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Sept. 7, 2020 - Freedomain Radio - Stefan Molyneux

02:04:04

"HEY STEF! DEFICITS ARE GREAT FOR THE ECONOMY!"

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	It's time to do some econ.
	It's time. All right. Good morning, everybody.
	Stefan Molyneux. It is Sunday, sometime in early September, birthday month, and freedomain.com forward slash donate to help out the show.
	Massively, hugely, deeply, gratefully, humbly appreciated freedomain.com forward slash donate.
	But we are going to talk monetary theory.
	We're going to talk money, printing, interest rates, and boy, for those of you who've been watching the stock market lately, let alone the roller coaster of Bitcoin, this is going to be a highly relevant, deep, and powerful topic.
	And yeah, I haven't talked decon in a while, so I'm very pleased to be having this opportunity, and I'd like to welcome...
	Our two guests with the ace ninja moderator, James, to chat about these very important issues this Sunday AM. Welcome, guys, and thanks for coming.
	Thanks, Steph. Hi, Steph.
	So modern monetary theory, right?
	I assume that MMTC... I thought it was either some form of jujitsu or an illicit street drug, but apparently it is.
	I was doing some reading of it, of course.
	Do you want to give the brief background, or not so brief background if you prefer, about modern monetary theory and the value you think it brings to the conversation?
	Sure. So the background is...
	Unfortunately, talking to this audience, I guess it kind of starts with kinesianism.
	But the guy who we can really point the fingers at and say that this has been crystallized into one idea is a guy by the name of Warren Mosler.
	And some of the fundamental ideas, and there's a lot of them, so try to get this down into a couple soundbites, is that...
	The most fundamental thing is the evidence for the history of money points to the fact that states have always been in control of money and have been the originators of money and that there doesn't really seem to be any evidence that barter theory exists.
	Or I should say that any economy started by the form of barter and developed into any sort of monetary system.
	And to kind of fast forward to what that means today is that, you know, we're looking at, particularly in the United States, with this crazy record deficit spending, that if we have the understanding that, you know, we got to pay that back one day, it's like, oh my God, this is really a problem.
	But if we look at it in the sense of, wait a minute, If the government has a monopoly on the issuance of currency, this is just issuing more currency, and it's the only place for the private sector to get that from.
	So one of the things that me and Nima want to argue is that not only is this potentially not a bad thing, it can actually very much be a good thing that we're seeing...
	Recently with the amount of federal deficit spending, I mean, we're focusing on the United States, but in the United States.
	It's a worldwide ailment, so I don't mind focusing on the U.S. to one degree or another.
	It affects every economy in the world, pretty much.
	I don't know any economy, at least sort of a modern economy, that has reserves instead of a deficit or a debt.
	Because, you know, it just sort of struck me that, as far as Keynesianism goes, and guys, correct me where I go astray, it sounds like you're deeper into the...
	The stuff that I am, but basic idea behind Keynesianism is to say, ah, you see, when the economy is good, government should save money.
	it from overheating.
	And I really, it actually kind of bothers me just by the by when economists use something like overheating, which is not an argument.
	The wealth is growing too quickly.
	It's overheating.
	What does that mean?
	Well, you know, we could cure your cancer, but I don't want your health to overheat.
	It just doesn't make, I really, really dislike it when they bring these carburetor-based analogies into a complex topic.
	But the idea is that the government's going to save money when times are good.
	And then when there's a recession, or a depression, that the government takes its liberal savings and applies it to the economy in order to prop up businesses and keep liquidity flowing like blood, yay, through the very arteries of the free market.
	And it's, of course, a very interesting theory, which has nothing to do with political power, and nothing to do with how governments actually survive.
	Because, you know, Governments survive by pretending that they add value by creating money and borrowing money.
	In the same way that many, many years ago, I posed this question which came out of a Dungeons& Dragons session of my early teens, which was we all ordered pizza.
	There were a bunch of us and each of us put in five bucks and one guy had a five dollar coupon.
	And yeah, okay, it reduced the price of the pizza, but he didn't actually cost him anything.
	It's sort of an interesting question as to whether he actually contributed or not.
	But governments don't have any money.
	They don't earn any money.
	They don't create wealth in that way.
	So if they just tax, it's pretty evident that they're a drag on the economy.
	So what they do is they borrow and print.
	In the same way that if somebody goes into debt to pay for his portion of the pizza, then he's not really actually adding value, particularly, of course, if he never pays that debt back.
	This doesn't work because no government sits there and says, well, I'm going to pull back on spending because, you know, government spending is not something that is like a one-time affair, so to speak.
	Excuse me. And government spending creates bureaucracies, it creates welfare classes, it creates dependent military industrial classes and so on.
	And when that money is flowing, everyone's relatively happy except for the future taxpayers who don't count because they don't vote yet, probably not even born.
	And so if the government then says, well, you know, time's going pretty well, we're going to claw back all this spending, then they get voted out of power almost instantaneously.
	And the media says, you know, this is another thing I hate when they say, this is so-and-so's, insert country here.
	You know, like if there are riots, they say, this is Trump's America.
	Like Trump somehow owns all the riots.
	It's just a basic sophist trick that only works because people are brain dead from government schools.
	And so they don't end up clawing back to spending when times are good any more than a drug addict says, well, you know, I'll have a lot of drugs this weekend, but I'll have fewer drugs during the week.
	It's not usually the way it works unless, of course, a drug addict runs out of money, which governments rarely do.
	So that's sort of the Keynesian side of things, and people do have concerns over national debts and deficits and so on, and the U.S. is heading for $3 trillion, which is absolutely mind-boggling, even by my standards.
	It's absolutely mind-boggling how much deficit spending is occurring in the U.S., and the CDC just took over rental contracts throughout the United States with no due process, no process of law by forbidding evictions or at least recommending it, and Trump's behind all of that kind of stuff, so it's pretty wild. But your argument that the seeming tumor of dead is actually muscle that's bulging out and growing, is that right?
	I would say more or less.
	Yes, I would say so. Yeah.
	Yeah. It can't be exactly, otherwise we'd have nothing to talk about.
	And after I said economic analogies are a problem, I then created economic analogies.
	But if they're accurate, that's good.
	Make the case, I'm all ears.
	I wrote down a couple points that you brought out, and then I think these will generate a good place to jump the conversation to.
	So, first off, the Keynesian idea that the government should save in good times and then spend in bad times, we're going to make the argument that it doesn't make sense for the government to save.
	Not that it's not a good idea.
	We're saying that's literally impossible.
	Because the government, as the issuer of the currency, and the monopoly issuer on the currency on top of that, because whenever it spends, it's creating money out of nothing like we all know.
	When it taxes, it essentially destroys that money, and it doesn't need savings to do any of that stuff.
	Right. The amount that it is taxed has absolutely nothing to do with its ability to spend.
	Okay, so hang on a sec.
	Sorry to interrupt. Sure.
	Keynesianism or Keynesianism?
	I've always thought Keynesianism.
	I'm not sure. Yes, Keynesianism, yeah.
	Okay, so Keynesianism...
	Just give me the, you know, for me and for the audience and for posterity for the world, give me the, you know, when governments tax, they destroy money, when they print, they create money, because that's not my particular understanding of it, but I'm certainly happy to be schooled, so give me the argument for taxation destroying currency.
	And then we're talking MMT now.
	This isn't the Kinesian art.
	No, I got it.
	Please, to use my old way of saying, explain it to me like I'm five years old.
	Maybe seven. Maybe seven, because, you know, I've had a coffee, but...
	Don't assume I know anything about the theory and don't gloss over things, don't skate over things.
	So if you make a statement like governments create money and that somehow adds to wealth and then when they tax that destroys currency, just assume I'm sucking on some glue in a kindergarten seat and you've got to explain it to me with beads or something.
	Don't be afraid to dumb it down to truly interstellar levels.
	And then, Nibu, did you want to jump in, or do you want me to keep going?
	Yeah, yeah. I mean, I just...
	I think I'd jump in on that.
	So, the origin story of money, according to MMT, is basically...
	Let's say there's some general who wants to conquer some territory.
	Let's call him Nima because that's my name.
	And he needs to hire soldiers to conquer the territory.
	I guess he's going to call Nima Stan, for example.
	So I'm going to create these Nima bucks and I'm going to pay every soldier Nima bucks.
	You know, like every soldier gets a thousand Nima bucks and the soldiers are going to ask me, well, what are we going to do with those Nima bucks?
	They're worthless. And then I tell them, well, we're going to tax the population that we conquer in Nima bucks.
	Everyone's going to need them and it's going to become the currency of the country.
	So I proceed to spend those NEMA bucks into existence, and we do our rampage.
	We conquer NEMA Stan.
	And everyone who is a citizen of NEMA Stan now owes, let's say, 50 NEMA bucks per week.
	And those soldiers will be able to spend those NEMA bucks and buy from merchants, etc., etc., To obtain the goods and services that they are looking to procure.
	Not necessarily a purely theoretical story, because this is how the Roman military and a lot of militaries way back in the days funded themselves.
	And if you look at this origin story, you'll see that the spending of the money comes first.
	Me into deficit, as it were.
	But it doesn't matter to me because I create the NEMA box.
	But I've spent so and so much NEMA box to hire the soldiers, haven't taxed anyone yet.
	Now we proceed to tax people a portion of that money, and the remainder, which is the deficit ultimately, remains in circulation.
	So the money that comes into the economy with the spending and it's cycled out of the economy, it's destroyed, literally appears from existence for all purposes through the taxation.
	That's sort of the origin story of money and MMT and actually a lot of historical evidence exists for that as well.
	Now, we don't have any government bonds yet in this example.
	So if I want to introduce government bonds, I would tell some of these soldiers who have saved up NEMA bucks, I would tell them, I'll give you an interest-bearing alternative.
	I'll give you a NEMA bond that pays you 10% per year.
	And so and so many of those will choose to, okay, return the NEMA bucks to me.
	I give them bonds instead and I choose to pay them 10% interest.
	Every year. And I create that money that I used to pay that interest, just as I created the NEMA box out of nothing.
	And when it comes time to pay the principal on the bond, I will replace the bond with NEMA bucks and make the final interest payment with NEMA bucks that I've created, and that concludes that particular asset for that soldier.
	This is trying to explain that cycle as quickly and as simply as possible.
	Does that help?
	Yeah, no, I totally get that.
	And my brain was racing with analogies, I guess, even that I've talked about, which is if you look at investment.
	So basically, it's an advanced payment on stolen goods, right?
	I mean, you'll create these bucks, which are only valid because you get to pillage a conquered population.
	Now, that, of course, is whether or not you're invading another territory or simply maintaining control over your own conquered territory.
	Sure. It's sort of immaterial in a way, but...
	It's easy to understand this way, you know, because I'm introducing new currency, so you start out with a concourse, but it doesn't have to be this way, for sure.
	Right, but...
	No, go ahead.
	I was going to say, another way to think of it is that instead of thinking of the government as saying, okay, we need to tax resources from the population in order to save them, and then we can, you know, dole them out through the initiation of force as we please, is to say, okay, we are going to create this figment of our imagination that forcibly moves goods and services from the private sector to the public sector,
	and then the whole time the private sector doesn't realize it's getting and then the whole time the private sector doesn't realize it's Thank you.
	Thank you.
	Well, I mean, if you run your own business, you do sort of get that feeling from time to time.
	No, no, I mean, obviously you feel like you're getting robbed when the taxes are coming out of your account.
	What I'm saying is, when I go and do work for the government, because I do have my own business and I have them work for the government and they pay too much, you're like, sweet!
	I just made a lot of money, but in reality, the whole thing that was set up for...
	The government set up the system where they got me to work for them for this...
	You know, figment of their imagination.
	With this tax token, basically.
	Right, right, right.
	Okay. Well, I mean, it's also someone steals your bicycle, you steal it back, you're still up one bicycle, so to speak.
	Okay, and also I was thinking about not just ancient Rome, but to some degree, and I don't know where you guys stand on these theories, but I put them forward as merely hypotheses that have been put out, that one, at least one of the reasons why the U.S. was so hostile towards people like Gaddafi in Libya and Hussein in Iraq was because they were exploring alternatives to fiat currency,
	that they were exploring... Gold-backed currencies, basket of commodities-backed currencies, oil-backed currencies, which could have, of course, put the status of the U.S. dollar as the reserve currency of the world in jeopardy and would have caused significant problems, to put it mildly, in the value of the U.S. dollar and thus the sustainability to a large degree of the U.S. economy.
	And so this idea that it's not just to create the value of money, but I think it's also to maintain and protect the value of money sometimes that these aggressions are undertaken.
	I think it's entirely possible.
	I've heard of those theories.
	I don't know how true they are because the vast majority of the US dollar's value is just the tax base or the tax payments that have to be made even just domestically in the US. You know, it's trillions and trillions of dollars that create a drain on that currency.
	So are they trying to create additional demand for that money through so-called petrodollar and by keeping people from exploring their own currency systems?
	Probably. There might be other motives behind that.
	You know, that whole laundry list of countries to attack also happens to be a list of banks who are not very keen on joining particular banking conglomerates in their schemes.
	And it may well have been a full-on UN assault on those countries the US just used as a muscle.
	So that's sort of another possibility that I see in that regard.
	Well, of course, if you look at Bitcoin versus the US dollar, the question...
	See, people think Bitcoin is raising in value, and I don't really think that that's true.
	I don't think that Bitcoin is going up in value.
	I think that fiat currencies are going down in value.
	Now, maybe not to the same proportion, because if you look at gold, which is fixed as well, gold hasn't gone up nearly as much as Bitcoin.
	But to me, if you were to look at something like Bitcoin, which is a limited currency, obviously you can't create more than 21 million and change, if I think that's right, something like that.
	21 million. 21 million, thank you.
	So if you look at something like Bitcoin and you would say, okay, well, if some government around the world created a limited fiat currency that was limited, And of course, limited in a government sense, we always think, well, there's a piece of paper.
	It's limited. It's like, yeah, well, there's a piece of paper that says that America should stop prosecuting General Flynn, but they don't seem to be very keen on doing that either, right?
	So it would be something that you would be able to test the value of.
	Of a fiat currency against something that is limited in scope.
	And so, whether it's these guys or some other guys, I think that it's like if everyone jumps out of the plane and everyone just looks at each other and nod at the ground, they don't look like they're moving very fast, right?
	They're holding hands doing those little Tom Cruise circles, but...
	If you look at the ground, they're actually moving incredibly fast.
	It's the same thing with falling fiat currencies.
	If all the fiat currencies are being overblown, particularly in this pandemic, the printing and borrowing like crazy, then they all look relatively stable relative to each other.
	But when you start to look at fiat currency relative to a truly limited...
	Store of exchange such as Bitcoin, you can start to see that Bitcoin is the ground that can actually measure the descent of fiat currency in a very real way.
	And so, yeah, I just sort of wanted to point.
	It's a great theory, and I think obviously there's an enormous amount of truth in it, because war is about the subjugation of taxpayers.
	I argued this Way back at the beginning of the show, when I was talking about a stateless society, right?
	A society without a government.
	People say, ah, well, but some government would just invade it.
	And it's like, but there's no tax system to take over.
	Yes. You know, why is it that governments invade other countries to take over pre-existing tax systems?
	In the same way that if you're hungry, you go to the farm, not the woods, right?
	I mean, if you go to the farm, you can go and...
	Yeah, you go to some place where there's already stuff if you want to steal stuff.
	You know, like if you're hungry, you go to the grocery store.
	You don't go, you know, to the woods.
	Because if you go to the woods, yeah, maybe you'll find some pretty dicey berries that could make your stomach explode or might give you 12 calories or something like that.
	Or you might find some mushrooms that is really dicey to eat or something, but it's going to be pretty risky.
	And the reward, the sort of calorie to...
	Calorie reward is going to be pretty bad.
	Whereas you go to the grocery store, it's like, yeah, I can just go and lift something.
	Obviously, I'm saying it's bad, but you go to some place where there is already a store of value, which is an existing tax system, you tend not to go into the total wilderness unless you're on your way to some other...
	Tax system that you want to take over and you need to maintain your supply routes so you'll subjugate the villages along the way.
	But even those villages you can probably tax, right?
	Anyway, so I think the theory is probably pretty spot on and even if you were to argue that it's not spot on with the establishment of a tax system, a control system, it certainly is the case that The maintenance of it falls under these categories in that people tend not to be very keen on counterfeiting outside the state because they want to retain that power for themselves and competing currencies directly.
	There was a liberty dollar in the US that I think was pretty heavily banged up by the state and all of that.
	So yeah, they tend not to be very keen on competition because they want to retain that capacity to basically type whatever they want into their own bank accounts.
	They came after him for counterfeiting.
	Yeah, that's right. I remember that now.
	Yeah, so quite a story.
	I wanted to push back on your point that the rise of Bitcoin's value expresses the decline in fiat's value.
	Because if that was the case, then the prices for groceries would just have to have gone up exorbitantly.
	Like, I'm talking... Hundreds of thousands X because Bitcoin went from, you know, two cents to...
	20 grand. Whatever, 11.
	Yeah, or 11,000 right now.
	I think a lot of the reasons really just...
	Because it's a new current system, it's incredibly novel, and there's some use cases for it in the future, and people are really stocking up on that for multiple reasons.
	It's a good asset. It's a good new asset.
	But if you think that that is an expression of fiat's decline, then fiat, the prices for products would just have to have been off the charts.
	And I don't think that we've had that kind of inflation over the past few years.
	And certainly in the US, especially after COVID, consumer price inflation has been consistently low, like to 1%, maybe even below that.
	You're quite right to say that.
	I'm glad this brings us probably to another interesting point of contention, which is well worth exploring, which is the value of Bitcoin is determined by people's perception of its value, obviously.
	It's not like gold in that it could be used for something else.
	It can be. It can be used for timestamping.
	For example, proof of existence of documents in a particular moment in time.
	Yeah, quite right. And so on. Exactly.
	So there are actual uses for Bitcoin.
	Go ahead. That's a very good point.
	But again, that only has value if people believe that the blockchain has value.
	So the fact that it does that is only of value because there's so many public blockchains that could do it.
	So it is based upon the perception of the value of Bitcoin that the public ledger has.
	The utility of the blockchain.
	There is no objective value.
	It's a basic principle of Austrian economics that all value is subjective.
	And so when I say it's measured against the value of Fiat currency, what is implicit, although I'm glad that we're making it explicit at this point, what is implicit is it is based upon people's concerns for or fears of, to some degree, the value.
	It has its own value, as you point out, public ledger, instantaneous transfers, low overhead, all that stuff I talked about years ago in my introduction to The Truth About Bitcoin series, which you can find on LBRY and BitChute and other places.
	But It's not that there is an objective value.
	In other words, Bitcoin has gone up tens of thousands of times relative to fiat currency, and therefore the price of everything in fiat currency should have gone up tens of thousands of times.
	Because if it's being used as a hedge, then it's against concerns of future drops in value to Fiat currency, and it is a perception of value rather than an objective value.
	In other words, it's not like mathematics and physics and so on.
	Like, if I say one spaceship is traveling a thousand times faster than another spaceship, that's not based upon subjective perceptions.
	That would be based upon objective measurements, but there aren't objective measurements in the realm And I think that with Bitcoin, there is the utility value of Bitcoin itself.
	But I think factored into the price of Bitcoin is, to a large degree, people's concerns about the future sustainability of the US dollar.
	And I think that's sort of priced into the mix.
	Sure, that's a possibility.
	We can speculate about that.
	Since we're talking about crypto, I think one very interesting aspect of this MMT theory is that Dylan and I have made the case that it explains the value of crypto just in the same manner as it explains the value of fiat currency.
	Because in the crypto world, you don't pay taxes, but you have to pay fees to access the blockchain.
	And the fees are essentially the reason.
	So as you already said, if people think the blockchain has value and utility, then they will want to have the tokens that give them access to that blockchain.
	And they can only get access to the blockchain with those tokens.
	So that's, in my opinion, that's the case that I'm making.
	The reason why crypto has value is because of the fees that people have to pay to access the blockchain are only payable in that particular token.
	The deficit spending government in the example that I explained earlier.
	The miners, they facilitate the transactions, they get rewarded for it, they channel Bitcoins into the economy, and people pay the fees, and they go back to the miners, which channels them out of the non-minor system, if that makes sense.
	You're going to have a tough time with me, which doesn't mean that I'm right and you're wrong, I'm just perfectly honest.
	You're going to have a tough time with me if you're making analogies between an entirely voluntary and decentralized system and a coercive monopoly like the state.
	That's like saying, well, penises and vaginas are both involved in rape and lovemaking, therefore the two are somewhat analogous.
	It's like...
	I might be able to...
	Sorry to interrupt.
	Help make that analogy, which is that regardless of whether or not the initiation of the use of force is used, what Nima's saying is that in order for an arbitrary token to be valuable...
	You have to somehow generate demand for that arbitrary token.
	Now, governments cheat.
	They say, I'm going to point a gun at you and give me that token.
	And you go, okay, I guess that token...
	And you cannot deny this token as a legal tender, and you have to pay your taxes in this token.
	Exactly. Whereas the free market that we're seeing with cryptocurrencies over, we'll say, the last decade...
	You know, they have to come out and say, okay, well, I can't point a gun at somebody, so how do I make people need this token to access my services?
	That's what Neem is saying, is somehow the creator of the token needs to accept that token for its own services in order to make it valuable.
	The difference being, of course, that...
	Like I said, the government's cheap, where they can just point a gun at you and say, it's valuable because I said so, or excuse me, it's valuable.
	That's the same thing.
	Yeah, that's the same thing as the earlier example where I pointed out that a pizza company put out a $5 coupon, but you wouldn't want to order it, take it to the pizza company, and they say, oh, we don't accept that coupon.
	I mean, of course, it has to work at the pizza place, otherwise it has no value at all if it's a negative value.
	Yes, exactly.
	And that's, in fact, how some hyperinflations have happened in the history, because the state stopped We're not accepting the token in payment of taxes.
	Oh, tell me more about that.
	Well, there have been examples.
	For example, in Roman history, where certain coins just weren't accepted anymore in the payment of taxes.
	Oh, because they were so debased at that point?
	No, we're saying...
	What was that?
	I was saying, Steph, we're saying the opposite of that.
	It's not that they didn't accept them because they were debased.
	They were debased because they stopped accepting them.
	Why would they stop accepting currency that hadn't been debased?
	Well, so if we're realizing that the currency is an arbitrary token and it doesn't matter what the material is made out of, and we say, okay, it's getting value from the fact that it's becoming taxed.
	What's that, Nima? Honestly, I don't think it had to do with one or the other.
	I think there was, for whatever reason at one point, for political reasons, a particular coin wasn't accepted anymore in ancient Rome.
	I'd have to dig out the details on that story.
	But a similar story, I believe, in the U.S. At one point, the continental dollar, during the revolutionary years, the government didn't have...
	Sufficient enforcement muscle to actually collect on the taxes of that, to collect those taxes.
	And then also the currency became worthless and there was a hyperinflation.
	So I was just making the point that in these fiat systems, the only way to default is actually, for actual default, is for the state to stop accepting the tax tokens that they formerly promised to accept in the retirement of tax liabilities.
	Yeah, that's like the National Socialists with the Reichsmark versus the Mark, right?
	Where they just said, okay, this out with the old, in with the new.
	I think the same happened in the post-war period.
	But I think that was just a currency reform.
	They made people whole who had the previous currency and all that.
	So I don't think that was like a literal default on accepting...
	No, no, no, that's right. But there was an example of the Mark losing value because the Reichsmark came into...
	And you could exchange, of course, but after a while, you just couldn't use the currency.
	Well, also, I guess you had the hyperinflation of the 20s, which was a whole other political issue.
	I'm sorry, I know we're jumping around a lot and we will get to the core issues, but I love this kind of history stuff.
	How does MMT explain the Weimar hyperinflation?
	MMT explains any hyper...
	MMT explains any hyperinflations that have occurred, and actually the literature observed, numerous of them, by saying that it always happens when there is a substantial collapse in the productive capacity of the country, and in many cases those countries are also in debt to foreign countries in foreign currency.
	For example, if you take the example of Weimar Germany, you had An incredible debt imposed on the country of, I don't know how many, 20 million gold marks, gold they didn't have.
	And on top of that, because Germans were defaulting on their payments, the French sent in troops in the West and literally started forcing German Workers to extract coal at gunpoint, which then left the country, wasn't available for the country.
	And also the government was trying to obtain gold, so they had to drop the foreign exchange value of the currency so they could make the gold mark payments.
	And so the productive capacity was fleeced, collapsed, and the country was in debt in gold, which they didn't have.
	These are the circumstances under which hyperinflation can happen.
	Same has happened in Zimbabwe.
	They had a huge land reform and Zimbabwe distributed all the land from white farmers.
	I love the way they always call it land reform.
	Like if some guy goes to rob a bank, he just refers to it as money to re-reform.
	Fiscal reform. It turned into scrap farming.
	There's almost nothing more dangerous than a bunch of socialists with a book entitled Land Reform.
	And re-education, too.
	Oh, yeah, re-education. Yeah, good luck with that, right?
	We'll take an ideological ice cream scoop to your neofrontal cortex and leave you with very little left.
	They basically gave those farms to people who didn't know what to do with it.
	They were scrapped for medals and all that stuff.
	And, again, the productive capacity of the country collapsed.
	The country was also in debt to the IMF and several foreign currencies.
	So once again, these are conditions, real political conditions and civil war or actual wartime conditions that can easily cause hyperinflations under certain circumstances.
	That's also why we're making the case that the U.S. is not going to see any hyperinflation anytime soon because these conditions are not met.
	And similar countries, you know, Canada, all the sovereign money issuers who have control of their own budgets and their own They don't necessarily...
	They don't go into hyperinflation unless some of these things happen.
	Productive capacity collapses.
	Okay, so sorry, let's talk about that because I know that this is a criticism of the Austrian school relative to existing economic conditions in America because the sort of praxeological basis of...
	Inflation, hyperinflation, let's say, in the Austrian school is pretty simple, right?
	If you don't have an extra number of goods and services, but you have double the currencies, you should more or less see 100% increase in prices, right?
	I remember debating this with one of the Marxists I debated back in the day, in my social media glory days, that I said, you know, you got 10 oranges and 10 dollars.
	Each orange is a dollar.
	If you have 10 oranges and $20, then each orange is $2, right?
	I mean, this is sort of basic stripped-down Austrian school.
	And remember, I'm no economist.
	This is sort of just stuff that I picked up along the way.
	And I know that Bob Murphy's been pretty critical of MMT, but that's sort of the general idea.
	And so as money is created and flows into an economy that is growing at a far slower rate, Then the rate of money creation then you should see not of course exactly it takes 12 to 18 months and it's not going to be in all sectors of the economy it's not like every single price doubles you know everywhere on one day but you should see over time a proportional increases a proportional increase in price relative to the ratio between money creation and the productive capacity or creation of the economy And given that there has been just a staggering amount of money creation,
	you could say, I mean, it was under Bush, it accelerated under Obama, and it's really gone into hyper-acceleration under Trump.
	So we should be seeing significant rises in inflation, according to And this isn't, I mean, this is one of the foundations because it's, so praxeology is basically like by definition, I don't want to oversimplify it, but it's sort of by definition this has to happen.
	So it's not even really much of a hypothesis.
	It's really the basis of The ratios believed to be mathematical in the system.
	And, you know, forgive me if I'm overextending the case, but that is not really occurring.
	And the Austrians are like getting some spotlights on them about this, right?
	Well, exactly. I mean, first of all, be very careful with anyone who tells you that their theory is automatically, it's not even a hypothesis, but it's true by definition.
	And that's what praxeology, unfortunately, kind of, I used to be a huge Austrian economics fan.
	But I think you understand philosophically it's not good to refer to your theory as automatically proven true.
	Wait, wait, we're going to get back into universally preferable behavior perhaps another time, because I feel you're skirting around the volcanic edges of my moral theory.
	But okay, we'll do that another time, but I certainly...
	If they say, look, it's just math, you know, if you have double the volume of water, it's going to spill out of the container.
	That's physics, man. I mean, that's not even a hypothesis, and taxeology tends to root itself in the vicinity of math and physics, which is kind of risky.
	If you simplify the system to...
	Sorry, let me just put it... So, for example, you said 10 oranges and $10, each orange $1, and I up the money amount to $20.
	That is assuming that people are automatically going to spend that money on oranges instead of keeping it in their savings.
	No, no, no. It's a closed system. No, no.
	That example I gave is a closed system.
	I mean, the oranges are the economy as a whole in the analogy, right?
	And it is very much boiled down, but just so I know that there's things you can buy other than oranges, right?
	There's one more thing we've got to allow for.
	You can also not buy anything.
	I'd like to extend the orange metaphor here.
	Go. So we got 10 oranges.
	I don't know how many Donald Trumps can we afford.
	So we got 10 oranges, we got $10.
	And we're saying, okay, we're going to increase from $10 to $20.
	And so the idea is, well, the math works out to, well, you know, everything, the orange is going to go up to 100%.
	What MMT points out is that if there's unused capacity, so let's say that there's a capacity of, hey, if this guy who owns this farm over here had a little bit more money in the system, he could start growing oranges himself.
	But right now he's unemployed because there's not enough money in the system.
	There's unused capacity.
	So by going from $10 to $20, that might have been enough for him to get that money and start his own orange farm.
	And now he created 10 more oranges, so we do have 20 oranges for $20.
	Now, that's an excellent point.
	And to be fair, the Austrians do talk about that quite a bit, that when the value of something increases, you bring unused capacity into...
	Well, and the economy.
	So, for instance, you know, if everybody has clothes around that they don't use, right?
	I mean, oh, you don't use much.
	Or maybe you say, oh, you know, after COVID is over, I'll drop that 15 pounds and fit into my skinny jeans again or something like that, right?
	But if, for whatever reason, the price of used clothing went up enormously, then people would start rifling through their closets and would start selling their clothes or...
	If the value of gold goes up enormously, people will take their unused jewelry and go and sell it.
	Yeah, you're right. There is a magnet or a gravity wheel with higher prices or higher valuation that does draw unused capacity.
	Into existence in the same way that if you have, everybody has some pennies in their house, right?
	And if you find one that's worth $100, you'll probably go and sell it or something, in which case at least one penny gets moved into circulation, so to speak.
	So yeah, there is a dynamic that there's an unused capacity in the economy that higher prices tend to draw into existence.
	So yeah, I'm with you there.
	Go ahead. So now let's go back to an MMT principle, because we're talking about MMT, is that What we're arguing, and what MMT argues, is that unused capacity is actually a result of a political decision.
	So, not a free market decision.
	So, bear with me when I say this.
	Unemployment is a government problem.
	So, unemployment is the result of a government demanding a tax.
	The reason we're unemployed...
	If I'm unemployed, it's because I'm not doing work that's giving me an income in the unit of account.
	And the unit of account is whatever country I'm in, right?
	So for the US... Well, no, sorry.
	But to me, at least, unemployed...
	And I don't want to interrupt, and I may be a little bit less shocked than you think I am.
	But unemployment is also when you want the job.
	Like a woman who's raising kids, she may be counted as unemployed, but she is being paid by her husband to raise the kids.
	When I was younger, I took 18 months off to write novels.
	I was not earning an income.
	I was relying on savings.
	Would I be counted as unemployed?
	Well, I wasn't looking for a job.
	There is, to me, unemployment, and I'm with you guys along probably a lot further than you think I am.
	We'll get into that more. But unemployment does have to do with you have a very strong desire for work, and you're not just kind of ticking lines on a wall, prisoner style, when you just wait for your unemployment to run out, and then three days before it does, you actually go and find a job.
	I'm talking about, like, actively out there, hungry for work.
	Yeah, I'm with you that the only thing that could really become between somebody who wants a job and an employer is some sort of government interference.
	I, thank you for bringing that up, unemployment.
	I am definitely using a much more simple, I'm kind of going back to our primordial definitions of how an economy works, not like the modern day version of unemployment where there's an unemployment thing or an unemployment office that has a specific definition of how you apply for it and, you know, someone can have savings and then they don't have to work for a while and then, you know, are they unemployed or are they not?
	I'm Going back to kind of the primordial system, okay, we've conquered a neighboring country or we're just continuing the hold over our own country.
	And we've announced to everybody, suddenly you owe a new tax in this arbitrary token.
	We've been using NEMA bucks for now, so you'd owe this new tax in NEMA bucks.
	Now, by the definition that we're giving here, everybody's now unemployed because no Nemabucks exist.
	They need the Nemabucks and they can't get them.
	They have Nemabucks...
	Sorry, let me just make sure I follow the timeline you established earlier.
	Because if you create Nemabucks in order to raise a mercenary or pay a mercenary army to invade someplace...
	Then the unemployment hasn't occurred yet because you're just in the beginning process of getting the ball rolling to end up with the control of a productive talent that results in the NEMA box having some sort of titular value.
	So just help me understand where that is in the earlier analogy.
	The unemployment occurs when the tax is imposed on the public.
	At that moment, the public It needs that money and can't have it, unless they work for the government, if that makes sense.
	Okay, so no, I'm not there yet.
	I'm sorry if I'm sort of bringing up the video here, so to speak.
	It's weird. We get it.
	No, no, I just really want to make sure I get this fully.
	So the government has control over the country.
	There are already these NEMA bucks in circulation because there's no reason to invade unless you can provide value for the NEMA bucks by taxation.
	So help me understand how NEMA bucks are not available.
	They must already be in circulation for this whole hypothesis to work.
	Only to me and my soldiers, but not to the private sector of the country that I've conquered.
	Only when I announce to them, okay, you owe a tax, and then they start providing services, selling goods to my soldiers, then the money begins circulating.
	Oh, so the money goes from state printing press...
	To bureaucrats, to soldiers, but there's this dam, and then when you say, okay, you have to use these NEMA bucks, then it goes from the soldiers to the gen pop, who then use it to buy.
	They would also buy from each other, but I guess primarily they would have to buy from the soldiers, because the soldiers should be the first ones who have the value, so they get it at maximum value, right?
	Exactly, and you're right, you're absolutely right, yeah.
	I want to emphasize that you nailed it, is that the private sector comes after the state imposes this tax and creates this circulation.
	So there's this whole thing about soldiers and conquering and, okay, we're going to impose this tax, we're going to give the money to the soldiers or the bureaucrats and blah, blah, blah, blah, blah.
	And then what's left over in the system?
	So we spend $100 into the system, we tax $50 out, the private sector has $50 left to have an economy with.
	Got it. Now let's imagine there's no spending at all, and I've imposed a tax.
	Now people are basically broke.
	They are in debt to me because of the tax debt that I've imposed, but they can't get any.
	So now we have a surplus.
	...surplus situation, basically.
	We have a government that's generated surplus, or at least a balanced budget.
	There's no... Okay, so sorry. Let me just back up for a second here.
	So, at the first instance, the soldiers have the NEMA box.
	They start... Spending it because the government has said you have to accept these NEMA bucks.
	No, no, no. The NEMA bucks are in circulation.
	They're spending it because we've demanded it as a tax.
	Like, we will come and take your house if you don't give me one or 50 NEMA bucks by the end of the week.
	And then the person who owns the house goes, crap, how do I get these?
	And I say, oh, well, you know, you sell goods to the soldier who I've given this to.
	He gets the NEMA bucks.
	And then the reason he wants those NEMA bucks is because I'm threatening him with the tax.
	Got it. Okay. I'm with you.
	Okay. Once the money, once the NEMA bucks go into the population, you have to give them more than is just necessary for the tax.
	Otherwise, they're going to starve to death, right?
	I mean, if you give NEMA bucks and their tax is 50 NEMA bucks, they've got nothing left, right?
	So now it's circulating in the, quote, in the remnants of the free market, the stuff that's outside government control.
	The NEMA bucks are circulating.
	So if you impose another tax...
	Which they will inevitably will, then you will end up with these NEMA bucks that are circulating being used to pay that tax.
	Is that right? Yes, and that's what we mean by it destroys the currency, is it takes it out of the system and puts it back into the hands of the currency issuer, who doesn't actually need it.
	The currency issuer just creates it by snapping his fingers.
	No, but he does need it, because if I understand this correctly...
	He does need it because if he doesn't have the capacity to take real productivity from the taxpayers, the NEMA box is going to fall in value pretty quickly, right?
	Good point. He needs that capacity.
	He doesn't need the paper tokens.
	He can create them at any moment.
	No, no, but if all he does is create tokens but doesn't tax people, Then the value is going to fall very quickly, right?
	Yeah, he has to tax, but let me put it this way.
	If he spends $100 and he taxes $10, He's good.
	Because the taxing of the 10 has created the value that the people need for the Niba bucks.
	Yeah, so taxation is source leverage for the multiple effect of government spending.
	You need it, but it's necessary but not sufficient for all the spending.
	According to MMT, taxation is basically monetary policy.
	It's not funding the state.
	It's just giving the money value.
	That's the purpose of taxation.
	And that you can achieve with a very little amount of taxation.
	You don't need to tax the projects you're looking to spend money on.
	Because you just create.
	Yes. Now, of course, the Austrian rebuttal to that is to say, but if you create currency in excess of productive...
	Output, then you end up with inflation, and then hyperinflation, and that's bad.
	And you guys are saying that's not necessarily the case, right?
	Go ahead. No, we agree with that.
	Of course, there has to be productive capacity expansion as the currency grows, and that's what happens when banks make loans and when investment spending is conducted.
	So yeah, I mean, just introducing new money doesn't automatically mean that the money just sits there and does nothing.
	The whole process of creating new money is basically through bank loans.
	A lot of bank loans fund facilities, projects, factories, computers, etc.
	And then there's also obviously government spending, which ideally we'd like to have less of.
	And if the taxation was much lower, then there would have to be much less government spending.
	To inject the token that are needed into the economy.
	But yeah, of course the two grow hand in hand.
	The monetary supply and the productive capacity of the country should ideally grow hand in hand.
	Okay, so do you agree with the Austrians, then, if money creation grows in vast access to the growth of the actual economy, that you will end up with inflation?
	Yes. Wait, uh...
	Okay. Wait, Astrid. Wait, because I thought that was one of the deviant points, but go on.
	So, uh, if the money is created and there is unused capacity there, then the...
	For example, we're going back to this orange farmer across the street who doesn't have enough money to start his orange farm.
	If the money gets spent into the system and suddenly there's enough money in the system that he can acquire that money and utilize it, is the spending of the money utilizes the unused capacity.
	MMT says once we go over that, where we say, okay, there aren't any more orange farmers, But we're still going to double the currency.
	I mean, orange farmers being the only thing in our closed economy right here.
	And we doubled the currency.
	Yeah, you're going to have inflation because there's too much currency chasing too few goods.
	But the reason I brought up that government causes unemployment, one of the most important pieces of unused capacity are people.
	If you have unemployed people, and now, yes, we're going back to the fact that an unemployed person actually wants a job.
	Talking about welfare people is another issue entirely.
	As long as there's unemployment, there's unused capacity.
	So, the MMT idea is that the biggest indicator, it's not the only indicator, but the biggest indicator that there's unused capacity, meaning there's more room for deficits, is The presence of an unemployed section of the population.
	So as long as that presence is there, and then this is completely oversimplified because like you were mentioning before, the economy isn't like one flat level ocean where it all goes up and all goes down in the same moment.
	There's pieces of it that are, there's waves going up and down all the time.
	But if you increase government deficits while there's still unemployment, you're not going to see the inflation because it's going to utilize And there's also industry capacity utilization, which I posted a chart in the chat here, the current Federal Reserve's chart of capacity utilization, which has absolutely collapsed to a new record low after the COVID lockdowns.
	Well, sure, people are, I mean, I've seen restaurants and cafes that used to be open till 9pm that are closing at 3 o'clock in the afternoon because, you know, they just don't.
	And so, yeah, there's a huge amount of just stuff sitting around.
	You know, I went for a walk last night and I went to a cafe.
	And they make...
	Don't even get me started on coffee or we'll derail the whole thing.
	Coffee is like God's mother's milk to the creative brain or something like that.
	But anyway, because I'm starting to work on a new book.
	And I went to the cafe and it had just closed.
	It was like, I don't know, like it was 10-10 or something like that.
	And there was someone in there cleaning up, right?
	And I knocked on the door, and it's like, human being, coffee maker, all of the ingredients are here for an economic transaction.
	It's like, nope, we're closed.
	And I get that.
	They probably had closed out the till and stuff like that, and I get all of that.
	But this unused capacity was torturing me last night.
	Because it's like you've got a big giant coffee maker the size of the ass of a space shuttle.
	You've got the caffeine Java joy beans that I desperately need.
	Although I was actually going to get a decaf.
	I just like the taste of...
	I have a flat white like maybe once a month and they're really good.
	Flat white also known... I hope that it helps people understand why we're seeing this absolutely record deficit spending, but we're not seeing much of consumer price inflation.
	And this is because of what we've said, that as long as capacity is underutilized or unutilized, there's a lot of room for deficit spending.
	If we hit capacity, then we're going to start seeing inflation pretty noticeably.
	But we're far from that.
	And that's sort of, I think a lot of people who follow Austrian economics are getting frustrated with the predictions that don't pan out.
	And I hope that this kind of helps understand people, you know, what's going on.
	I'm sorry, was there something else you wanted to add?
	I heard a hmm there. No, no.
	You're just a James Brown moment?
	Okay, got it.
	Okay, so if I understand this correctly, so you're saying that basically demand collapses, unemployment swells, but if the government is deficit financing a whole bunch of stuff, then it's in a sense preventing a price collapse rather than the money going into creating hyperinflation.
	Absolutely, absolutely. Wait, I got that first try?
	Woohoo! I have shot the arrow over the house and hit a bullseye.
	If these programs hadn't occurred, I'm pretty sure we would have seen literal price collapses, in my opinion.
	Now, that's a bit of a prejudicial term because I love a good price collapse.
	I really do. I mean, who doesn't, right?
	I mean, prices are collapsing in computers all the time.
	I was just thinking the other day.
	The first notebook that I bought was a 386 with, I think, 1 meg of RAM and a 40 meg hard drive.
	And it was monochrome, like just black and white.
	And it was like $1,300.
	This is decades ago, right?
	Yeah. And now, you know, $1,300 can get you, like, basically a computer with all the computing power of, like, 1990 in the world in a tiny little thing, right?
	I mean, and so I love price collapse.
	Price collapses is great, you know?
	There's two kinds of price collapse.
	You know, there's two kinds that comes due to improved productive capacity.
	There's the kind that comes because the government has suddenly told you you're not allowed to buy anything and do anything anymore.
	Right. Okay, so let's talk about the COVID thing and how MMT... Before we talk about the COVID thing, there was a point that, Steph, you and Nima were getting toward that I think is super-duper important back when we were talking about the...
	All right, so the COVID conversation is imminent but asymptomatic.
	Okay, we've got two weeks.
	Correct. So, okay, go ahead.
	So... Nima mentioned, was talking about surpluses in our fake Nima stand.
	I think we can move from the fake Nima stand to the U.S. economy and even look at it historically because the historical evidence is there.
	So when we're looking at a situation where, okay, we're taxing out more money than we're putting in, so you've got people that they say, okay, I need to get this In order to be employed to pay this tax, but the government hasn't created enough for me of this arbitrary token for me to actually go and do that.
	And if we actually get to a situation that's worse than, okay, we've put a trillion dollars into the system and we've taken two trillion out, or excuse me, we've taken a trillion out.
	If we change that to, okay, we've put a trillion in, but we've taken two trillion out, which is what Neba says, or Neba pointed out, is a government surplus.
	What that is, is it's actually a private sector deficit.
	And that is the indicator or that is the thing that causes the economic crashes.
	And if we look at the government, I mean, sorry, the government can't take anything out of the economy the way the current system is set up.
	Because if you take money out of the economy, you trigger unemployment, then you got to put it back in and unemployment benefits and welfare payments and subsidies and you name it.
	But if they actually do it, right?
	Right. So, if...
	And then, we also have to keep in mind, this is an important point, that state and local governments aren't the same as the federal government.
	In the sense of, they can't create the currency, so they are...
	They have to treat the currency the same way you and I do.
	They're currency users, not currency issuers.
	So if the federal government pulls out the currency and then a state government tries to make up the difference, everything that we talk about with the government has to save in good times and spend in bad times and borrow it, that all applies to the states.
	So yeah, Austrian economics is local government, not currency creation government.
	I mean, it doesn't work at the federal level, but it works in Illinois pretty hardly in that the U-Haul lineups go around the block.
	Yes. In so much as they're not able to get federal grants.
	Right. Right.
	They can apply significantly more pressure on the federal government than, say, you or I or all three of us combined.
	Exactly. Now, in the historical setting, when we see government surpluses or attempts to balance the federal budget, there have been seven times this has happened in U.S. history, and I don't know, I don't have the dates in front of me.
	Nima usually pulls them up pretty quick.
	Yeah, I posted it in the Colin channel.
	No, no, for those who are watching the Call-In channel years down the road, just skim us over the dates if you could.
	Okay, hold on. I'll open it up here.
	Where are these dates? Here we go.
	So, I'll start at the beginning or the end?
	I'll start at the beginning. So, from 1817 to 1821, the national debt fell by 29%, and from 1823 to 1836, it was eliminated by Andrew Jackson.
	Oh, sorry. Sorry.
	He actually challenged the national debt to a duel and won this time.
	These are two different paragraphs.
	I need to read these simultaneously.
	So from 1817 to 1821, the national debt fell by 29%.
	Depression was in 1819.
	From 1823 to 1836, it was eliminated by Jackson.
	Depression in 1837.
	From 1852 to 1857, the national debt fell by 59%.
	And in 1857, we had a depression.
	From 1867 to 1873, it fell by 27%.
	In 1873, we had a depression.
	From 1880 to 1893, it fell by more than 50%.
	And in 1893, we had a depression.
	And from 1920 to 1930, it fell by about a third.
	We all know when that depression came.
	And the very last one, which is one that we're all readily familiar with, was the Clinton years, ran a budget surplus, and then we had the crash of 2008.
	Well, 2001 first, and then later on...
	Okay, that's a wee bit of a delay there.
	I think you may be stretching your imminence, because the first one, well, like, right after, right?
	And then, what, Clinton was out...
	The Clinton thing gets a little more complicated, because we've not been talking about trade here so far.
	We've been assuming balanced trade, so no trade surplus or deficit.
	But in the lead-up to 2007-2008, the U.S. started increasing trade.
	It's trade deficit substantially and that is another that's called suction mechanism on the net private savings of the country that literally makes money leave the country and it's not available for spending here.
	And that needs to be made up by deficit.
	And that just wasn't made up.
	Sorry, that's money flowing out of the country that's not returning through reciprocal trade.
	And since it's a bleed of the monetary stock of the country, you have to make up for it with deficit financing, money printing, that kind of stuff.
	And then some. Yeah, you deficit finance whatever the money left.
	Due to the current account deficit, and on top of that, you just need to have the deficits that we've, the routine deficits we talked about earlier.
	One of the reasons Germany can afford balanced budgets, for example, relatively balanced budgets, because they have a chronic current account surplus.
	They constantly have money coming into the country.
	That's why the country never really struggles, no matter how bad things get in Europe.
	It's one of the highest IQ countries in Europe and has that German anal engineering excellence and all that kind of stuff and heavily focused on efficiency, which in the free market in Germany is fantastic.
	When it's not turned to free market pursuits, 1939, it's really, really bad just as a whole.
	Now, help me understand this.
	So to maintain a trade deficit seems to me kind of strange.
	And I'm sure that there's a good explanation that I simply passed by somehow or glazed over.
	But to maintain a trade deficit is to say, I'm happy to accept your currency even though I don't want to spend it in your country.
	Oh, I guess for the U.S. it's different because you can spend the U.S. dollar in many other countries.
	I think there's actually more money circulating, more U.S. dollars circulating in Moscow than in New York or something like that.
	But you're right. You're still right with what you're saying.
	No, go ahead. So it basically means that there's countries who want to, who choose to hold a dollar, or central banks who choose to hold a dollar in their account just to be prepared for whatever may come.
	There's no other reason than that.
	And one economist I heard a while ago, I forgot his name, but I'll dig it up.
	He was saying he thinks that China has accumulated these dollars for defensive purposes, almost like...
	military defense mechanism because of the bad experiences they've had with colonialists in the past.
	Can you break that down just a smidge?
	Just make sure I follow that. Well, if they hold the U.S. as currency, they can always buy stuff that's produced in the U.S. If they ever need stuff, if the U.S. starts to go hostile in China, for example, They have a valuable asset in their dollar holdings.
	But, you know, honestly, I don't know if that is the reason.
	Well, I mean, there's lots of other reasons that China would want the U.S. dollar.
	First of all, it gives them enormous power over the U.S. Because if they decide to start dumping, they'll survive, but the U.S. would be hit pretty hard.
	Disagree with that, but okay.
	No, go ahead. Well, because people always say, what if China starts dumping?
	That basically means that they sell a treasury bond to somebody else who buys a treasury bond from them.
	It's not really a big disaster.
	And then they're stuck with dollars.
	So what do they do with the dollars?
	They'd probably just rather put it in interest-bearing security.
	Well, first of all, they can sell.
	Hang on. But the counterargument to that would be that, as you know, governments have U.S. treasuries as an asset that they have on their books, and the asset is priced at a certain value.
	But if somebody starts dumping them, the asset value goes down, which has a significant whiplash effect on the balance books of governments.
	And saying, well, okay, but they have U.S. dollars, but you can spend U.S. dollars in lots of places other than the U.S. I mean, eventually, they have to make their way back to the U.S., But it is...
	And it's interesting now that you say that they're concerned about hedging, which is my argument regarding Bitcoin.
	But anyway, I think that there is a case to be made that it does give them some leverage.
	If they have... Yeah, go ahead.
	Well, the market cap of treasury bonds worldwide is too significant for China's own holdings to make a dent in the price.
	And even if it did, in my opinion, it would maybe be a one-day, two-day price adjustment you'd see on the market.
	However, people still buy these treasury bonds for other reasons, namely because of the interest that they pay and the interest they get guaranteed over 30 years in case it drops.
	Well, except that, you know, I mean, as you know, the selling is a bit of a herd mentality, right?
	And if there's a lot of dumping, some people would just, oh my gosh, the price is going down, I better dump it.
	Or the price is going down and I'm using it as leverage for other things.
	I mean, this is what happens in Bitcoin quite a bit, right?
	If there's a stock market...
	If they decline, then people need to sell their Bitcoins to cover stock market losses and people think that somehow Bitcoin is going down in value too, so to speak, which I guess it is since value is all subjective, but it's not like the fundamentals of Bitcoin have changed.
	Sure, if there's a disaster scenario on the horizon, then especially, however, I'm pretty certain that people will run for treasury bonds more than anything else.
	And if they dump treasury bonds, there's nothing else left to hold.
	Not even gold will save you at that point.
	But that's speculation.
	We don't know what would happen.
	But that's sort of my prediction.
	And hopefully we won't find out before the end of this call.
	That would be excellent.
	Okay, so back to trade deficits.
	I apologize. I can't remember.
	I dragged us off at the tangent.
	Oh, because we were going through the Clinton stuff, right?
	And why there might have been a lag of eight years between...
	Yes. Now, again, the fact that Clinton had surpluses is hotly debated, you know, whether it was an accounting trick or whether it was actually real.
	I don't know if you guys have looked into that stuff.
	Yeah, it doesn't matter.
	What matters is that the mentality was, you know, we have to eliminate this pesky deficit.
	That's all that matters because everything else, all the other programs, all the other attitudes, all the decisions will be made based on that attitude.
	that says, well, this is not really a big deal.
	They have deficits.
	Actually, they all go to the private sector, and there needs to be a certain amount of net private savings in the private sector, so it's not a big deal.
	So deficits for you is leaving money on the table of the private sector?
	Yes.
	And because the money is in the private sector rather than being consumed by government bullshit, that we end up in a situation where the private sector is used generally to apply it to me what is sort of one of the most important drivers of economic growth, which is worker productivity.
	And because they're innovating and they're upgrading and they're automating and so on, government deficits are strength to the private sector and weaken the public sector.
	Yes, I think so.
	I think so. And this is why government deficits don't produce inflation, because although more money is being created, you have a concomitant, at least to some degree, increase in worker productivity, and therefore the economy grows to match the deficit of money.
	Is that right? If that capacity is unused sitting there, yes.
	Assuming that, yeah, assuming that they're not, you know, the catalysts aren't all just going to buy gold bathtubs or whatever, right?
	That they're actually investing. It's not consumption, but production economy, right?
	Well, it can be both.
	It could be either. No, no.
	Sorry, you're right. It always is both, for sure.
	I mean, it always has. There's no point producing unless you're going to consume at some point.
	That's like a farmer growing his crops and then just setting fire to it, I guess, French agricultural policy style.
	But yeah, so the money that's left in the private sector as the result of deficits not clawing money back into the public sector is used to grow the economy, which is why the inflation is not hitting.
	Yes, exactly. And especially, I think, MMT can be used by, you know, it's used by leftists, obviously, as you may have seen, who want all kinds of government programs to expand the deficit.
	But you can also just expand the deficit by cutting taxes.
	And this is why this theory would help decision makers understand they could cut taxes drastically.
	And it would be very good for the private sector, obviously.
	And it wouldn't cause any problems with paying debts in the future.
	It would certainly cause no inflation or anything like that.
	Well, okay, okay. So the Austrian in me is currently beating at the plexiglass door of his MMT prison because if you're saying – like the Austrian would certainly agree, hey, man, you cut taxes, you grow the private sector because you're leaving money in the hands of the most productive and taking it away from the money-eating hellscape of government bureaucracies.
	But that's not the same as – Deficit financing, because deficit financing has the additional problem, which is okay.
	So maybe they would agree with you that deficit financing is going to leave more money in the private sector, which is good for the economy.
	But, of course, there is the whole debt thing, right?
	So it's a future liability that is at some point going to hoover money out of the private sector because they have to find some way to pay it off, right?
	Well, this is where we started, right?
	Because the... So how does this...
	But if they print money, if they print money to pay off the debt, that is going to have an impact on prices.
	I think we had agreed that to some degree.
	No. So how is the...
	What is the end game for government debts, right?
	As you know, the US, I think, Lawrence something has created an estimate of...
	Hang on, hang on. Go ahead.
	It's not a debt in the same way that you and I have a debt.
	Right? Like, if you and I rack up our credit cards and we got to go, oh crap, we got to go to work and pay this thing off or we're going to run out of credit cards at some point and then they're going to get shut off and we're not going to be able to buy anything else.
	Federal government debt, and I want to emphasize this is the federal government.
	The states and the counties and the local and all that stuff have the same issues that we do in as far as it can't get federal grants.
	The federal government, because it is the monopoly issuer of currency, there's no other place for the currency to come from.
	It creates it out of nothing, and when it taxes it, I mean, as we said before, it taxes in order to give value to the money, but it doesn't tax because it needs to acquire a certain number in order to spend that number.
	Shit, I lost my train of thought.
	Sorry. It's alright.
	Too much explanation kills the endgame.
	It does. Give me back to where we were.
	What were we talking about? Okay, so the Austrians say cutting the taxes is great because you've got more money in the hands of the private sector.
	But cutting the taxes, hang on, cutting the taxes if you cut government spending is not creating the same kind of future liability as deficit financing.
	Right, because the government doesn't need to tax in order to continue putting that deficit forward, and it doesn't need to borrow either because it doesn't make sense for the entity that issues the currency to borrow it from somebody else.
	Does that make sense? Like, if I'm the guy, and I'm the only guy who's allowed to do this, write on a piece of paper and say, okay, here's a dollar, here's $100, I'm the only guy who's allowed to do this, How does it make sense that I need to borrow it back from you in order to continue writing on my piece of paper to hand out more dollars?
	But governments do borrow.
	That's what we're saying. They call it borrowing, but it's not.
	So... Let's just look at something real quick.
	The question about the endgame always comes up, right?
	The U.S. every year retires hundreds of trillions of dollars of debts.
	This year alone, I'll pull up the numbers at one point.
	Hundreds of trillions? No, that could be right.
	Yes, because they cycle through it and reissue new debt all the time.
	This year alone, I think it's already somewhere...
	Oh, when the treasuries come due and then people buy new treasuries kind of thing?
	Yes. Is that hundreds of trillions, really?
	Yes, it's a huge number.
	These stories about the endgame.
	Well, the endgame is on us almost every quarter of every year.
	I'll pull up the numbers. I'll send you the exact numbers for sure.
	But it's definitely very, very high numbers.
	Shockingly high numbers, basically.
	All right. I mean, yeah, that's dozens of times larger than the entire U.S. economy, at least according to government stats.
	So it could be, but, you know, I'm a little jaw dropped, which I knew was going to happen sooner or later in this convo.
	So, I think a good way to understand government reserves versus government bonds is the only difference is, like, the difference between a savings account and a checking account.
	With government reserves, that's cash that you could use right now.
	With government bonds, you move it over to your savings account, it pays a little bit better interest, but if you want to spend it, you've got to move it back over to your checking account and spend it.
	Right. And where they get the money to pay off those bonds, you mentioned it before, they just type it into a computer over at the Federal Reserve.
	I mean, it's not a keyboard anymore.
	I'm sure it's all automatic. But, you know, someone says, okay, well, there's $100 government bond and it matured after 30 years.
	So now it's $130. So I'm going to subtract $100 from your savings account and I'm going to add $130 to your checking account.
	And so, remember at the beginning, I said, it doesn't make sense to talk about the government having savings because the federal government neither has nor doesn't have money.
	It's the scorekeeper.
	So imagine we're at a football game or whatever, and someone scores a touchdown, and the scorekeeper goes, okay, there's six points to Team A. Nobody says, well, where'd those points come from?
	Or nobody says that the scorekeeper has the points.
	It's the team that has the points.
	So you're saying it's kind of a battle between the public and the private sector, between the producers and the consumers of the currency, so to speak.
	And I mean that not in the economic sense, but in just the forcible transfer of wealth sense between the dependents and the creators, that they're keeping score between these two groups, but that they don't have any points themselves.
	Correct. Yeah, I mean, I personally...
	Wait, you said correct too quickly there.
	Are you sure? Are you sure?
	Because I'm going to use this as a foundation for something.
	I guess we'll find out when you use it as a foundation for something.
	Now you're hedging your bets.
	That's good. But I have found it most useful when I'm thinking of, okay, how do I best understand this money that I have?
	It's just points.
	It's the government using points to keep track of everybody and us using points to keep track of each other on how to measure debts on each other.
	The banking system is keeping points probably more accurate.
	Is it a debt or a claim?
	What do you mean? Well, I mean, if you have money, you have a claim, optional claim in a free market, you have a claim on the productivity of others.
	If I've got 20 bucks, I have a claim on dinner.
	Of course, it's government currency, so the claim is also a debt.
	But if it's just a debt and not a claim, the debt doesn't mean anything because nobody would want it, right?
	If there's no claim on productive capacities through the currency, then nobody would buy it.
	I mean, because all the buying of government debt is buying a potential claim, or at some point it has to be actualized for the thing to have any value, a claim on future productivity.
	In other words, there's going to have to be an economy of some kind for the government to be able to pay interest on a treasury.
	Not really, because the government creates the interest.
	Wait, one of you says yes, one of you says not really.
	So you know must find it out, Hungry Hippo style.
	I'll let neither go. No, I mean, certainly for everything to work well, there has to be some sort of functioning economy.
	Otherwise, we're just hand to mouth.
	But theoretically, the government creates the interest that it uses to pay.
	It creates the money that it uses to pay the interest on its bonds.
	I agree with that, of course.
	But in order for people to buy U.S. Treasuries, there has to be something to tax in the future.
	Oh, sure. That's what I was saying.
	Sure, too. The taxes...
	Because there has to be taxation in order for the money to have value, which is what we call...
	And you have to have something to tax.
	Sure. Okay. You have to have a private sector to tax.
	At some point, there's got to be blood that goes into the body for the transfusion to work, even if putting a lot of other crap in there, too, right?
	Yes, yes, yes. Okay. For sure.
	Okay, got that. Yeah, so we're on that.
	So, the end game, so when the US goes $3 trillion into deficit this year, I think your argument is that they're saying, look, we're giving 3 trillion points to the private sector.
	Yes. And I know that that's oversimplifying some of it's going to the public sector and all that, but as a whole...
	Oh, I see what you're saying, yeah. No, it's dead on to the dollar, it's actually correct, to the cent.
	It's correct. The money goes all to the private sector.
	But the teachers are still being paid, and the government workers are still being paid, and the bond workers are still being paid.
	I see the hair being split here.
	So, Steph, when we're talking about the private sector, it's federal government versus everyone else.
	And in everyone else is the more local governments.
	But there are federal employees, of course.
	I hate to state the obvious, which everyone knows, but they would get paid from some of this largesse as well.
	They were getting paid before, but okay, because we're talking about the deficit now, so...
	Oh, so this deficit is considered over and above.
	Some portion of the deficit... Yeah, I mean, the federal employee, once he's paid, he's still part of the private sector, right?
	Because he's going to take that and go spend it in the economy.
	Well, once the money is spent, it's considered private consumer spending, yes.
	But until then, no. So, yeah, maybe...
	Yeah, and I don't want to be Mr.
	Nitpicker. I also do appreciate a comment about hair that doesn't have anything to do with my scalp.
	That's really, really nice. And I really don't want to be that nitpicky guy who's like, yes, but there's a pause as they deliver the money, and I don't want to get all of that.
	So basically you're saying the government through deficit is adding three trillion points to the private sector, which is going to grow the economy.
	But of course, to return to our now, I think it's been two weeks, to return to our COVID discussion, because the government is forbidding massive amounts of economic activity, the private sector is not able to provide the kind of returns on investment that the three trillion points should give them.
	Is that right?
	But that doesn't seem to be the case because all these large corporations are suddenly reporting record profits.
	So, yeah, maybe a lot of small businesses are losing out, but in the aggregate...
	Hang on, hang on. You mean largely, largely the tech companies, right?
	Well, yeah. Obviously, about 80% to 83% of those profits...
	No, no. I get all of that.
	But I mean, you know, that's economic activity that some of it is productive and some of it is not.
	For the tech companies, obviously, 80% to 83% of their profits arise directly out of banning me.
	But there's other things as well that are going on.
	And it has to do, of course, you know, people working from home and people needing to invest an upgrade in tech.
	Like I went to try and buy a webcam the other day.
	They just laughed at me. And so there is a huge demand for tech services.
	People are at home, they're consuming bandwidth, they're burning up Netflix and Prime and all of that.
	Yeah, yeah, yeah. So there is a lot of additional use of technology that's coming out of COVID. Now, some of that I consider to be enormously beneficial.
	I've always considered... The daily commute, which was, of course, the genesis of this show in the car way back in the day.
	But the daily commute, to me, has always been one of the worst economic things.
	And I can't even tell you the number of people in the tech industry when I was high up in companies.
	And I would really like saying, dudes, you know, yeah, give a raise.
	That's fine. But if you really want to give a raise, let people work from home sometimes.
	Yeah. That's a huge raise for them because people are saying, oh man, we're working an extra hour during the pandemic a day and that's bad.
	It's like, yeah, but you're not commuting for two hours and you're not killing the birds with your exhaust and you're not dying.
	You're not killing the planet with your exhaust and you're not causing accidents and getting stuck in traffic and getting frustrated and we're not digging up more dino bones to make gas and all that.
	I mean, it's really, to me, now that one in four American workers is working from home, I've heard mixed stories about the productivity, and I get all of that.
	But that is, to me...
	Okay, so COVID doth take, and it also doth giveth, so to speak.
	And that, to me...
	So, yeah, tech companies. Walmart, of course, yeah, sure.
	Of course, Amazon, we can imagine.
	People don't want to go to stores, and they're sitting at home more, and they want to...
	Some people are quarantining, and some people are self-isolating voluntarily, and so on.
	So, yeah, there's, you know, it's like Uber Eats deliveries is a big deal and all of that.
	So... Yeah, I mean, there is it.
	And this is what I was going to say earlier about they hit the deficit hard, they eliminate the deficit, and then there's a recession.
	It's like, well, of course there is.
	In the same way that when you quit heroin, you have a crash.
	When you quit smoking, you get anxious.
	When you quit alcohol, you get the delirious tremens or whatever, right?
	You get shakes or whatever. So, yeah, after the government has been spending a bunch of crap money and reconfiguring the economy based upon this drug of infinite money printing press stuff, when you cut that off, there, of course, is a recession, but a recession is a very good thing if it's realigning the economy to something more rational, in my opinion.
	Well, if you cut that all off...
	Yes! That's not an argument.
	That's a choice to say, okay, we're going to stop these deficits.
	That's a political choice that the governments and people may support or may not support.
	It's not an economic necessity.
	That's what MMT would say to that.
	If you want to choose to go into austerity, you have your reasons.
	You think that the punch bowl was too large or whatever.
	You can choose to do it.
	There's no economic requirement to do such a thing.
	Now, history as a whole would lean a little bit against this hypothesis in that, what is it, there's only one fiat currency that has lasted.
	The British pound sterling has been cooking at 400 years or something, although it has lost the vast majority of its value over that time.
	But if deficits and debt and so on is not such an issue as the MMT theory proposes, in other words, it could be a benefit in that you're giving more points to the private sector than the public, which most people would say is a good thing, then how does it explain?
	Well, the explanation for that is that political systems arise and fall all the time.
	It has nothing to do with the debts they incur, nothing to do with the deficits that they incur with their currency.
	It has to do with all kinds of reasons, cultural reasons, political reasons, but definitely far more complexities, far more complex reasons than, oh, they ran a $3 trillion That's not an answer.
	I mean, I'm not saying it's a bad answer, but you're saying it's not the currency is not much of an answer, because there are a lot of people who say, okay, well, if you look at, say, the fact that the Roman Empire was spending like crazy and had the, you know, bread and circuses and the warfare state and so on, and ended up Having to debase its currency to the point where, to some degree, that currency was refused acceptance because it had become so polluted with copper and iron and other crap metals and so on that people didn't want to use it anymore.
	And, of course, once you have hesitancy or significant doubt in the future validity or even current validity of a currency, the economy tends to collapse which provokes political changes.
	I'm not saying it's the only thing, but it's one of the dominoes for sure.
	Well, you're saying it's a significant thing, and I'm saying it's probably not But, you know, I don't know.
	The ultimate answer to that...
	Debasement of currency is not significant in a far-flung economic empire?
	Oh, come on! You can't say that debasement of currency doesn't have any effect.
	The currency was always debased.
	And I realize that me squealing like a stuck pig and being outraged is not an argument, so I'm aware of that.
	I'm just telling you what I'm experiencing emotionally.
	The gold coins that were, so basically, the gold coins that were used in the Roman Empire to pay taxes always circulated above the gold, the metal gold content of the coin.
	Because the value, once again, the value of the currency was created by the fact that it was accepted for certain, to retire a certain amount of tax liability.
	Or back then they had tithes and all those kinds of things.
	So the currency in that sense was always debased.
	They ran out of gold, so they used some other technology to print the amounts on.
	People still use the currency.
	I don't know how severely the currency debasement It led to Odo Acker and the barbarians ultimately ransacking Rome.
	Well, yeah, but one of the reasons the barbarians came and ransacked was they were being paid in currency that was virtually worthless.
	They're like, no, we're going to go to the source and get the tax system and get the actual gold from Rome.
	And so the debasement...
	Now, of course, there were lots of other problems in Rome.
	I'm not a single-explanation kind of guy as a whole, but, I mean, it's in the mix for sure.
	I mean, if they hadn't grown as much politically, if they hadn't overspent as much politically, if they hadn't removed entire productive sections of the population to the welfare state, if they hadn't Destroyed the family with easy, sleazy divorce laws and so on.
	I mean, there's lots of things that are going on, but the fact was that they did not have the productive capacity to maintain the value of the currency, so they debased the currency, which meant that they couldn't pay their soldiers, which meant that the soldiers sacked Rome.
	I mean, there is some domino in there that has an effect.
	MMT would totally agree with you on, you know, you should not hurt the productive capacity of your country, because then, you know, all the other things that you just...
	No disagreement on that end of things.
	It's only the idea that the fiat system is fundamentally flawed and always causes all these currency collapses that MMT would disagree, that I would disagree with.
	Sorry, what happens when the people who buy government bonds, what happens when they begin to doubt the capacity of the government to tax enough to pay interest on the bonds, right?
	The government doesn't need to tax to pay the interest on those bonds.
	That's one of the things that we're really trying to get across here, is that paying the interest on those bonds is simply typing a number into a computer screen.
	Yes. No, no, I get that, but we did talk earlier about how there does need to be some taxation to give the pretensive value.
	Yeah, but that doesn't change. It stays the same.
	It doesn't have to change.
	You need to have some tax so the money has demand and value.
	But that's it. We don't need to raise taxes in the future to make an interest payment.
	No, no, no, but hang on, hang on.
	So, as the money...
	I don't know if this is Austrian or just Irish-German like me, but...
	So, the reasoning would go something like this, which is...
	So as the government prints, controls interest rates, distorts the economy, I think one of the main drivers for the 2007-2008 financial crash was the government passing laws and creating incentives for banks to lend to underqualified recipients.
	A lot of blacks, a lot of Hispanics, of course, in the name of political correctness and diversity, equality, and so on.
	And they could only cover up the issues that that created for so long.
	And they tried to bury those by selling the instruments overseas and so on.
	And I think that was one of the things.
	Now, that wasn't necessarily specifically due to currency manipulation.
	That was due to other politically correct legislation or incentives that were put forward by the government.
	In other words, buying votes with houses that turn out to be brutally temporary to impoverished sections of the population.
	But... The argument goes that if the government causes malinvestment, causes people to slide from the productive sector of the economy to the, not just unproductive, which is like living in the woods, but counterproductive in that you are consuming resources for the sake, like, I mean, just look at government subsidies to universities which produce Economically destroyed and often emotionally destroyed human beings who end up rioting and causing destruction and damage and so on.
	Well, that's an investment that would not occur in the private sector.
	The government invests in that and that starts to create, what was it, just out of the George Floyd riots, it was $600 million worth of economic damage.
	I don't think you guys are like broken window fetishists in that, well, you get to rebuild that and that's good for the economy.
	It's like, no, I don't.
	I think we can all go with Hazlitt on that, that that's a net loss.
	To the economy, and that's like close to a trillion dollars Canadian, so that's some serious coin there.
	And so as the government has power, and a lot of that power has to do with money creation, then it causes malinvestments in the economy, it causes counterproductive investments in the economy, which then reduces the productivity of the economy, and as we know, wages and worker productivity has not been increasing massively lately.
	And so then what happens is you end up with Fewer people to tax, and that causes doubt as to the future capacity of the government to pay interest on its treasuries and other instruments.
	And then people say, well, I don't really want to buy those treasuries as much anymore.
	I'm going to go to some other place to get my future inflation hedges or whatever.
	And then what happens is the value of the economy, the currency, and all of that declines.
	And then there is an eventual issue on the capacity of the government to simply print its way out of that.
	And that's where the hyperinflation could come from.
	That was a slippery slope in my opinion.
	But one borne out by every currency in history, including the British pound over time.
	Well, in particular, interpretation of every currency in history.
	Like I said, I don't agree that currencies have gone away just because of money and financial issues.
	Political systems and cultures have gone away and arisen for thousands and thousands of years.
	I'm sorry to interrupt you, but to be fair, of course, and I think to argue a little bit on your side of things, the fact that the government has the power to create and control currency and interest rates is sort of shoulder to shoulder with a lot of its other powers, right, such as regulation and tariffs and taxation and subsidization and all of that.
	I would say it's even more primary because if you're a government and you don't have that ability to use a currency, you've got nothing.
	Well, yeah, you certainly have a tougher time selling your infinite value to the population as a whole.
	And so I wouldn't want to say, you know, after this, therefore because of this, and I certainly wouldn't want to say, it's like saying that a smoker dies because he can't breathe.
	It's like, well, no, a smoker dies from whatever emphysema or lung cancer that's usually triggered by smoking.
	And so just because societies collapse, I wouldn't want to say it's all because of the currency.
	But when a government has...
	Currency and political power, currency creation and political power, they're not the same thing, but they're heavily overlapped if you sort of think of those two circles, right?
	They're not as far apart as the Olympic circles, but they're not the same circle, but they're heavily overlapped.
	And so to me... Political power is derived from currency power, but political power also enhances currency power.
	And so I think that, to me, the issue is power as a whole and violations of the non-aggression principle.
	And the currency monopoly, the currency mafia counterfeiting monopoly that the governments have...
	Why are they counterfeiting?...is concomitant with other...
	What are they counterfeiting?
	What are they, counterfeiting?
	The creation of currency without productivity?
	But counterfeiting is when you have the authority to create money, and I do it on the side.
	Right? Well, no, that's legally.
	I'm talking morally. Like, the legal definition of counterfeiting is not central bank creation of currency.
	Morally counterfeiting, central banking is counterfeiting.
	I think all the problems you point out about government power, they absolutely still apply.
	I don't think we're saying that we should have a large government with lots of powers or anything.
	We're just outlining a mechanism of how public finance and banking works, and it can fit within a small state, absolutely.
	You have a very low tax level, and you keep your spending accordingly low, and it could work just as well.
	I would actually argue better if you include the morals, which I know for economists can be a little bit tricky.
	Okay, so right now, did you get the number for the cycle of treasuries?
	I did not, but I will definitely… Yeah, keep having a poke at it.
	I'd just like to get that. But let's say hundreds of trillions cycle every quarter, or I know it's short.
	You said every day, right? Because it's not like they're all sold.
	I think it's every quarter.
	Every quarter. Okay, I can go.
	I thought it was every day. Every quarter, yeah, I can go with hundreds of trillions there for sure.
	Okay, so back to sort of where we started with Keynesianism, you know, the famous statement of Keynes, right, when he was asked, in the long run, he said, in the long run, we're all dead, which is frankly kind of gay.
	But there is a time...
	So think of somebody who invests in a musician, and that musician is very talented, they're very hard-working, they give great concerts and so on, but they have a heroin addiction, right?
	I mean, you know, this sort of a star is born kind of stuff.
	They have some sort of drug addiction, and it's not a drug addiction like, you know, they like a lot of coffee, because hopefully that doesn't prove fatal, at least not before the end of this conversation for me.
	So if you invest in a musician, and the musician is young and relatively healthy, but they have this drug addiction, then let's say the musician is like 20, right?
	Okay, so the drug addiction is probably not going to take them out until they're like 35, right?
	And so you're perfectly happy to invest in that musician.
	In fact, you might invest more in that musician than some other musician who doesn't have, I don't know, cocaine or heroin or whatever it is that makes them really creative and productive and so on.
	And I think it was Freddie Mercury came up with Bohemian Rhapsody after he started taking cocaine, right?
	So, you know, as far as cocaine creativity goes, if that was the case, then that's a pretty good argument as to why they had a very productive time and then Brian May never took drugs as far as he's reported.
	So you've got a musician who's really productive and they can work extra hard because of their drug addiction, especially if, let's say, it's cocaine, not heroin.
	So the cocaine, you know, they can be up three nights straight writing music.
	They can do, you know, three concerts in a weekend, and, you know, they're really...
	And so the monetary return is enormous, but the longevity of the musician is not, right?
	I mean, they may not make it past that.
	They may not make it past that magical barrier of 27 that got, like, Jimi Hendrix and Janis Joplin and Jim Morris and a bunch of others.
	Kurt Cobain, I think, too. So, I guess this labored analogy has something to do with, yeah, people will accept that the cocaine of...
	Government money creation is fine, but there is a time where you'll stop investing in that musician, because the toll of the drug is beginning to occur.
	But how do we stop investing in the musician?
	How do we stop investing in the musician, to keep the metaphor, because the thing that keeps the musician or the government going is the tax system, not us investing into it.
	Sure, and the tax system here would be the creativity of the musician.
	And at some point, the drugs overwhelm the creativity, and you don't get that creativity.
	And at some point, the musician dies, in which case there's no more creativity.
	Now, we have to kind of ignore the residuals here.
	I mean, if you don't mind, you say so, because you can't invest in a musician for the residuals.
	The metaphor is now stretched beyond my ability to compare.
	Can we just talk about the...
	Explain it in terms of the actual government.
	Sure, sure. At some point, people have doubt that the government can fulfill its obligations to pay interest on treasuries or other debt instruments because the productive sector for the economy has shrunk to the point where the taxes aren't going to cover it and the money printing is going to not cover it either.
	We've heard it talk about that the taxes don't have anything to do with their ability to cover it other than give money value.
	And the people's feelings about the taxes don't matter because the government's got guns.
	They point a gun at you and say, give me the taxes.
	And that's where the value of the money comes from.
	And in terms of, are you suggesting that the value of the currency or the government's ability to spend is partially reliant on people's willingness to purchase bonds?
	If the perception is that the government is killing off the tax base, which happens regularly throughout history, either directly through war or indirectly through depressions and so on.
	Sorry to interrupt.
	I've got to be clear.
	Do you mean like literally killing the people who are paying the taxes?
	Well, no. As I said, in war, that certainly happens.
	Okay. Right.
	I mean, if you look at the First World War, you had 10 million people slaughtered, you know, the young, the best, the brightest, those with the greatest economic future after a massive investment into their education and so on.
	So, 40 million in the Second World War and 100 million under communism and so on.
	So, yes, sometimes the government's a quarter billion killed by governments in the 20th century.
	Sometimes the government literally does murder off its own tax base.
	And that's one of the reasons why the communist economies, the fascistic economies tend not to last very long.
	Because, you know, everyone talks about, I mean, the more, I don't know, extreme right elements in society, they talk about, oh, yeah, but, you know, there was an economic miracle under Hitler.
	And it's like, yes, and then Germany was burned from end to end and just largely destroyed.
	So, you know, forgive me for not admiring too much the economic genius of Hitler, who, by the way, I just wanted to point this out, Hitler had a terrible flatulence problem that caused him to take But yeah,
	governments either kill off I'm sure his self-defense as, you know, the first shot of a civil war, and there's lots of talks about that.
	Now, should that come to pass, heaven forbid, and we're all working as hard as we can to avoid that kind of stuff, I think, but should that come to pass, that there would be civil war in America, well, that would be a brutal affair.
	I mean, there are more guns than people in America, right?
	So that would be a pretty brutal affair, and, you know, that would be a huge problem for people's perception of the government to tax enough to give the currency credibility.
	Why? I would say it's not even the perception, it's the actual case, right?
	If there's civil war, I don't really care about whether or not the IRS is going to come knocking on my door because I didn't fill out my tax return rate.
	Right? I would say that's an actual, A, destruction of productive capacity, and B, it's a very negative effect on the government's ability to...
	Collect its own taxes.
	I personally would not want to be...
	Not that I'm an American. I would not want to be a tax collector in a civil war.
	I just got a feeling that that would not be...
	I don't think anyone would have any patience with you whatsoever.
	If those things happen, then you're probably right, Stefano.
	If society...
	If the bond deteriorates to that extent, then of course the holders of the bonds will start doubting the future of the country's ability to pay, etc.
	So yeah, I think there's no disagreement.
	If the scenario occurs, and if things are that bad, then sure, things are bad.
	No doubt about it.
	And some of that civil war would have come out of the government's capacity to create currency out of thin air, because it would be used to fund universities and indoctrination and all the extremism and CIA. Oh yeah, absolutely.
	And of course, the currency creation has created, you know, half the population in America is to a large degree or completely dependent upon government spending.
	And so you've created a very reliable voting base for big government, but of course...
	It does cause huge problems when the money starts to run out.
	At least the validity, the perception of the validity of the money.
	Sorry, go ahead. Something that I really want to point out.
	Nima and I aren't saying we like this system.
	I think that's really important to point out.
	No, no, I get that. We touched on the violation of the non-aggression principle.
	Yeah, taxation is force. No, we're trying to explain something without judging it morally, which is actually a very valuable thing to do because the morals are important, but the short-term effects of deficit financing and people's perception of the economy is important too.
	Well, and this is something I really want to hammer on, is that if the government doesn't deficit spend, Where else is the money supposed to come from if the government has the monopoly on the issuance of currency?
	Well, it can't come directly from taxation because that would cripple the economy, right?
	Because you're awarding trillions of points to the public sector rather than the private sector, so to speak.
	I'm trying to ask you a more primordial question.
	If the U.S. government doesn't create U.S. dollars, where else do U.S. dollars come from?
	Well, they don't, right? That's the point.
	Exactly. They are consumed, right?
	People would say, well, but how are US dollars destroyed then?
	Maybe we have enough and each one can just go up in value in a deflationary way if the government doesn't create new currency.
	And then what we're saying from the MMT side is that's not what's going to happen.
	What happens is you destroy the productive capacity because there isn't enough money to go around to support the current price structure that the government is set up with.
	No, no, no. Hang on.
	To support the current price structure, if there is...
	Yeah, money is lost.
	Money goes overseas. People lose money.
	They destroy it. They put their wallets through the laundry or something like...
	What I'm saying is, if we see a deflationary period where, okay, the government's not printing money, so everything's going to start deflating, that is incredibly destructive on the economy.
	And here's why.
	Let me tell you why. Go on.
	Yeah. Is because if I own a business, and remember, deflation benefits the creditors.
	If you lend me $1,000 and I got to pay you back, and things deflate, the $1,000 I pay you back is worth more than the $1,000 that you lent me.
	Now, if things deflate to a certain point and I borrowed that $1,000 to start a business and all my prices drop, our arrangement of the financing, of me having an amortized over 10 years of paying me the $1,000 back, that doesn't change, but my profits have now dropped.
	Okay, sorry. I want to just break that out for the audience.
	Forgive me if I go astray and correct me.
	So if you have $10,000 a month rent on your business and then deflation occurs, then you're basically paying, let's say it's 50% deflation, give or take, right?
	You're paying $15,000, in a sense, to your landlord.
	So that's bad.
	And you have to adjust your prices accordingly and so on.
	But, I mean, it would be a shock, but there would be, I think, a relatively rapid adjustment.
	Some people are in fixed leases and so on, right?
	Well, I'm not talking about leases. I'm talking about banknotes.
	So if I've got a loan for my business, and when I originally got that loan, I determine my prices based on the fact that I got that loan, right?
	So I say, okay, debt servicing is going to cost me X number of dollars, and I plan on selling so much stuff, meaning I better be at this price if I plan on being able to pay off this debt service.
	Well, if everything deflates and the prices that I'm able to sell my stuff for goes down below my ability to finance my debt, the prices stop deflating.
	I just go out of business and there's nothing to buy.
	Right, so deflationary, for those who, deflation occurred in the housing market in 2007-2008, right, where housing prices crashed.
	And yeah, that had some effects.
	And I agree, I want things to be cheaper for my money to go farther, right?
	I mean, I think everybody wants that.
	But I think it's important to point out that just because if the government stops printing its money and says, okay, the current system that we have right now is fine, everybody's got enough dollars, we're just going to stop And then that chokes the private sector where...
	Well, if they stop taxing, then we wouldn't have a problem.
	Right. Oh, okay.
	And then we freeze-frame it.
	Yeah, it's like if they say we're going to defund the police...
	Sorry, if they say we're going to defund the police, but we're also going to cut taxes 25%, that's a different matter.
	But they always want to defund the police, but never cut the taxes, right?
	Oh, they want to replace them with communist death squads, but that, you know...
	Oh, yeah, yeah. It's usually a little pause of chaos.
	Community-led whatever the fuck, right?
	Yeah. No, I'm pretty...
	Total side thing, I'm really close to Seattle, by the way, so this is kind of really close to me.
	Why? Why are you close to Seattle?
	Why? I'm far enough away that, at least I think I am, but I think this whole thing about the community-led stuff is just the commie speak for, we want roving bands that are armed that can declare you a racist and kill you on site and burn your business on site if we don't like you.
	I think that's what they're pushing for. Look, it's one thing to say defund the police.
	It's another thing to say you also are not allowed to use anything in self-defense.
	Like that to me is, then it's just, yeah, criminals free reign.
	Yeah, and then we're openly communist saying defund the police.
	And our idea is to replace it with something else.
	And I wonder what that thing could be that you would replace them with.
	I wish we had historical examples to point to you.
	We don't have to wonder.
	Unfortunately, we've tasted that recipe a bunch of times before.
	All right, so listen, and I don't imagine, sorry, there is no scenario that is politically viable at which point people would say, hey, we're just going to stop deficit financing.
	Hey, we're just going to stop creating money out of nowhere.
	Like, that's just not going to happen. So I don't think we have to worry about that.
	It has happened seven times in American history.
	Yes, but that's also before 150 years of government indoctrination and a media that's incredibly hostile to the free market and general hysteria programming in universities about the evils of liberty and so on, right?
	So that's kind of a different world back then.
	I think we're crossing too many streams at once.
	So the...
	One of the biggest points that me and Nima want to make here is that because the government has the monopoly of the issuance of currency, and it is a very simplified system.
	It spends it in and taxes it out.
	I understand things get more complicated when we add the trade deficit, and then there's these bonds, and there's a central bank, and then there's these interest rates, and then...
	There's one other one I missed.
	Oh yeah, the banking system, which, you know, expands the currency base farther than the government does.
	All that makes it a lot more complicated, but the central current system Is that government spends in and taxes out.
	Now, like I said, I don't...
	I'm not saying I like this idea, but because government creates unemployment by demanding a tax, if it doesn't give you the thing, the token by which you can pay that tax, it's intentionally...
	I mean, I guess it doesn't matter if it's intentionally not.
	Just because me and Neema are talking about this doesn't mean that the people in Congress understand a damn about it.
	It's the government imposing austerity for a political reason.
	It has nothing to do with economics.
	It's just the government saying, well, we don't like the way that these numbers have shuffled around on this board, so we're going to shuffle them this way, and now everything deflates and 10 million people starve like in the Great Depression.
	Well, I don't think they starve, but yeah, I know what you mean.
	Or you could argue that the World Bank imposing austerity has more to do with destroying the remnants of the free market rather than any sort of responsibility.
	So what me and Nima want to get through this is it's like, look, if we want to understand how to play this game and we actually want to create a free society, we have to actually understand how these rules work.
	And we're saying that the damage and destruction...
	That you're really going to see doesn't come from government spending.
	I mean, unless they go to war.
	Minus the war thing. It doesn't come from the government spending.
	It comes from the government surplus.
	It comes from austerity when the government pulls it away.
	And when we get put in the state of austerity, and this applies even more so once we start spreading out to the third world.
	I mean, I think South America is a very good example of this.
	But Basically takes the whole population and makes them slaves because they can't do anything.
	Right? We're like just fundamentally scrapping for mere subsistence.
	I mean, I don't see how that can be considered anything close to freedom.
	Right? When it was chosen by the government to say, you know, we're just not going to put the money into the system to let the private, you know, we've set up the situation where the private sector needs our input in order to exist, because that's how the structure has been built.
	And you know what, we're just going to deny them that.
	Yeah, we're going to stop feeding our slaves and expect to run a better farm.
	Exactly. So, now, when we're making predictions, and we're saying, okay, I mean, let's take Trump, for example, pushing forward these record deficits.
	Me and Nima are jumping up and down, giving our thumbs up, but I know his base is freaking out.
	Because his base comes with the understanding of, hey...
	We need to be fiscally responsible because I need to be fiscally responsible in my own home.
	I understand a socialist doesn't mind spending my money, but I worry about it because I'm worried about morals and I have some sort of ethical structure and I don't want to be spending everybody else's resources.
	However, the federal government, the terms have different meanings.
	Debt for the federal government has a different meaning from debt to you and I. Surplus to the federal government has a different meaning from surplus to you and I. And if we get these, the interpretational screwed up, we can say, hey, we want a moral society, and we, you know, so we should do X, Y, and Z in the economic sphere in order to achieve that moral society, but, well, if we understand the economic sphere wrong, that X, Y, and Z was actually the wrong way to get there.
	So what you're saying is that if, so the deficits are aiding the private sector, but if the communists were really smart, they'd impose austerity.
	Yes, which is what they're doing.
	And I mean, imagine if Hillary Clinton had won.
	So if Biden gets in, and let's say that he has more than four or five functioning brain cells, which seems to be in doubt at the moment, but if Biden gets in, then he and or his handlers will try to do what Clinton did and say, hey, man, you know, we got to sort this record spending.
	And that way they would be transferring money out of the private sector into the public sector through austerity.
	And that would further harm economic recovery and would allow them to continue the relatively rapid socialist creep.
	If that's what they're, if that's their playbook, which I mean, I'm guessing that's pretty close to what the playbook is.
	That would be a decent playbook.
	That would be a very good playbook.
	Immorally, that would be a good playbook for implementing more and more government controls.
	Right. And then, but however, I mean, you could also, I mean, we're getting, we're nitpicking here, but we could also say, okay, we want the U.S. strong enough to go and attack this country, so we could turn that into a socialist hellhole.
	So increase the spending here for now, get some muscles in the American economy, we'll send it to go kill, you know, kill all these different people in all these different countries, then we'll turn the austerity on.
	Right, right. I mean, you know, you can shuffle the chess pieces around as you want.
	What I'm saying is the Austrians are playing with the wrong rules.
	Right. That is, you know, and I really appreciate you guys taking the time to come on and talk about this.
	I mean, I know it's good for you.
	It's good for me. I really find this approach to be quite fascinating.
	My brain is a bit of a crater at the moment because, you know, you're a meteor.
	This would be the last analogy of the day, I promise.
	But, you know, I mean, it's been a bit of a comet strike, and I appreciate that.
	I really, really do like getting my...
	My jimmies in a shingle, so to speak, and the passion and energy with which you guys approached this issue was great.
	If we have Austrians out there who wanted to take this topic on, I'd be very happy to have either a counter show or a debate or both or something like that.
	I think that would be fantastic.
	But yeah, great stuff.
	I really appreciate your energy and enthusiasm and I have reservations, which is not an argument and doesn't deny anything that you've said.
	It probably just, you know, maybe realigning my own particular perspectives, but it's a great argument and I really appreciate you guys bringing it forward.
	Yeah, it sounds like you're trying to wrap up.
	Is that right? Yes, I called for the check.
	It's one of my last sunny days before the iron grip of Canadian winter wraps itself around my testicles.
	But if you wanted to add something, please feel free.
	I had two things to add which I think are super duper important.
	The first one is, one of the big reasons that me and Nima are jumping up and down about this is because this conversation right now is dominated by leftists.
	MMT is growing in the leftist community.
	I mean, we know it now from Bernie Sanders.
	AOC has mentioned it now.
	And we don't want them to be the dominant voice of MMT, largely because if they are, conservatives are going to look at it and go, well, AOC's nuts.
	She's saying MMT is a good thing, so clearly MMT's bad because she said it.
	Right. And when the lower level socialists get a hold of it, like we said, they look at it and they go, here is the magic free stuff wand that we've been looking for our whole lives.
	Here's our free education, here's our free healthcare, here's our free this, here's our free that.
	And Niva and I completely agree that you can't ignore...
	The moral considerations of a government bureaucracy because, you know, okay, we set up this government bureaucracy, we have enough money to pay for it, great.
	However, that destroys incentives and it destroys customer service.
	And you get this freeze frame in time where nothing ever gets any better.
	And, you know, eventually the money doesn't matter because it's calcified to the point where nothing is actually being served.
	They completely don't get that at all.
	And what we want is to say, in quotes, okay, we are the right-wing MMTers saying, okay, we agree with your description, we disagree with your recommendation of how to use and how to move those chess pieces around on the board.
	Right. Second thing I want to leave with...
	Was there two things? Yeah, go ahead.
	Yeah, so the second thing I want to leave with is when I understood this, and it was Nima who rattled me over the head.
	Nima was actually posting on your old online forums and he came in posting and I tried to strangle him and he won.
	Metaphorically speaking, right? The psychological relief that came to me When I understood this, knowing that, oh my god, hyperinflation is not around the corner.
	I don't have to freak out every time the government writes a check.
	I mean, there's reasons to freak out, but that's not it.
	And I feel in terms of, okay, how I'm planning out my general everyday life, how I'm, you know, interacting with my job and interacting with my savings and interacting with my own investments, I am much more psychologically sound from understanding MMT than I was when I had my Austrian hat on.
	Oh, anything we could do to de-dread the population, because there's a lot of dread out there, right?
	Yeah. People see these numbers and so on.
	So, you know, that's another reason why I thought it was very interesting to have this conversation, because if it's like, I don't think anyone is saying central banking, yay, but in the rules of central banking, if deficits swell the private sector, and of course we are seeing deficits and we are seeing unemployment go down, so that's I think numbers that help support your conjecture.
	But yeah, to de-dread, to undread, so to speak, the population is pretty good.
	Yeah, we want to de-dread and we want to get the, again, in quotes, right, more involved in this conversation before the left takes it off a cliff and destroys it, like they destroy everything else.
	Where should people go to get more of this?
	Neba, are you still there? Yeah, I'm here.
	You can go to economicsjunkie.com.
	I've recorded all of Dylan's and my shows on our podcast.
	And also Dylan has a YouTube channel called Volitional Science Network.
	So all of this stuff, a lot of this would be on there as well.
	Put all the links that you want in the chat and I'll make sure that they end up in the show notes.
	Thank you. Is there anything else that you wanted to add?
	I think we didn't get to this but I think that because you always said philosophy should help you actually make better choices in life and I think economics should help you actually make better investment decisions.
	For me MMT has helped a lot with that and For example, we were able to predict in April that the stock market was going to go to new record highs and stuff like that, based on looking at these numbers.
	So I think that's probably my main reason as to why I like this economic theory so much.
	And the recent clawback is what?
	The what? The recent clawback in the stock market is what?
	Well, the rally...
	No, I was talking about the rally.
	No, no, I got the rally, but didn't they do just a smidge lately?
	Oh, well, because the fiscal flows have slowed down a little bit.
	I mean, the major injection that has occurred over the past months has tapered off.
	It's still very high, but it's slowed down.
	That might be one reason. Other reasons, put me on the spot right now.
	No, no, that's fine. I don't expect a live economic analysis.
	Well, certainly, because re-lockdowns were occurring, and you always have to look out for what the media frightens the population about.
	And there may have been some spending slowdowns.
	I think people are waiting for new corporate profit data, and then we'll see what actually materialized.
	But it could also have been just the rally was so strong for the past months that it needed a little breather.
	It was overheating. Oh, let's go back to that.
	Thanks, guys. I really appreciate it.
	I will put the links below, and you're welcome back anytime.
	And if there are more economic dislocations that your theory encapsulates, I'd love to have you guys back on to talk about how it fits into MMT. And again, I really, really appreciate the conference today.
	It was very, very illuminating.
	Thank you, Steph. Thanks everyone so much.
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