YouSaid · the spoken record

Warren Mosler

lines on the record: 129
first: 2023-06-01
most recent: 2023-06-01
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Federal Reserve credits set account. Somebody can't come through the door at night and credit an account, you know, not tell anybody. They debit and credit your own accounts on their books. So for JP Morgan to have a positive balance, the Federal Reserve has to credit it first. Then they can debit the account.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“They couldn't get in the account through taxing, they had to go out and borrow. And if they couldn't borrow, if China did buy our bonds, then they couldn't spend the money. Well, close examination of the Fed, which is first thing Stephanie Kelton did before recognizing what's going on here, because she had the same impression after studying getting her PhD and the whole thing. All the academics do. They came to realize that when you look closely inside the Fed, they have to credit the account of the commercial, of the private sector, like JP Morgan's account. If Boeing needs to pay taxes or JP Morgan needs to pay taxes to the government, and it has no money in its government account and its account at the Fed, its reserve account, it has a bank account like you would have a bank account, but it's a client of the Federal Reserve Bank. If it doesn't have any money in there, if there are no dollars in its account, it can't pay its taxes. The only way dollars can get in an account at the Federal Reserve is if the”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Come only from the government itself through its agent, the Federal Reserve. So what we had was everyone in Congress and every relationship in the world, but everyone in Congress believing that they had to get the government treasury had to get money into its account to be able to spend. If there was no money in the account, they could not spend.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Right, right, right. What MMT started off pointing out way back when I first started, and this was three years before I introduced it to the academic community, so in the early 1990s, is that Funds to pay taxes and the funds to buy bonds come from the government. They come from the Federal Reserve, an agent of the government. They do not come from the private sector. Now, at that point, Yes, and the funds to buy bonds, treasury bonds, or treasury, I call them securities because their bills, notes, and bonds, people say bonds, but it's bills, notes and bonds.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“They're accounted for at the same time in this case. And then JP Morgan will change the Boeing's account on its books. It'll change the number in Boeing's account up a billion. And so JPMorgan now has an asset, the billion dollars in its account at the Fed, and it has a liability, which is the checking account of Boeing, which now has a billion dollars in it. That's JPMorgan liability. And so everybody's in balance and they wait for the next instructions.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Not Boeing will have a commercial bank. Say JP Morgan. I think they're the only bank left, right? So the treasury will say debit, the treasury's account at the Fed and credit the account of JPMorgan for further credit to its client, its depositor Boeing. Fed will do that so they'll reduce the number in the Treasury's account, they'll change it down, and they'll change the number in JP Morgan's account to a higher number. And then JP Morgan.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Right. And so let's take this example the treasury is going to buy a plane and send it to Ukraine. Let's just say the plane costs a billion dollars or a series of planes costs a billion dollars from Boeing. The Treasury has an account with the Federal Reserve, the Treasury General account, TGA. When the Treasury sends the money to Boeing, it instructs the Fed to credit a billion dollars to Boeing.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“And then they get it done. And operationally, they've got everything they need to get done, whatever Congress wants to get done on a nominal level. They can change the numbers. They can't create, they can't make it rain. They can't cause the temperature to go down, but they can debit and credit accounts all day long, whatever Congress wants them to do in that regard.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“She decides to pay for weapons to go to Ukraine, she instructs the Federal Reserve to credit those accounts. The Federal Reserve gets permission from Congress to do that under certain circumstances. Operationally, you can credit any account that Treasury tells it to. But if Congress says no, you can't credit the account for anything right now because we've put a debt ceiling on ourselves, then the whole system can grind to a halt. But that's not an operational problem on how it works. It's not because the money isn't there. All they do is credit accounts. It's because their boss, Congress, told them, hey, you're not allowed to push that button. Okay, you just hold off until we pass this debt ceiling. Treasury, you cannot instruct Congress to credit any money for Ukraine unless we approve it. You can't do that on your own. These are agents of Congress. They get their instructions, their marching orders from Congress.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Well, the Federal Reserve is an agent of Congress formed under the Federal Reserve Act, like Chairman Bernanke said. I get my marching orders from Congress. They make all the rules. They appoint them. All the profits go back to the Treasury. And the Treasury is an agent of Congress. Congressmen aren't going to do this to themselves. They're not going to debit and credit the accounts in their spare time. They're going to have some people do that somewhere. And they call that the Fed. They're going to have somebody at Treasury keeping track of things who they're supposed to pay. And they call that Treasury. And they have Janet Yellen over there and she signs some money. That's a busy job in herself. It's a lot of work. But then she's...”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Is I'd be happy to do it. But that's gone now. You know, everybody like, okay, President Trump said we just print the money, that's enough for most people. And then we can move on.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Gone, and I'll declare victory and move on for MMT. It's in my path the least resistance right now. Now, I can explain in technical details why that's the case. And it's sort of because we just print the money, but there's a lot more to it than that. We made the technical arguments, which are the same arguments that every senior staff guy in the Fed has always had. And so when these people went to the Fed to check this out, it's like, hey, that's what we do. This is how it works. When we spend, we credit an account. We change the number to a higher number. President Bernanke said, we asked where the money was coming from. He said, we just use the computer to mark up their account. That's where all the money comes from. It sort of always came from this no other place. And so it's not like a policy choice or something. They're the scorekeeper, the scorekeeper enters the score. And so I can go into all that, but it's probably not worth it right now because you on a limited time.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's even more detailed than that, but this whole Sort of Damocles hanging over our heads is not there anymore. There's no doomsday coming because the debt's going to get to $40 trillion or $50 trillion. What might happen is inflation might go up if there's sufficient spending or supply chain or something could happen. But nobody's ever thinks the government's going to bounce a check. They just think the money could go worthless. That's a big step. Solvency was front and center before. It's like you can't do this. You're going to be Greece in front of the IMF on your knees, shutting down, having to them dictate terms to us as to what we have to do to continue. If China doesn't buy the debt, then we're not going to be able to spend the money. And we had our president and secretary of state go to China to negotiate to make sure they would buy our bonds. That's all gone. President Biden didn't go anywhere with anybody to make sure we could sell bonds. That whole fear mongering rhetoric is.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Right, and you're absolutely right, the discourse has changed. President Obama's stimulus proposed stimulus. It was called all this government intervention, socialist. In retrospect, that stimulus pales just in the dollar amount to the COVID stimulus that was passed under Republican administration, as well as tax cuts in 2016, also under Republican administration. So I guess that the theory was that deficits are inherently bad and that If you're borrowing money now, your grandkids are going to have to pay. The reason that is because the government prints the money. It could always monetize the debt and print green dollars, aka current dollars, to pay off those yellow dollars bonds. And that debt is money.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“So that a representative government could have more choices and use those choices to get us through the COVID crisis, whether you agree with them or disagree with them. Either you believe in an informed electorate or you don't. And I believe in an informed electorate. And so the electorate has been informed, certainly not completely about how it all works, but enough to get the idea that the government checks are not going to bounce unless there's like a debt ceiling where they bounce their own checks they get.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Two trillion dollars. And the only discussion was whether or not that spending would be inflationary. There was no talk about these other things. So that, I think, tells you how far it's come. And so I think they understand, people understand today that the government checks are not going to bounce. We're not going to go insolvent. There's something about the public debt. They might not understand it, but it's, you know, Ronald Reagan said if it gets to $90 billion, we're doomed. So they get the idea that it's not something they need to worry about per se. They need to worry about inflation right now. That's the biggest worry. And what's causing it and if it's to public debt or if it's just spending or if it's supplyable chains, you know, whatever. So I think the MMT's contribution has already been made, accepted, and I'll say change the world for the better because it put options on the table that weren't considered policy options before.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Okay, well, one thing is the idea of all this rhetoric around the public debt and the deficit. But I think we've largely won that battle because when Obama, President Obama went to do his stimulus package, they cut him in half. He and Hillary Clinton went to China, our bankers, to make sure that they buy our bonds so we could pay for it. Paul Ryan was talking about how we're going to be the next Greece and Paul Krugman had a stack of papers on the president's desk about how interest rates are going to go higher. So all these things we heard about leading debt to our grandchildren and that type of thing. By the time COVID came around and you got to give credit, Stephanie Kelton was on the front line. She was on the Senate Budget Committee. She wrote the book. She popularized it to where it is today. And by the time COVID came around, they're talking about a trillion.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Do that the hours were debited from my account and credited to Mercedes account. They didn't go anywhere. And so the headline rhetoric can be very confusing. And the hardest part about what I say to people is not understanding what I'm saying, but trying to reconcile it with what you're hearing everywhere else.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“It's a It's not anti MMT. What MMT does is it's a lens to view these policies to see what they're going to do to us. Now, when you talked about people's idea of money, okay, you know, it moves What I like to tell the analogy I like to give people is if you look at your TV screen and you're watching a football game, you'll see people moving across the screen. But if you get right up close to the screen, there's just dots going on and off. There's nothing moving on that screen. And apart from actual cache, which is a very small part of the economy, money is just dots going on and off of people's bank accounts. One number is going higher, another one's going lower. There's nothing moving from one account to another. And as a matter of accounting, when you increase one, you account for that by decreasing another. But that doesn't mean anything actually moved. If I buy something from a non-resident, my bank account goes down. His bank account at, let's say I have a bank account at Citibank, my account goes down, his account goes up. They'll say the money left the country because it went to a German resident or to Mercedes or something. They have an account at Citibank. But when did it actually do?”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“At least analyze to looked at to see how much damage this is going to do to the economy and how quickly because it's a cascading thing once it's put in place. Once things start slowing down, then they slow down some more, then they slow down some more. And the federal government has to continue to cut spending all the way down because its revenues are being cut all the way down.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Taxes, which is probably the larger effect there's a dynamic effect here, and I understand that Just because Don't get the income. Doesn't necessarily mean the deficit went up at that moment because I didn't pay the transaction tax. But it starts this process going where as it's respent or would have been respent, transactions taxes aren't getting paid. So the first person isn't necessarily the impact, you know, the dynamic impact. But the second and the third, all the multiplier effects of all these things are in there. And it lowers tax revenues. So that means that spending has to go down more. And it can be severe. It has to be”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Didn't get that $250, which had been being counted as part of their expected revenue stream. So it cuts into their revenue stream. When I cut spending, it cuts into their revenue stream. Like I said, it doesn't like, it's not one-for-one, it's not 100% multiple, but it's a factor that is dynamic. And if you would have respent that money, paying your bills, going out to eat, that would have been somebody else's income. tax revenue, you know, the money they would have paid in taxes falls. And most of the money, once it gets spent, gets respent, not most of it, but quite a bit of it immediately. It gets transferred to somebody else. And look, all my Social Security that I get is taxable income. So if I get $3,300, a little over $3,000 a month, I'm paying whatever $1,000 in taxes. I don't get the check. I don't pay the taxes. You know, I don't respend the money, so somebody else doesn't pay the tax.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so most federal taxes or income taxes and they're paid based on your income. So if the government has to withhold payment to you, your income goes down and so your tax liability goes down. If you're going to get paid $1,000, they might be 300 that might go to federal taxes, $250 or something like that. So if they don't pay you, now the federal government.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Payroll tax who are funding the Social Security, how is it that that tax liability will go down? And I guess the more broader point will be if US government does not spend on firefighting or police, how does that make the taxes that people have to pay not payable”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Warren, you said that if the US does not pay out Social Security, you have to someone, a senior citizen who's eligible, then the tax liability goes down. Tell me about that because number one, I think it's integral to MMT, which is where is money created and where is it spent and what is the order in which that happens? When I was a kid and I first learned about Social Security, the sense was you're paying into it and that when I'm seven years old and I'm receiving social security, it will be quote the money that I paid in. When my grandfather told me about Social Security, he paid into it. He earned it. And therefore, the money that he received as a senior citizen was the money that he put in. But as we know money, money is a commodity and it's not that simple. So just tell us how is it that if the US defaults on US does not pay Social Security, how is it that people who are paying the”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“It goes down in the slowing economy. The deficit goes way up because tax revenues fall off so quickly. So it's unstable to begin with that dynamic is not even being discussed. I address a large pension fund, global pension fund, hundreds of billions under management. And I ask them about this. I said, you get coverage from all over the world. Has anybody mentioned this dynamic process that might kick in? They go, no, which tells me it's just not being discounted.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“You see what I'm saying? By not spending, you're also cutting off revenues. And normally that would just make the deficit go up because you'd be spending the same, but revenues would be down. Well, once you've hit the debt ceiling, now you have to, you can't spend. So you have to cut some more. So every spending cut that results in a revenue cut results in another spending cut. And you get a dynamic downward spiral. Now, it's not an every bit of spending. And there's a multiplier, but there are things that stop because of this. You know, somebody might close their restaurant for a couple of days. And so they stop paying. Their employees stop paying taxes. But you've got this dynamic downward spiral. Most of our taxes, federal taxes are transaction-based today. So they're highly unstable. In an upmarket, good strong economy. They grow so fast. They grow faster than even the government can spend money.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“It's not to default. What happens is they've run out of borrowing authority, so they can't pay, let's say, Social Security. So, if somebody gets there, starts security and doesn't get it, now their income tax liability goes down. So now the government spending is cut further. And so their income tax liability goes down more. So it's cut further. You've got this dynamic process going on.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, they're understanding the risk because When you come up against a debt limit, it means you might have to cut spending when you get to a certain point because that would be deficit spending. Well, once you cut spending, you've also reduced tax revenues. And so once you've reduced tax revenues and you have more spending cuts because you can't run a deficit. Now in a simple government shutdown when they stop paying people and stop spending, the deficit goes up and it's allowed to do that. That's not a violation. So they can keep paying certain things and keep functioning. This has a dynamic aspect to it and it's not 100%. I mean, but it's there and it hasn't, I haven't seen it mentioned by anybody at all. So potentially it could take things down towards zero and almost instantaneously, certainly within a few weeks. And so I just don't see that risk being discussed. Therefore, it's not being discounted in the market.”
2023-06-01 · Forward Guidance · Rate Hikes Are Inflationary, Says Warren Mosler, Godfather of Modern Monetary Theory (MMT) · IDENTIFIED FROM THE TRANSCRIPT