HOW CAN WE AFFORD THE BOOMERS? The Freedomain MMT Debate...

Stefan Molyneux

Stefan Molyneux discusses modern monetary theory (MMT) with a pair of callers, examining its implications for the aging Baby Boomer population, labor shortages, and healthcare resources. They explore contrasts with Austrian economics and the potential of government debt as a private sector asset, while also considering the impact of cryptocurrencies on state power.  SUBSCRIBE TO ME ON X! https://x.com/StefanMolyneux  Follow me on Youtube! https://www.youtube.com/@freedomain1  GET MY NEW BOOK 'PEACEFUL PARENTING', THE INTERACTIVE PEACEFUL PARENTING AI, AND THE FULL AUDIOBOOK! https://peacefulparenting.com/  Join the PREMIUM philosophy community on the web for free!  Subscribers get 12 HOURS on the "Truth About the French Revolution," multiple interactive multi-lingual philosophy AIs trained on thousands of hours of my material - as well as AIs for Real-Time Relationships, Bitcoin, Peaceful Parenting, and Call-In Shows!  You also receive private livestreams, HUNDREDS of exclusive premium shows, early release podcasts, the 22 Part History of Philosophers series and much more!  See you soon! https://freedomain.locals.com/support/promo/UPB2025

Transcript

00:00:00i think that this this is the interesting segue to talk about if if we're ever going to get the

00:00:06mmd here is when will the government not be able to afford the boomers so let's just kind of

00:00:12if you're okay with it just kind of frame it in that in that uh um context and

00:00:19on one hand we would argue me and nema that they will never not be able to afford the

00:00:29boomers the money will always be there but on the other hand not looking at the money just looking

00:00:37at a resources perspective what is it you know how many resources does it take to take to take

00:00:44care of these people at this older age i mean just look at say um assisted living and memory care

00:00:49um communities okay so we've we've drastically reduced the number of population at the low end

00:00:56and that's the population we literally need to work in these elder care facilities

00:01:01right where are they gonna come from i i mean maybe there's enough people to work in all these

00:01:07facilities and i mean i don't have the math in front of me or something but i think that's an

00:01:11interest uh interesting way to look at it which is again just forget the money for a second let's

00:01:17just look at the actual resources the actual health care resources the actual labor resources

00:01:20the actual housing resources whatever to to be able to care for this elderly population i think

00:01:26that's the constraint more than whether or not the government can actually afford it because i mean

00:01:33the argument that we've made before and we continue making in the future is that the government can

00:01:40always afford it and that the repercussions which is it's usually inflation right um aren't as bad as

00:01:49usually indicated um so i think i think i understand what you mean just sort of translate

00:01:58it to the gen pop so we can we can print more money but we can't print more people so if the

00:02:04constraint is labor uh there's not an easy solution this is outside of some some automation but it would

00:02:10kind of weird to see the 87 year old granny be being cared for by the terminator it would just be kind

00:02:15strange this there's a new movie right there yeah well um yes but on the other hand if if the the

00:02:25money constraint isn't a a seriously vital constraint is there a way that we could say can we have a

00:02:35conversation of a solution from this angle instead of going oh wait a minute there's not enough money

00:02:42yeah i know what basically the the um when we want to solve this problem as a matter of policy or

00:02:51whatever the fiscal deficits are not a variable to optimize for they're not um and if we try to optimize

00:03:02for it then we will um shortchange ourselves we won't achieve the objective of whatever it is that

00:03:10we're trying to solve and so sorry just to back that up for a sec because if we're going to do mmt

00:03:15we're going to assume that people don't know what we're talking about or what you're talking about

00:03:19since you guys are much what is this so let's just give the brief overview on mmt and then we'll talk

00:03:24about how that could solve or not solve these problems yeah mmt basically uh uh proposes that the

00:03:35uh federal the federal government that issues its own currency can never run out of that currency and

00:03:45always has the money to do something and that uh federal government deficits are not a um constraint

00:03:54on their activities now or in the future and it basically proposes that the reason money has value is

00:04:02that this money issuing government imposes a tax on its population which creates a demand for that

00:04:08currency and then proceeds to spend that money into the population and then the money it taxes out of

00:04:16the population is deducted from whatever the private sector keeps and the deficit is what the private

00:04:22sector gets to keep at the end of the day so literally the public's net private savings come from the

00:04:30federal government deficit and also by the way if we assume trade export surpluses

00:04:35okay so and by the way mmt stands for modern money theory you you forgot that part of the beginning

00:04:43sorry definitely yeah no don't don't apologize it's a combo yeah yeah okay so

00:04:50we can sort of get into criticisms which we've sort of done before but uh so

00:04:57tell me how mmt deals with the graying of the population

00:05:03can i do you mind if i take a stab at that one first just to kind of set um uh uh a foundation here

00:05:15so i i think it's important to to point out that mmt doesn't actually suggest anything

00:05:22it's it's just a description to say okay this is how we we think the the system is working

00:05:30to propose a solution is to say okay i am a particular mm tier and and here's my political

00:05:38views i'm more right-leaning or i'm more left-leaning or or whatever and based on that

00:05:42um and based on my understanding of the mft this is what i think we should do

00:05:46and uh it's i mean imagine it kind of like physics physics doesn't say you should do any

00:05:51doesn't say you should do anything it just describes stuff and an individual physicist

00:05:55might say well based on the physics i think we should do this well because you could have someone

00:06:00oh hold on okay go ahead no well let me finish this point you could have someone who's a eugenicist

00:06:07who says well the way we deal with the graying population is kind of like we just described before

00:06:11which is we just need to kill them all because i don't like them right and uh here's the mmt

00:06:16because i understand mmt i know we need to turn these dials on the economy in order to make that

00:06:21happen right now i i do appreciate the intellectual hubris of saying that mmt is as proven and as

00:06:28objective as physics uh but i'm sorry i did not mean to say but if if your theory is wrong then it

00:06:36does matter right so if you say well i want to build a rocket ship and i'm going to assume not that

00:06:40mass attracts mass but the mass repels mass i'm going to base my rocket ship on anti-gravity

00:06:45uh it's going to fail right because you'll just assume that you actually have to restrain it from

00:06:49flying away from the earth and so on right so so i think it does matter so he's wrong then everything

00:06:54that comes out of it is bs right so so yes i would say from sort of the austrian economics argument and

00:07:01obviously i'm far from a rigorous expert on austrian economics so uh forgive me where i go astray but

00:07:08from the austrian economics perspective uh they would say that uh government money creation

00:07:14uh really does matter uh because and of course they would say well we understand that you create

00:07:19demand for the money that you print because you require it to pay taxes and you can siphon off

00:07:23excessive money from the economy by uh by raising taxes or or something like that but the problem is

00:07:32is that when money is not released into the free market but rather is created

00:07:35in the under the wing of politics that it is interfering with market signals by taking money

00:07:41out of the free market and putting it or creating it through government you end up with the money being

00:07:47spent on political ends rather than economically productive ends and that's a negative even if we

00:07:54sort of overstep the significant moral problem of giving a small group of people the violent monopoly

00:08:00power to create and destroy currency that's quite a quite an awesome power it's a big a big ring to

00:08:05put on somebody's finger so to speak but there is going to be massive distortionary effects of

00:08:10simply having the money politicized uh no matter what that's going to harm the um economic productivity

00:08:17of the system i think it's really important to point out that i i support mmt and i agree with

00:08:24literally everything you just said so i don't think that there's a conflict between mmt and a prospering

00:08:34private sector heavy economy with a small tiny government in fact my whole point is that mmt would make

00:08:45that economy given the constraints of the fiat money system let's say we accept we don't live in

00:08:50encapistan all that that mmt makes that possible by eliminating this deficit obsession constraint because

00:08:59it would allow us to literally cut our private sector taxes to near zero and would allow for the

00:09:06flourishing of a big private sector a big free market lots of employment and maybe that would

00:09:12even solve this whole graying of the population because now you have people can easily afford homes

00:09:16easily find jobs like they used to be able to in the economy at full employment um when wages were rising

00:09:23and all that stuff and maybe that would solve the graying of the population even to your earlier

00:09:29question i don't know but uh i think it's just important to point out um mmt in my opinion is not

00:09:37opposed to what you just said to eliminating the public sector as much as possible and enlarging the

00:09:45private sector substantially well but if you give the government the power to create and spend money at

00:09:50will and you remove to some degree remove concerns no no but i mean if if even the theoretical concerns

00:09:56or constraints if the general population is led to believe that deficits don't matter and the

00:10:01government can create as much money as it wants do we really think that's going to end up with a

00:10:04reduction in the size i'm not saying that deficits don't we never say deficits don't matter right so

00:10:10that's why we go back to uh real resources are constrained so if the deficits get too large they start

00:10:17bidding too much resource out of the private sector then we start seeing significant inflation

00:10:22um that's also in line with mmt um what what we're saying is that the variable to optimize for

00:10:31can't be the public sector deficit it has to be something else in my opinion it's employment

00:10:37because with full employment so many of society's problems would be solved you could get rid of

00:10:43welfare you could you wouldn't you would have less crime less alcoholism less uh domestic abuse uh

00:10:50less single motherhood households all these things if we could create an economy with full with true

00:10:56full employment um and it could happen with a tiny federal government with a tiny uh federal budget

00:11:05with very low taxes um as long as we're not worried about uh about deficits but if we worry about deficits

00:11:14then we're going to start imposing an arbitrary constraint because we feel good about a number that looks good

00:11:21we feel good about a balanced numbers because we're used to that as households but then it becomes a

00:11:27personal esoteric endeavor for people in power such for example elon musk was an example that he really wanted

00:11:34to uh to pay off all the government debt which by the way the federal government debt is the private

00:11:39sector's um uh net savings so okay so just make that connection for people to make sure that people

00:11:47follow this well because the public sector deficit adds to the bond holdings of the private sector

00:11:54and um whether domestically or overseas right like say huge japanese bondholders in the american debt so

00:12:01so basically if you've taken the the the national debt is is held as assets by people either

00:12:09domestically or uh a foreign and so it's it's simply just private sector savings if the debt can

00:12:15ever be paid largely the domestic private sector there's also some foreign holders because we have

00:12:20a trade uh deficit um but largely the private sector yes and some of it also the federal reserve which

00:12:29i'm against i don't think the fed should be buying up buying away bonds from the private sector

00:12:34and to hold them but generally speaking to the dollar the public sector uh debt is the private

00:12:41sector's net savings that that is savings that do not come against bank debt or stock debt because all

00:12:50other private savings financial assets they always come with some kind of bank debt or a debt to a

00:12:58stockholder or a bondholder so that's basically you you issue a common uh you issue a bond now you

00:13:06borrow money from the bondholder but you owe money to the bondholder that is a wash in the private sector

00:13:12but federal government deficits are a net injection into the private sector of money with no strings

00:13:18attached and it's not even really necessarily that theoretical or hard to think but if you imagine we cut

00:13:25all our taxes to one percent or 0.5 percent or whatever how much money would you be able to keep

00:13:30in your pockets uh after that's done uh so it's a very practical way of looking at the monetary system

00:13:39in my opinion i'm sorry i i thought there was something else coming or everybody better if anybody else has

00:13:48anything else i want to add that's good yeah no that was yeah yeah that was my my thoughts on that

00:13:54yeah okay so the bondholders are saving the money that the government creates and then when sorry

00:14:03steph i'm having a delayed reaction to what you just said in terms of adding something to it i think i

00:14:08might be able to add a little bit of clarity please uh which there's this confusion between the bonds

00:14:15the reserves that me was really good at explaining i think i'm 50 good at explaining but if if we set

00:14:21that confusion aside for a second and we recognize the fact that the u.s government is the sole issuer

00:14:26of u.s dollars they can't come from anywhere else they've got they've got a monopoly on the currency

00:14:31now philosophical arguments of whether that's bad or good aside that's the situation as it stands right

00:14:37now so if the federal government does not issue dollars there's no dollars for the private sector to have

00:14:44that's actually not true because private banks can also loan dollars into existence i'm sorry i'm

00:14:50sorry if the federal government doesn't issue reserves there's no reserves for the for the for the um

00:14:56uh private sector to have which um me correct me if i'm wrong that would mean there would be no private

00:15:02sector net savings which we haven't gotten into part of the conversation of why that that specific

00:15:06type of money is so vitally important to the economy the private sector has the desire to net save they

00:15:13want to accumulate more and more financial assets every year and if they don't we run into problems

00:15:20they stop consuming they stop investing and you know bad things well but they save in order to invest is

00:15:27that the general argument no just to hold as a um financial asset to have available if something bad

00:15:37happens if and yet also potentially to invest of course but people also have the desire for a safety

00:15:44buffer that they just want to they don't want to put it in a factory or in a house or whatever right

00:15:51well i think i think most people would actually rather not invest their savings it's just that they

00:15:55have to because the inflation is constantly eating away at their capital well no because you can you can

00:16:01allocate some of your savings to stocks and and those will benefit from inflation generally speaking

00:16:08you put some of it in gold which is obviously a real asset but then somebody else gets your money

00:16:13you can put it in bonds which interest rates are not you know not terrible for they went over five

00:16:20percent for 30 year bonds recently um and also if a big bad crash happens and those bonds will do very

00:16:26well uh so yeah you obviously sorry and i agree i agree with all of that sorry to interrupt but i'm

00:16:32just saying the average person like you know we we're all i guess fairly well versed in some financial

00:16:37abstractions and so on and like to manage our our resources but the average person like the average

00:16:43person that i worked in doing manual labor when i was a teenager or in my early 20s the average person

00:16:48doesn't care doesn't know and doesn't want to have any of that sort of stuff they just want to put

00:16:53the money in the bank and save it for a rainy day and spend it when they need to but but they're kind

00:16:57of forced into learning about this stuff or handing over their money to a bunch of dubious financial

00:17:03wizards who say oh you know you got to invest because you know you're going to lose four percent of

00:17:08the value of your money every year and it's all going to evaporate so people don't want to in

00:17:13generally but they don't want to invest they want to have stable currency that they can manage now

00:17:18there's some people who are like yeah i'm a hungry wall street shark and i want to invest and make a

00:17:22zillion dollars and you know but but most people don't most people don't want to they just want to

00:17:26go to work they want to have they want to pay their bills they want to drive their kids to little league

00:17:29and they don't want to get involved in the stock market but they're kind of almost in a sense forced

00:17:34to uh half a gunpoint now because otherwise the value of their money is just going to evaporate over

00:17:40time well i don't know what it's like in canada but in the u.s there's actually a very broad

00:17:45culture with the 401ks of even just the average worker you know he will have

00:17:50some money in stocks just because the employer is offering it you know so yes but why does the

00:17:56employer have to offer it because without the 401ks uh it just goes up up the tax uh up the tax uh

00:18:03smoke yeah smoke chimney no and also like i said i think investing in stocks is one good way for the

00:18:09population to protect themselves against inflation but because among the beneficiaries of inflation are

00:18:14the corporations who get to charge those prices that go up okay so hang on hang on

00:18:19i get nema's point which is joe schmoe doesn't want to deal with it yeah i think steph was agreeing

00:18:30with you nema which is that they they want to get their savings they want to stick it into account

00:18:35and i mean unless they really have to through their 401k garbage or whatever from their employer

00:18:40they don't want to jump on and figure out all the stock stuff the safer want to get an account and

00:18:46and just shave it and forget about it and then the inflation eats away at that which is the i guess the

00:18:51dynamic pressure going back and forth here sure no that is what inflation does and so i was just talking

00:18:58about ways to protect yourself against that there's no other solution that i have um to offer to the

00:19:06individual i think practical solutions are important but yeah so i guess um the net assets injected through

00:19:14federal deficits are the safest assets only the safest of the savings assets but they constitute a net

00:19:21savings that does not come with a debt associated with it unlike other money

00:19:29like for example um a bank uh a bank money which comes through a bank loan if i buy a house from

00:19:39someone the seller of the house you know banks a bunch of a chunk of money but i borrowed money from

00:19:45the bank so in aggregate the private sector does not achieve net wealth um if i buy a stock same

00:19:52situation like the stock is a debt for the company a bond is a debt for the company but federal government

00:20:00deficits inject net savings which don't come with strings attached and add to very safe a very safe

00:20:07asset buffer for the aggregate private sector if that makes sense well i would argue that a stock is not

00:20:16a debt for a company but is an asset and i'll sort of give you a personal example which i think is

00:20:23generally true excuse me which is when i first uh co-founded a software company back in the 90s

00:20:30we went around hat in hand we couldn't get any institutional investors because i had a history

00:20:35degree and i was saying no i'm a great programmer they're like come on man and so we went around hat in

00:20:42hand to doesn't sort of really matter who private individuals and we raised eighty thousand dollars so

00:20:47we owed eighty thousand dollars or you know whatever it is at the beginning but that created

00:20:51a company that was worth a lot of money and so i wouldn't view and i know you guys know this but i

00:20:58just want to clear it up for the audience i don't view uh in stocks as a debt i view it as an asset

00:21:06because it gives you the money to improve and create more and so it's an asset for the stockholder

00:21:12right but from the company's literally from the company's balance sheet perspective it's a it's a

00:21:17liability to the shareholders it's a profit share that you have to uh send over to the shareholders

00:21:24it's not a fixed uh uh payment like with a bond but it is a variable profit share liability

00:21:31sure but you sell shares not because you want to just go around creating liabilities but

00:21:37you sell shares because it gives you capital to improve expand your business

00:21:43if you look at the cosmology of the economy and you add up all the the plus ones and minus ones

00:21:52no not literally as a company if you sell shares as a company you incur a liability to the buyers of

00:21:59your stocks right now i understand it comes with benefits of course you have now cash to invest expand

00:22:05and obviously also you can issue additional stock right so if your stock price goes up a lot now

00:22:12you have some sort of some sort of uh uncreated asset uh on the back burner that you can sell to

00:22:21uh um to more shareholders by committing to more profit share to more people but at the end of the day

00:22:29my point is just a stock is a form of financing instrument like a bond is with different

00:22:35characteristics and only in that sense am i referring to it as a liability well and i i want

00:22:41to sort of differentiate and i hope this isn't overly nitpicky and just tell me if it is but i want to

00:22:46differentiate between liabilities that are negative and liabilities that are a net positive and i would

00:22:55not view those in particular as liabilities so uh to take an example if some guy goes and and takes

00:23:03out a loan hopefully from the bank maybe from some shady guys in a soprano back alley but if a guy goes

00:23:09and takes out a loan for ten thousand dollars and goes and blows it at a casino now he has a liability

00:23:14but without any i mean the casino's made some money but it's not the most honorable way to make money and

00:23:20it's really just serving hedonism but now he's got a liability of ten thousand dollars that he has to

00:23:27pay back and he has nothing to show for it right he's i mean other than well i guess one anxious

00:23:32evening at the casino whereas a liability for a company that sells shares in order to raise money

00:23:37in order to open a new factory or do some marketing campaign or hire talent away from its competitors or

00:23:44whatever that is sort of net uh positive and of course yeah so i just i want to i don't want to

00:23:50sort of put liabilities in one big uh bucket or debt in one big bucket uh somebody who owes a bunch

00:23:58of money to their drug dealer is technically in debt but it's not driving much economic growth if that

00:24:03makes sense but the same could apply to a company issuing shares and then using that money to buy you know

00:24:10you know beanie babies or tulips and then that all goes belly up then they're sitting on bad stock

00:24:16just as the gambler said on no but the gambler is is i mean praxeologically sitting on bad debt

00:24:22the company has to basically defraud in a way uh unless it just makes mistakes which obviously you

00:24:30know there's all these calculations in in business that you can make errors in but by definition the

00:24:35debt to the loan shark is a bad uh debt and the company sure it can make mistakes it could be full

00:24:41of cheats but that's not praxeologically sort of baked into the entire interaction but you can make

00:24:48a good bond you can you can uh um get a loan and invest that money properly and then that can turn

00:24:56out to be a good debt too from the bondholder bank's perspective no i i sorry and i i agree with that if

00:25:02you borrow the ten thousand dollars and you invest in dell in the 90s whatever right okay good uh then

00:25:07then you've made some some money but i'm just saying that there are liabilities that are automatically

00:25:13negative now negative is simply from an economic standpoint if you had the greatest night of your

00:25:20life playing you know i'll remember it forever it will bring a smile to my face for the rest of my

00:25:25you know i was up fifty thousand dollars i was down twenty thousand dollars i ended up only being down

00:25:30ten thousand dollars it was the wildest most exciting night of my life everybody was so there

00:25:35may be some uh you know pleasure benefits like if you go on a cruise uh it's not like the money is

00:25:41being invested in something that that grows it's being consumed in pleasure and that's fine i mean

00:25:45we have to consume our resources in pleasure but there is a difference between loans that will not

00:25:52generate additional productivity in the economy and then there are loans that will and i'm sorry to be

00:25:59again so nitpicky but i really want to differentiate these things correct steph but i think we got kind

00:26:05of lost in the weeds because um taking a step back again really looking at like the whole picture of

00:26:13of saying okay well where do dollars come from in the first place was was what we were talking about

00:26:19and we were talking about the national debt and whether or not is that it you know what what do we

00:26:23mean is it a debt if it's a debt what do we mean by this is that because here's these weird guys

00:26:28coming on saying it's actually uh good for the private economy because now i have money what

00:26:33does that mean right um so you're saying that the government is transferring money to the private

00:26:37sector i'm sorry i was sorry i apologize so so the government by by creating uh currency by by

00:26:46selling bonds and so on is transferring resources to the private sector and i'm sorry if i've over

00:26:51oversimplified that but it's actually introducing resources to the public sector

00:26:55because it's creating fake nothingness out of out of thin air no no it's literally resource to the

00:27:02private sectors steph is correct right let me finish my point because because the government

00:27:08creates the nothing the money and then buys resources from the private sector and the and the

00:27:14government gets the real resources so the private sector gets money the financial asset move to the

00:27:19private sector okay financial asset but then also they also um hire people send out stimmy checks

00:27:25where they don't actually move any resources to the private sector but that most definitely they're

00:27:32moving financial assets to the private sector when they deficit spend money okay so they move assets

00:27:38to the private sector and then the private sector may sell stuff to the government in which case it

00:27:44would be a transfer of labor or materials or something to the government but by creating debt it's

00:27:49putting resources in the hands so uh of the private sector well all that by by creating the in quotes

00:27:55debt and and part of the argument here is we're saying that the debt from the money issuer is

00:28:00categorically different from the debt of a money user right yeah i agree that um in in remember

00:28:07so the the stock conversation we went into like the you know whether it's liability or an asset with

00:28:12with the person buying the money of the stock whatever that's all predicated on the fact that

00:28:16there's some money to buy stocks with to begin with right and that money has to come from somewhere

00:28:21and right now it comes from the sovereign monopoly issuer of the currency in which if we're talking

00:28:26about the united states is the united states government so at at like the beginning of of like

00:28:32you know in the beginning there was nothing and god said let there be light let there be light it's

00:28:37kind of like well in the beginning there was the government the government said let there be money and

00:28:39there was money and now there's something to work with jackson's yeah okay

00:28:42so so then there's something to work with i think i mean nema correct me if you think i'm coming at

00:28:50this from the wrong angle here but i think i want to hear what uh steph okay keep going keep going

00:28:57i'll hold my thought okay so so that's kind of the first step now whether that's good or that's bad i

00:29:03think is a very important conversation to have but but me me and nemo are coming out here going okay

00:29:10before we have that conversation let's just describe the situation as it is right now and the situation

00:29:16as it is right now is that's how money gets created is it it gets created through this thing that we call

00:29:22national debt or national deficit and then the government or excuse me then the private sector

00:29:27has something to work with in order to make an economy from sorry in order to make an economy

00:29:33what i didn't get that last word from from they have an economy from okay sorry i was expecting a

00:29:39different word my brain assembled the wrong jigsaw piece sorry go ahead sorry yeah so so that that is

00:29:45the lifeblood that the private sector needs and historically speaking you know it it's funny that that when i

00:29:53compared mmt modern modern theory to physics you're like wow you're you know there's a big leap there

00:29:58which on one hand is true but on the other hand we want to always point okay what's the evidence

00:30:04backing up what we're saying in united states history ignoring covid for a second because that was bizarre

00:30:11there have been seven recessions slash depressions every single one of those uh um depression slash

00:30:18recessions no depressed what about the great recession it's a great recession okay if we count that

00:30:25whatever bad economic downturn but yeah go ahead yeah but all bad economic downturns were preceded by

00:30:33either a a surplus in the government or paying paying off or trying to pay off the national debt

00:30:39and from the mmt perspective this totally makes sense because basically what you're doing is you're destroying

00:30:45the net savings of the private sector and then the private sector goes oh there's we don't have an affair

00:30:51and it crashes

00:30:53i i could get more specific than that but i thought that was an app metaphor at the moment

00:31:00uh i don't mind more specificity and i'll i'll give you the austrian approach to that and again i'm not

00:31:05it's not just mmt versus austrian but uh so go ahead and i'll i'll sort of get what i think

00:31:10so basically i mean there's there's really historically speaking

00:31:15two places where the money generation can come from it's it's the the the sovereign issuer with

00:31:21the monopoly control over the currency and the in quotes private banking system and we say that in

00:31:26quotes because it's really like this private public partnership because the banking system receives

00:31:32license from the government to do what it does um i think most people on the show by now i think

00:31:37know that when a gut when a bank makes a loan they make that money out it just comes out of thin air

00:31:43yeah they just type it into an account

00:31:45they just type it in and poof it appears and um

00:31:49was something like 97 percent of money or in

00:31:52in of us dollars or whatever are consist of actually that the that bank money

00:31:57right so um holy shit i lost my train of thought i'm sorry steph no no i apologize so you'll be

00:32:05talking about some more details about why these seven uh depressions yes have yeah yeah thank you

00:32:10thank you thank you okay so what happens is the when the federal government starts pulling back its

00:32:17private sector net savings oh this is the mmt argument starts pulling back its private sector net

00:32:22savings in order for the economy to continue pushing the only place it could go to is the in

00:32:27quotes private banking system in quotes because for reasons i described before but because the private

00:32:33banking system it it the the net liability and um asset is zero in the aggregate and i would even

00:32:42argue is negative because it comes with an interest rate as the economy keeps moving in order to

00:32:50service its own debt it has to continue to borrow from the private banking system which creates an

00:32:56even bigger debt to service so it has to you know it has to keep pushing that forward until one little

00:33:01you know jenga piece finally slides out and the whole thing comes crashing down

00:33:06austerity 2008 yeah yeah austerity caught government budget balancing or surpluses always go hand in hand

00:33:15with uh excessive private sector leverage interestingly that is the process that you're describing there yes

00:33:22okay so the austrian answer as far as i understand it again not being much of an expert but i think the

00:33:30austrian answer is that the more government interferes in voluntary free market exchange the more distorted

00:33:38and misallocated they always say sort of misallocated resources and so if the government decides to

00:33:45subsidize a whole bunch of agricultural development you know we're going to pay you a million dollars per

00:33:50acre of land that you turn to farm then yeah what will happen is you'll end up with a massive excess

00:33:56of farming with no particular place to sell goods that inevitably spoil and you will end up starving

00:34:01by by redirecting capital away from say industrialization or savings or education or whatever it could be

00:34:08and subsidizing like crazy farmland then you end up with a misallocation of resources and then the

00:34:15resources have to be reallocated more rationally because it's unsustainable and that reallocation

00:34:21process is called a depression and that's that i think again forgive me if i've gone astray but i think

00:34:27that's the general austrian answer and their evidence of course is that these things hit uh the business

00:34:33business or the hyper capital sector long before they hit the um consumer sector which is because

00:34:38there's resources being artificially applied if government subsidized massive amounts of housing

00:34:44which of course they have in various times in the west if they subsidize massive amounts of housing

00:34:49then you'll get a huge number of houses built then there won't be as much demand and then i know it's

00:34:55hard to imagine these days right but there won't be as much demand and then just think about china and

00:35:00they're and they're massive yeah china these massive cities or of course the 0708 crisis which we can

00:35:05sort of get into the causalities of that one but basically the idea is that the government interferes

00:35:10in the free flow of capital usually diverting capital towards its political favors uh its political

00:35:16favorites and usually getting some kickbacks under the table and so on and they'll build a whole

00:35:20bunch of white elephants or bric-a-bracs or you know monuments to itself and then uh it's

00:35:26unsustainable and then like like you're holding you know 20 pound barbells above your head you can't

00:35:32do it forever and then that sort of sudden drop is when the capital has to be reallocated because

00:35:38it is there's no demand for the products of the excessively stimulated capital environment if that

00:35:43makes sense yeah what you described or just now is um called the austrian business cycle theory

00:35:51when mises and i mean you didn't describe it 100 accurately because me please correct it yeah

00:35:58please correct it where i've got it's been a while since i've studied this stuff yeah yeah no i read

00:36:02basically everything from mises so i i remember it pretty well um in human action he describes the

00:36:11process but he doesn't talk about government deficits causing this process he talks about

00:36:16artificially low interest rates changing the private sector's time preference that is the

00:36:22author and business cycle theory and he suggests that changing time preference makes it look to the

00:36:28savers and to investors as though there is um more demand for long-term capital goods than there

00:36:38actually is so they start investing excessively in long-term capital goods at the expense of the

00:36:44consumer sector and when it turns out that there was no real demand for those capital long-term goods

00:36:50then the the investment sector collapses and the depression ensues that is yes i think the argument is

00:36:59if the price of money is going up it's because people are saving and saving is deferred spending so

00:37:05then people settle into longer-term projects and so if the government suppresses interest rates

00:37:09then uh you are um you're you're also saying people are spending now and and want to lend their

00:37:17money now because the price of money is cheaper so yeah you're right and and thank you for the

00:37:21bringing that a very important bit point is that the interest rates signal the relationship between

00:37:26saving and spending and i mean i remember this in the business world there were certain times where

00:37:30it was just very hard to sell stuff you know summer was tough to sell because everyone's on vacation

00:37:34vacation and christmas forget about it a lot of businesses kind of at the high level shut down

00:37:39for a week or two over christmas and new year so uh so but but you expect that there are going to be

00:37:43more sales uh or people would say well it's not in my budget for this year but i'll put it in my budget

00:37:48for next year uh and all of that so yeah the what you invest in if you're expecting a whole bunch of

00:37:53sales down the road you have to build your infrastructure now to produce the goods and so yeah by messing

00:37:58with interest rates it does dial up and down preferences and gives the wrong signals but sorry go ahead

00:38:03there's yeah there's in my opinion there's one giant defeater for this whole theory and that is

00:38:10sorry which theory mmt or austrian austrian business and that is the fact that the federal reserve never

00:38:19artificially lowers the interest rates they always artificially raise the interest rate above zero

00:38:26because if the federal reserve were to not intervene in the interbank lending system if they actually

00:38:34allowed for the banking system the interbank lending system to be as free a market as possible

00:38:39the interest rate would always fall to zero so all their efforts are attempts to jack up the interest rate

00:38:47from zero to some other level and to the extent that they don't do anything the interbank lending rate

00:38:54would naturally fall to zero because banks always have an incentive to lend out reserves they have

00:39:00no incentive to hold reserves other than statutory requirements and cash withdrawals and interbank

00:39:08clearing and tax payments so sorry why would they lend money at zero percent interest rate because

00:39:13there's labor involved in lending the money wouldn't that be a loss it would be maybe zero point one

00:39:18because they want to economize on their reserves it would be easier for them with the push of a button

00:39:24to uh to loan out a reserve to another bank that happens to need it then to actually holding on to

00:39:33reserves restrains a bank's ability to lend especially because the stupid basal regulations

00:39:39they actually count reserves as assets even though reserves as risky asset even though reserves are

00:39:45completely safe asset so they prefer to economize on their reserves and loan them out to other banks

00:39:54who are short reserves at the moment oh so you're talking like the sort of 30 day 60 day 90 day

00:39:59lending windows overnight overnight yes so overnight yes of course sorry so it's the shortness they

00:40:05wouldn't do it for zero but they do it for 10 bucks on 10 000 because you might as well get that

00:40:09rather than nothing especially if it's automated or some sort of computerized system right yes it

00:40:14would tend towards zero is my point okay so maybe um and then he was if you could piggyback off this

00:40:22that whatever rate that the federal reserve turns is arbitrarily and politically not economically turns

00:40:28its style toward the interbank lending rate is always just a smidge above it yeah yeah so this is

00:40:36actually uh so understanding this whole process is very helpful in predicting interest rate movements

00:40:43and investing your money wisely and all that kind of understanding long-term short-term rates because i

00:40:47just explained to you the ultimate cause of the short-term rates fed policy the ultimate cause of

00:40:52the long-term rate is the investors expectations of all the individual short-term policies of the fed

00:40:58within the individual three-month periods of the term for a 10-year bond for a 30-year bond whatever

00:41:04it is a market bet on what the fed is going to do um if the fed chooses to not do quantitative easing

00:41:12or they could just choose to interest yield curve control like they do in japan and just declare the

00:41:17interest rates on the entire uh term of the yield curve and the so this one but my point is just the

00:41:25whole defeater for the notion that the federal reserve artificially lowers the interest rate is that the

00:41:30interest rate is actually always artificially elevated my second point is that um as villain was just

00:41:38telling us earlier these periods of excessive private sector leverage have always occurred with

00:41:46with a government attempting to balance the budget or generate surpluses not with the government trying

00:41:54the deficit spin so much rather the business cycle was encouraged by um public sector austerity policy

00:42:04to where the private sector now uh is incentivized to go to the banking system and to go in debt to get

00:42:10the cash that they need and that leads to excessive private sector to income the private sector debt to

00:42:15income leverage empirically so something is and i appreciate that explanation something you said earlier i just

00:42:22wanted to circle back on oh god i've gone full jen saki anyway but you were talking about yeah well

00:42:29wait you actually answered the question yeah so maybe no maybe let's see let's see so in general

00:42:36the government in my view the government pretends to add value through debt so if the government goes

00:42:43and spends 10 million dollars on some waterfront development but it borrows that money then it looks

00:42:48like the economy is growing but who did it borrow that money from well i think that the general

00:42:55argument would be that it borrows its room it's it borrows the money against future tax receipts

00:43:00but but where would who could pay those tax receipts if the government didn't create the money to begin

00:43:07with right no no i understand that so yeah but the government is is going to create the money or even if it

00:43:16has i mean the government has income based upon tax receipts so it's going but it's going to it's going

00:43:21to borrow against future tax receipts in other words if the government stopped taxing at all like had zero

00:43:28capacity to tax tomorrow who would lend it money right i mean the argument would be well nobody

00:43:33because they'd have no income from which to pay it back just fyi so first of all i'm for zero percent

00:43:39interest rate so that would solve the whole interest uh payment problem uh immediately you won't have

00:43:44pay interest and the federal government i don't know if you know this but the u.s federal government

00:43:49regularly repays hundreds of trillions of dollars of debt every year there was a year recently

00:43:56they literally repaid 120 trillion dollars of uh federal government debt because i mean

00:44:05that's just that's just the bond turnover every year there's three month bonds there's one

00:44:10there's six month bonds they constantly cycle through them without raising any taxes for any of

00:44:17this so just as just that is an objection okay so how does it uh i is it just like shuffling more

00:44:24bonds or how does it pay this hundreds of trillions and this this might provide

00:44:28the fed reserve types it into uh bank accounts basically i'm sorry i think this might provide some

00:44:37clarity let me interject this is that when you understand or if you could think about it that

00:44:45a reserve from the federal government and a bond from the federal government are both money

00:44:52one just pays an interest rate and one doesn't it's kind of like a savings account at a bank or

00:45:01versus a checking account at a bank i put my money into the checking account i can access it easier

00:45:06typically i don't get an interest rate i put it into the savings account you know there's some

00:45:10stupid federal regulation you can only make six withdrawals a month or some whatever the heck it

00:45:15is and it's theoretically harder to access but they'll get an interest rate for it right and because

00:45:22it's a bond and we think a bond means debt and the government's got to find the money somewhere to pay

00:45:26the debt um really causes this confusion when in reality the government is just issuing two separate

00:45:33securities one is they call reserve and that's the money that you need you don't need to pay debts

00:45:39with uh or excuse me taxes with and the banks need for various to shorten this whole thing step on our

00:45:46call in 2021 summarize it perfectly step you said back then i think mmt is just like screw bonds yeah mmt says

00:45:53that we don't actually need uh bonds at all in fact so um we could just generate the reserves and leave

00:46:02them in the banking system as reserves um it's a choice to sell bonds and to suck up those reserves back

00:46:10out of the banking system but no necessity to do that right okay so so yes sorry to answer the this idea

00:46:22that okay in order for the government to buy this or spend that or build this you know the statue to

00:46:29itself or whatever um future generations have to pay off that money again i was i was trying to get

00:46:35at it from where did that money come from in the first place because in order for anybody to pay

00:46:38anything that money had to be created and that there's this confusion between the the money and

00:46:45the bonds and i'm saying that if we consider it all money which we're making the argument that you

00:46:49should because it's just that they issue the the reserves just the same way that they issue the bonds

00:46:56which is they just type numbers into bank accounts it's all just money that they issue out of nowhere

00:47:01and that the taxes that come in is just money that's just destroyed yeah let me let's hear steph i don't

00:47:08think that addresses okay i'll turn you know right so the liability that is created in the future in my

00:47:18mind is that the government spends 10 million dollars creating some waterfront property or something like

00:47:24that which is you know it's it's very inefficient it's to some degree you would argue taken from

00:47:30the private sector because it is created for political purposes usually to bribe friends and

00:47:35punish enemies and so on wouldn't disagree yes so can i mathematically go through that transaction you

00:47:42just described there and then you can continue so the government builds a waterfront property so what

00:47:47happens uh literally for the individual actors involved the federal government types money into

00:47:55the waterfront property builders bank account and he builds a waterfront thing and now has reserves

00:48:03in his bank account that he can go spend in the grocery store spend at walmart spend all over the place

00:48:10which basically creates consumer demand or investment demand for other businesses to generate

00:48:17profits and income and higher people yeah well sure i mean but that's looking at the demand uh side

00:48:24but not looking at the destruction of the supply side so when you build spend 10 million dollars to

00:48:30build this waterfront museum or whatever it's going to be then resources are diverted i mean scarce

00:48:37resources right labor uh i guess capital is it's part of the infinity glitch here we're talking about but

00:48:43labor and materials are taken from elsewhere in the economy and so the fact that he goes and buys

00:48:48sorry go ahead but there's unused resources yeah i was about to bring that up

00:48:53so i agree with you but um industry capacity utilization for example in the u.s

00:49:01right now is i don't know 70 percent or so there's unemployed individuals as we all know

00:49:07so those um factors counter the argument of we're we're bidding um uh necessary resources

00:49:20resources out of the private sector no they're idle resources and the reason why they're idle in our

00:49:25argument is because the government has imposed a tax the entire population has a constant tax liability

00:49:32that they have to satisfy in u.s dollars that creates unemployment so in order to fix that

00:49:39unemployment problem the federal government needs to spend that token into existence in order for people

00:49:46to pay the tax to begin with and then have the safety cushion to have the minimum of exchange etc

00:49:51sorry no that's fine i'm and i'm i think that certainly tax liability is a big issue for

00:49:58a capital but i mean i'm sure you're aware and i'm just really just saying this for the sake of the

00:50:03audience but there is uh you know what is it 150 000 pages of federal regulations let alone state and

00:50:11local and municipal so the amount of of interference in the free flow of capital and the price signals of

00:50:19supply and demand is you know legendary and almost i mean there's no one person who understands it all

00:50:24because it's just too big and too complicated um so the reason why there's this idle capacity is

00:50:31you know it's just a wide variety of massive amounts of government interference and so i think that you

00:50:37and i well i think sorry we all would agree that what we want to do to reduce the amount of unused

00:50:44capacity is to remove the barriers to the free flow of capital and price signals so that these resources

00:50:51could be used more effectively and we're saying that's a component of it and we're actually

00:50:56emphasizing that's a secondary component because the primary component is again if the currency doesn't

00:51:03exist to begin with there's there's no currency to earn or spend or or invest or anything like that

00:51:09now we completely agree with you which is the tax code is is just completely utterly insane

00:51:17give them give them most of their example they'll probably be easier than anything else

00:51:22with the with the business cards yeah yeah okay so um think about it i this this is a very simple

00:51:30example let's say i don't have i don't have a business card in front of me i got a sticker from

00:51:34one of my kids so uh this is uh this is an airplane so steph are you willing to clean my house for this

00:51:43airplane sticker uh i would say no okay all right so uh let's say you're over at my house and i ask

00:51:50you that same question you say no and i say okay there's a guy outside with a nine millimeter who will

00:51:54not let you leave unless you give him this sticker i feel that the value of the sticker has increased

00:52:00considerably in my mind correct that's what i'm doing right you need the sticker but you don't have it

00:52:09so you're unemployed basically right and so now let's say there's 10 of us in the house or 10 i'm

00:52:16the government and there's 10 other people in the house and i say okay in order to earn this sticker to

00:52:20leave the house you have to work for me there's 10 of you but i'm only going to issue five stickers

00:52:26right five five people are left out five people five people can't participate they will rot in your

00:52:34house until they well but but but of course and again i'm sure that we're all aware of this but

00:52:40the additional wrinkle of course is that you can either work for these five stickers or i can give

00:52:44you even more money to not work because i mean a woman on the welfare state with two kids is earning

00:52:51the equivalent of well over a hundred thousand dollars uh or she'd have to earn the equivalent of

00:52:55over a hundred thousand dollars just to get all the benefits she gets which is a terrible policy

00:52:59i would say because because even left-wing mm tiers are against uh uh the welfare payments

00:53:08they would prefer put people to work than to send them money for nothing well i mean it's not money

00:53:16for nothing a usual i mean sometimes it is of course right and of course the um uh the disability system

00:53:22is wildly abused as well but uh for for a woman who's got you know three kids and and no dad in the

00:53:29picture or no no provider in the picture if she's you know raising the kids and all of that it's not

00:53:32for nothing and you know but i would say that the unused capacity is also because the market system

00:53:39is not allowed to function in that you know and and maybe this is just growing up but i have

00:53:44let me just say that that's step two step one is you got to have enough money in the system to pay

00:53:52the tax you're all and i completely agree with you if i mean let's say we're in the soviet union

00:53:57and they print a bunch of money well we don't have the freedom to do anything with it anyway

00:54:00right well we can't start a business with it we can't make more wealth out of it we can't you know

00:54:05uh extract resources with it we can only do what the state tells us so in a similar fashion we got

00:54:10you know 15 150 whatever bazillion number of pages of the irs code um totally agree that screws up

00:54:17um where the money could go totally sends mixed signals and that that's why as we call ourselves

00:54:24right-wing mmt right uh we would say the easiest thing to do out of all the things that could be

00:54:30done is is completely gut the tax code and for example in and i know this will like it set

00:54:40libertarian and cap ears on fire when i say this put a small national property tax over the whole country

00:54:48that would eliminate the need to chase individuals and to track their money

00:54:54and and what's unique about a property tax is it's not transactional currently with the income tax and

00:55:02the self-employment taxes that we have in the united states and pretty much every other country

00:55:06that's modern or whatever is that i get as a business owner i get punished for starting a business

00:55:13as an employee you get punished for getting a job and the more that you work the more both of us get

00:55:19punished because the more you work the more taxes come out so in that sense similar to a sales tax

00:55:25it's transactional the more the transaction occurs the more you get punished versus a property tax and

00:55:31i guess you could have like a head tax where it's just like steph you just owe a hundred dollars a

00:55:35month in taxes because you exist that'd be a head tax right or uh you can have a personal property tax

00:55:40but with a real estate tax you're not tracking anybody um and we track the property we're not

00:55:45tracking it in particular person and you can say well here's the number and that's what it is

00:55:49and if we recognize the fact that like we don't need to pay off the debt we don't you know we

00:55:56we don't need to get this money in order for uh you know future generations to pay for the

00:56:02waterfront dorkiness that we built that's just you know there's a certain amount of money in existence

00:56:07that that we extend forward and we have to tax at least some of it out in order to make the money

00:56:12valuable to begin with then that entire bullshit tax code could go away now well and of course uh

00:56:21we're all aware that power corrupts so uh if we have a head tax they'll just import people to to raise

00:56:28the tax base and if there's a property tax they'll simply we don't need the tax that's the argument that

00:56:32we're making no what i'm saying is that if if any any kind of tax is going to distort the economy

00:56:37because if it's a property tax then the governments will do everything they can to raise the value of

00:56:42the property to tax more i gotta push back on the distortion thing and i mean this kind of

00:56:47really gets down kind of to the root of it where the austrian argument stems from accepting the

00:56:55barter theory of money which is that okay you know uh back in the day that what you know you had

00:57:01chickens and i i had fish and it you know i i want fish but you don't want chickens i don't even

00:57:07remember if i said it the right way based on my example that i said before and so at some point

00:57:11we figure out some sort of medium exchange because that starts getting used more and more and

00:57:15historically speaking that's been silver or gold because of the you know blah blah blah reasons it's

00:57:19fungible and and doesn't corrode and you know it's easily transportable and all whatever the reasons

00:57:25are and that's where money came from and when the government comes in and says okay well we you know we

00:57:30need to violently move resources over here and we need to subsidize that and whatever that's

00:57:35distorting the flow of that was happening before and what we're arguing is that that's not where

00:57:42money came from money came from the state historically speaking and that it's always been you could say

00:57:49it's always been a distorted process we're trying to work we're not saying the state is good we're not

00:57:54saying the state is good we're just looking historically to say if yeah yeah yeah that that

00:57:59money as far as we can tell appears to be a unit of state not a unit of market

00:58:05which is terrifying i agree right but if money is a unit of state and not a unit of market

00:58:14when we start well you're distorting the market you're distorting the market it's like well

00:58:18i don't really know what that means because if we don't put the money into existence there's no

00:58:24market to distort right so i think you were talking about how your government intervention

00:58:30distorts the market i don't think there's any disagreements on this point um we're just trying

00:58:37to make the best of it i guess again again i i know that and i remember this very vividly from

00:58:44our conversation for a couple of years ago the emotional investment and optimism which i don't

00:58:48discount the emotional side of life is really really important that that the emotional uh

00:58:52investment in having optimism for the future and not looking at the massive debt and saying

00:58:57we're doomed uh so i get all of that and listen i mean having having optimism and being able to get

00:59:03out of bed with a song in your heart and a smile on your face is really important so i'm not going

00:59:06to just discredit that as a whole but i mean the austrian argument i think is not that there's no

00:59:15state involved in money i mean even if you look at if you count sort of primitive tribes as as even

00:59:19worse than modern governments which i think they were in terms of dominance and authority and i did

00:59:24this whole speech on on aboriginals in australia i would much rather live under a modern western

00:59:28government than a quote non-state government or non-state authoritarian tribal system like the

00:59:34aborigines but i think the argument from the austrians is something like well look the the government

00:59:41was at one point restrained by a gold standard you guys don't know all of this right and so

00:59:45it couldn't just create money out of thin air because the money would lose value relative to

00:59:49gold and the hyperinflation and all of that whereas if the government is not constrained by

00:59:54tying its money creation to any fixed resource or limited resources then you get uh massive amounts

01:00:02of spending and and and listen i mean the argument don't argue both sides but the argument against

01:00:08that is and i i think people have said this and i think it's a fair question towards the austrians

01:00:11is like okay so like 40 percent of all u.s money that's ever been created has been created since

01:00:17covid where's the hyperinflation now if you say well inflation is high it's like yeah but it's not

01:00:21weimar high and so yeah and that is a real question and and i've heard the austrian arguments since the

01:00:2880s about how you know well all of this money creation we're off the gold standard nixon 1971 and

01:00:33and it's the hyper and hyperinflation is right around the corner and you got to get some food in the

01:00:37basement and so on and while there certainly has been inflation my gosh i mean it's no question

01:00:42right when i first came to canada it's not in zimbabwe it's not it's not weimar or zimbabwe

01:00:46and the uh the austrians i haven't delved deep into their arguments and i'm sure that they have

01:00:52arguments against that but the amount of money that's being created has been truly staggering the

01:00:56amount of debt is truly staggering and yet now they they can say yes well the fact that you haven't

01:01:01got lung cancer yet doesn't mean lung cancer isn't bad for you and it's like but that really wasn't

01:01:05the prediction as much the prediction was that inflation was going to follow 18 months or so

01:01:09after the money creation the money has been created in levels that von mitzis could scarcely conceive of

01:01:16and yet the hyperinflation has not hit and i think that may be um a flaw in the general theory

01:01:24i yeah so i think that the mmt's theory theory on inflation is more nuanced than that so for example

01:01:34when we were on our call in 2021 i did say that because of these large deficits the mmt theory

01:01:41would uh tell us that we're probably going to see higher levels of inflation and i i think i even

01:01:47called i said about five to ten percent for the coming years um i also have to add that i did not

01:01:54know that the russia ukraine conflict was going to break out in february that was a huge inflation factor

01:02:00these are always there's way more than monetary factors that cause uh inflation uh inflation by the

01:02:07way being defined as a increase in the aggregate price levels just to be clear on my definition um

01:02:14which is not the austrian right the austrian is increasing you started um by saying that the austrians

01:02:21uh uh believe that the austrians disagree that the austrians agree with the state theory of money

01:02:30to some extent and i don't think that is the case the original regression theorem by van mises and i

01:02:37think bim bavik also it does not have a state in the origination theory of money it has atomistic

01:02:46individuals bartering with one another yeah whether they're using seashells or salts like there's some

01:02:51medium exactly and and i i accept all of that but uh but certainly all modern economies it's state-based

01:03:00sorry go ahead you know so there is a big a fundamental uh difference between the mmt approach to money and

01:03:09the austrian approach to money and a lot of the ensuing disagreements stem from this huge difference

01:03:17in the respective theories on the origins of money but sorry why would that matter insofar as it's all

01:03:27controlled by the state now in every square inch on the planet except maybe antarctica uh so help me

01:03:34understand why that would make a big difference because the austrians have a theory as to how do

01:03:39we go back to the most best possible free market money system let's do a gold standard because as we

01:03:46all know money came from individual exchanges and people chose to use gold in in the free market of

01:03:52money and so the best reflection of that system would be a national gold standard that is the theory

01:04:02that that that is where they end up by uh starting with this uh money regression theorem uh theory and

01:04:12that is the theory that i that i oh so it's sort of like i hate to sort of put it this way but it's

01:04:17sort of like a noble savage theory that uh we originated with gold and silver and we need to get back to

01:04:22that uh i i don't i mean personally i don't care as an end cap i don't care how money is defined i just

01:04:28don't want it to i don't care who gets married let's just not rape each other right and and so

01:04:32for me it's like i don't care how the money is solved assorted whether it's a bimetallic thing i

01:04:37don't think it would be i think it would be some combination of maybe commodity-backed digital

01:04:41currency or bitcoin of course which we should touch on before we stop talking i don't care how currency

01:04:46is is maintained because i i would never in in my wildest dreams imagine that i knew how a currency

01:04:53should be best created maintained transferred i mean protected from inflation and yet at the same

01:04:59time you know stable and fungible and all of that kind of stuff i have no idea i i mean obviously we

01:05:04all have some ideas but you know one of the fundamental things about uh ancap is you you are

01:05:10a vainglorious fool if you think that you can replace the combined genius of the free market

01:05:14with all these brilliant souls searching for ideal solutions you can't do it it's not possible it

01:05:19would be like me saying i'm going to build my own computer and not from components but from like

01:05:22raw materials like sand and water like this is not going to happen right i mean i can't even make a

01:05:27pencil as that sort of famous old article goes and so uh if they say well you know this is the solution

01:05:34i think that that would be a violation of basic market principles the whole point of because gold

01:05:40silver would be central planning and saying this is the best way to do it and of course you know there

01:05:44was no such thing as digital currencies or even really computers back in von Mises day so

01:05:48the idea that it would be gold and silver would be a throwback and i think would be a substitution of

01:05:53individual preference based on noble savage routines rather than letting the market decide

01:05:58adding as making a gold standard creates an arbitrary objective of subsidizing a particular gold price

01:06:08that is a very esoteric unpractical uh ideological objective to pursue um by the way also it's often

01:06:18been pursued by banking lobbies if you read carol quigley's tragedy and hope he describes how the

01:06:23banking lobby in the 1800s and 1900s has occasionally pushed for a gold standard because they thought

01:06:31that it would restrain uh the government from running deficits and keep inflation low and that they earn

01:06:40fixed uh income and so they're interested in keeping inflation low that's generally their uh bias um on the

01:06:47other hand also by the way i don't know if people people keep talking about weimar germany i don't know

01:06:52if they're aware that weimar germany was on a gold standard when when it went through uh hyperinflation

01:06:58um so i think that's kind of dispute that you you optimize or you keep inflation low by having a gold

01:07:06standard because inflation is impacted by so many other important factors resource availability

01:07:11world war one exactly in french coming in from the west and exploiting coal at gunpoint these these are

01:07:21things that cause hyperinflation you're zimbabwe doing a land reform that demolished its entire

01:07:27agricultural sector that will give you hyperinflation but not some and by the way zimbabwe's hyperinflation

01:07:34happened during years one of the few years where the government was running a surplus you know just to

01:07:39i looked that up recently because i had a debate on twitter with someone about that so let's sorry i

01:07:45just want to make sure in the interest of time a topic i'd like to touch on which of course is

01:07:50subject to vote and you guys outvote me but how would mmt work let's say governments start accepting

01:07:58bitcoin i know there have been some movements towards that governments start accepting bitcoin as

01:08:03a tax payment so how does and and let's say that magical you know here a miracle occurs and

01:08:11the fiat currency system is displaced by a bitcoin monetary system and how would that work with mmt

01:08:21theories so the government runs on bitcoin well i think it's to have that first email with some basics

01:08:26and i know that this is like nema's specialty he'll good good and it's a good topic i think

01:08:31um so uh nema's got an awesome theory on this but i i a couple components here is that first off if

01:08:39if the government were to start accepting bitcoin as taxes which i believe someone correct me was it

01:08:47arizona or some county in arizona or something started doing that it is is the tax being measured in

01:08:54bitcoin or is the tax being measured in dollars because if it's being measured in dollars and

01:09:00then the bitcoin is just like a a medium to get from point a to point c let's say that i think it

01:09:06would be better if it's measured like you get you get a bitcoin uh you get a tax bill in both fiat and

01:09:11bitcoin but but how but by the time you get the tax bill couldn't the the value have changed

01:09:18sure but of course like you know i get i get all of that but let's just say you get the tax bill i

01:09:25mean it would have to be electronically the same day you've got to pay within a day or whatever it

01:09:29is right i mean so let's just say that that somehow and again i know that this is a bit magical thinking

01:09:35that the price variability of bitcoin can be minimized or let's say of course that uh if tax bills are

01:09:42going to be denominated in bitcoin immediately there'll be about 10 billion industries that uh

01:09:46uh that sprout up to normalize and stabilize the price of bitcoin so that the government can have

01:09:53some predictability in what it's uh getting that they sort of promise to make it a stable so whatever

01:09:58that where there's a demand for the stability the supply will emerge so let's just say that

01:10:03the tax bill comes in dollars and bitcoin and you can pay either way okay cool uh the second

01:10:09thing i just wanted to bring up is is the usage of the term fiat that i'm sure you're aware that

01:10:16that fiat just means decree yeah by force yeah right so uh people often compare okay well we can

01:10:23have the gold standard we can have fiat well it's all fiat because it's just whatever the government

01:10:26decreed so if the government decrees that we're now accepting bitcoin at some level it's still so i know

01:10:35i know we're getting complicated because we're talking about interest of time we're talking about

01:10:40in the interest of time oh sorry let's answer this question um yeah the payment is still commanded by

01:10:48the state i agree without that so sorry go ahead so right so um it wouldn't turn bitcoin into fiat money

01:10:54um but i don't think it would substantially change much in terms of the mmt system if the if the

01:11:04government gives you the option of paying in dollars and bitcoins it would just be extinguishing

01:11:10some dollars less some fiat dollars less from the economy and it would be collecting some bitcoins

01:11:20from certain uh crypto whales and bitcoin holders and then it would have to do something with those

01:11:26bitcoins obviously um i think it would be a bit of a case of gresham's law where you know bad money

01:11:32drives out the good i don't think most people would care to pay their um taxes in bitcoins um

01:11:39especially the people holding bitcoins right so i don't think it would really um fundamentally change

01:11:46much much okay and i agree with that so let's go to the other scenario which is it's all bitcoin

01:11:52right so if it's all bitcoin then now the government um creates a kind of gold standard situation where

01:12:04they accept tax payments and sorry my battery is running low so i have to uh i have to okay sorry um

01:12:13so if it's only bitcoin then the government basically relinquishes all its powers to issue

01:12:18currency and probably self-destructs in the process which you know could be a good thing could be a bad

01:12:25thing um one thing your argument is that mmt is cpr for the government yeah kind of yeah okay so so if it

01:12:34keeps that entity alive so to speak then the people who want less government won't be fans right

01:12:41you know but but so i'm saying we can't assuming we can't abolish the entire fiat money system

01:12:49tomorrow right yeah that is our point but no i'm not a uh opposed to uh uh the network state or

01:12:57encapistan or the bitcoin economy or anything like that um one more thing i would like to point out

01:13:01about bitcoin is that it ironically mmt kind of explains the reason why bitcoin has value

01:13:07only in the transpose the fiat economy to the cycle of money in a fiat economy to a voluntary economy

01:13:18where the issuer of the money demands a fee in the form of bitcoins the equivalent is the government

01:13:26demands a tax in the form of dollars and spends that money into existence that's the miners spending

01:13:32bitcoins all bitcoins come from miners and individuals if they wanted a bitcoin transaction

01:13:37they have to pay a small fee to the miners so you have a same similar flow of money of money being

01:13:43as it were deficits spent into the economy by the miners and some being taxed back by the miners in

01:13:49the form of fees so the difference is of course yet taxes i know you're going to say taxes are um forced

01:13:56and no no no i i we all i'm not i'm trying not to you know cover ground that we all agree on

01:14:02but the difference of course is that miners have to invest a fair amount of energy resources time

01:14:07and effort into the creation of bitcoins as opposed to fiat currency being typed into a bank account so

01:14:12to speak yeah but to to conquer a territory and establish a government that's fiat also takes

01:14:20some time and resources i could argue right so that none of it comes without some initial degree of

01:14:27efforts to establish your and of course the miners are much less powerful in the bitcoin economy at the

01:14:34end of the day than the federal government the fiat economy which is something we would want right we

01:14:38wouldn't want excessive authority by the money issuer right i'm just saying that the the people in

01:14:46the government can get or create currency far easier than a bitcoin miner can

01:14:52sure yes and that and that's really the austrian argument behind the gold standard is you can't

01:15:00just sort of snap your fingers and create gold like you have to go find it and all of that so

01:15:04and i can tell you from personal experience it's a lot of work i did that right so so i think yeah

01:15:11we you want to have a barrier you know this is one of the things that's of great concern about sort

01:15:17of digital ids and ai that uh that the costs of tyranny are about to go down enormously and that's

01:15:24that's not good at all right so you always want some sort of cost resistance to the expansion of

01:15:29state power and i think the austrian argument is that uh friction-free creation of currency is

01:15:35removes a significant impediment to the expansion of state power right so then how did weimar germany

01:15:41achieve that would be my counter sorry i'm going to get my yeah network adapter my keep talking

01:15:47i have to get my charter uh steph i i want i want nema to finish that point so i don't want to step

01:15:57on that point was another previous point you wanted to hit on while he's finding his computer charger

01:16:01well if he uh wants to talk about the weimar thing i mean the weimar thing was subsequent to

01:16:08you know the the most massive intervention uh to date in western history of the government into the

01:16:15freedoms and free market of the society which is the first world war i mean it hasn't been fashion

01:16:20well no the first world war a first world war was a massive of course staggering expansion of state

01:16:25power and slaughter of state uh actors or citizens and again the argument is something like well if

01:16:33they'd if they'd been restricted by uh fiat currents if they hadn't been if they hadn't switched

01:16:38over to fiat currency sort of halfway through the war has happened in a lot of places to sort of make

01:16:42up money or selling bonds then the war would have ended when they ran out of gold which would have

01:16:47been a whole lot earlier than well my understanding and this actually comes from reading tragedy note

01:16:52very quickly because he he goes into some pretty significant detail on this is that uh before world war

01:16:59one roughly speaking the the at the like gold to reserve ratio at a country was something like one to

01:17:05three if i'm remembering this correctly and by the end of the war it turned into something like one

01:17:10to ten right and uh part of the economic disaster that that came um into uh into existence after that

01:17:19was the fact that everybody after world war one for whatever reason was obsessed with getting the

01:17:24number back to one to three instead of one to ten instead of just accepting the fact that the world had

01:17:27moved on but that that's a different story the point that i wanted to make is this uh wait am i still on yep

01:17:35okay uh by the videos moved around nema's rebooting uh the point that i wanted to make i like that

01:17:42he's so identified with his tech it's not even he's rebooting his phone nema himself is i'm just

01:17:48going he's merged he's gonna listen back to this but you heard that monotone voice of his

01:17:56sorry sorry nema okay um the uh uh uh

01:18:05yes in theory that restricts the government but for whatever reason when a war happens they always

01:18:12seem to figure some way around it yeah yeah yeah because in they did have a gold standard in world

01:18:17war one and they just kept stretching it out right yeah and i mean the um going back to the nixon thing

01:18:25i think this is an interesting point that war in moserl actually made is that everybody points to i think

01:18:30it's 1971 that nixon nixed the gold standard that's why they say the wage stagnation kicked in

01:18:36and so on yeah well that he nixed the international gold standard the domestic gold standard was nixed in

01:18:441933 right by fdr fdr yeah and he had the forced buyback yeah right and moser's argument is that was a

01:18:52much more impactful situation on the gold standard because between 33 and 71 no one ever internationally

01:18:59demanded money back until i think it was france demanded the money back or demanded gold back

01:19:04with further money and that's when nixon was like we're not giving him that gold back i'm

01:19:08i'm nixing that right so the the point that i'm trying to make is that when a government wants to go to

01:19:15war and kill everybody they're really good at figuring out how even if they had like we put some

01:19:23arbitrary restraints in yesterday let's get rid of them today because we want to go to war like that

01:19:28well ultimate socialization is not of the money but of the people through the draft so uh if you

01:19:33have that then um just about everything else uh sort of falls into line but of course on a pure

01:19:39bitcoin economy uh that is functionally impossible because you can't just create your own bitcoin out

01:19:44of thin air and but again once we get to a full bitcoin economy the presence of the state would be

01:19:48somewhat in question anyway right well and then i would even say that there's actually a problem

01:19:54in a currency that can't expand and contract uh because you you can't access the capital when you

01:20:02need it for example well you can you just have to pay more for it

01:20:07yeah but does it make sense in that case well again i don't care about make sense i care about

01:20:15the foundational ethics of it and a non-compelled currency uh is is really good i wasn't talking about

01:20:21whether it was compelled or not i was talking about whether it could expand to contract or not

01:20:24right but and the way you say it won't be able to expand past a certain point yeah but i think all

01:20:31that is voluntary makes sense like morally like i don't really care about the practicality of things

01:20:36uh all that is moral makes sense i'm not i mean i'm i don't know if you guys are sort of utilitarians

01:20:41or consequentialists or whatever but voluntary okay certainly bitcoin uh the price of everything

01:20:47everything is uh is going to drop because it's fundamentally deflationary because it hits its 21

01:20:52million and then stop so but i don't care uh as long as it's not compelled but sorry go ahead

01:20:58yeah i think with if discussing a bitcoin economy is very difficult because we've never seen it before

01:21:08so everything we say is some level of speculation i don't know how that i think what dylan points out is

01:21:14an important problem in the fiat money economy um but i don't know how relevant it would be in a

01:21:20bitcoin economy also the bitcoin economy is not just a bitcoin economy bitcoin economy is ethereum

01:21:26solana sui aptos and a bajillion other currencies all of which allow for capital formation some of which

01:21:35actually are inflationary they're not completely capped so and you would have to study you would have

01:21:41i think in in i mean i know that there are these sorts of things but you would have a stable coin

01:21:45which would grow relative to the economic productivity so that future quote dollar values

01:21:50could be predicted i mean wouldn't it be great if you were planning a 10 year business uh plan you had

01:21:56a 10 year business plan and you knew that the price of wood the price of concrete was going to be the

01:22:02same in 10 years as it is now so there would be definitely stable currencies i think bitcoin would be

01:22:06more b2b and the stuff would be more consumer based yeah without fiat because currently all stable coins

01:22:13are tied to a fiat coin but it's conceivable to have a stable coin that um that runs on a smart

01:22:21contract for difference against the cpi index and the ppi index for example something like that uh would be

01:22:29interesting and it's going to happen soon well and if you had a coin that was trying to denominate the

01:22:33value of of goods and services probably not capital but goods goods and services if you had a coin that

01:22:40was attempting to make that as stable as possible a whole bunch of other industries would sprout up

01:22:44to try and figure that problem out because of course it is impossible to know what the price of

01:22:47anything is going to be even tomorrow let alone 10 years but right now there's not any particular

01:22:52incentive to try and figure that uh sort of stuff out because there's no mechanism at least you could

01:22:57pack peg it for example to the inflation rate over the past year or something like that

01:23:02something like that yeah or or you could you have a basket of commodities and track it relative to

01:23:07those price if they were sort of core business commodities but i think that certainly one of the

01:23:12massive variables i mean there's so many variables you have to deal with in business

01:23:16now that you wouldn't have to deal with in a free market like you know massive regulations uh

01:23:20uh the um woke pushes for various uh quota systems and uh immigration or not and then immigrants

01:23:28sometimes uh sometimes have or just a tax code like you're talking about regulations yeah who's in

01:23:32power you know and and whether they're going to give money to their friends on their side of the

01:23:36aisle and and starve their enemies and so on so uh but yeah stablecoin would be absolutely fantastic

01:23:41for our business as a whole the power dynamics in an economy like that would shift from uh a state

01:23:49kind of authority to probably more uh mega corporate uh chip producing and validator running authorities

01:24:00because those would be the bottlenecks that this whole system would still be depending on to some

01:24:06degree right but it's impossible to predict exactly what is going to happen but it could be kind of like

01:24:12a world as described i don't know if you've watched the latest alien alien earth on google but it's kind of

01:24:19interesting because they envision a world where five corporations run the planet because governments

01:24:24they figured out governments weren't working so the whole planet is run by six corporations well

01:24:29except corporations are legal fictions created maintained by the state as bribes to the ruling

01:24:33class to escape consequences for their criminality but that's a topic for another and i've actually

01:24:37written a whole novel set in a um a free market a truly free market um society people who are

01:24:43interested can check it out it's a great i mean i'm a trained actor too so like the the audiobook reading i

01:24:48think it's pretty good but it's called what's it called it's called the future because i'm very

01:24:52imaginative when it comes to my science fiction names i wrote a book about the future called the

01:24:56future and then i wrote a book about the present called well i think you can probably finish that

01:25:00sentence for me but yeah freedom.com books it's all free and uh this is sort of a my view of how

01:25:05an economy runs in the absence of uh state state actors uh and so yeah you should check it out i think

01:25:11it's really good all right but listen a great conversation and um i have uh to to uh move on

01:25:17to another appointment but really do appreciate having the chance to chew this through again and

01:25:21i do want to invite people you know i mean i'm a big fan of the austrian school though i recognize

01:25:26that they have some limits in their explanations of what's going on at the moment but the mmt is a

01:25:31good it's a good challenge it's a good challenge and it's not easy to just wave a wand you know it's

01:25:36not like communism you just wave a wand and say well there's no price signals so it doesn't work

01:25:38but uh it's it's a worthy um a worthy addition to the economic debate and it's not as easy to

01:25:44wave away as some people think and i really appreciate you guys bringing it to the attention

01:25:47of the listeners if there are resources that you think people would want to pursue if they're more

01:25:53curious about mmt and it's um excellent explanatory power where would you suggest people go

01:25:57you want to take that uh yeah come to uh so we actually have a podcast called irida tv irida.tv

01:26:07we're on all platforms spell spell it out i r i d a dot tv okay and you can find us on spotify

01:26:16apple um all these uh all those platforms we'll put yeah we'll put the link in the show notes and uh

01:26:22i really do appreciate the time today and i hope we can talk again hopefully it won't be a couple of

01:26:26years well we appreciate you having us on again uh my pleasure take care guys thank you bye bye

01:26:33bye bye

01:26:34you

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