Macro N Cheese

Our guest this week is John Harvey, the alter-ego of everybody’s favorite Cowboy Economist.  While this cowboy would be at home in any MAGA rally, we find that behind his homespun wisdom is a great deal of planning and analysis. John talks to Steve about his approach to framing macroeconomics in such a way as to break through our preconceived notions.   In response to recent attacks on Modern Monetary Theory as a radical plan, John’s aim is to show that there’s nothing radical about it. It’s been with us all along. Who better than a cowboy to carry this message?   In explaining the Green New Deal and federal job guarantee, John’s first step is to point out that it’s not in the private sector’s best interest to hire everyone who is willing to work. The private sector minimizes the use of labor because labor is a cost, so there’s no reason to expect them to hire everyone who wants to work. This isn’t necessarily a bad thing; when businesses automate, it saves us money as consumers, but it puts people out of work.   So, on the one hand there’s a pool of labor that private sector won’t hire, and on the other hand there are services that our communities require. The police and fire departments are obvious examples and from there it’s not such a leap to think of others, like child protective services or environmental cleanup.  None of these are profitable industries, so we can’t expect the private sector to meet those needs.   On to the big question: how will we pay for it? To answer this, John takes us back to World War II. When the US entered the war, after the bombing of Pearl Harbor, there was still massive unemployment. The government didn’t borrow money by selling bonds, then build factories and hire the workers. The sequence of events was pretty much the opposite. They spent the money, creating it in the process. They built the factories, activating idle resources and taking resources from the private sector. In John’s narrative, they took steel that would have been used to build Fords and used it to build Shermans. The role of war bonds was never to finance the war. Their main purpose was to deter people from spending the newly earned income that was burning a hole in their pockets on products that were no longer available due to the shifting of production priorities.   This episode will interest anyone new to MMT, as well as those who hope to introduce others to the concepts.    John T. Harvey is a professor of Economics at Texas Christian University
http://personal.tcu.edu/jharvey/cowboyeconomist/index.html   Follow him on YouTube
https://www.youtube.com/channel/UCL9PHjlPQ5wq0CD6vAibxYg/featured   Twitter
@John_T_Harvey   Read his blog
https://www.forbes.com/sites/johntharvey/#5935884b685c

It turns out that cryptocurrency is both more complex and more simple-minded than one would have thought. Or are we missing something profound? Is bitcoin just another speculative asset or will it soon be replacing money as we know it?

Steve’s guest Brett Scott dispels the myths about bitcoin and gives us a brief history lesson on the development and uses of fintech (which simply means financial technology), blockchain, and cryptocurrencies, including bitcoin.

Some of the misconceptions about bitcoin can be traced to the way it’s explained by the mainstream media. It’s treated as a radical new ‘stateless’ currency. But the bitcoin community itself is also guilty of doublethink and contradictory language. Predictions of bitcoin replacing fiat currency are not grounded in reality. How can it take the place of the US dollar when it is, in fact, priced in US dollars?

Scott’s explanations are blessedly clear, coherent, and consistent with MMT. Even listeners unfamiliar with blockchain technology and cryptocurrencies will find this episode illuminating.

Brett Scott is a journalist, campaigner and the author of The Heretic’s Guide to Global Finance: Hacking the Future of Money. He is a Senior Fellow at the Finance Innovation Lab in London.

Follow him on Twitter @suitpossum

Trump keeps telling us that unemployment is at an all-time low. Even if that were true, it wouldn’t stay that way. As our guest Scott Fullwiler explains, the private sector isn’t about creating jobs; it’s about profitability. So even if there were enough jobs for everybody who wants one, it would be a coincidence. And how can we design an economic policy around a coincidence? 
In this special interview with host Steve Grumbine, Fullwiler says that we have a choice whether to have a buffer stock of the involuntarily unemployed or a buffer stock of the employed. He says that this is one of the revelations in Randall Wray’s seminal 1998 book, Understanding Modern Money: The Key to Full Employment and Price Stability. Another revolutionary concept was that the central bank is about interest rates, not the money supply, while government deficits are about money, not interest rates.   In a wide ranging conversation, Grumbine and Fullwiler revisit some of the key moments in MMT history -- what Fullwiler calls the “hockey stick moments” -- including Dr. Stephanie Kelton’s position as Chief Economist on the Senate Budget Committee, and Alexandria Ocasio Cortez’s public utterance of the phrase “Modern Monetary Theory.” As we all remember, after this was reported it was referred to in one article after another, carrying MMT, in name at least, into the public square. Grumbine brings up the ongoing conflict between supporters of the Federal Job Guarantee and a Universal Basic Income. Fullwiler insists the two are not in competition. And because the UBI doesn’t have a solution for the guy who still wants to work but doesn’t have a job, we’re back at square one, with the choice of having an unemployed buffer stock or an employed buffer stock.  Professor Scott Fullwiler is in UMKC’s interdisciplinary program and a Research Scholar at the Global Institute for Sustainable Prosperity  Follow him on Twitter @stf18 https://ftalphaville.ft.com/2019/03/01/1551434402000/An-MMT-response-on-what-causes-inflation/ http://www.global-isp.org/scott-fullwiler/

It’s not such a stretch to have Mark Blyth as a guest on our podcast. Although we normally feature proponents of Modern Monetary Theory, our interests are, above all, in the health of the planet and the social, physical, and economic health of our fellow citizens.   In this episode, host Steve Grumbine and Professor Blyth find that they share two concerns of utmost import: austerity, as both an economic as well as an ideological system, and the climate crisis.   Blyth is known for his pop culture references and his fantastic sense of humor. “A Lannister always pays his debts” leads to an illustration of the difference between public and private debt. Hint: the first is intergenerational. Grumbine may not agree that generations of private individuals are actually responsible for repaying the government’s commitments, but they both know that when wages are stagnant, personal debt is likely to be devastating and never-ending.   We think our listeners will get a kick out of Blyth’s irreverence as much as Grumbine clearly does. When Steve challenges Blyth’s comparison of Venezuela’s sovereign currency to that of the United States, Blyth retorts that it’s all “smoke and mirrors and bullshit.”    Professor Blyth is concerned that MMT proponents haven’t faced up to the reality of political obstacles. “Have you met Republicans?” They’re not going to agree to “just take the Fed, write a big check, stick a golden penny in the Fed, and we’ll do a green new deal.” Well, we can’t argue with that.   You’re going to enjoy this conversation that takes us back to 1315, revealing that there has been a downward trend in interest rates for 700 years. (Did we mention that Grumbine and Blyth agree that the threat of inflation is vastly overblown?) Whether you’re interested in Westeros or Brexit or the Grateful Dead, it’s an episode you won’t want to miss.   Mark Blyth is The William R. Rhodes ’57 Professor of International Economics, Professor of Political Science and International and Public Affairs at Brown University.   Follow him on Twitter @MkBlyth   https://global.oup.com/academic/product/austerity-9780199389445?q=mark%20blyth&lang=en&cc=us   https://global.oup.com/academic/product/the-future-of-the-euro-9780190233242?q=mark%20blyth&lang=en&cc=us

Who better to explain the Federal Job Guarantee than Pavlina Tcherneva, who wrote her first paper on the subject in 1996, when it was called the Employer of Last Resort? This was at the height of the Clinton “Goldilocks economy,” which boasted of full employment. Needless to say, the ELR did not capture the popular imagination. Now, almost a quarter of a century later, the conversation has shifted. The FJG is getting noticed. With the campaign season heating up, we are re-releasing this interview from 2018, in which Tcherneva talks about her newest working paper. She talks to Steve about the wide-ranging effects of chronic unemployment and defines the essential components of the solution.   The Job Guarantee is not just a policy for full employment, but for structural reform. It takes on macroeconomic, socio-economic, and labor market problems and shifts the paradigm for stabilization. We have a choice: we can stabilize the economy with a pool of unemployed workers, or it can be stabilized with a pool of the employed. The public sector is the only one that can serve this countercyclical function, through the power of the public purse.   Tcherneva points out that the government has price supports for commodities like dairy, soybeans and corn. The most important commodity is neglected: Wage labor. She reminds us that economists, going back to Adam Smith, have always recognized that labor is a special input of production -- unlike machinery, factories, or raw material. Labor is the one commodity that reproduces the economy and the social reality. Yet it is the one commodity that is not supported by public policy.   Now that the Job Guarantee has come out of the closet, there are plenty of distorted, diminished proposals that miss the mark. According to Tcherneva there are three essential components for a Job Guarantee that will serve its full macroeconomic function:
1. It must be a permanent program
2. It must be universal
3. It must establish a wage floor   The wonks in our audience will appreciate the discussion of the JG as a preventive program, going much farther than merely preventing unemployment. It will prevent crashes in the labor market and the collapse of aggregate demand. There’s a marked difference in the way workers spend into the economy when they’re receiving unemployment insurance versus when they have guaranteed employment, even at a minimum wage. It’s the difference between retrenchment and full economic engagement. The less wonky will be grateful for Tcherneva’s clear, direct illustration of these concepts.   This interview covers a wide range of related issues, from the three most common arguments against the Job Guarantee, to the faux Keynesians, serving up crank schemes for economic growth. After listening to this episode you will be armed and ready for the onslaught of lies and misconceptions the candidates will be slinging.   https://www.pavlina-tcherneva.net/
Twitter @ptcherneva

Here in the Macro ‘n Cheese clubhouse, whenever we think we fully comprehend neoliberalism, a guest comes along with a whole new range of insights. Scott Ferguson is just that kind of guest. His main area of interest is culture and he makes some surprising observations about our ingrained misunderstanding of money and how it relates to politics, art, and our very experience of modern life. Neoliberalism structures our innermost thoughts, feelings, and desires.   Ferguson traces the roots of neoliberalism back through what he calls the “big L” liberalism of Adam Smith and the class warfare waged against the aristocracy by the merchant and industrial class. The “small L” liberalism of FDR and post WWII mid-century America played a role as well. By the 1970s, neoliberalism grew as a reaction to the gains made by the civil rights, labor, and anti-war movements. Power needed to be locked down and consolidated. The neoliberal narrative of scarcity flourished.   Money can be legitimately seen as our oxygen. It is the centralized medium that connects us to one another. But we don’t have a culture that affirms this view. In songs and films, money is related to greed and, whether this is seen as a positive or negative quality, it is always portrayed as a zero sum game. There must be winners and losers. This is as true of our popular culture as our political rhetoric.   Despite the enormity of the problem, Ferguson sees this as an exciting time. The current paradigm crisis is exposing cracks in the neoliberal foundation. Activist groups are aligning with the modern money movement and, for the first time in decades, rejecting the mythology of scarcity. The clarity of focus and purpose in proposals like the Green New Deal and the federal job guarantee can ultimately change the debate so it is about abundance rather privation.   Scott Ferguson is Associate Professor of Film and Media Studies in the Department of Humanities and Cultural Studies at the University of South Florida, Research Scholar at the Global Institute for Sustainable Prosperity, co-director of The Modern Money Network Humanities Division, and producer of the Money on the Left podcast.   Follow him on Twitter @videotroph
Money on the Left Podcast  https://www.buzzsprout.com/172776   Check out his book, Declaration of Dependence
https://www.nebraskapress.unl.edu/university-of-nebraska-press/9781496201928/

Steve is joined by Thomas Fazi, co-author of Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World.  Fazi believes there’s an undeniable connection between the historic defeat of the left over the past thirty years and the dissolving of national sovereign power as we’ve transferred the tools of economic policy to supranational organizations which are outside the control of citizens.    The first part of the 20th century saw the gradual integration of the masses into the democratic processes of western political systems. This posed a great threat to capital, auguring the possibility of its power being curtailed.    Universal suffrage had been hard won in these nations, so the neoliberal solution was to hollow out the power of the ballot box. Formal political rights could be kept in place but by separating the mechanisms for democratic policy making from economic policy, they were able to render worthless traditional means of affecting change.   The Eurozone is the most extreme example, but other western democracies were similarly disemboweled through the shifting role of so-called independent central banks as well as bilateral and multilateral trade treaties which increasingly prohibit progressive government intervention in the economy.   Fazi maintains there is nothing free about the free market, which continues to need state intervention in the economy to forward the interests of capital, which could still make it vulnerable to mass democracy. He believes the left should acknowledge that our political, economic and social rights were all won within the context of the nation-state. And that is where power must be reclaimed.   https://www.plutobooks.com/9780745337326/reclaiming-the-state/
  Follow Thomas Fazi on Twitter @battleforeurope and Facebook https://www.facebook.com/thomasfazi

We’re excited to welcome back the metabolically optimistic Robert Hockett, advisor to Senators Bernie Sanders and Elizabeth Warren and Representative Alexandria Ocasio Cortez. Bob talks with Steve about a wide range of subjects that will thrill political junkies and educate those interested in exploring the depths of Modern Monetary Theory.   They engage in the popular sport of punditry, looking at the recent Democratic Presidential Debates and surmising the calculations behind our favorite candidates’ messaging. Hockett makes the tantalizing suggestion that Senator Warren is more accepting of MMT than is commonly believed.   Addressing the ubiquitous question of how to pay for progressive political programs, they turn to Hockett’s article in Forbes that asserts “how we will pay for it isn’t ‘a thing.’ Kicking off from the basic tenet that our only constraint is the availability of resources, he explains why inflation is not “a thing” either. Newcomers to MMT will find the depth of this discussion illuminating.   Steve asks about the hoopla surrounding Libra and other cryptocurrencies which prompts Bob to talk about the need to understand money as credit. He makes the compelling case that credit allocation severely affects inequality and suggests a new, public institution which would make capital available to small businesses and individuals. He outlines what we want a central bank to do, comparing it to what the Federal Reserve actually does, and talks about future legislation to transform it.    Robert Hockett is a Professor of Law and Professor of Public Policy at Cornell. He writes about law, justice, money, finance and economics for Forbes.   https://www.forbes.com/sites/rhockett/2019/01/16/the-green-new-deal-how-we-will-pay-for-it-isnt-a-thing-and-inflation-isnt-either/#485baf94d7fe

The evening news has stories of children in cages on the US-Mexican border. Again. Fadhel Kaboub, President of the Global Institute of Sustainable Prosperity, asks us to imagine the conditions that would make someone desperate enough to send their kids off to seek safety in a foreign land.   The root causes of the refugee crisis are the same all over the world. Decades of neoliberal policies, climate chaos, the exigencies of empire, and unsustainable trade deficits have destabilized the economies of developing nations. Kaboub explores examples from the Middle East to South America. Then, using the lens of Modern Monetary Theory, he proposes an alternative to austerity and explains how a job guarantee would relieve the financial insecurity of every worker, citizen or not.   http://www.global-isp.org/president/

There was a time when Mathew Forstater & Warren Mosler would conduct regular counts of MMT believers. There were 11 or 12, and they knew them all well. In this interview, Forstater takes us back to the late 1990s, when Modern Monetary Theory first took root in academia.   Today he is Research Director of the Global Institute for Sustainable Prosperity, but his story begins with his first post-doctorate teaching job. He secured a summer internship for an undergrad named Pavlina Tcherneva. Her assignment: write a critical review of Mosler’s first book.   The relationships they formed resulted in the creation of a research institute, the Center for Full Employment and Price Stability at the Levy Institute. Randall Wray and Stephanie Kelton descended upon it. After a couple of years, the MMT nucleus moved to UMKC, where they established an interdisciplinary program. Today it’s an international movement with a reach into other disciplines and far beyond the walls of universities.    Forstater emphasizes the importance of keeping policy discussion on the table. What distinguishes them from mainstream economics is they recognize the need to be grounded in reality. MMT is not just theoretical.   Steve asks him to talk about some of the specific policies associated with MMT. Forstater believes that the Job Guarantee should be a central piece of Green New Deal by demanding only sustainable jobs, or jobs with minimal negative effect. The federal government isn’t subject to the pressures of the private sector which, by the very nature of the capitalist economy, must minimize production costs regardless of environmental impact. The JG can be a vehicle for other policies as well, establishing a minimum wage and standards for health care coverage.   Global Institute for Sustainable Prosperity   http://www.global-isp.org/research-director/