Modern Money In Six Short Videos

L. Randall Wray | March 31, 2014

I recently did an interview for Euro Truffa on six topics related to MMT. The website is here. They are transcribing my interview to Italian (I think that only two are up so far) and putting up the videos. They have also posted all of the videos to YouTube.

As you can tell, I did not realize they were recording the video—I might have tried to sit still if I had known. Also, the coffee had not quite kicked in so I was not entirely awake. Here are the links with just a brief indication of the topic for each.

The first two videos have already been embedded here. (1) The first one addresses all the (silly) (non)-controversy about “consolidating” the Government’s central bank and treasury for the purposes of analysis of fiscal and monetary policy operations. I provide three responses to the critics. (2) The second video tackles the belief that the Euroland crisis is due to current account “imbalances.” As I explain, the real problem is the abandonment of sovereign currency. No one describes the USA financial crisis as a problem of current account imbalances between, say, Alabama and New York. Why? We unified our currency—the dollar—but under Uncle Sam in Washington. The EMU only partially unified, without a central fiscal authority that issues the euro.

(3) In this one, I argue that a floating currency provides more domestic policy space. A country that floats does not need to accumulate reserves of foreign currency. Still, I do not argue that a floating exchange rate is always and everywhere the best strategy.

(4) This one addresses the Job Guarantee (or ELR) and questions about inflation and labor discipline. I argue that the JG provides a job to anyone who wants to work, but without sparking inflation or eliminating discipline. Note that Minsky, like Heinz, argues there are 57 varieties (I think I said 52—again, too early in the morning for me to be doing interviews) of capitalism and pickles.

(5) This segment continues discussion of the JG, arguing that it is morally reprehensible to keep people unemployed, poor, and hungry on the argument that this is necessary to avoid a trade deficit. I do not agree with Tom Palley, who objects to the JG on the argument that “the poor will want meals.” Give them jobs, let them eat. If you do not like trade deficits, then reduce imports of luxury goods bought by the wealthy.

(6) How to save the EMU? Some suggest a unified central bank system—like the Fed. I argue that the problem is fiscal policy, not monetary policy.

Here are the original questions, in English and Italian:
Domande/questions:
1)
ITA – Prof. Wray, in molti hanno criticato la MMT sulla base della vostra identificazione tra Ministero del Tesoro e Banca Centrale, chiamando questo conglomerato “Settore Governativo.” Marc Lavoie, in un suo lavoro dal titolo “The monetary and fiscal nexus of neo-chartalism” ha evidenziato questo aspetto come una “critica benevola” alla MMT. Anche Augusto Graziani, da poco scomparso, ha sempre tenuto distinti Governo e Banca Centrale. Può spiegarci per quale motivo la MMT considera il Tesoro e la BC come un soggetto unico?

ENG – Prof. Wray, several authors criticized the MMT identification of Treasury and Central Bank, a conglomerate denominated “Goverment sector.” Marc Lavoie, in his recent work “The monetary and fiscal nexus of neo-chartalism” pointed out this aspect in form of a “friendly critique.” Augusto Graziani, recently passed away, always distinguished Government and Central Bank. Could you kindly explain the reason MMT considers Treasury and CB as a single unit?

2)
ITA – In molti hanno analizzato la crisi dell’Eurozona come una crisi di Bilancia dei Pagamenti e, in particolare, delle partite correnti. In una sua risposta di un po’ di tempo fa a Sergio Cesaratto lei ha sostenuto che non è così. Che crisi è, secondo lei, quella che i paesi dell’Eurozona stanno affrontando?

ENG – Many economists analized the Eurozone crisis as a Balance of Payment crisis, and expecially related to current account imbalances. In a reply to Sergio Cesaratto you asserted that this is wrong. In your opinion, what is the nature of the crisis that Eurozone countries are facing?

3)
ITA – Altro punto su cui i critici della MMT insistono è quello del tasso di cambio flessibile. Una flessibilità del cambio offre sicuramente un maggior margine di intervento nell’economia volto al sostegno della domanda e dell’occupazione. Ma un tasso di cambio fluttuante è sempre auspicabile? Pensiamo ad esempio a paesi in via di sviluppo che hanno una necessità quasi vitale di detenere riserve in valuta estera con la quale pagare le importazioni e/o rimborsare del debito estero. La MMT come si pone dinanzi a questi casi specifici?

ENG – Another MMT point often criticized is the flexibile exchange rate. For sure a flexibile exchange rate provides a wide margin of intervention in the economy, by supporting the aggregate demand and employment. The question: is a flexibile exchange rate system always desirable? Let’s consider developing countries that need to accumulate reserves in foreign currency in order to pay for imports and/or pay the foreign debt denominated in foreign currency. What is the position of MMT in these cases?

4)
ITA – Uno dei punti di maggior forza della MMT è il programma di Job Guarantee. Un programma le cui radici si trovano in Hyman Minsky ma che è stato auspicato anche da altri personaggi della storia come Martin Luther King. Frederic Lee, docente di Microeconomia alla UMKC, pur condividendo totalmente l’analisi tecnica del Job Guarantee, ritiene che la disoccupazione sia intrinseca al modo di produzione capitalistico, punto che sollevò anche Kalecki nel 1943 e che viene ripreso anche oggi da alcuni pensatori marxisti. Lei crede che nel capitalismo (con i suoi rapporti di forza tra classi) sia possibile mantenere un permanente pieno impiego?

ENG – One of the key strong point of MMT is the Job Guarantee programme. Its roots proceed from Hyman Minsky’s works, as well as others in history like Martin Luther King – who aimed to a federal programme of public works, in 1965-1968. Prof. Frederic S. Lee, professor of Microeconomic Analysis at UMKC, totally supports the technical analysis of the JG, and at the same time considers unemployment to be intrinsic in the capitalistic way of production. Such analysis was also raised by Kalecki in 1943, and today is shared in several marxist authors. Do you think that within capitalism, and its power relations among classes, a permanent full employment can be achieved?

5)
ITA – Abba Lerner, in alcuni suoi scritti, sosteneva che uno dei principali problemi relativi a un deficit di partite correnti sia quello della disoccupazione interna. Quest’ultimo fattore può essere colmato con un programma governativo di pieno impiego. Ma proprio un deficit di partite correnti non può causare anche un problema di debito estero? I casi di India e Turchia, ad esempio, come sono inquadrabili?

ENG – Abba Lerner, in some his writings, wrote that one of the main issues with a current account deficit is domestic unemployment. Domestic unemployment could be faced with a Job Guarantee programme.Could the same current account deficit lead to a foreign debt issue? In this context, how do you consider the experience of Turkey and India?

6)
ITA – Prof. Wray, tra le tante ipotesi proposte per mantenere in vita il progetto dell’UEM c’è quello di costituire una banca centrale sul modello della FED e costituire una sorta di unione di stati federali sulla base l’assetto attuale degli Stati Uniti. A suo avviso, quel modello potrebbe essere importato con successo in Europa? Se invece non fosse possibile, data la situazione attuale con la minaccia deflazione alle porte, per gli stati del sud si profila la urgente necessità di stabilire un piano per uscire dall’euro: ci potrebbe elencate i punti critici di tale passaggio per salvaguardare le economie delle nazioni più deboli? Quali ripercussioni potrebbero avere gli Stati Uniti da tale evento?

ENG – Prof. Wray, one of the hypothesis proposed to keep alive the EMU project is to establish a central bank modeled on Fed, and create some kind of federal states union on the basis of the current system in the United States. In your opinion, could that model be successfully imported to Europe? If not, given the upcoming deflation threat, it’s urgent for southern states to plan an euro exit. In this case could you point out the related critical points, in order to preserve weaker nations economies? In this event, what implications could affect the United States?

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