debts and credits if

we mostly are using credit and death so writing had to be invented and it turns out that the origins of money and the origins of writing are tied very closely together so far as we can figure out Babylonia is unusual uh because it has this extremely long period of essentially unbroken EV ution of writing from 8,000 to about 3500 BC what we find is these little tokens and the tokens look somewhat like uh what they represent so you have a different token for a basket of wheat or barley uh and a another token for a

goat and sometimes they would push these tokens into clay balls for safekeeping now exactly why they were recording sheep and bushel of wheat 8,000 years ago I mean sorry 10,000 years ago 8,000 years um BC we don't know precisely what they were doing sometime around 3200 BC they realized they didn't have to have a whole bunch of tokens for goats and a bunch of tokens for bushels of wheat instead of poking through a hole in the ball and keeping them all inside all they had to do was push the token into a piece of clay

and then let it Harden and they could use the same token over and over again so that comes about 5,000 years ago after that they realized you know you don't really need to make those tokens you can use a stylus around 3,000 BC they start using a stylist to record uh those tokens in a piece of CL and again let it Harden around 2700 BC the um the markings had become much more stylized markings and they become much more like the later kuna form writing that we are familiar with and which we can read and

then finally around 1500 BC uh they created an alphabet now this is the first time that writing uh replicates spoken language uh before the invention of the alphabet uh they had representations of things and they would use these to record and uh later to tell stories um but uh the written language was nothing like the spoken language beginning with the um invention of the alphabet then uh we finally have something that looks like um modern writing that can replicate our spoken language now the uh the conform tablets uh we can read and so we know

what they were recording what they were recording was credit and debt and for the first um uh almost 6,000 years of these records of writing of various form uh it was apparently only records of credits and debts we don't see writing that is um of a religious nature ferary uh records of people's lives and then later stories until very much later than that so all the earliest writing always is just records of credits and debts as so far as we uh can understand it um so that's the historical record uh Philip greerson was the greatest

expert of coins um but he also he knew that coins are relatively recent uh development only about 700 BC uh we find coinage but he knew that money uh had existed long before that so where did this notion of recording debts come from greerson speculated that it came out of the ancient practice of ver Guild so tribal societies that um we have come in contact with uh with civilized society which has writing and could keep records of what they observed um they find that they always had some kind of a system for imposing uh debts

for transgressions and these debts would be payable in things are relatively common and uh useful so uh you might pay a goat for one kind of injury that you have inflicted on someone and uh for a more serious uh injury you might owe a horse now these practices I'm sure you're familiar with because um they uh existed up to modern times in the form of things like bride price where uh early Western anthropologists who came in contact with tribal Society might have thought well there there there's a market here in Brides of course that wasn't

true the idea is that uh if a family is losing a woman to marriage you have to compensate the family uh that's what bride price is it's just another example of verel so anyway these uh payments were always in kind um not in terms of a money of account but at some point greerson hypothesized uh they made this leap from payment in kind to payment of debts denominated in a money of account this would have been an extremely uh difficult uh jump intellectual leap uh units of measurement are probably as old as humans so you

have a unit of measurement for weight uh pounds or kilograms you have a unit of measurement for length um inches or centimeters you have a unit of measure for volume liters or gallons uh these are pretty simple to come up with but uh coming up with a measuring unit that you can measure things that have no obvious physical characteristic in common must have been extremely difficult and um occurred much later around four or five thousand years ago probably and uh gron speculated that this is where um the uh unit of measurement came from all the

early money units were uh measurements of um grain uh barley grain or wheat grain or rice grain and um those uh then became the basis for the modern pound or L um weight units that were used uh the names of the weight units are used for money measurement units and so we have records of debts that are kept in a variety of forms on clay tablets in Mesopotamia on wooden tally sticks throughout Europe um the and then much later on metal coins and m coins later than that so what all of these things have in

common is that they are records of measuring in money units the technology changes uh but that doesn't change the nature of money which is records of debts so we think of money as an IOU it's a record of indebtedness uh all of the um monies that we use today are records of indebtedness currency is the IOU of The Sovereign government Uncle Sam and our case uh when you write a check to pay your landlord that is your debt a promise to pay now A Bank endorses that and the bank is actually going to make the

payment for you um using its liability and then finally we have um using iPhones for inductive coupling it's called Uh electronic payments so the most of the records now are kept electronically uh technology changes but it doesn't change the nature of money and just because someone might have this question is crypto money the answer is simply no it does not qualify uh crypto is nobody's IOU and I what is it it's a it's an instrument for separating stupid people from real money that's what it's all about um the second thing crypto does not have have

is redemption Ingam argued that there is a universal principle of redemption uh the issuer of an IOU must accept back his or her IOU in payment so Eric T uses this example I think it uh drives the point home uh very well so Joe opens a pizzeria and he's trying to drum up business in the neighborhood he issues use a bunch of free pizza coupons to the houses in the neighborhood and people come in with their free Pizza coupon uh they redeem the coupon for a free pizza and we use that term for redeeming coupons

in America and I suppose you do in Australia too um and it does come from this uh practice of redemption of IUS once Joe has redeemed that c on for a pizza he is no longer in debt he has to accept back his own IOU redeem it and then he is no longer in debt um what does Joe do with the uh coupon when he receives it back well he tosses it in the pizza oven and burns it because once Joe receives it it is um no longer uh worth anything it's only uh worth something

thing when it's in your hands it's not worth anything when it's in Joe's hands because it would be very schizophrenic for Joe to force himself to supply a pizza to himself Farley grub um gives an example and I we actually had used this from the very beginning of the creation of mmt uh Matt forat was our historian of thought uh back in the mid 90s and he found um you know something that we everyone had read but we had overlooked it in Adam Smith's Wealth of Nations Adam Smith said there's this very strange thing going

on in the American colonies those colonial governments are issuing paper money and as long as they don't issue too much people will accept them even if they're not backed by gold you know why would people accept pieces of pap well Farley grub I think maybe beginning about 10 years ago dug in to the Colonial records and found out that Smith was right uh all 13 of the colonies issued paper monies uh exactly the how they did it the the the process was a little bit different across the colonies but they all did it and uh

much of this paper money money was issued without a promise of uh redeeming it for gold instead what they would do is passed two laws simultaneously one law would authorize printing say 10,000 pounds of Virginia currency we were a colony so we were we called the currency the pound it was only when uh we revolted and uh purposely thumbed our nose at the British by changing our currency uh to the dollar uh modeled on the Spanish currency uh to show our independence from Britain um so anyway the the colonies used um the pound as their

unit of count but it was a Virginia pound not a British pound the reason why the colonies decided to issue paper money was because the crown prohibited us from poining uh money we could not do that and of course the reason the British did that is because they wanted us to earn British coins and we would have to export to Britain in order to get those coins so our Colonial legislatur were always short of money uh to finance government and they hit on the idea of issuing paper money and as far as um I can

tell this was the first uh major example in the west of paper monies although China had been using them for some time anyway two laws are passed one authorizes issuing 10,000 pounds and the second law is called a Redemption tax law and that um imposes a new tax that uh will last a two or three years long enough uh it is expected to retire all of that paper money so as the um taxes are paid with the paper money they come into the government and then the government will burn them so here's an example of

American Colonial paper uh why would you sell your mule and wagon to the government for paper money well the reason is because you had to pay taxes and uh the the acts make it very clear that the colonial government and the colonial people completely understood what was going on and that is that the uh taxes are going to redeem the currency burning the notes make sure that you don't have um someone stealing them uh and trying to reuse them uh and it takes them out of circulation so that they will not cause inflation and so

this is the answer to Smith's question why would anyone accept paper money well they have to pay taxes uh why does the paper money retain its value well as long as most of it gets burnt uh it's not going to be circulating and causing inflation and it turns out that about 75% of the notes typically were collected and burned uh in tax payment and about 25% would continue to circulate and some people would pay some of their taxes in coins so if uh you're asked the question which comes first spending or taxes uh the spending

has to come first because you have to put the currency into existence before taxes can be paid taxes uh do not fund spending logically the spending has to put the currency into the economy before it can be taken out so you have to create the currency before you can redeem it um when I was a student in the early 80s uh hman Minsky used to say this this is a direct quote from Minsky the need to pay taxes means the people work to get that in which taxes are paid so I had heard this from

the early 80s um but I had not fully understood the importance of this until this guy on the right who I know you all know uh Warren Mosler comes on the post canian thought Network U an early Discussion Group online in January 1996 so we know exactly when he came on because Bill uh was able to dig up the old pkt um post and Warren laid all this out in the in in one month um and he said taxes Drive money okay and that is the precise date on which mmt began as uh Warren helped

us to see how all of this uh fit together so finally we can think of money as scorekeeping um Matt for had to put it this way you can run out of innings sorry this is baseball the American sport um I baseball unlike um soccer or what I guess you call football uh is is based on nine innings so game last nine innings uh you can run out of innings you can run out of time in a soccer game uh but you cannot run out of runs so we call them runs uh I'm not sure

what you call them as soccer scores maybe uh which comes from tally sticks of course um so anyway uh if the home team hits another home run where's the scorekeeper going to find another run does he have to take it from the other team no of course not uh in the old days they would just put up a a five card uh over the top of that four uh today they just keystroke the credit um Stephanie I argues I'm sure you heard her say this that we should not think of uh GMA bonds as a

debt uh we should think of them as government owes uses uh that's our financial wealth and this is what um of course it was obvious from Minsky too but this really was what wind Godley uh brought to Modern money Theory uh the notion of the sectoral balances approach and then a closed economy with only a government and then a non-government private sector it has to be true that uh the government's uh debt exactly equals our our net Financial wealth in the private sector we can owe each other but that's going to cancel out so at

the aggregate level uh the only source of financial wealth has to be uh the government's uh debt and uh if we think of government debt as actually being the government owes us then it doesn't sound so scary okay uh what is mmt um my argument uh and I have had this slide maybe with a few words changed since the invention of PowerPoint which I cannot remember when that happened and before that I had it on transparencies um what is mmt well of I've lost Randy's sound um I might oh yeah oh there there it is

let's come back oh how long was it gone only a few seconds about three seconds okay good so anyway from the very beginning 198 I would say we were at this point uh what we were trying to do was to inter R all of the heterodox approaches into something that we eventually would call Modern money Theory mmt uh my first book was understanding modern money so pretty clear that um we were um talking about uh the uh approach to the kind of money that we have so anyway from Marx KES Vin Minsky what we borrow

is the monetary Theory production in Marx's terminology but K's early drafts of the general theory was using that same terminology uh Vin called it a theory of business Enterprise uh but if you look carefully at it it's exactly the same thing it's the idea that in capitalist economies you start with money to produce Commodities to end up with more money at the end uh you measure success in terms of ending up with more money than you started with okay so that's basically the definition of production in a capitalist economy uh from the institutionalists uh we

we borrow two ideas one is that money is all bound up with power uh when you say that many people will immediately think of all the power to do bad things but it also gives you the power to do good things um and also we adopt the view Foster and others that money is the most important institution in a capitalist economy from postans um we H bring in uh K's original arguments but also taken up by Davidson and Minsky that uh use of money is all bound up with um uncertainty why is there preference for

liquidity why do we write contracts in money terms why as Kan said does holding money quell your disquietude okay so uh we have uh brought in the theory of liquidity preference into our version of modern money Theory and the second um aspect that's always been there and was in Warren's January 1996 um uh postings and in my 19 90 book was the notion that money is endogenous the deposit multiplier story is wrong uh Banks create money out of thin air and so does the government okay then uh from the chart list and state money approach

uh we take the view that money is all bound up with sovereignty as um goodart said uh when you go back in the past or around the world in the present uh you see very few violations of the one nation one uh money or one currency um uh Rule and that is because uh money is bound up with sovereignty um we adopted a Learners functional Finance approach I believe Matt forat was actually the one that brought that to mmt um that I um says that the government really is different and uh government should not be

focusing on trying to finance trying to balance his budget uh it should be focused on achieving the public purpose and finally sectoral balances uh Minsky understood this it was there implicitly in all of his work but really Godly was the one who um brought in the uh the macro balances approach to um the economy and together these make up uh what I believe to be modern money Theory KES and uh the state money approach uh is in the treaties on money and um all of this stuff was in my 1990 book uh he said the

money of account comes into existence along with debts that makes it very clear uh the tie between money and debts and it distinguish between money and money of account by saying money of account is the description or title and money is the thing I don't like that word thing but it makes you think that money must be a thing I wish he would have said the money record which answers to the description uh further the state claims the right to determine what thing corresponds to the name and to various declaration from time to time this

right is claimed by all modern States and has been so claimed for four some 4,000 years at least which again that's where the term modern money came from as an inside joke uh with Matt for um and probably Warren too uh when Elgar I proposed several different titles for the book and we said none of these is working and um I thought of this quote and that's where the term modern money came from um inis I we discovered early on but he was not there in 1996 um I don't remember the exact date but inis

actually is the clearest he is the best to read on both the stat money approach and on the credit approach to money because he integrates the two they're both in nap too but I nap's discussion of the credit money approach is not nearly as clear as inis so I strongly recommend you read in's 1913 and 1914 articles I think they're the two best pieces ever written on money it's absolutely clear uh what the link between the credit and state approaches are so using ke's terms but in's ideas the state enforces the dictionary by imposing a

tax liability ensuring that the money it issues will be generally accepted because the state takes it in tax payments and then second the very nature of credit throughout the world is the right of redemption so that's the credit money and then he brings them together government money is redeemable by the mechanism of Taxation so this is as clear as you possibly can be it's the tax that imparts to the obligation its value a dollar money is a dollar not because of the material that it's made of but because of the dollar of tax liability that

you can redeem using it so summing up what's money it's a social unit of measurement State money of account and then we designate as money things ke's terminology Money Records I prefer the IUS or debts or liabilities denominated in the money account and then those Money Records fulfill traditional functions of money to various degrees so Minsky had this notion of a hierarchy of monies um and then um Duncan Foley uh wrote an entry for the Paul grave on a pyramid of monies um so the degree that these Money Records can fulfill the fun functions of

money that people typically associate with money depends on where they are in the Pyramid of liabilities going um up in the pyramid we have the most acceptable going down we have the least acceptable uh and going up we have the most liquid and going down we have the uh least liquid and then finally generally you need to um pay your pay down your own liabilities using liabilities that are issued higher in the pyramid than you are so banks will use government IUS to pay their debts and non-financial businesses will use Bank IUS to pay their

debts and so on oops wrong direction Sovereign currency use of the currency value money are based on the power of the issuing authority so this is the power that we were talking about the institutionalist approach money is about power um not in intrinsic value goodart I already mentioned One Nation one currency rule could not be a coincidence because it's too common uh until the Euro there weren't any big exceptions to this taxes Drive money the state imposes an obligation payable in its own money thing or Money Record and when taxes are paid uh there's a

simultaneous Redemption the taxpayer is redeemed and also the government is redeemed uh so we have to use quadruple entry bookkeeping four entries are wiped clean any time a debt is repaid and the simple model the state uh uh directly spins its currency uh into the economy and then the subjects or citizens depending on whether it's a democracy uh use the state's money to pay their taxes so it's very obvious in colonial America and in the United States really uh until the creation of the FED in 1913 it's very obvious how the system works it's much

less obvious uh later on uh bank money is a liability issue by Banks and uh in all modern States endorsed by the state now in two ways there's us the deposit insurance and then there's also the central bank that will um provide reserves on demand um firms have to borrow that is issue IUS to start production that's the M part um lending e fluxes money and repaying refluxes money Redemption follows creation as I said before central banks were originally created to make payments by and to the state so this was the Swedish Central Bank was

the first and then Bank of England was the second they were created to make payments for the state um and then Banks gradually uh discovered that they could use Central Bank liabilities to make payments to each other and that's how we get the pyramid clearing at the top is through uh the use of the central bank's liabilities so they will hold some liabilities for clearing and that's what leads to the fractional Reserve System uh which doesn't give us the deposit multiplier uh but it does mean that you only need to hold a little bit of

Central Bank liabilities for clearing central banks discovered they can act as lenders of Last Resort so this was the second function of central banks um and then the um uh the the third function is maintaining par clearing ensuring that um Banks can always clear with each other uh at par which wasn't possible in the United States until the Fed was created in 1913 central banks can then lend or or spend their liabilities reserves into existence so the way that it works today this is a Consolidated but still very simple model is that treasuries spend through

their central banks when the treasury spends the Central Bank credits the reserves of a bank and that bank credits the deposit account of the contractor that does work for the government this is how modern treasuries spend they don't spend uh their currency directly uh the Central Bank makes payments for the treasury and then private Banks make payments on behalf of the Central Bank uh tax payments just reverse this process uh the taxpayer writes a check it's received by the treasury the uh Central Bank credits the treasury's account and debits the uh bank's reserves and the

bank debits the account of the taxpayer so all modern uh governments spend make payments through their central banks and tax receive payments through their central banks and this is what makes it difficult to see that nothing fundamental has changed um with the development of central banks and private bank systems uh with regard to the um the order spending comes first uh before tax payments uh it's obscured because we have two degrees of separation between the contractor or taxpayer and the treasury they don't directly receive the currency and so it's not obvious that uh the it's

the government's spending that creates the money that can be used to pay the taxes so summing up the Central Bank facilitates payments buy into the state payments by the state eflux money taxes reflux money they do not Finance government spending taxes are for Redemption bonds don't Finance the deficit either it's already been financed by the eflux of central bank money a deficit is exposed after the reflux of taxes and in fact we won't know what the deficit is for fiscal year 2024 until the end of the year although I think in the 98 book I

did use the term deficit spending I don't use that anymore there's no such thing governments do not deficit spend they just spend at the end of the year we calculate whether there was a deficit or not Bond issues are fun functionally part of monetary policy so this was a a brilliant recognition that Warren brought in January 1996 um now I had been teaching this without recognizing the importance of it uh because if you do the tea accounts it's very obvious uh what happens to bank balance sheets uh and the central bank balance sheet and the

treasury balance sheet um when you sell bonds all you're doing is draining reserves and it doesn't matter whether it's the treasury that does it or the central bank that does it uh the purpose of selling a bond is to drain reserves which is a monetary policy operation it's not a fiscal operation okay so normally uh central banks and treasuries are selling bonds to take reserves out because otherwise the banks would have excess reserves quantitative easing uh reversed this we had sort of this intellect huge intellectual setback not Leap Forward setback uh believing that somehow quantitative

easing was going to stimulate at the economy because we take all those bonds back out and put excess reserves into the banking system that somehow was supposed to lead to more spending which of course did not what are taxes for beerley rumel who was the chairman of the New York fed at the end of the world World War II he said the war has taught us that taxes are obsolete as a source of Revenue and if you look uh what he's saying taught us and he and he went on to say both the government and

the public this is true everyone understood this at the end of World War II you do not need taxes uh for Revenue purposes the government doesn't need taxes in order to spend okay and then he listed uh the what taxes are useful for in addition to driving money now he did not have that um but to remove private demand to free resources for government programs okay that's a useful function of taxes reduce inequality if you tax the rich distribute cost to beneficiaries of a government program if the government is going to build super highways for

trucks to use uh the trucks ought to pay a cost that was the idea and finally punish bad behavior or use tax credits to encourage good behavior the mmt logic then is you spend and then you tax you can't take out of the economy what you have not put in the colonial governments could not have taken paper money out in taxes if they did not first spend it taxes are paid by debiting Bank Reserves in modern economies the only sources are reserves treasury spending Central Bank purchases of bonds for example or lending uh there's no

way you can take reserves out unless you put them in and those are the only ways it gets in so the government has to put the reserve rabbits into the Hat before the magician pulls them out um so that's that should get you there but it doesn't quite get all postans there and uh if you ask a postan um which has to come first investment are saving they will all say investment has to come first investment creates the income that can be saved investment is an injection injections have to come before leakages but then if

if you ask them which comes first government spending or taxing they'll say taxing the government needs the money before it can spend well that can't possibly be true government spending is an injection taxes are a leakage so even if you don't understand how government spend you know that the government spending must come first before you can take the income out you have to create the income um so logically government spending has to come before tax pay that is it um and this is um well was my latest book a cartoon uh mmt book and it

has a German Edition now hope we got time for questions we definitely do thank you so much such an interesting um discussion and lots of interesting questions here and in in the chat as as well some of them have been answered by other participants which is fantastic um I think I I did um cast my eye over one from from Shane um uh Shane writes do you think we should be using a word other than debt when describing money the national debt Etc because once you do a presentation like this and people understand but people

con seem confused by the word debt um and Shane says I know Warren likes to to say the net money supply do you have any thoughts on the kind of the language and how we um how we are prone to misinterpreting things because of the the language having this uh extra connotations yeah I don't like net money supply um because I I'm not going to call a bond uh money supply um and um I to to the extent possible um I would prefer to to to use the the specific um form of money so if

it's a deposit call it a deposit if it's currency call it a currency if it's reserves call it reserves don't use the term money because it's too vague so let's be really specific okay I I am very sympathetic to the view that you shouldn't use scary words and we are trying not to use scary words and it's true that um Deb is scary I think most of the time it will be perfectly fine to use the word bond Bond doesn't have a negative connotation I now I I know that um lowincome people are not likely

to hold government bonds when I was a kid we used to take a 25 cents a quarter uh to week to to school every month and add a quarter to uh toward a US Saving Bond and all the kids were encouraged to get a Saving Bond and uh we would end up paying $17 to get a $25 Saving Bond and um it was a a very pleasurable thing uh Bond did not have a bad connotation at all and I don't think it has a very bad connotation so I would use the word bond however look

debt is universal among humans and we also know among animals chimpanzees keep records of debts debt is not necessarily a bad thing you are indebted um when someone invites you to dinner you've now got a debt okay is that a terrible thing no it helps bring people together you've got a debt now if you repaid them exactly the same dinner that they gave you they would think that's kind of bizarre okay uh so it's not a specific debt and it's not a money debt but it is a debt we're indebted in many many ways you

know you all say you have debts to your parents of course they brought you up you feel indebted is that a bad thing no of course not so I'm I'm I'm I'm sympathetic but I'm not going to go all the way and say we need to get rid of this word debt there's another question here um which is from actually from my partner Alexander And he says uh can you say something about the relationship between money and wealth okay uh um well so monetary uh debts that we hold as assets are part of wealth uh

but it's only financial wealth um I I would prefer that we call Financial wealth instead of saying we hold money uh because probably a very small part of your financial wealth is going to be in the form of cash you hold a wide variety of financial assets uh directly and through your pension fund and um that is financial wealth uh measured in money terms but you also have a lot of real wealth maybe you own a house um and that is um a a real asset but you also measure that in money terms um so

wealth is a broader term uh than financial assets because it includes real wealth um but um you know as as you you develop a a monetary production economy uh eventually virtually everything gets monetized and I'm not saying that's a good thing I don't think it is uh but if you're in America and you ask anyone you could point to anything say you know what is that worth they're going to give you a dollar answer right and uh if uh an airplane crashes we almost had one here in Portland you probably heard about the a false

door being blown off a plane in the air um you know I we're going to measure the pain and suffering of the people on that flight in dollar terms and they're going to get compensated in dollar terms um so it's sort of inevitable that you start if you live in a thoroughly monetized economy you're going to start measuring everything in money terms yeah I think it's this is not a New Concept though I mean you were talking about earlier in your lecture about if um if somebody had wronged you you might expect compensation in terms

of uh some food or an animal or something that's material so yes it's yeah it's part of our human nature I guess in a way but taken to the extreme it's where debt it's where debt comes from that's that's the origination of debt yeah well there sorry there are other kinds of debts too that that is a debt that's imposed it's imposed on you because you did something wrong um there there always been has been reciprocity among humans and among chimpanzees I do something for you you do something for me that's a de can I

can I ask a question Gabby just just one abusing my position uh why are so many economists scared of this story Randy because they are well I think there there's a wide variety of reasons so uh if you're an economist you have devoted um probably minimum of 15 years of your your life uh to learning neoclassical economics and becoming proficient enough at it that someone will give you a job doing it either teaching or giving policy advice or whatever um and you find out everything you know is wrong you know that that is a um

a tremendous barrier uh to to getting through to Economist um but uh it's so there there's so much power associated with money uh access to money gives you power and uh it's political power it's economic power it's power over other individuals and um they see this as a h huge threat it's much more convenient to argue that you know the supply of money is very limited and um we have to be extremely careful what we do with money we don't want the government to waste money hiring unemployed people you know so I think that there's

lots of that too how policy would change a lot against the interests of the people now in power if everybody understood this so I think there's individual reasons but there's also that kind of a a reason it could change everything there's thank you there's there's lots of um there's lots of questions and comments coming in all the time I'm struggling to keep track a little bit which is a good thing um there's some discussions in the in the chat about um the independence of central banks and also the Euro um I I would note that

we have a talk with Dirk an coming up who is going to be talking specifically about the Euro Zone and and what the future holds um but if you have any comments on either of those um uh topics be really interesting to hear your views Independence of the Central Bank uh is completely false and it's knowingly false the notion was created in harder to consolidate power at the central bank because C Central Bankers I mean I can't talk about every country in the world because I don't know but uh certainly in the United States Central

Bankers are not elected they are not accountable to the voters but they're also not accountable to our elected representatives uh By Design um and elected representatives you know they're they're given a coach Shing when they first go to to uh Congress and when the president is first elected you know they are told you can never criticize the FED okay they all know this uh it's completely outside uh their their duties as an elected representative to tell the FED what to do they can't do it and the president will never uh tell the fed you know

you should not have been raising the interest rate even though it's uh been extremely damaging to President Biden in this case but it it's always damaging to the uh aspirations of the president when the Central Bank raises interest rates but you cannot say that because the FED is independent well that's kind of crazy so you put what most Economist believe is the most important macro policy you have which is monetary policy now that's not true but most economists think it's the most important policy you have taken that out of democratic control and given it to

unelected Committee of supposed experts so it's completely anti-democratic um but it's not true they are not independent in the sense that um most economists uh and a lot of pundits but probably not the general population thinks which is that uh it was put this way in the United States the central bank is there to take away the punch bowl because the problem is that elected representatives are always going to want to spend too much why uh they are trying to cater to the people who elected them which is a bad thing but think about it

hold it the people elected them to serve their interest they're not supposed to do things to help the people elected them um but the idea is they will always spend too much and so they're always going to cause inflation so the central bank's responsibility is to take away the punch bowl when the party gets going too strong to prevent inflation but is there any way a central bank can prevent Congress from spending and the answer is no they cannot they can't bounce treasury checks uh there is no way that they can prevent the treasury from

spending what Congress has authorized now what they can do is raise the interest rate that can make uh things tough but it actually increases con Congressional spending because uh interest payments will go up and that's not part of the authorization process so this isn't a a government program that has to be approved by Congress they have to pay the interest interest so government spending actually goes up when the Central Bank does that so they can't prevent the uh Congress from spending and um raising interest rates doesn't reduce spending it increases spending so they're not really

taking away a punch bowl what they're doing is C causing financial problems throughout the economy by raising interest rates so it's just not true oh on the Euro so yeah you the the euro is coming together at exactly the time that mmt was being created um and so we looked at the Euro and I'm going to be brief because I know Dirk can can fill you in on the way the especially the transitions that have been made in the Euro but the original setup we looked at and we said this can't possibly work uh when

Godly was warning about it as early as 92 uh and goodar was warning about it as early as '96 saying that these are becoming like US states and US states can cannot run budget deficits at all so when we saw the master criteria we didn't say those criteria are too tight we said they're too loose okay a non-sovereign government cannot run a deficit of 3% year after year uh they can't run up a debt ratio of 60% we looked at US states there was no US state that had a debt ratio of 20% because the

financial markets shut him down would not lend to them so we thought that um that the financial markets would shut them down and Warren wrote a paper I think in 99 uh that predicted perfectly what happened in the Euro area the first serious financial crisis some country is going to blow up their debt ratio trying to bail out their Banks which is exactly what happened Ireland okay um and that'll be the end of it now they have sort of resolved the the issues and Dirk can talk about that thank you very much for that that

um that answer um there's a comment here from Katie Shields um about uh the mmt movement and building alliances with the feminist movement in that um the the idea about taxing and uh uh and the the unpaid work that is largely done by women around the world unpaid care work um and and she ends the the comment with as we know our economy is wholly owned by nature and supported mainly by unpaid foundational economy made up of care and the commons would you like to share your thoughts on that yes but but first let me

recommend uh zadka todorova uh wrote her dissertation at UMKC and published a book that is a feminist approach to mmt and focuses on issues like that and consumption okay so uh Ju Just broadly what can mmt do uh well it makes it obvious that the um government can always afford to uh pay women for the work that they do um it doesn't have to be part of the capitalist sector at all uh women um are necessary to the production of the labor force right and they they that labor has been generally unpaid Marx talks about

this too that capitalism cannot exist uh without this huge labor force that is unpaid and um the mmt says that um of course we can afford to pay for this I a job guarantee can include that kind of Labor um as a paid labor so I think that that's uh one way to that it helps uh um we can start we uh can put a money value on it and we can pay the labor for it reparations uh in America uh you know there is talk about reparations for African-Americans and for Native Americans um the

government can obviously afford this the only issue for any of this for paying women for the work that they do that's unpaid and for reparations uh for Injustice the only uh limit on this is the availability of our um natural resources and productive capacity so if we can find the resources uh then we can afford to do it and the only thing we need to worry about is inflation and if you look very carefully at Sandy deri uh reparations uh which I think is $800,000 uh per desend of slavery uh this is not going to

be inflationary okay now I haven't done the calculation for for women's work uh but it's unlikely it's going to be inflationary there is the issue of consumption and the fact that we're already using 1.7 Earths to fulfill our lifestyles around the globe well we as in the global North anyway um so yeah it's um a complex one uh perhaps we'll just finish with um something from Susan um uh Susan asks what is the next Great Leap that needs to be taken to reset General understandings about how economies really work is it educational like sneaking mmt

into ecological economics departments which on the case by the way uh popular Grassroots or labor movements penetrating legislates or legis Le legislative staff uh and central banks what what do you think is the best and most important uh well education uh but it can't start in college um we we need to start in kindergarten uh and so I I don't know if it's been mentioned but um there is a documentary finding the money uh that I think will uh help a lot in um educating uh let's say at least the teachers of young children um

and it's a start for educating the population and politicians and so on uh you know they we always say a picture is worth a thousand words a documentary is worth a million words um it it is just so much more effective than anything we have been able to do in books books or articles yeah um and my cartoon book I part of the reason for doing the cartoons was that uh pictures work better but videos work even better than that so yes I think education but it needs to start uh very low labor unions yes

uh now in the United States uh we are making some advances uh in the labor movement uh we're we were down to 6% of the labor force unionized so um we not only need to educate labor unions we need the labor unions to expand a lot to have much impact in the United States but other countries are in a better situation than we are legislation yes so the job guarantee uh there are various efforts uh to put in place a job guarantee in the United States and in other places so yes um the job guarantee

is an example of important legislation um we there was a a good proposal for a job guarantee I about 10 years ago by Dennis kusich pavina and I met with him he understood with literally within two minutes he said I will sponsor that legisl ation the problem is the pay for part of it was all screwed up so you have to make sure that the legislation understands uh mmt so it's not enough just to be yeah yeah the government ought to employ people who can't otherwise find a job but you've got to have the mmt

part in there too uh otherwise it won't get through if you don't have the pay for part right it will never pass so mmt has to influence that kind of legislation central banks no I think that what we need to do is uh eliminate central banks um the the kind who are trying to implement monetary policy uh and uh replace them with a robot uh that can supply that can manage the payment system I I think we just it's not a matter of educating them it's a matter of essentially getting rid of them we don't

need them uh and they they are never going to be sympathetic to this stuff