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Thanks for this video, but just one think: at 13:00 you didn't explain that such cases of hyperinflation always came with first a massive breakdown of the supply of goods & resources (esp the food supply). Such as huge reparations, or civil war & farms stopping production; or a centrally planned communist style economy which then was then badly mismanaged (free market crushed). This this huge restriction in the supply of necessary goods means "more and more currency chasing less & less goods" PLUS printing currency a lot instead of fixing the breakdown (which is pretty hard in their circumstances such as civil war).
If anybody else read Geospilik's comment: MMT is primarily aiming to describe a Soveriegn Fiat Currency as it already is. This doesn't apply to Nations which gave up their Currency Soveriegnty, like European Nations They must or do borrow from am external source which they then give their power to. Think about it: Why would a Country borrow in the currency only it can legally create (although when Private banks create credit, it is also behaves the same way). If people understood MMT, private banks & bankers would have wwwwaaaaayyyyyy less influence over Govt or public Economic discussion. They would not really be so necessary. The bank bail outs would probably not have been so necessary or made much sense and the public could have been bailed out instead. But "it's all a conspiracy theory". There is no arguing with someone once they have decided something is a conspiracy and they are angry. It means everyone else is either stupid (& they are so clever, rather than angry & demanding ppl listen) or must be part of the conspiracy.
In my own experience, if I ask someone who is angry and shouting and condemning MMT as all a conspiracy.......I have never yet once found someone who could actually fairly represent what MMT was claiming and why. It is Ethical and reasonable to represent a claim & it's evidence accurately before dismissing it. Otherwise it is technically the strawman logical fallacy.
Btw, MMT Economists actually tend to predict Economic events much better than Conventional Theory Economists, who continually predict something and then the opposite happens. E.g. 2008 financial crisis, Eurocrisis (very early); Japan's Economic situation.
@@EconomicsExplained Some of these videos are truly hilarious...I imagine just a whole day a company will spend walking in the park, blowing bubbles, hopscotch games...all to record for stock videos.
@@EconomicsExplained I love your work, but could you please correct the false info you given here? At 17:18 There is literally no well known MMT Economist or Founder of the theory that claims that supports the current solution of creating govt or bank money (credit) recklessly & putting most of it into asset bubbles like property. I'm pretty sure all the ones i have heard of call that inflationary (which it is, by careful logic). If I'm wrong, name one, please? I have never heard any of them claim that. Yet your video supported this myth, despite the rest if it being an accurate representation (thank you 🙏🙏🙏 for that btw)
Gold Standard wasn't a failure. Complete misunderstanding of why the gold standard "failed". Every-time the gold standard "failed", the United States had actually *SUSPENDED* the gold standard just prior to the "failure". Substantial deviations from the gold standard were the "failure".
if you were a top richest guy, with that option you could take a loan and use half the government´s budget to buy yourself a massive spaceship and drive it away, knowing they would send someone to your front door and arrest you for not paying them back. Good thing that isnt happening wait.
Likely if they gave it only to you you wouldn't even be able to cause some significant consumer price inflation because you couldn't buy enough consumables fast enough (at least not if you also want to use it). But you may cause some crazy asset bubble if you start buying all the stocks.
If you really want to understand it you gotta get your hands dirty and learn about it from actual MMT economists not channels like this. Here's a few links. Basics of modern money ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-TDL4c8fMODk.html&t Prof. Stephanie Kelton ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-ZKIBpKL2xoQ.html&t
Did you actually see the video, or just sleep through it then put out this inane comment? Maybe do some actual reading on the subject first BEFORE making non-contributions.
I am a Congolese national. You spoke about my country just when I thought you would have! LIKED AN FOLLOWED!!! Our sketchy currency comes as a result of the fact that all of us Congolese always say that our country is mineral rich as if that's all it takes to build economies!!! oh and the taxes paid by the multinationals are sucked out and looted by corrupt officials!!
@@cnrspiller3549 I'm guessing they need a a managerial class -- prosecutors, lawyers, judges, a police force, to track down the corruption and looting. But that only works if the managerial class is itself not corrupt. And that only works if people are educated enough, smart enough, to know how to deal with corruption. And a powerful set of leaders to "do the right thing". Its a tangled trap. It's a hard trap to get out of. And if the Congo has the Wagner PMC and their sledgehammers, well. you're screwed.
Most of the channels I watch are the likes of Wendover Productions, Real Engineering, Mustard, ReallifeLore, etc. Huge channels with millions of subscribers, I hold Economics Explained in the same regard - so it always surprises me when I look and only see 321k subscribers. Seriously guys get this man more views he deserves it!!!
All fantastic creators that have been doing this for much longer than me. Hopefully I will get there some day but in the meantime I am just glad people are enjoying my little videos
Just missing two important points about MMT. First, MMT was theorised based on how the world currently works, not as a proposal to change all of international economics. The author noticed that various conventional wisdoms about printing and inflation did not hold up in practice. He generalised his findings when he presented MMT. Second, the indefinite money printing proposed should always target productivity, always stimulate the broader economy and nothing else. If it does that effectively inflation won't enter into a death spiral, or so the theory goes. Now if you ask me, the whole theory is born from primarily US' economic perspective and translates poorly to other nations, who run much higher risks of their currency taking off in the wrong direction. There's also the added danger that politicians around the world use MMT as an excuse to boost popular policies that are not beneficial to the long term productivity of their society.
Every nation that has its own non-convertible free floating currency and no debt in a foreign currency has unlimited spending capacity. So it translates to a whole lot of other countries. And even if a country doesn't meet one ore more of those criteria that doesn't mean that MMT doesn't apply, just that the fiscal space of those countries is somewhat limited. Orthodox economic theory is mainly built upon barter economies and even if they add money, they treat it as if it is scarce (which applied to the times of gold standard). MMT is simply the model for free floating non-convertible currencies (which is what many countries have today). But I agree with you in the sense that a government can only buy what is for sale in its own currency. If your economy doesn't produce enough good and services to satisfy the needs of your own population then you might be dependent on imports that you might not be able to buy with your own currency. This is where the US indeed has the advantage of having the most demanded currency, basically the world reserve currency. But this is very much in accordance with MMT that states that the real constrains of spending are what is for sale in your currency. But then on the other hand you could export more goods and services so it is not a one-sided coin. Countries like UK, Japan or the Eurozone do have a big enough and flexible economy to enjoy quite a big fiscal space. And for the other countries there are still valuable insights that MMT provides, mainly that they have to get independent of certain key-goods and services to increase their fiscal space. MMT doesn't claim that it will be easy for them the moment they realize it but it's still better to know what your restrictions are and why you have them. _"There's also the added danger that politicians around the world use MMT as an excuse to boost popular policies that are not beneficial to the long term productivity of their society"_ I've seen this argument before and I kinda dislike it. We''ll simply have to work on building a better democracy with measures to prevent that. And ultimately governments can be and have been able to do lots and lots of terrible stuff completely without acknowledging what MMT teaches us about free floating currency systems. And ultimately MMT is just a body of knowledge. You can't really prevent it from being used in the sense that you must prevent politicians from being aware of it. Most of the central banks are already well aware of some of the implications MMT provides, mainly that crowding out does not exist in a free floating non-convertible currency. I believe they even think about interest rates very differently than pre GFC and Covid. So the knowledge is already spreading.
You answered the question Id been racking my brain for almost a year now: the money MUST follow productivity. In theory this could work but i agree, super risky. All you might need is a string of a few bad investments before collapse.
Your first paragraph is perfectly true. Although there are many countires beside the US that can fully "implement" or rather accept MMT. For less currency sovereign countries much depending on US Dollar e.g., it is much harder but still beneficial. MMT helps to understand what elemental ressources you better keep in your own hands. The second paragraph merely reflects the purposeful misinterpretation of MMT as a kind of gift card printer for everyone. You should not assume that MMT is free of spending limits, it's just other standards like ressources, employable workers, machines and such, and of course still prioritization is essential
Lee Oswald Despite the recessions each decade, generally speaking, the global economy has been on a consistent upward trend for a very long time. It’s not saying “infinite prosperity”, just maximum according to capacity. Of course, given how such things are increasingly distributed, it can feel like it’s not prosperous for many.
@@olivercuenca4109 I think we should think about something new, change something To bring the real prosperity, for all the countries, equally, balanced system that grow proportionally You got the idea We need to change something, make the system more sustainable, stable, whole
@Elijah Feuerstein shake things up?? Like some plague? Or government collapse? The way that we have everything now- just stepping on the same rake, again, and again
Yeah I came to write a comment as soon as he used that term. "Maximum prosperity," through increased government spending??? Honestly just ridiculous on its face if you know anything about how economics actually work. Modern monetary theory folks will sometimes pay a tiny bit of lip service to there being some upper limit there based on real assets and inflation, but the way they talk about it always seems to imply that printing money is pretty much a cure all, essentially an almost always underused good thing. Damn shame this stuff has gotten so popular. If more people knew who Thomas Sowell is, this world would be a better place.
paper money doesn't have intrinsic value, it has extrinsic value, that is one of the points of MMT. And hyperinflation is from productive capacity loss, not really from printing money. Money printing comes after the hyperinflation, not the other way around. Look at history.
3:51 *hopefully very secure excel spreadsheet. There are to many companies out there still using some legacy database from the early days of computing with barely a thought about security what so ever.
@Jorge MESA PEREZ Firefox marked a companies website as being unsecure. The company pubically complained about that and their complaint got noticed. Causing their website to get hacked. www.reddit.com/r/programming/comments/60jc69/company_with_an_httpserved_login_form_filed_a/ Here's the article about the event: arstechnica.com/information-technology/2017/03/firefox-gets-complaint-for-labeling-unencrypted-login-page-insecure/
@@fealdorf storing Passwords in cleartext isn't something you say it "works". Sure it works bit once it gets hacked all your users loose all their accounts and maybe even different accounts
"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. . . . Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." ... Quote By John Maynard Keynes
@@sriramm6824 I doubt it, considering the number of actors crew and locations and post production costs he must spend about 5 million minimum per video. He must make about 50 million in advertising. Where does he get time, let alone plan the logistics of travel and shipping film equipment. He must have his own production team of atleast a 100. His work ethic is impressive.
Also, being a bank sounds like a pretty good gig: you create debt by typing digits in a computer, and you get to pocket the interest for no work at all
the lender can borrow against the debt it issued, as once it's issued, debt becomes an asset of the lender...they can sell derivatives off the debt they've issued...it's legalized high plunder
Printing is effectively a tax though. When you print money, you increase demand for the good you're going to buy with said money, this leads to higher prices, reducing the purchase power of the people who did not get the printed money. So basically, each time the printer goes brr, you're the one paying for it.
this broadly increases all prices. and lowers the burdens of all dollar denominated debts. it is a wealth transfer FROM savers. to the printer holder and ALL debtors.
@@gordonjohnson2497 so the earners who were probably in debt also lowers their price of labor too, so you end up devaluing your production, so its really an IOU for yourself that someone else collects interest on.
When you create money you can increase demand yes, but that does not mean higher prices if more people are hired and supply of products and services increases. Then prices stay the same or goes lower.
@@henrygustav7948 you can create dollars out of air but assets take time. printing money doesn't make more iron, gold, oil, coal. it inevitably and historically creates higher prices.
@@gordonjohnson2497 1. Most currency is digital so we don't really print money unless its to satisfy a physical demand for notes. 2. Creating money does not cause inflation and taxes control/regulate the value of currency by destroying money & deleting it out of the economy. 3. Money directs economic activity which depending on how you spend it can create new resources. For example Fed govt can try to get more iron by spending money, hiring more people to mine the iron.
when you realize the stereotype of "the average economist" is the same as "the classical music enthusiast" you start to understand EE's fixation with Beethoven in his videos
See I think that the average economist actually supports MMT, because almost every college teaches and supports it. How many economists out there didn't go to college? far to few
MMT is just the same centralised crap managed by the designated money masters. More incentivized moral hazard like Keynsianism on steroids. Because most economists of today does not understand economics and the only thing they do know is printing money to fuel a fakeonomy. A fever dream for MMT addicted enthusiasts and ultimately a nightmare for the people suffering the whims of their reckless actions.
if we have an electromagnetic crisis that erases the internet & all digital files across the world, thus eliminating digital money from the global market, sure
Thing is, the concept of making money from nothing isn't specific to mmt - it happens all the time, as this video explains. What mmt does is admit this fact and tries to use it for good.
@@eoghan.5003 Except like the video explains there is no reasonable expectation of scarcity, the government will just print more and more currency to satisfy its short-term debt obligations, further devaluing the currency. Gold, for example, is a real physical metal with actual scarcity. Gold is money. US Dollars are fiat currency. Quite the difference.
@@brianhelmuth9414 Anything can be money, toenail clippings can be money the problem lies in getting it accepted as payment. The reason the USD is in demand and accepted all over the world is because of the ability of the US to enforce tax laws. You can only pay your taxes in usd and not yen or euros or chicken feet. Creating more currency does not devalue it as money is not a store of value its a relationship between spending and supply of goods and services. If the US creating 100 trillion dollars, there would be no inflation if that money sat in a bank account not being spent. It is always spending vs supply.
MMT were the first ones to discover that government do create money out of thin air. Some MMT'ers are even from the Treasury and Fed so they have seen it first hand.
They really are not just printing money. They are printing you debt. For every dollar printed a treasury bill(or something) is sold to back it. Someone buys that to make safe interest rate, and you have money, that has to be repaid! No question countries that have it's own money have an advantage when things get bad like this. Where do you think that 2 trillion stim. bill came from? 2T loan against Treasury notes that are being sold now as we speak, and those will have to be paid one day!!
@@lubu2960 It's not like MMT is intentionally trying to be consistent with Marxism. It just happens to be that way. And, you could potentially argue that it is not a PERFECT fit, but it's pretty close. There are a few differences, but it depends on interpretation. Marx believed that there is an "intrinsic" value to things, because you are capable of determining how much of one thing is worth a different amount of something else. For example, 1 tomato might be worth 4 potatoes, or something. This is only possible to do if there is a middle term allowing for a direct conversion. 1 tomato is worth 4 potatoes, because there is something measurable about their values, and that measurable thing is equivalent between 1 tomato and 4 potatoes. Otherwise, it would be impossible to determine relative value. Marx thought that the thing underneath the relation was the amount of labor time that went into producing or acquiring the things. For society as a whole, it's the average amount of labor time that went into producing things of similar quality. So, if society pretty much agrees that 1 tomato is worth 4 potatoes, then it probably generally takes 4 times as much work to grow tomatoes as it does to grow potatoes. That's why they are worth more. It is harder to produce a tomato. Now, you can argue that value is actually about how much of something there is relative to other things, and how much people want it relative to other things, with demand being subjective. So, if there are a ton of potatoes and not many tomatoes, but people generally want tomatoes, then tomatoes will be worth more than potatoes. Marx would probably say that in order for there to be so many potatoes relative to tomatoes, it's likely just easier to produce them. So, again, supply and demand ultimately goes back to the amount of labor necessary to acquire different things. It's not that supply and demand is wrong. It's that supply and demand alone ignores the underlying material conditions for why the supply and demand is what it is, which is different amounts of labor needed. Natural resources, like rocks, which cannot be produced, are only useful to society if they are extracted by labor. The harder it is to extract, the more it will be worth. To some extent, the more rare it is, the harder it will be to extract, because it isn't abundantly accessible. Modern Monetary Theory says that the value of money is relative to the value of other things (1 tomato = $5 = 4 potatoes). Marx agrees with this. The supply of money in the system, relative to the supply of other things, alters how much money is worth. If $5 buys 1 tomato, and we increase the supply of money without increasing the supply of tomatoes, then since $5 is worth less now (due to inflation), $5 will no longer be worth 1 tomato. Prices will go up overall. 1 tomato might be worth $10 now. On the other hand, if we reduce the supply of money (due to taxation), then the opposite will happen. Money will be worth more relative to other things, because there is less of it, and it is harder to come across. $5 might buy 5 tomatoes now, assuming no additional tomatoes appear in the system. In addition, MMT also suggests that the solution to unemployment is for the central state to print more money and spend it on socially beneficial things, because a lack of employment is a sign that there is not enough money in the system, with which new jobs can be created (so long as there are enough raw materials and unused labor power available). If too much money is taxed out of the system though, resulting in less of it to go around, then money is harder to acquire. It is demanded too much for there to be so little of it in supply. People have to work harder or longer to make the same amount of it, and so, the same amount of labor is essentially worth less, because we measure the value of labor with labor time (one hour of labor = $10, for example). If there is less money, wages will be worth less. There is also an implication that doesn't get brought up much, that inequality has an effect on how much labor is worth, due to supply and demand for labor. If there is a ton of unemployment, and only a few people with the ability to hire for jobs, then the supply for labor is far higher than the demand, meaning the price for labor (wages) goes down then too. However, the price for other things may not go down relative to the price for labor, because supply may remain constant, and the demand for necessities will not decrease (people will just use credit or loans, with higher interest rates the more people there are in need of financial assistance). Since more capital investment generally produces more of a return on investment, and since debt results in more money owed over time, inequality will continue to grow, leading to lower wages, higher debt, higher profits for the rich, and less ability for people to participate in the market. More capital will accumulate into fewer and fewer hands (which can be empirically observed to happen). In other words, Marx was right. Marx, of course, also thinks exploitation is taking place, because profits go to the owners of capital, not the ones who actually do the work responsible for the extraction or creation of wealth via useful labor. MMT doesn't necessarily have much to say about this in particular. It doesn't care about whether there is exploitation or not. It's just describing how money works in general. It just happens to be, coincidentally, that the way money works implies Marx's description of exploitation. Regardless, MMT is not inconsistent with Marx. It is just going a step above what Marx said. It is effectively tying Marx's analysis in with modern economics. It's bringing Marxism back from the dead, in a way. Like, Bernie Sanders' economics advisers were modern monetary theorists, and one of his major policies was a federal job guarantee. Anyone who needs a job can have one through the government. If you were to combine MMT with worker cooperatives as the main form of business (workers are their own collective boss), then you would essentially have market socialism. It may be a mixed market system, but leaning towards socialism rather than capitalism. You can have high government spending as long as there is also high taxation, but you can have progressive taxation. Tax more from larger accumulations of capital, and less from smaller ones. If everything were a cooperative, then the government could just take its share from business, rather than individuals. That's more or less how socialism works. It just wouldn't be Marxism-Leninism. It would be actual democratic socialism, because the government is still democratic. We would have just switched economic systems.
@@lubu2960 I'll also add that MMT, if true, might suggest that the reason socialism has not historically worked has been due to inadequate access to resources or labor power required to meet the needs of the population. Or else, incompetent leadership. It's not inherently a problem with socialism, government spending, or even necessarily central planning. After all, China uses loose central planning, and it does fine.
The reason printing money didn't cause inflation is because the money printed was used to fill holes for big corporations and financial market. If you think stocks, bonds and houses as every day products, yes, there is inflation.
We should also take into account that the dollar is an international reserve currency, and can export part of its inflation. Also, as other countries are also applying inflationary policies, dollars are still being demanded internationally. "Bad" is better than "very bad".
@@mehrshadvr4 probably a mix of both, but u can see in theory why there would be inflation mostly just in the stock market. When we lower interest rates, that will effectively lower the demand for gov. securities by reducing the yield, and even more obviously, because the gov purchases them to lower the rates. This means that capital that was used for treasuries will most likely go towards other asset classes, and this will inflate those assets
@@legendfighter310 of course supply and demand also cause inflation but we are talking about money printing inflation. If printing money causes inflation, everything gets more expensive not just a few things.
@@mehrshadvr4 Yes if you print too much money you will feel the effects of inflation everywhere, but the point is that inflation is generally used to curb the deflation felt in recessions, but the problem is not all markets deflate at a constant rate meaning some areas will have inflation, and others won't. This is especially true in the stock market, since prices are incredibly reactive to market conditions, will absolutely inflate faster than many other goods and services because an increase in the money supply will increase investor confidence, and pair that with the effects of a decline in treasuries, it will absolutely cause disproportional inflation.
Nice simplistic overview. To go deeper, we need an explanation of the circumstances under which inflation takes place versus those under which inflation doesn't take place. It's not as straightforward as simply measuring the money supply against the total of goods and services.
@@jeronimo196 How did this not age well? Just because inflation happened? The commenter said inflation takes place under certain circumstances. Giving money out via stimulus checks creates inflation because inflation occurs at the point of purchase. If the increase the purchasing power of all citizens, then you have inflation. If you were to stimulate the economy via another method, then you wouldn’t have the same inflationary effect. For instance, if the government spent the same stimulus check money on increasing public education infrastructure. There may be an inflationary effect of school supplies maybe construction (as new buildings are created) but not bread, milk, gas, ect.
@@cwhit0110 "There may be an inflationary effect of school supplies maybe construction (as new buildings are created) but not bread, milk, gas, ect." Until the construction workers and supply sellers start buying more bread, milk, gas, etc. It is as straightforward as simply measuring the money supply against the total of goods and services.
@@jeronimo196 why would construction workers buy more bread, milk, ect? Just because you have more money doesn’t mean you spend more on common goods. There are only so many loafs of bread a person can buy. Obviously giving more money to everyone would have a different inflationary impact than targeted stimulus. Also inflation is neither good or bad. Overall you want inflation, it means growth. Too much inflation means income inequality. My overall point is that mathematically it’s a lot more complex than just more money = drastic inflation. There are millions of factors in all of these markets. Placing stimulus money in certain markets would have different consequences regarding inflation. Think of QE, I’m not a fan btw, but QE in 2009 and the years following resulted in asset inflation, stocks, bonds, market securities etc. but had little to no effect on CPI. Why? Because of where the money was available. Banks buy assets and lend to businesses that buy assets. Whereas if the fed instead sent the trillions of dollars of QE money to individuals in a stimulus check, we probably would have experienced hyperinflation and the returns would be minimal. It’s not as straightforward as you suggest but rather a highly complex system if it was that easy, every investor beat the market.
MMT is a dangerous idea. Unlimited money creation can destroy an economy, even a civilization. When money supply outbids the availability of goods and services, inflation results. We’ve had a small, taste of this recently. South American countries like Venezuela and Argentina have had much higher inflation rates >100%. Socialist minded politicians never learn this lesson. Beware these here.
Good video. I think the biggest criticism of MMT was actually left out though. MMT put in to practice essentially removes the independence of the central bank and puts politicians (rather than central bankers) in charge of the money supply. Incentive structures in a democracy are such that politicians will continue to spend in order to get re-elected and therefore can't be trusted. MMT would likely lead to a massive increase in the size of the state with greater and greater spending and higher and higher taxation. For socialists, who trust in governments to make good decisions on behalf of their citizens, this may be an appealing idea.
Is it? Because of you think logically the only way they would stay in power is if they spent that money on things which the people benefited from. If they don't they will not get enough votes at next election. So it's win win for the people, either the government will spend money on things that benefit people or they get a new government that will. In fact it's the only system where the people will always get what they want.
Congress is already in control of the money supply because it spends however much or little money it wants to into existence. The CB controls little more than the overnight interest rate. But rather than evaluating the debt consequence of spending the CBO ought to be projecting the inflationary consequences of specific spending proposals. Build Back Better, for instance, was deficit spending that increases the economy’s productive capacity and is therefore less likely to cause inflation.
I'm Nigerian but the answer is simple it's power in the global economy the US economy simply had more assets and political power to do the money printer thing. Nigeria just has oil and agriculture. edit: I'm expanding to state that of course Nigeria has other growing sectors in manufacturing and even IT but these are still in their early stages of growth and not fully competitive on global stage as the goods from oil and agriculture. E.g. palm oil used in many forms of foods processing.
Except they are trying to skip all the steps to get there. The USA was by any measure a 3rd world country until the late 19th century - early 20th century. 90% worked in agriculture and a lot of it was substance farming with the extra being sold for new farm equipment. Industry gradually built up from colonial times along the Eastern coastline and through savings eventually an industrial revolution began. Small businesses were started from the sons of farming families that had built up wealth. The government built railroads and a service industry popped up in small towns to meet the demand. Farming improved and started to be exported. Coal and oil and natural gas eventually became scaled up enough to be exported too and support service industries that were built around these industries and workers. And all the while wealthy European companies were investing in the US and even expanding there operations to the US. The difference between that and Africa, is that they don't have stable governments nor a stable society. Every few decades a militia group rises up and overthrows the government, or the military itself starts a coup. No one has any incentive to do anything with their productivity than the bare minimum. It's all about survival. Not to mention infrastructure and businesses being literally blown up. Or railroads built by former Colonial Powers being dug up and sold for scrap metal (this literally happens every day). That is why Africa is the way it is and why they can't simply print money. It's also how one can understand that sadly the only time Africa experienced growth is when stability was forced at gunpoint. And the only thing that can do that is European Colonialism coming in and enforcing a stable government and stable society. The worst things colonialism did was to abrubtly leave before installing stable governments that could last more than a few decades.
I love how the priciple of typing money into existence and how it effects our economy is so well shown in the GTA Online (Video game) world. Since hackers maxed out a substantial amount of peoples bank accounts, the ingame prices increased so much and almost every dollar you earn in the game is almost worthless, because there is so much existing.
Grand Theft Auto is not an accurate measurement of modern economics... Are you taxed in GTA? Do you need to buy food? Do you need to have a job? Nope. In an MMT run economy, taxation is used to counter inflation.
@@Emmet-sd8og Exactly, his scenario actually goes further to prove MMT correct. Without the constraints of taxes or typical household expenditure, of course inflation will become bad. And MMT explicitly states that governments should only be introducing more money when production capacity of the country can handle it. So nice going Trichter Tus, you didn't say anything.
@@Emmet-sd8og It would never work out like that. I think MMT makes sense, but it would never work in the way its supporters envision. No government would raise taxes in an election year. I also doubt that they would be willing to raise taxes/ cut spending in the face of inflation. It's not exactly popular to raise taxes on groceries when the price of groceries doubles. So in all likelihood we would end up with a financial system with no safeguards when inevitable black swan events arise, and inflation even milder forms is a very scary consequence - see Japan. There's also the question of how you increase and decrease taxes in a progressive taxation system. Democrats would be very resistant to decreasing taxes on the wealthy even if they had increased them the year prior to counter inflation. Best thing would be to decouple taxes/government budgets from politics (like how the central bank manages inflation by changing interest rates), but that won't be popular. IMO the current system is much safer for managing the economy, although I do think the concepts of MMT can be used to augment it in a limited scope. I also think it's funny that there is a flip side to MMT that basically says that the government can print money to stimulate private sector growth through low taxes since debt doesn't matter. Very Reaganomics-like.
@@Emmet-sd8og taxation is a bad way to counter inflation. Not only your currency is getting devalued, now you are getting taxed harder. You get churned out both ways by this. How exactly is this gonna benefit common man in anyway? It won't. Increasing Interest rates is better way to counter inflation or asking banks to increase reserves.
Could you do some kind of summary at the end? You give us so much Information spread through the video with examples etc. and at the end of the Video we may already forgot the information from the beginning
The old laws of monetary theory dating back to Hume still hold. One should be suspicious when a government makes a substantial increase in the money supply.
@@mjdillaha Problem with that statement is, unlike at any time in human history, we have never been more interconnected and the fact that most of our banking and financial system in mostly digital does, in fact change a lot. money can be created and destroyed in a blink of an eye.
@@mjdillaha Over millennia? The concept hasn't even existed for 100 years and the term is only a few decades old (even its precursor chartalism is only about 100 years old as a theory). So what attempts are you referring to here? I don't even know of any societies other than China which were using fiat currency more than 1000 years ago, it didn't make it to Europe until a few hundred years ago. It's not clear to me what you mean by it having been tried and failed either. MMT is primarily descriptive, not prescriptive. It's an attempt to explain how currency works in modern society, not instructions on fiscal policy. Its success or failure should be determined not by successful or unsuccessful governments, but by the accuracy of the predictions it makes.
@@anthonyderosa7757 Yeah your right. Cause having a hiden tax (inflation) is a good thing. The middle class is getting fck over by this because there savings are losing their purchasing power year by year. The only way to stop this is by purchasing precious metals like gold or silver. Or having a well balanced porfolio with stocks, obligations, crypto etc But most people don't have the knowledge to invest in such things and end up losing their money, because its nothing different than going to the casino at this point.
O yeah and from my observations, we will have really high inflation in the upcoming years. Maybe not hyperinflation because this is caused by capital escaping from the current place where the inflation is going. Which will result in switching to a new monetary system mark my words
Or you know. The government could tax the people with the highest marginal propensity to save and with the lowest marginal utility to raise funds. Simultaneously use the fact that a sovereign currency cant to bankrupt to help fund whatever is being targeted. That way there is little pressure on inflation, not to mention they can always restrict the money supply. Lol. But what do I know.
@Joakim von Anka You don't know what you are talking about. I'm an MMTist and we don't think humans are rational, in fact it is one of our main points, humans are prone to make mistakes. Also if you look at it from a biological perspective, there's system 1 ( fast thinking, emotional, little effort) and system 2 ( slow thinking but more rational). Humans evolved to use system 1 most times because it is more efficient and uses less energy for our human body, system 2 consumes a lot of energy and it would not have been efficient for our human body to use it all the time. That was from my MMT economist teacher in university. Hence, why we are not rational humans. But according to monetarism, new keynesian, neoclassical or classical economics, we are. So i think you are confused.
@Joakim von Anka Mark Blyth didn't destroy MMT, he doesn't understand it. He is like you, labeling and putting neoclassical ideas into MMT which does not work because MMT isn't neoclassical, you can't put neoclassical ideas into MMT.
I love how he explains this concept of money without any grim undertones of other videos. He explains the concept very well and only uses facts , no assumptions or crazy conspiracy theories. Love your videos.
18:00 *WRONG!* My finite time and energy was used to get that money and it's being taken away from me against my will! That gives me the right to complain all I want!
He's not saying you can't complain about your money being taken by the govt. He's saying that money is not being taken in order to give to poor ppl as many conservatives complain about. The amount you are taxed doesn't depend on how much the government spends.
Henry Gustav , the Japanese Yen is a reserve currency. Not anywhere approaching the USD what with it being 64% of all reserve currencies in the world.... but the Yen represents about 5% of all currencies held in reserve which is, respectable given that makes its tied for 3rd with the British Pound and just under the Euro at 20%
@@henrygustav7948 1. the Yen holds 3rd place as a global reserve (the Pound is 4th btw( 2. "no inflation" is a bad thing. (You want just enough inflation to deter hording of cash...to maintain liquidity and thus economic activity). Hording cash has upsides...it creates room for currency devaluation. 3. The current debt to GDP isnt the highest Japan ever had. They've done this before. After WW2 they made massive debt (260% to GDP) knowing it would erode with inflation and currency devaluations. While at the same time using mercantilist policies to build up foreign reserves(their piggy bank)...which would not erode as fast. Modern Japan is doing the same thing. High debt to GDP....$1.35 Trillion in foreign exchange reserves. They still devalue their currency (which is great for the exports of a manufacturing economy). The "no inflation" situation, on the other hand, is not desirable.
Its not about centeal planning fot industries that already exists. MMT ist about using resources that arent used by the private sector like unemployed people
every time you print money, you are basically stealing the people's money who uses your currency, because in the end those people pay for it through inflation. Let's say you printed money and bought a bridge. You didn't just print a bridge out of thin air, the users of your currency paid for that bridge through inflation. Some of which may not even be your citizens. That's why a currency that can't just be printed at will is better for the users of that currency. And the public needs to be more aware on that issue.
@@mystisification I'm saying whatever benefit you created by printing money, in the end, the holders of your currency paid for it through inflation. And maybe they benefited as well maybe they didn't. It's like a hidden tax everyone pays for using your currency, except some of your users may not even live in your country or are your country's citizens.
@@mystisification well what you're trying to say is that the US government takes 2-4% of the entire world's population's wealth through the inflation to build some bridges and schools for the US citizens. And it's good because it could be worse.
@@mystisification theres no such thing as a "cycle" and counter cyclical policies are just desperately trying to rewind the money printing process for previous years
@@mystisification I'd claim the opposite and say there are loads of economists that missunderstand (sometimes on purpose) the present and think they can predict the future because they are smarter than everyone else. When this people screw money up and make, by printing, buying debt or buying currency more profitable than investing, most of that printed money falls into a pit and the rest depreciate along with the new fresh cash. Why would someone invest for a 4% risky anual profit it if is going to be devoured by inflation and you are offered a 2% for buying stupid debt
Being a “good citizen” means I work tirelessly to expose the lie that fiat currency has intrinsic value. It doesn’t. Only MONEY has intrinsic value and currency (or cash) is NOT the same thing as money! Currency can be “legal tender” but but not “lawful money”. See Article 1, Section 10 of the US Constitution. Currency is to money, as a coat claim ticket is to a coat. Wake up people before we are ruined.
if that is the ONLY thing you got from this basic introduction...not only is that sad, but also wrong. How about doing some actual research on MMT starting with lectures by Stephanie Kelton.
Remember your only half way through life and you know how important it is now so if I were you I would invest Invest as much as possible into the s and p 500 monthly teach your kids if you have any
This video coupled with your previous from Mar 26 is an amazing exercise of cognitive dissonance. In the other video all our woes are caused by runaway debt. Yet in this video, Modern Monetary police just has to be managed properly even tho the entire monetary system, the WHOLE thing, is founded on runaway debt because... we borrow money into existence. Why? You did a great job explaining it was not always this way, but you never explained what changed and why. Why do we borrow money into existence? If the banking system didn't create money, who would create it. How was it created in the past. You could even explore the rationale, and after 100 years of the current system, really contrast the two. Because the monetary system we have now was supposed to cure the ills of the previous system. Unfortunately your trashing of the "On a Desert Island with a $1m" story misses the true efficacy of the illustration. It has nothing to do with intrinsic value, because well, nothing has intrinsic value (another discussion). Money is useless (worthless) on a desert island because there is nothing to buy. Money is irrelevant when there is nothing to buy, so what is more important, money or stuff/things? This is not a chicken and the egg question of which came first, money or products. Money never comes first. That fact, illustrated by the desert island story, reveals the true nature of money, the constraints of which are the single biggest hole in the Monetary Theory of money.
@@r-gart I've never seen a video on YT addressing this question: If a government or it's central bank did not print money, where would money come from?
@@lastgiddon In the case of crypto's like bitcoin that eventually become static/finite when the max number of coins are mined, by dividing them into smaller and smaller fractions. Today a loaf of bread could be 1 bitcoin, in 10 years it's 1/2 bitcoin, in 10 years its 1/4 etc as the products/services expand while the money supply remains static, until one day a single bitcoin buys a private jet and .000001 bitcoins buys a loaf of bread. Natural money (specie) like gold (whose supply is negligible enough to be essentially static) can't do this because, following the same progression, a spec of gold dust would buy a loaf bread when a 1 ounce coin buys a jet. When money is a product of the market like cell phones and ice cream (instead of a government monopoly), the free market adds another coin like silver to the money supply. Likely we will get multiple crypto's of varying value/buying power in the same fashion rather than buying bread for .000001 bitcoins.
So modern monetary theory is promising the the same thing that the U.S. federal reserve has promised for a hundred years now. I’m not holding my breath.
Listen I love this channel and it’s helped me learn so much, but you cannot say “printing money is the answer to our problems” with a serious face and still maintain my confidence
14:58 "Almost every country in europe..." Yeah like only two thirds actually Edit: Two thirds of the countries in the EU. In Europe way less than half the countries have the Euro.
The fundamental flaw of MMT is that an economy is not the exchange of money, it is the exchange of goods and services, or more simply, labour. Printing money does not create new labour out of thin air, it just confuses the metrics as to who is owed labour (itt has money). When a government prints money to fund a school, it is taking the labour necessary to build that school out of your pocket. Friendly reminder that the Roman Empire collapsed, destroyed its middle class, and gave way to feudalism largely because of the belief that it could print however much money it wanted to fund projects.
The other way of looking at what you said is they ignore the importance of prices in the economy which leads them to wrongly believe that prices are irrelevant when the reality is prices are the mechanism to make judgements about the relative efficiencies and outcomes of investments.
EE: “ state is not a money consumer, rather money creator, and thus it should not be treated like a normal citizen when it comes to spending” Also EE: “ ...and that’s why Greece has been a naughty frivolous boy and didn’t save enough money for the hard time”
This was fascinating. However I don't understand the difference between what you explained here and today's reality. What are the influences that make it so that governments can't just print whatever they need. Why are we all talking about the state having to get income through taxation? Keep up the great work and thx for opening my eyes to many of these processes!
VatnsFjall it is linked to the economic output of the country and what people are willing to pay for it. Without the increase of economic output inflation would get worse.
Two things that MMT advocates fail to understand/explain: 1 - banks OUTSIDE the USA jurisdiction can also create dollars (eurodollars), and therefore the FED is not in full control of how much currency is created, thus not in full control of inflation. 2 - if you can just print money to address basically any problem, why do we even have to go to work tomorrow? Can't we just stay at home forever and receive cheques (or any sort of digital currency) from the federal government or the FED? Why do we need to pay tax then? If the government can just print their way out of any deficit, then no taxation is necessary, right?
2) Inflation. Taxes are required to take money out of circulation if inflation rises beyond the target level. Which brings you to 1) governments that issue their own sovereign currency won't accept tax payments in any other currency. So if you owe US taxes and you hold eurodollars, you'll need to convert them to US dollars to pay your taxes.
Answering in order: #1 every single bank in the world is subject to the regulation of its host country. And, guess what? Every single country uses a form of fractional reserve, except for Islamic banks. Thus, there's a limit to how much new money is created thru emssion of debt. For British banks, fractional reserve is defined by law at 3%, so every pound you deposit into an account gets converted into 33, of which 32 can be lent by the bank. AND when the receipients of said loans repay their debt, those 32 pounds get mostly destroyed... except for the interest, so if the bank is charging 10% interest rate, the bank ends up with 3.2 pounds of profit off the initial 1 pound deposited. So it doesn't really matter that banks outside US jurisdiction can create virtual dollars out of thin air by emitting debt, the amount they produced is effectively capped by a maximum that will never be passed. On the other hand, the FED has no law limiting how many dollars it may print on any given period, nor the US gov't has any law limiting how much debt it will take (yeah yeah, there's the damned "debt ceiling", but it's semi-periodically lifter).in circulation. The point is that M0 is what the FED has printed into existence, strict M1 is 1/(reserve %) which is 10x in the USA, real M1 is bigger than that because of, as you noticed, eurodollars but still it will always be a constant multiplying the amount of M0, which will only change should those banks' regulating bodies change the laws on the reserve percentage (happens, but very rarely).
HayenMill The fact that he has a lot of self-promotion pages in his Google results, but doesn’t have an entry on Wikipedia, reaalllyy makes me doubt him. He also lacks any credentials that would make me believe he’d be an expert on this specific area of economics, having earned a BS, worked as a financial advisor for just short of two years, and then jumped into the fray of economic theory. If someone like Dr. Krugman thought that MMT was the best current macroeconomic theory available, I literally wouldn’t listen to Roche about anything he had to say.
Krugman self promotes quite a bit as well. Additionally while higher level specialization is a need for diving into the technical aspects of MMT,a general education in economic is sufficient for a general critique. As for your last point do keep in mind that 1.) There are always institutional biases, limitations, and culture which create limitations in their logic. 2.) Krugman has personal interests, must conform to aforementioned limits, and are simply wrong at times. 3.) Short of historical and empirical evidence a theory is just a theory regardless of proponent. I wouldn't say to simply be a contrarian and take the heterodox view,but neither should you take a view in its entirety just on account of it's proponents established nature or accreditation by said establishment.
@@georgescotsdale361 Having a doctoral degree directly relevant to the topic of study versus having an irrelevant BS degree and a topically relevant (and short-lived) job in the field doesn't make you an expert in anything. Paul Krugman is an internationally acclaimed scholar on macroeconomic theory. It would be like saying that some random Joe Schmoe who cooked at a nice restaurant for two years and studied online for a bit could hold a candle to recommendations from Gordon Ramsay. It's silly to think there's a legitimate comparison.
Hey man. If you ever had a course on economics I swear I would invest in it. I guess I'll check your Patreon for now. Your lessons are truly mind blowing
MMTers pushers are so happy because they have been looking for someone like you who swallows their illogical confused contradictory theory without being able to see through it.
This blew my mind: the government does not actually need your tax money so it can spend on programs, it only needs only needs them to create demand for money! At some level the two are still pretty much the same thing, but I never thought about the latter characterization.
No they're very different. One claims that you need taxes to fund a program. The other demonstrates that the govt is itself the backer of the dollar. We're not in need of Gold bars, for example, to back our purchase. So long as the nation continues to maintain it's population and continues functioning, we keep making money. Remember that money is just a representative for resources that we control through our govt's licensing and regulation.
@@draunt7 Taxes are still necessary to counteract runaway wealth inequality, which leads to capital asset price speculation, which in turn leads to consumer price inflation as asset holders attempt to derive 'appropriate' returns from overinflated capital assets. This is why inflation followed the Covid relief payouts, because of lack of windfall tax for 'high-enders'.
My problem with MMT is that it is just too convenient. Now that our debts are huge - national, commercial and personal - along comes a theory that lends intellectual cover to just printing money to get out of it.
A couple of things you have to ask yourselves is why MMT may not be practical for us, since if no answer can be found, it is a sound path to embark on. MMT's core fundamentals derive in part from Keynes' theories, which many would argue were an ideal set of monetary & fiscal policies that could help revive economies that collapsed due to a decrease in aggregate demand. However, Keynes himself argued that his theories where to be applied only under specific circumstances where AD fell and AS (aggregate supply remained constant) in which case the Government should increase their spending and create a fiscal deficit to consume the extra surplus in supply that would remain available in the economy in order to cut the bottom & later on the top from the business cycle. In order to do this, Keynes argued that governments should run a fiscal surplus during the boom years, reducing the monetary supply in the economy that had been introduced during the bust period. This is of course a huge oversimplification of his theories, however, few economists outside of the classical schools of economic thought found much issue in these recommendations, for which they were implemented by governments all over the world. The issue of course was that economic assumes that people are rational, at least to some extent, and that politicians want the best for their country, but as we all know, it is not from the goodness of the butcher's heart that we get meat to eat for dinner, it is due to their own self-interest. This meant that nations all over the world took Keynes idea's and kept only the part that was politically profitable, at the end of the day, who cared about the business cycle when elections creeped up in the corner, right? This has led nations all over the world to create huge fiscal deficits that they will never pay off. This has created different consequences for different nations since each situation is different. For those that borrowed in other country's currencies, the risk of default grew exponentially, causing many economical collapse along the years. For others, welfare states where implemented with the best of intentions to ensure that the people found themselves better off regardless of their faith, & slowly but surely these nation's cultures and motivations to continue innovating, continue growing (in terms of REAL GDP) and continue prioritizing their liberties over their paper money has subsided. Now, where could MMT fail in the US? Let me start off by being clear, I am not sure whether it would work or not work, I am not sure whether it is desireable or not desireable, frankly, each individual's morality & ideology will lead them to a different conclusion, but I am sure that it is essential to question any theory or economical current that one seeks to adopt BEFORE doing so. Firstly, for MMT to work the Federal Reserve would need to be politically independent in order to act in response to the levels of inflation and not to the demands of a president or congress seeking re-election. We know that on paper they indeed find themselves in this position, however, just a quick look at present times and at what has been historically done to Keynes' ideas can tell you that this is largely an idealistic utopian belief. Secondly, The Federal reserve would need to have real time, exactly precise data on what the current monetary supply IN CIRCULATION is, the actual rate of price inflation in EACH AND EVERY INDUSTRY AND REGION since bubbles can form in all asset classes as well as all cities in the country, and one number reflecting all states and cities would not accurately do justice to the real situation on the ground. It would also have to find a way to inject or retrieve money from certain sectors of the economy and certain regions of the country without necessarily impacting all others, which would prove excruciatingly difficult in this era of special interests. Thirdly, the individuals at the federal reserve would not only have to have even more power than they currently do, they should be expected to exercise this power absolutely perfectly, making all the right decisions at the exact right time with no margin of error whatsoever. Fourthly, the currency value of the currency in foreign exchange markets would be expected to be analysed and controlled heavily to ensure that the country's exports remain competitive in the global outlook to ensure that more productive, supply generating companies and jobs are not lost as a result of government intervention, which would be considerably difficult since our currency follows the laws of supply and demand similarly to all other goods and services. Even more points: Unelected officials will be given the remote control to our economy not only with the ability to create money like they currently do, but with the ability to decide or directly guide the taxation imposed upon the population regardless of the will of the people, since imposing taxes is vital in MMT's regulation of Inflation. - In the event of that a given good's supply is reduced substantially, say Cars, the Fed would have to ensure that none of the money being introduced in the economy be directed towards the purchase of cars, since doing so would inherently become inflationary quite rapidly, for which they would have to greatly reduce the freedom independent adults have on what they want to do with the product of their work, going far beyond what we now consider the role of a government that believes in democracy and the will of the people. - In the event that a mistake is made and inflation arises, taxation will have to be increased to levels much higher than what we currently consider reasonable, which will decrease motivation of production in the private sector thereby reducing aggregate supply of goods and reducing the amounts of goods available in the economy for money to purchase, creating more unemployment and either worsening inflation if people are subsequently employed by the job guarantee that MMT's superstars prescribe only to bid up the prices of these goods which are collapsing in supply, or creating mass suffering amongst people who have no job, have no money, have high demand for money since their tax obligations are high and are forced to see prices rise around them. Many more things can be said about the theory but I've gotten quite tired as is. Again, I do not claim that these points are inherently valid or that MMTers cannot provide me an answer for them, as a matter of fact, that is exactly what I hope will happen as the reason I post this comment is to get some insight as to how you would combat these issues if MMT were to be implemented. Personally I find many elements of MMT really insightful and extremely useful, whereas I struggle to grasp other elements of the theory like any other theory out there. Apart from the Job Guarrantee, I attempted to leave out policy prescriptions since they are for the most part absolutely appalling from my point of view, and it serves no purpose discussing them until we have reached a consensus on how MMT would actually work. Whoever you are, & I plan to comment this on multiple videos to get more insight, I highly encourage to write your thoughts and comments on what I have just laid out, as well as any concern or alternative you have for the theory, please keep comments civil so we can learn and grow together, thank you!
Banks: Inflation is a thing USA: Nukes and aircraft carriers are a thing to Banks: ok, US Dollar doesn't lose value, lets quickly shift the wealth to the top 0.01%.
So what can the ECB and Eurozone do to mitigate this downturn and rising debt? Why is it different from a national currency. Could you do a video on that too?
Have a treasury, you have a central bank but not Treasury. MMT already proposed a number of reforms for the ECB. Including that one I said, and going back to their original currencies. The Eurozone was a failed experiment, you have all these countries with joint monetary policy but no joint fiscal policy, it will always be biased towards crises. MMT predicted that long ago.
Yup.He assembles a real straw man there. You could make the case that all assets values are circumstantial, but that disregards that currency is a non physical asset that attempts to represent goods and services, it's neither on its own.
It's not a good idea to print currency, without demand for that currency. (That's how you end up in a Zimbabwe situation) Tax creates demand for that currency. (One of many ways to create demand). The more demand you can create, the more money you can print without becoming Zimbabwe.
@Economics Explained Firstly, there is a great sense of appreciation, joy, comfort, even clarity concerning matters I had less knowledge about, which comes from watching your content. I'd like to think I'm not alone in this, maybe even enough so that others mention it itoo, and it becomes worth it to consider and implement an alternative. I realize I'm a lot more sensitive to my memories and imagination than seems normal, but simply seeing chalk on a chalkboard (apparently just thinking about it, cause it happened again) is enough to send shivers down my spine
Do the economy of Argentina! It's incredible to see how we've dropped from being one of the biggest economies in terms of GDP per capita in the 1890's to one of the worst in just 100 years
