Venezuela, the Weimar Republic and Zimbabwe prove MMT is true 

Excellent and insightful commentary as always, thank you Richard.

Thank you for this Richard. Every time someone raises Venezuela, Zimbabwe or Germany post World War I, in what is usually a throw away one line comment to try and discredit Modern Monetary Theory, I will point them to this video. A brilliant explanation of what really caused their hyperinflation.

MMT doesn’t harm people Politicians do!

Another wonderful youtuber. Thank you for keeping the videos short and precise! Now I have so much knowledge to look forward to watch

It was Ian Smith who declared UDI in 1965. By the time of the Lancaster House agreement (an agreement that Rhodesia only signed because their economy was on the verge of collapsing), Rhodesia had been fighting a war for over a decade and been sanctioned by virtually every country in the world. Their sole route of trade was with South Africa, who naturally cut trade links after ZANU won the 1980 elections. Britain then officially granted Zimbabwe it's independence. The first Prime Minister, Robert Mugabe, has been reported to have been a Marxist, Leninist, Maoist, (he wasn't, which is why Zimbabwe didn't become a Marxist state) which naturally dissuaded investment from western Europe and the US. I don't see how any country could have thrived under those circumstances. Edit. The land reforms were a mistake from an economic point of view (as well as other points of view). The farm owners were the people best qualified to manage the farms profitably. The land didn't generally go to the farm workers though. In 1979, ZANU had over 25,000 armed guerillas, ZAPU had 20,000. These people had been promised land reform. Did I mention that they were armed? It was a stark choice between a certain civil war or a probable economic collapse. I'm not a Mugabe apologist BTW, He certainly made mistakes. He became more authoritarian the longer he ruled, and maybe he would be remembered more positively if he'd just served one term and retired.

Unilateral Independence from the UK was declared by the Rhodesian government in 1965, not by the Zimbabwean government in 1980. Rhodesia was punished by sanctions. The new black government of the renamed state had international support from its inception and wasn't until fairly recently.

To me the MMT sequence of events looks more like this: 1) There's an economic catastrophe that destroys the tax base. (Outside forces for Weimar, self-inflicted for Venezuela and Zimbabwe with their inept socialist policies and rampant government corruption). 2) Government won't reduce expenditure to match their reduced ability to levy taxes. 3) Excess government money being pumped into a reduced economy leads to inflation which further damages the economy. 4) Rinse and repeat until complete economic collapse.

Lets see what would happen in Venezuela if it didn't have crippling sanctions passed by the west and it's reserves stolen by the banks. By the way, it was Ian Smith who declared unilateral independance. Mugabe was voted in by the people but was punished for his socialist land reform.

I agree with this explanation, but I’d like to take a step further and ask: what if those who benefit from the current system actively operate to prevent any alternative taking place?

Richard, it would interesting to discuss Argentina and its current hyper-austerity solution to its woes.

"The world turned against them" So, in short, MMT is still at the mercy of the global economic system, something that no single country can control or change.

If the UK used the creation of State money to finance Government expenditure, then the money supply would increase rapidly. This would almost certainly lead to inflation. If taxes were raised in order to destroy excess money, and thereby control inflation, then we would end up with both higher government expenditure and higher taxes. This would leave us in virtually the same position as if we'd used higher taxes to fund higher expenditure in the first place. That is why MMT is not the panacea it is claimed to be. It is much better to limit the creation of State money in the first place, than having to use higher taxes to control inflation.

I thought UDI was declared by Ian Smith when the country was called Rhodesia ?

Interesting article 👍 👏

Thank you. I'm beginning to get a handle on this financial world.

The main difference I see between economists regarding MMT is the extent to which it can be leveraged, not the validity of the concept. Oddly, the people challenging it usually support a concept of austerity which has zero supporting evidence of efficacy, and in fact large amounts of evidence to the contrary.

This is all really interesting. Am learning a lot about something I knew really nothing about except that having little money makes life very hard, and watching UK crumble around me.

Venezuela 🇻🇪 subjected to sanctions and US political interferance. Weimar as you correctly say was already an economic basket case and had to pay reperations in the victors currency.

This is the first of these videos of which I've felt seriously critical. The depiction of what happened to Weimar Germany accords far too much credence to Keynes's prediction in "The Economic Consequences of the Peace" and pays far too little attention to what actually happened, which is quite a complex story. It has to be remembered, in particular, that there was always scope for rescheduling reparations payments and negotiating them downward, with assistance from the international community. The key was the Wall Street Crash of 1929, not the terms of the Versailles Treaty.

Turkey 🇹🇷 seems to knock noughts off their currency periodically, and the locals love $ and £s

Could you talk about how Argentina's economy got to the state it's currently in

What about Argentina?

Nice to see the soup-for-brainers on previous posts are silent today now their favourite response has been debunked. To all those people: imagine if you actually educated yourself before posting on the internet :o

And lets not forget the correct sequence of events: inflation occurred first; money was printed to meet the payment needs of the people.

I'm afraid that your mistakes about the history of Zimbabwe rather undermine the credibility of your argument, even though it may well be valid.

This is what the wider world is trying to do to Russia with sanctions, but Russia has made allies with China. With Iran in Africa, so they are able to trade. The sanctions have not hurt the country as much as the world wanted it to do.

Robert Mugabe did not declare UDI, Ian Smith did. Get your facts right.

Argentina might be added to your list?

MMT is very good and very interesting. Once you understand it, it makes obvious sense.

An excellent explanation marred by the careless mistake about UDI - even though it doesn't really impact on the argument.

Why are we here? surely not to live in pain n fear as J Lennon once said.... Gotta be a better way and these Man made systems for the benefit of a few surely need a radical overhaul. 🤔

Quality as usual ❤. What really needs to be said is that the downfall of a country’s economy is usually down to corruption of politicians and the banking system itself. We As ‘citizen’s’ are liable for the nation’s debt and our taxes are laundered off to foreign corporations like the WEF . We’re forced to pay for cameras for ULEZ via council tax and road tax . Private investment is encouraged, draining our nation of its wealth. Just like privatisation of our infrastructure in the 90’s . Now everything is sub contracted to ‘outside’ entities. Political parties and financial institutions lining their own spineless pockets via laws they lobby for . I say ditch say everyone should ditch the worthless pound and buy gold or silver, select blue chip crypto whilst learning how to be self sufficient, especially in a practical way . I’m 150% up since doing it 18 months ago and have no debt or anything on finance. 😃😃😃😃. Or you could borrow and use a promissory note to pay it back via the bills of exchange act . 🤔😉 Would be nice to do a topic on this please Richard. ❤🇬🇧

The idea is widespread that the Weimar Republic collapsed because of hyperinflation. That's flat-out wrong. The Weimar government ended the inflationary spiral by switching to the Rentenmark and the country was relatively stable and prosperous, considering it had just lost a war, until the effects of the global financial crash of 1929 made themselves felt.

MMT is, or seems to be, a theory in the scientific sense. It's really that the word has other shades of every day use. If those senses, you could say that, say, The General Theory of Relatively was more of an explanation than a theory.

Thanks for the video! A few notes on Zimbabwe: 1) Zim (at the time Rhodesia) was sanctioned up to its ears during the Bush War. These sanctions continued for some significant time after that (I believe some are still in place today). You're not wrong that it was under sanctions in the '80s, but they didn't start in the 80s and Zim was already suffering - evidence: look at the conditions and subsequent protests which lead to the Gukurahundi Massacres in 1983-87. 2) The official line on the seizure of farmland was that it was going to be given to the farmhands. In reality, the farmhands were usually expelled (or killed, along with the farmer) as well. Small parcels of land were given to the War Vets (of the Bush War) who did most of the seizing, with the balance (the majority) being given to government ministers and their cronies. Corruption in Zimbabwe; who would ever have expected that! These ministers/cronies obviously didn't know how to run commercial farms (especially in a country which regularly suffers from drought and other challenging conditions) and so that was a major part of why agricultural production collapsed like it did. Most people miss the collapse of production in key national sectors when it comes to all 3 of the examples you mentioned, but it's nigh-on impossible to understand the subsequent hyperinflation without those events.

How about a vidio on your thoughts on UBI

I have read that currently there are two economies i) the financial economy - example equities ii) the real economy - example goods and services that the average citizen engages with. In addition I have read that the problem with the current version of MMT is that government generated fiscal stimulus is only entering the financial economy and is raising asset prices while the real economy is not receiving the benefit of this stimulus and is struggling. This misdirected stimulus might be as a result of a function outside of the MMT machine but even if it is not it should be rectified as soon as possible as it is damaging the support for MMT.

The UDI of Rhodesia was made by apartheid leader Ian Smith in 1965, making the white settler regime independent of the UK. The UK recognised Zimbabwe's transition after the fall of that regime and accepted Zimbabwe as an independent state in the Lancaster House Agreement of 1979. I'm not sticking up for Mugabe here, just trying to get the facts right vis-a-vis Zimbabwe and the international community - it was not considered a rogue state in the 1980s, but fully accepted by the UK and its allies. More importantly it had full IMF/World Bank backing during that period.

Venezuela - persecution and intrigue from Washington, its proxies in Europe. Zimbabwe - the long impact of imperialism, and sustained intrigue post-Empire Weimar - it would be interesting to look at this history in the context of Washington/London driving Fascism in Germany* (key text in this area * Conjouring Hitler)

I’d like some examples of countries where MMT is actually being used.

I think you have hit the nail on the head

Small correction. UDI was Ian Smith in 1965.

Ian Smith declared UDI not Mugabe!

QUESTION: What about Iran now? Iran has sanctions imposed against it, although it seems to be selling drones to Russia, and I presume is selling oil by the 'back door.' It has a horrible repressive goverenment and there is massive unrest in the population, with a possibility of an armed uprising/civil war. How is it doing economically?

If China is selling US bonds and increasing commodities purchases, alongside the fact that the 'BRICS' countries are considering a commodity-backed currency, is the dollar still a reliable currency to trade and preserve wealth in? It's the most sought after currency as it's the world reserve currency (although it's purely backed by debt issuance). As all other major currencies are derivatives of the dollar (also only backed by debt issuance) are they good currencies to trade and invest in? In this context where do Argentina and Russia sit? Both are resource-rich countries with terrible currencies. Can MMT apply to these countries?

Zimbabwe did not declare UDI in 1980 - that was the year that it became independent and internationally recognised. Rhodesia declared UDI in 1965 and was under sanctions.

Not sure on MMT yet but I definitely think Richard should go on Strictly Come Dancing.

So for MMT to work, ten conditions (by my count) have to be fulfilled. Talk about a cop-out! Ten reasons to say 'it was not really MMT'. Perhaps you should become a politician? You have all the right excuses...

arguably the countries that conspired to make Zimbabwe and Venezuela fail understood and applied the principles of MMT. Or perhaps not ‘the countries’ but individuals key to those actions.

So what is going on with China Russia Iran forming a challenge to the USD ?

Nothing backs the concept of money up though

I am not an economist. Can you answer please these questions. Is cryptocurrency a threat ? With the rise of China's economic power, is it's currency a threat to the dollar ?

So money only has value because of the taxes you have to pay for the government. What happens when too many people work for the government. The private sector can't generate enough tax revenue to fund it, that's where we are heading.

Weimar currency collapsed largely due to the private Reischbank printing large quantities of the German mark to be borrowed/short selled by International Currency speculators.

Enoch Powell the famous monetarist would never have let the national debt reach £3.5 trillion.

Totally wrong to blame the USA, even in part, for Venezuela. The currency collapsed a decade before any sanctions. The US was until then their only full price customer

The BRICS common currency in development are free from these limitations and not pegged to the USD or Euro. It also doesn’t replace domestic currency or soverign central banks ability to adjust rates as needed. Venezuela's exclution from the global financial systems and sanctions had much more to do with the hyper inflation they suffered than oil price fluctuations. Quite different from Zimbabwe or Argentina (not mentioned).

Does MMT explain why the buying power of the dollar, the pound, and the euro weakens year after year?

I have just returned from Zimbabwe. The Government, is corrupt and dysfunctional, and has just launched a new currency (the ZiG, which is already inflating and no one uses it. There is a large and vibrant informal economy, using the USD. No one pays taxes, things sort of work and people get by. Where the formal economy has failed, the informal economy has taken-up the slack. For example, the police are paid in the pretty worthless ZiG, but operate a system of informal “road tolls”, payable in USD.

No. Ian Smith declared UDI for Rhodesia. No need for the little dig at the world punishing a left wing government with sanctions. Quite the opposite. There were no sanctions on Mugabe.

Beginner question: Are there any other currencies except for USD, GBP, EUR and YEN that are accepted for international trade? I thought most countries need dollars to trade internationally. If that's the case, can't we say MMT applies to a handful of rich countries?

To opponents of MMT, the culprit is always a reckless government. But in 2008 the private banking system did just what the govts. are accused of. They issued money in excess of ability to pay back,

MMT appears to be correct in that the real economy and the monetary system have become completely detached under the current system. The problem I see is that none of the serious MMT proponents seem at all interested in talking about the real economy. It makes sense that growing the money supply is fine from a deficit perspective but they seem to take for granted that there are all of these “idle resources” lying around to be utilized. I am not convinced that this part is true because I work in the real economy and it doesn’t make any sense.

The fiat currencies of the world were adopted in early 1970's and all are in slow motion hyperinflation. All have lost at least 97% of their value, and the GBP has lost 99%. There is no sign that any fiat currency will stop losing value. Whatever the reasoning, this is not a good outlook for populations and deters saving, and promotes wild speculation in search of returns that will exceed the decay of the currency.

It’s not “the world” that turns its back on the unfortunate (left voting) citizens, it’s the USA and it’s client states. The crushing suffering of ordinary citizens in Venezuelan is the direct result of US sanctions applied because the citizens had the effrontery to elect a government not slavishly obedient to the USA. Similarly in Zimbabwe, along with too rushed Africanisation of agricultural exports.

What would happen if Scotland declared UDI?

Thank goodness we left the EU and never took the Euro. Otherwise no politically independent MMT option for the UK.

MMT not modern. Its in the bible. The inflation was due to the lack of an effective tax system. Modern tax systems give rise to excessive deadweight losses. The UK loses at least 25% of its wealth production due to the taxation of economic activity. The Weimar Republic stopped its inflation dead in its tracks at the end of 1923 with the introduction of the Rentenmark, when Hjälmar Schacht took over at the Reichsbank. Murphy needs to do a video about the Rentenmark

"Why did the Weimar Republic fail " One characteristic of Weimar was not only that its currency was worthless, but that its reparations obligations were denominated in foreign currency. Same with Venezuela, with the US lending money denominated in US$, as the Bolivar declined in relative value, the Venezuelan government either had to print or tax more to service the foreign debt obligations. More tax stifled the Venezuelan economy, and more money printing just accelerated the depreciation of the currency. Effectively a vicious circle. By the way, the UK economy isn't any great shakes either, measured by gold, the UK currency has depreciated by 98% in the last fifty years. The UK is on the same trajectory as Venezuela, just not quite as advanced along.

Does this mean that MMT can only work effectively if the government apply tax rises correctly and fairly? In the UK, Sunak borrowed approximately, £850 billion. If that isn't taxed back from the wealthy, the middle and working classes are swallowed up by tax rises, and inflation. The younger generation can't buy houses, and the landlord generation still continue to ensure their wealth by pushing rents up. With a debt that large, can Labour actually borrow anything to repair the economic damage left by the tories? It seems a fine line between allowing the expenditure, and being able to tax it back. Can MMT only work in a situation where the wealthiest can't hide their wealth through tax loopholes, offshore tax havens and accountants?

And Argentina?

<a href="#" class="seekto" data-time="528">8:48</a> That sounds to me exactly like what a theory is. I'm not sure I get your point in saying that it's a misnomer to call it a theory.

Incorrect statement about UDI by Rhodesia

The world did not turn against Argentina.

Keynes was the first one to suggest that balanced budgets were not necessary. Until him, balanced budgets were the order of the day. And Keynes,the great man, only suggested that budget deficits be allowed if budget surpluses are made in good times. So much of economics is about expectations. Keynes has been followed within broad boundaries.The expectation is that rules will be followed. What happened in the Liz Truss experiment? Historic rules were not followed, the exchange rate went into free fall and with a continuance of that inevitably inflation would pick up with hugely increasing import prices. If the experiment continued you would have had Weimar. It was inevitable that the experiment would be stopped.It is the expectation that rules were being followed that restored sanity. Calm was restored. It is the expectation that certain rules will be followed, which means that there have been no truly calamitous economic events of a similar nature Because everyone more or less behaves predictably following traditional rules then, because that is the expectation which is followed, there have been no enormous disasters.

People see a meme or headline & don't understand the story behind it but use it as a cliche.

Three countries which had one thing in Common - the most evil ideology the world has ever seen - Soclialism. MMT is fantasy land economic, any serious economist will tell you that. Perhaps Mr Murphy in all his Socialist / Communist pomp will enlighten us as to which governments of the world run a balanced budget and do not indulge in massive defecit spending? These countries are places like Saudi Arabia, Qatar, etc they rarely need to print money anyway, but the rest are chronic spenders who never pay their debt, just kick the can down the road, and this is why MMT is as realistic as the rainbow unicorn Mr Murphy will undoubtedly tell you is a real creature.

Not sure the Weimar economy was a disaster really They inflated their way out of the Versailles reparations So I think it was probably a good thing overall The Nazis came in because of the austerity programs that followed

Today, I was reading about history of French livre. The first French paper money was issued in 1701 and was denominated in livres tournois. However, the notes did not hold their value relative to silver due to massive over-production. The Banque Royale (the last issuer of these early notes) crashed in 1720, rendering the banknotes worthless. History is filled with numerous examples of hyper-inflation. But most of us don't look prior to the past century. If we search history of fiat currencies, we'll find that all fiat-currencies failed because of hyper-inflation caused due to massive printing. Creating more fake money, doesn't create more resources. All fiat currencies which can be printed or digitally created on massive scale and without limits will fail eventually. For a fiat money to be foolproof, it is necessary that only one fiat money shall be issued for one gold, silver or copper coin. The global fiat monetary system is like getting several loans from different creditors on same property. In the end, all the unsecured creditors will be screwed over. International trade only delays the inevitable. It is not the answer.

So applying your explanation of MMT to the UK....... - We have our own currency acceptable for trade and used by citizens to borrow 😊 - Government is probably stronger than many but needs tweaking😅 - We collect tax in over-complicated ways and don't distribute it equally 😢 - According to your other posts our central bank has too much power 😢 How do we get stronger government? How do we adapt our tax system? How does government set up to replace the MPC? On another important note..... How do your explanations tie in with trade and current account imbalances?

Print Baby Print....

10 minutes of trying to cobble together an argument!! Rhodesia declared UDI in 1965 and the UK imposed sanctions. Zimbabwe was independant and had been for many years. At 7.09 "The government ran an enourmous deficit, it printed money to cover it .. .. its currency collapsed" That is all you need to know. Can you name any country that has pissed away huge borrowing on "investment" and come out wealthier and better as a result? Countries like Japan grew their economy after WW2 with industry that made money, not schemes that just spent money. They re-invested profits and kept growing.

Major problems early doors then, if a basic requirement of the successful operation of MMT is to have a government that has popular support. Show me one of those around here. When are we going to have a look at the way our fiat currency has been denuded of buying power through money printing? Or is that a bit too vulgar a subject?

That you got your facts so absolutely wrong on Zimbabwe kind of invalidates your argument

Thought provoking. Too many conditions as you outlined in making MMT work. Now apply your logic to USA. We have case number 4 in prospect? So if the conditions for MMT are disappearing we will see if easy money is sustainable. Then of course the same analysis could be run for UK. So we have the real world and MMT. Or is MMT the canary in the cage for spendthrift politicians? Whichever end of the spectrum one comes from, a neat video, and time for a careful look at current events. Once faith in fiat breaks, as you mentioned, the system grinds to a halt, or alternative currencies emerge, or gold and silver resume their roles. When creditors ask for payment, the music stops if your country is a net consumer.

Governments love high inflation as it diminishes their debts. MMT may never work properly because it can't cater for the way people behave.

Economic sanctions

So hyperinflation was not caused by the printing press, but by a weak government??? And this person is a professor? It's a bit like saying that it's not that communism has always failed, rather that "proper" communism has never been tried yet...

MMT will accelerate the collapse and devaluation of GBP..... bring it on!! 🤪

also think hes being too simplistic jeff from dublin

Spare me the hyper-British delivery. If your case were solid you wouldn't such a rhetorical device.

what about north korea ??? you see i believe rhodesia could have survived because africa was never important even in the cold war jeff from dublin

Good try. Yes each of the main hyperinflation examples have specific reasons why they failed. That is because unlike you suggest any reasonable run economy stops going down your route before hyperinflation hits normally at the point where inflation hits 20% plus. Unfortunately we may see this play out here. The thing you also failed to mention is the context of competitive economy’s. We are currently running very high levels of debt historically but because of Covid so are most if not all of our competitors and much like after the war markets can both see and understand how this came about and can be rectified.

On one hand you're suggesting that MMT is a description that only applies under certain conditions, but on the other you're saying that the fact that failure to meet those conditions leads to hyperinflation is evidence for MMT. These are inconsistent and only the former is true. For MMT to justify itself based on evidence from economies that don't have the conditions you specified, it'd have to be broader and actually make concrete predictions based on the properties of those economies. You have instead used ad hoc (and perhaps accurate) explanations for specific instances of hyperinflation. You didn't even use MMT to explain those failures, so they can't be used to support it. Moreover, you'd have to account for the many successful economies across the world before the era of central banking, and the politically isolated countries that don't hyperinflate.

Ten minutes of pure mental gymnastics.

I don’t think a country requires hyper inflation in order to show MMT is not in the people’s best interest. (You could make an argument that it’s the government part of the equation that fails the test - but we don’t live in utopia.) Hyper inflation is just the worse case scenario that as you say only happens in the most extreme outcomes. Much like the climate doomsday morons are constantly churning out worse case scenarios (the only difference being none of those have ever happened). humans are obsessed with the possibility of disaster. MMT goes hand in hand with terrible government financial management. It certainly hasn’t done the west any favours when combined with globalism and free trade. The net international trade of the US and UK are in awful shape. The idea of creditors trusting your currency and your ability to pay your debt runs hand in hand with them believing that investment on their part will net them a return or at least not a loss. In a 40 year bull market for bonds it’s not hard to understand why they were happy to park money in debt. Have you considered why the US main buying creditors has switched away from being China and Japan (the countries that had the some of the biggest trade surplus). We’ve seen more bond market dysfunction in the last 5 years than the previous 40. There is a reason exporting countries are buying other things instead of increasing their bond reserves. Seems like it could be decreasing trust… You only have to look at the monetary wastage over Covid to see how poorly MMT works in reality. Now we are seeing it happen with war funding. There is no doubt MMT works in isolation,as you correctly highlight you need trust, peace and responsible government with great national investments - none of which seems to be moving in the right direction… Prior to the last 40 years bonds were and for the quite some time before that certificates of confiscation. What elements defined those periods, wars, distrust between nations, large government deficits, at least they got huge investments in national production efficiency. If you were a major oil or resource exporter why would you want to exchange oil reserves or mineral reserves for bonds that aren’t appreciating compared to just holding your oil reserves. The answer is well because you politically have to but you’d look for opportunities to buy up physical resources or rights that will hold their value. Chinas buying contracts for multi decade supply of natural gas you say? Gold is at all time highs you say? Record buying from central banks in the years following Covid.. strange I thought there was all this trust in MMT and government debt.

Wow, Richard you should work for the tobacco industry. Ie. An experiment on three animals forced them to smoke. The result: all animals died of lung cancer. THEREFORE this PROVES that Smoking is good for everyone. Richard, do not defend the indefensible, it makes you look foolish.

MMT needs a new way to destroy money, and those 3 examples only create new money so it's not an MMT good example 🙂

Ta

Analysis of Zimbabwe way off the mark. Factually incorrect in many respects. Go and read up again.