 All right, so the talk this afternoon here. First, I want to thank you for coming. I know you had the opportunity to hear a funny talk instead. So you're here. People really devoted to monetary theory. Again, I appreciate that. So the talk this afternoon is about modern monetary theory. Although when I look at the title of this theory, it kind of makes me wonder what postmodern monetary theory would look like. I don't know. But I think I told the story the first night of how this talk came about was that I suggested that Dr. Murphy would give a really good talk on modern monetary theory. So here I am. That's OK. But because it got a sign to me, I had to actually find out what modern monetary theory is. And the more that I read into it, the more I realized that modern monetary theory isn't particularly modern. It's not really much of a theory in many ways. There are lots of things that go unexplained. And it's not even clearly about money. So the title, I don't know how they got it, but there it is. But we know that, nonetheless, it is an important idea that we do have to deal with nowadays, despite the fact that for a long time it has kind of existed on the fringes of economics. It has been pushed into the limelight recently. OK, so I need to tell a story about how I get my news. Because I don't like to pay attention to the news. I don't know. I like to be disconnected from reality as much as possible. That's why do economic theory. So I get my news one of three ways. Either my wife tells me about it, because she likes news better than I do. Or it comes through on my Facebook feed. Somebody shares a news story. Oh, OK, I found out about that happening. Or on my phone, I can flip through, swipe to the left, and then Google presents things that it thinks I might find interesting. So this morning, I swiped to the left. And there was a story from Bloomberg News where apparently Stephanie Kelton, who is one of the big names in modern monetary theory, declared that she believes that central banks are going to become more accommodative to fiscal policy, which is exactly what modern monetary theorists want to have happen. So it's right there. Google decided that it was important for me to know that. It's a little bit creepy. I wonder whether they know about this talk happening. Probably so, because I put in my Google calendar. I obviously don't care much about privacy. Anyway, so let's get into modern monetary theory. First, kind of outline what it is, and then I want to respond to it. Now, I'm going to try, as far as possible, to be fair in my presentation and not have modern monetary theory say things that the theorists don't actually say, because they do suffer from this quite a bit. And as an Austrian economist, I can sympathize with that problem. So I want to be as fair as possible to them. So when you look at modern monetary theorists, they will say they're really two sides to what they do. One side would be the theoretical side. The other side would be the policy proposals that they would present. So we want to focus, at least I like the theory side. If we get that right, I think we can understand the proposals better. So let's start by looking at the monetary theory. Now really, I said before it's not that modern. It's actually a combination of two previously existing theories that have been around for a good century. So first is the credit theory of money, which comes from Alfred Mitchell Innes, who's roughly 100 years old. And the other is the state theory of money of Georg Friedrich Knapp. So what the modern monetary theorists are doing are taking these two theories and combining them in a specific way. If you want to do some reading from the more modern monetary theorists, just a few names to look at. Bill Mitchell, Warren Mosler, Randall Ray. Randall Ray actually played a big role in my formation of this particular talk. He has a talk, Modern Monetary Theory for Beginners, that's up on YouTube. You can watch it, I think, in an hour, 15 minutes, something like that. So I'm pulling a lot from him in this summary. Scott Follweiler has some work that you can very easily get to. And then Stephanie Kelton, who I just mentioned. So most of this talk really comes from the works of Randall Ray, Scott Follweiler, and Stephanie Kelton being the big names that I looked at. But I certainly would encourage you to make sure that I'm being fair. I go out and read them. So how does it start? That is, in fact, the question that we're going to start with. How does money start, according to Modern Monetary Theory? So we go back, what is the origin of money? Well, they inherit this from the credit theory of money. So the idea is that money is created as effectively a debt instrument. I might, for example, write up an IOU. So IOU $5 from Englehart. I hand that to you. Then this can circulate, or you can use this IOU to buy things from other people. And then eventually, if somebody owes me those $5, they can come back to me and say, ah, but I have the IOU. You actually owe me the $5 that IOU. And then it cancels out. We call that redemption. So this credit is created. The credit circulates. And then it ends up eventually backward started. And I have to accept the debt that I owe myself then at that point is the idea. So historically, they might point to several forms that this is taken. So one would be the form of tally sticks. So actually, when I heard this described by Randall Wright, it's a very interesting idea. So the way they would keep track of debts here, you would have a literal stick, a wooden stick. And then they would cut different widths of cuts and the different widths were different amounts of money or grain or what have you. That was owed. Then they would take this tally stick and they'd cut it in half lengthwise. So the creditor would keep one half of the stick. The debtor would have the other half. And then when things are paid off, this is all canceled out, or you take the two halves, you put them back together. And that ensures that there's no counterfeiting involved, nobody was adding hash marks to this. Oh, you actually owe me more than we previously said. No, the debtor still has. Their stick to prove how much they would start with, which is kind of, it's a clever way to go about this. I do have accounting for debts, but it's fairly easy to understand. Randall Ray mentions that these tally sticks actually hung around for a long time in history that they were being used in some parts of rural Europe as late as the early 1900s. So we have very good evidence that these things exist and we find them going way, way back historically in the anthropological record. And this idea that debt played an important role, modern monetary theorists would point out, is very consistent with the anthropological evidence we have. That is that we know that debt seems to be prehistoric because the earliest writings we can find from the Sumerians are debt records from what we can tell, which means since history started when writing came about, debt was apparently already existed. So debt is already as old as history. Meanwhile, if we look at the record, according to modern monetary theorists in here, I'm basically quoting Randall Ray, when you look at the mangarian story, the mangarian story is a little bit different. How does money come about according to manger? Like, well, we have this barter economy, but barter economy runs into problems, which Dr. Klein described earlier. This double coincidence of wants is difficult. It has to match up, you have to have what I want, I have to have what you want. We have these divisibility problems as well. It would be kind of nice if we had something that could both everybody would want, solving the double coincidence of wants, because we all want the thing, and then also would be divisible. Now, we don't immediately do this, rather, we figure out some things are more marketable than others. So I trade my less marketable good for a more marketable good, even if I don't want it, and then eventually this becomes extremely marketable, is commonly accepted as a meeting of exchange, and that's how we get money. So that's the story that we would tell following in the Hungarian line. The response to that, the Randall Ray gives, is that, frankly, there is no anthropological evidence that there was a pre-monetary barter economy. We just don't see it. On the other hand, the earliest evidence we have historically is that debt did exist, that's the earliest history we have is debt existing. So this is clearly evidence that the credit theory of money is more credible because we know that credit existed from the beginning, we don't necessarily know that barter ever happened. This is Randall Ray's story. So now, then where does the state come in? So let's add in the state theory of money. So another thing we know is that pretty much as far back as we have good records of monetary systems working, the authorities have been involved. Here the authority is meaning the state, the king, whoever it happens to be. And the suggestion here is that from a theoretical basis, what the state does is unifies the monetary system. So when we think about the credit theory of money, a consequence of that is that anybody can create money as soon as you're taking out a loan effectively or that creates this credit instrument that can circulate as money. So how is it that we all end up using dollars rather than a multitude of different currencies, all of us in debt having our own currency being issued? How does this happen? Well, here the modern monetary theorists suggest that there is a hierarchy of money and at the top of this is government debt. So government debt is at the top of the hierarchy. It is then used as a money of account. So why is government at the top? Well, because everybody has to pay taxes in our society. So we're all willing to accept this government debt and then I can hand back to the government when I owe them money, as I owe you is canceled. So we all need to have some of this debt that was issued by the government to pay them back. So that then, that's a prominent place on the government money, they're at the top of the monetary hierarchy, whereas my Engelhardt dollars are not at the top of the monetary hierarchy. So then how does this then float down? Well, the second in this hierarchy would be bank issued money. Because we know that when I pay my taxes, I don't have to pay it in physical dollars. I can pay, say, with a check. Of course, this check is a debt instrument that's against a bank, not against the government. So this bank money, because it is also accepted in payment of taxes, it is also a very important in the monetary system, just underneath the state issued money according to the modern monetary theorists. Follow on down, then we have all the individual monies. So for example, when I went into debt to get a mortgage, that was a creation of money right there, but it is denominated in the state money of account, which makes it more acceptable, makes it more likely that I'm actually going to be able to get the loan that I need in order to pay for my house, say. But this creation of money, they would say, that still exists, yes, that was personally created, it's just not as acceptable, so I can't just create money on my own as easily as the state can. So that's the story of where money comes from and how the state gets involved, the payment of taxes is an important key. So now I'll come forward to how does the modern monetary process work? So we've got the origins, we've got how the state got in, what do things actually look like today? So here you hear this phrase from modern monetary theorists, they say we focus on the operational realities of the monetary system, it's the phrase they like. And here Randall Ray and his talk, it's really fascinating to watch, he starts with the criticism of kind of standard mainstream macro, where do you start with mainstream macro? The circular flow diagram. So we have the households on the one hand, we have firms on the other hand, and there's money circulating around here as households are buying goods, and then as firms are buying the factors of production from households, so money is flowing around. And Randall Ray says, well the problem with this is it doesn't tell you where the money came from in the first place. Credit through of money comes in here to explain that. So how does this actually work in the modern system though? Here they say we need to get the government in there from the beginning, after all our money of account is government money, dollars, so government creates this money through its spending process. It's creating that money in spending, that's how money gets created in the modern system, and then it redeems some of this money, that old system of handing back the tally stick effectively when things are being paid off. It redeems some of this money through the taxation process. So we spend money into existence, we tax some of it back out, and to some of this we can also take out of the system through the issuance of bonds. So I issue these things that are more obviously credit instruments, and that also removes some of what we would think of as money out of the system. He uses another historical example of the colonial Virginia. Apparently this is really interesting. At the time, he says colonial Virginia was running into a problem where they just didn't have enough of the official money of the empire, of the British empire. So what they did to solve this problem was that the colonial government created a bunch of just paper money. I think he said something 10,000 pounds or something along that, although I think it was just a hypothetical number that he gave. He created this 10,000 pounds and then they could go out and spend in order to pay for the various things that the government had to pay for. And at the same time, in that same legislation, they introduced a redemption tax which was actually the name that they gave it, of 10,000 pounds. So the idea is we spend this money out, eventually it's going to flow back to us. And that is exactly the way that they suggest the system works. Now is that we spend this money out, at least some of it is going to flow back to us, us being the government here. So this is kind of the heart of how the modern monetary theory works, as I understand it. Now where things get more interesting for me is the practical implications of this. If this is the way money works, then practically what does that mean? And here the modern monetary theories are extremely clear. They say because fiat money can be created just infinitely by government, government spending has no financial constraints. As long as you have a sovereign currency, that is as long as it is your government creating the currency for your country, so this would not work for say dollarized economies other than the United States, or for say a lot of the Eurozone, where you're not producing your own national currency. But if you are producing your own national currency, you don't actually face financial constraints. Effectively you can always print the money into existence and buy whatever you need to buy. However, and this is where they're often misrepresented, the modern monetary theories are very clear and they're not saying that deficits don't matter or the deficits never matter, rather they recognize the deficits are funded through money creation. And this can create inflation under the right circumstances. So you might ask say Randall Ray, well what about the 1970s? Should we have all this high inflation? How did that happen? He says well it depends how the money is targeted. So if for example as he suggests happened during the 1970s, the government spending a lot of money, it's creating a lot of money to spend, but where it's spending it is not on all these unemployed people where we have high unemployment rates, it's rather trying to hire away engineers and the like from say tech companies as we're trying to say do more space exploration or that kind of thing. Now that we've been to the moon we have to do something else. So we're trying to hire factors of production that are already being used. When you start running up against capacity then the only way to get those factors into the government is to bid higher than all the private actors. Meanwhile, so we can have high inflation from that. The government driving up prices from trying to buy away, bid away by these various factors of production that are already being used by the private sector and this is perfectly consistent with also having high unemployment if the government's not bothering to hire those people that are unemployed. So there's no inconsistency here as far as Randall Ray is concerned. And he would point to other cases, you might challenge him, well what about all this hyperinflation, things like find our Germany. Okay well there are the problem and according to Randall Ray is not that we're just creating too much money. The problem was that Germany had these enormous war reparations they had to pay back in monies other than their own and these claims are so large that effectively all of the production of Germany was required to be sold internationally to raise the foreign currency to pay these off. Which means effectively there weren't really resources there for the government to buy with their money. So if they create money at all they're having to bid these resources away from having to pay off all these foreign debts. So this money creation is naturally going to be extremely inflationary in this kind of environment because the resources aren't available, we're having to bid away from these other uses. That is the claim. So naturally we get hyperinflation in this case and he would say, though somewhat vaguely, this is the kind of thing that also happened in Zimbabwe more recently. However, at the same time if we spend money on things like say providing a job guarantee I have the government act as the employer of last resort for anybody. So anybody who wants a job and can't find one now we're not bidding resources away from the private sector. So that's not going to be inflationary. Okay, so that's the distinction. The government's trying to bid away from the private sector that will get inflation if we're just buying up unused resources. This is not inflationary. We can print as much as we like for that purpose. Now naturally there would be a limit with this. Eventually everybody's working for the government at which point it would become inflationary to do more of this. And I think it's fair to say that modern monetary theorists would not deny this. Once everybody's working for the government, okay we shouldn't print money to hire people more or if we do it will be inflationary. All right, so this is as I understand it. The positions of the modern monetary theorists on these points. So I want to respond to the modern monetary theory. First I think it's best to always recognize the good before you start criticizing. So what is good about the modern monetary theorists? Well first I want to agree that it is true that technically fiat money can be created without limit. And in fact I think that Randall Ray and his exposition Modern Monetary Theory for Beginners makes an important point in correction with actually something that I have gotten wrong. Here at Mises U I say things like oh it would only cost five cents to print a $10 bill, that kind of thing. Well as Randall Ray points out, focus on the operational realities. The reality is that when we create money we're very rarely printing bills. Instead it's basically free because it's just happening in the computer. So you just press some numbers and we can create money. Which means we can basically create money without limit. Okay, yes, yes, nobody denies this. In fact I've never heard anybody say well the problem with modern monetary theories that you can't actually create that much fiat money. No, we'll agree, we'll grant that. A second point and this is something where I do think the modern monetary theorists do actually better than the mainstream is that they understand the way that money works in the economy in a disaggregated fashion. So the way that we can get things like the stagflation that all relied on disaggregating the economy and say well we have this sector that's kind of underutilized, this sector that's already utilized, this disaggregation and understanding that money will have different effects depending on where it ends up. I have to give them some credit for that. That is something that's difficult to see if you look at the standard Keynesian or Friedmanian framework that you would typically get from macroeconomists. So good job on that. Also, I'm not even going to deny that credit can actually serve as a basis for money. Mises talks about credit money and the theory of money in credit. This is something that he recognizes first can happen and second actually had happen. That is that you can have some kind of debt instruments that are used as a medium of exchange. This is perfectly possible and we know that it has happened. So I'm not going to deny that either. But let's dig into this a little bit then. So Mises talks about this credit theory, this is not the credit theory of money but the idea of credit money. And he says, what distinguishes credit money from just a standard money substitute? So I have this gold-backed currency, say. Well, what is it that distinguishes the two? He says, first, it's not immediately payable in full on demand. Or, that's one possibility. Or it's repayment is not absolutely certain. That's what makes it credit money rather than just a money substituter. I can hand this in and get the gold in exchange. But, and at the time, I thought this is really interesting too as I was reviewing theory of money in credit and this distinction, because I knew he talked about credit money. I wanted to see exactly what he said. At the time that Mises was writing, he suggested that a lot of alleged fiat money was actually just credit money up to that point in history. He said it's theoretically possible for a true fiat money to exist, but at the point that he was writing, he wasn't sure that it had happened. This credit money, as far as he was concerned, was something that had happened though, which I think is interesting. But now let's get more into kind of what I consider to be the problems with modern monetary theory. The first is in the definition of money. And I didn't, you may notice, I didn't really define money in modern monetary theory's terms quite yet. And the reason is that they're kind of vague about it at times. So Randall Ray, I found in that talk, was particularly bad as he offered actually two different definitions of money. So the first of them is that money is an IOU. So money is credit. Now the second though, which is the one I want to deal with first, is that money is a social unit of the measurement of value. So a social unit of the measurement of value. So let's start with that one first. That's the easier one to deal with. So the social unit for the measurement of value. So here's the problem. In brief, value is not measured. Because value is not something that exists inherently in a good. So you can't really measure it per se the way you can length or mass or weight, these kinds of things. Value we know instead exists in the eye of the beholder. Value is subjective. So the value that I place on something may be different than the value you place on it. Now if we're talking about exchange value, that's a little bit different in that that is an objective thing, though that's not inside the good. Rather in that case, I would say, if we say swap out value for price, being the exchange value, though that doesn't really help with this idea of the measurement of value. Again, these prices are not measuring the objective exchange value of money. The price is the objective exchange value for a particular good. You might put it another way, prices are stated in money. You're not measuring something in this case. So still no measurement here. But I think it's probably not fair to hold Randall Wright too much to that particular definition because he does offer us another one. And the other one seems to be the more acceptable one to most of the modern monetary theorists. Stephanie, at the time of Stephanie Bell, she's now Stephanie Kelton, wrote a very interesting paper regarding this. This money as an IOU concept. So what this suggests, logically, and we've stated this before, is that any IOU is effectively money then. If money is credit, anytime credit is created, money is created. And that's where she introduces this idea of a hierarchy of money. Now here's what Stephanie Kelton says, affirming this definition. Oh, here's the paper. The role of the state in the hierarchy of money. So that's the title. In this, she says, money is credit. It represents a debt relation, a promise or obligation, which exists between human beings and cannot be identified independently of its institutional usage. So money is debt. It is this debt relation that exists. And then she goes on to quote Hyman Minsky, who said that everyone can create money. The problem is to get it accepted. Randall Ray also suggested this, which I think is kind of a clever statement. Anyone can create money, the trick is to get it accepted. But Stephanie Kelton made a great point here, and she said, no, that's actually not true. Because debt is a two-sided transaction. If I'm actually creating money, I need to find somebody that's doing the lending side of that transaction. So if I'm creating money, it's already accepted, because that means we're entering into debt. So she actually corrects the logic of one of the predecessors of her theory, which I can appreciate that as well. You can have a debtor unless you also have a creditor. So let's deal then with this one. This is a little bit more complicated. Now I would suggest that the very idea of a hierarchy of money suggests an additional standard for what we might call money-ness. Because Kelton suggests that the money that I create through credit transactions, like taking out a mortgage, is not quite as money. Which actually in the slang sense, that's probably true. But it's not quite as money as the money that is created by the government. It's further down on the hierarchy. Well, how do we decide what's on the hierarchy? That's the question. Well, that's obvious, and she answers this very honestly. Acceptability as a medium of exchange. So what is it that makes it money? It's more money, the more acceptable it is in medium of exchange. It's less money, the less acceptable it is. So they're kind of playing around with definitions, but ultimately having to go back to the trait that we, as Austrians, would use to define money in the first place, or the acceptability as a medium of exchange. Generally accepted as a medium of exchange, that's what money is, right? All right, they ultimately have to appeal to this. Whereas we, when we define money in this way, you can have an economy entirely without debt and still have it be monetary as far as we're concerned. And that's going to be part of the criticism going further down. Now here, Mises also takes over a little bit talking about this idea as well. When he talks about credit money, he establishes again, yes, credit instruments can be money, but the fact that they're acceptable at all as credit money is the fact that they are redeemable at some point in the future at some ratio in true money. So the credit money is not fundamental. It's not where the money started. It's that it's a claim to something else that is already acceptable. So the idea that money came just from credit being created in some kind of non-monetary system is very questionable, right? Unless the thing that we're having claim to is a commodity. So there's either fundamentally a commodity underlying this or some other form of money that is acceptable to people. Now, when we get to this historical issue, Michael Watson has a very good paper about this. The title of it is, did debt precede money or did debt precede a medium of exchange? Maybe I forget the exact title, but something like that. And he says, it doesn't matter. It's actually in the title, the second part. Did debt precede money? It doesn't matter, right? Because he says, even if debt precedes having a medium of exchange, this isn't really a problem for us as Austrian economists. It just means we have inter-temporal barter happening. That's perfectly fine. We can give a name to this, right? It doesn't require having money in there. I would also add to that. Even if it is true that early money took the form of trading these credit instruments, if that is the way that money was created in some sense. This is the first thing being used as a medium of exchange. We have credit before we start trading these as money. That's also not a problem, right? After all, all we really need from the regression theorem is that the thing that is originally used as money has some value that is pre-existing that we know. Well, if it's a claim to a certain amount of wheat or what have you, that wheat has value, so the claim to it would have value. So it's not any problem at all, right, for our story in terms of the regression theorem or even the origin of money. Okay, so rather than trading the wheat itself, we're trading claims to the wheat. It doesn't really make much difference. So this is not a problem for us. Now, another issue, and here I think starts to get a little bit more fundamental, is the exclusion of the possibility of pure commodity monies. I think this is especially a problem. And Ray is very clear about just one example of this, he says, for example, that Bitcoin is not money. It's kind of funny, this was in the Q and A, I think. And just in terms of his attitude, it seemed to become very cranky when this was brought up. Ah, Bitcoin's not money, it can never be money. Well, of course, if you're defining money as credit, Bitcoin can never be money. Sure, it's not basting credit, right? But what we do know is that Bitcoin has served as a medium of exchange. So even if I might not call it money, I'm certainly not going to deny that it's used as a medium of exchange. And it has the potential possibly to be money. And we also know, and I think this is interesting, given kind of the tax basis that they rely on so much, we know that some governments, I mentioned, I think before, the state of Ohio has declared it's accepting Bitcoin payment of taxes. Still not money, it can never be money. That's a strong statement. Yet somehow to say, if it's acceptable in payment of taxes, doesn't that make it on the second tier, right, below with bank money? Except, we've defined it away from being money because it's not credit. Okay, another problem we have is we know that there are numerous other cases of actual commodity monies that have existed in historical time. For example, prisoner of war camps when we have things like a cigarette-based economy. So we're using cigarettes as a medium of exchange. So if they want to define money as credit, fine. They can do that. I think it's a bad use of the term people with a cosmic understanding, but fine, let's let them do that. In that case, that's leaving these commodity-based transactions outside of the analysis, right? You cannot simultaneously claim, as they do, that there is no evidence of a barter economy. And at the same time, claim that money is credit. Because we know that these prisoner of war camps are using this medium of exchange, right? So either, if we're using this, say, cigarette as a medium of exchange, either we're doing barter, right? Because the cigarette is not money, right? In which case you're claiming that there's no evidence of a barter economy is wrong, right? Or what they're doing is actually trading, right? In money, we have just local money in the prisoner of war camp that takes the form of cigarettes, right? That is not credit-based, right? So either way, we're gonna get something wrong. Either we accept that this is money in this context, in which case money is debt is wrong, right? Or we accept that a barter economy can, in fact, exist and has existed historically, right? We have to choose, right? We cannot simultaneously say money is debt by definition in that there is no or it never has been a barter economy, okay? All right, so that's another issue. But now let's get finally, I mean, not finally, but now to what I really think is the fundamental theoretical problem, right? With their issue, with this theory. And it's not a new problem, right? Like here I'm just citing Mises, okay? The problem is how do we establish the purchasing power of money under this theory, right? Okay, and this has been a problem ever since, right? NEP created the state theory of money at the beginning and Mises pointed out the problem a hundred years ago, roughly. There's no understanding here for where the purchasing power of money comes from how we can explain that purchasing power of money. And so let's talk about how this works under the Misesian system. This is not new or you've heard this before, right? So we know the purchasing power of money today, right? Comes from the supply and the demand for money today. Money is not radically different from any other good in that fashion, right? So where does the demand for money come from? And Mises has had a very important insight and this is something we need to explain as economists. Well, the demand for money comes from the fact that I have expectations about what I can get for that money in the future, right? Where do those expectations come from? Well, the fact that I've observed in the past, right? Money being acceptable in exchange, right? So the fact that I've observed this array of prices yesterday means that yes, I'm willing to be paid in money today because I expect that I can spend that money in the future to get the things that I need, right? That establishes exactly what my demand for money is going to look like, right? It tells me how much I should be willing to work for, right? Because I have some sense of what I can buy, right? With that income, for example, right? So I have to have in my mind, right? Some sense of the value of money before I find it acceptable, right? And this is where the regression theorem is extremely important, right? So where did that purchasing power come yesterday? Like, well, it came from demand and supply of money yesterday, right? Where did that come from? Well, the demand was because people expected to be able to spend money in the future based on their experiences in the past, right? And this is why we have to trace it back to something that ultimately did have some kind of value in exchange to start with, right? Even without any kind of monetary use, right? That's why we suggest a commodity basis makes the most sense. It is actually logically consistent with how we know people actually work in terms of their demand for money, okay? All right, so then, getting into modern monetary theory, where does the purchasing power of money come from? Now they don't seem to deny that the supply of and demand for money is going to have some kind of impact, so I'm just going to assume that they do believe there's a demand for money, right? So where does the demand for the medium of exchange come from? So it comes from these tax liabilities, right? Tax liabilities, everybody has to pay that, so we all have a demand for money, okay? But that doesn't really work for what a good economist would mean by demand, right? Demand doesn't mean that I want something, right? Demand is related to what I'm going to give up to get that thing, right? So the way that we would often define the same principles of microeconomics is, right? Demand is this relationship between the various prices that I might be asked to pay for the good and the amount of the good that I want to buy, right? So it's this connection, right? It's not just all, it'd be kind of nice to have this thing, right? My demand for money is not infinite just because I'm willing to accept lots of money. My demand for money is based on what I'm willing to do to get that money, right? So that's where it comes from. So demand is not just a desire or even a need, right? For a good, in money's case specifically, right? Demand would be the relationship between the purchasing power of money and the various quantities of money that people desire to hold at those various purchasing powers, right? So if I have a liability of 100 of some arbitrary unit, right? It's just totally fiat and I have no sense, right? What this, how this would relate to anything else, right? So the state says, oh, you owe us 100 units of tax payment, right? What am I willing to do to acquire those, right? It's not so obvious, right, right? So that's where there's a lack of clarity, right? Where does this, where's my demand for money going to come from if I don't have any sense, right? Of what these 100 units would be worth, okay? This is very unclear. Now it seems reasonable to me that I might want to say, do just enough work for the state themselves, right? To get 100 units, just have them pay me that, right? Then I keep those 100 units till it's tax time and pay them back in it. That seems like a reasonable thing that I would do. But in that case, I'm never using this as money as a medium of exchange, right? Just basically enslaved to the state till they give me enough money to pay them back at which point I leave that and I go do something else, right? There's no point where they can explain how this enters into exchange. And that is why Mises, when he talks about the state theory of money, he puts it into a broader category of what he calls a catalactic theories of money, a catalaxis being the analysis of exchange, right? So as far as he's concerned, this theory is totally separated from and it's impossible to get into an analysis of exchange, right? So the question is, is there any evidence of any fiat money coming into existence that wasn't tied historically to some commodity? As far as I know, there's not, right? We can always trace back ultimately, right? To some kind of commodity and that is the regression theorem at work. Now I wanna take a minute and just talk about Bitcoin because sometimes people challenge us on Bitcoin. All right, Bitcoin is fiat, it doesn't have any pure use value. I disagree, right? Important thing in my mind to remember about Bitcoin is that when it started, it was extremely cheap, right? Which means it didn't have to have much use value to anybody. I think this is just kind of an interesting curiosity. I say you start mining Bitcoin or you buy some, right? So it can have this direct use value even if you don't expect that people are going to actually accept an exchange later, later then does actually get some demand as a medium of exchange, right? So I can't think of any example, maybe you can. If so, then they actually have an answer, okay? So that I think is really the fundamental theoretical problem. How do we actually get the purchasing power of money out of this system? Now I want to finally then turn to the practical issue. So what would happen if people actually accept modern monetary theory and its practical implications at the very least, right? That is that we don't have any financial constraints in the words of Randall Ray. The only thing that's constraining the government right now is this totally artificial debt ceiling that the United States is the only country he claims that has a debt ceiling. Just repeal the thing and then we can spend as we like. So the only constraint are those we put on ourselves and then actual physical resources, right? So what's going to happen if we accept that this is true? I suggest that the government feel less constrained in its spending, right? So we'd probably see a significant increase in government spending, shockingly people that want significant increases in government spending often point to modern monetary theories justifying it. NPR actually just recently ran an extremely poorly titled article saying this economic theory could pay for the Green New Deal, right? I'm not sure that any economic theory has like assets it can sell or the sorts of income that it could use, right? But it might be able to explain how we pay for it. Ah, there we go, that's what theories do. Theories should explain things, all right? Anyway, so the government feels less constrained. It decides, yeah, let's go ahead with the Green New Deal or the debt ceiling is just nonsense. Anyway, we can always print the money to do this. It's not a problem, right? And it might be a problem for having to bid away previously employed resources. That's where it might run into issues. But as long as there are unemployed resources, we can buy those up without any problem at all, right? Now surely this is a good thing, right? We can all agree that having unemployed people is bad and if we can hire them without it being inflationary then this should be something we should do, right? Except I don't think we can agree with that, right? So as I was thinking about this job guarantee idea and employing these unemployed resources a title popped into my mind and I thought, I should read that book. It sounds important. That's Hutt's theory of idle resources, right? And as I've been reading it, I admit I'm not all the way through it yet but I'm through enough chapters to say things that I hope are potentially important here or at least relevant, if not important, right? Hutt I think really got at the heart of the Keynesian program, right? Not necessarily theory as much, right? But the program of what the goal was in the first place, right? So in the theory of idle resources and the theory of idle resources, what Hutt says is that Keynes was assuming, was simply assuming that full employment is a desirable thing, right? And that this full employment is something that we can see, something that is visibly possible to identify and that it is something that is actually inherently desirable, but, and a lot of what Hutt's work was doing was saying well the problem is that we don't actually have a good theory of why resources would be idle in the first place, right? There might be good reasons, right? And the first several chapters in that book are actually going through good reasons that we might have idle resources. It might be the resources are actually valueless, right? That is we don't have a good use for them, right? We don't have a good use for them, we should not be trying to use them is the idea or it might be that they are in a state of what he calls pseudo-idleness, right? A pseudo-idleness is say typically what my car is in most of the day, right? If you look at my car, I'm driving it very, very little. The average day I'm driving it may be 40 minutes, maybe slightly more if I hit the stop lights wrong on my commute, right? But something like 40 minutes out of 24 hours I'm using my car. So the rest of the time is just an idle resource. So we need to find some way to employ that, right? No, we don't, right? Because I want to have access to my car, right? What it's providing for me the rest of those 23 hours and 20 minutes of the day is availability, right? It has this possibility that I could, if I needed to use it actively, I can, right? So if I need to run my kid to the hospital or something like that, I can run down, throw them in the van, right? And drive off to the hospital, that's something that I can do. And I would not be able to do that if I didn't have possession of this car in what looks like an idle state, right? So this availability is actually a service that a lot of apparently idle resources are providing. He also mentions what he just calls preferred idleness, right? It might be that my grandma doesn't have a job because she's 90 years old and doesn't want a job, right? This is something that happens, right? It might be that I simply don't want, right? To use the resources that I could potentially be using. All right, so preferred idleness. All of these are perfectly good reasons that we would not have every single resource employed all the time, okay? So what happens then if we decide, no, we do need to employ these, right? And the government can employ these without any kind of inflationary effects. Let's go ahead and say, suppose we can do this without immediate inflationary effects for those resources. Well, one of the problems is that employing resources typically requires the cooperation of complementary resources, right? So just because you have lots of employed people does not mean that you can get them jobs, right? Because a job usually requires working with something else. It's not just people standing on street corners singing or something like that. I guess that could be a potential job. And that's actually one that Randall Ray lists is a possibility, right? So he has in mind these kinds of jobs. He actually lists these in a paper called Employer as a Government as the Employer of Last Resort. He says, here are some examples of the kinds of jobs you could provide to employ people. People could be a companion, right? So we know that, you laugh, but we know people are actually employed as this, right? Say elderly people get lonely, that kind of thing. Employee people go talk to them. Well, how are they going to get there? We need additional resources to get them, right? To actually be a companion to somebody, right? Or could be a public school classroom assistant. Now these also already exist, so I don't know if these would be new jobs necessarily, but we have to have classrooms there, right? Teachers that are being assisted as well. A safety monitor at schools is another thing we could do. Well, we need to make sure we have schools there, right? We could do cleanup and things like parks, okay, right? Of course, again, we need to get people there and give you the equipment to actually do the cleanup. Are there these complementary resources that are necessary? We could do low-income housing restoration, the kind of thing that Habitat for Humanity does, but pay people to do this as a guaranteed job and so on. And so there are all kinds of possibilities out here, but they all require using these other resources as well, complementary resources. So what's going to happen, right? If we want to employ people these ways, we have to drain these resources out of the private economy where they're already being employed, right? How else do we drain these resources out of the private sector? What happens, right? Well, there's going to be a drop in productivity. Interestingly, rental rate is not suggested as a problem, though he admits that it's something that will happen. Oh yeah, we could have a drop in productivity, but we're rich is basically what he says in this paper. I'm not kidding, right? He says a country wealthy as ours should be willing to put up with some unproductivity. I'm not joking, right? But what happens with lower productivity, right? We're going to get higher prices, right? Even by MMTR standards, if we have less goods being produced, right? That's less stuff that we're spending money on. So what are we going to do then? Well, as part of the system, we can increase taxes that will increase the demand for money, soak up some of the money that's out there. According to Ray, increasing taxes, again, this is a quote decreases the ability of the private sector to compete with the government for resources. Hmm, now I'm not going to say he's wrong, but it's interesting the program that underlies the way that's stated, okay? All right, so then it turns out in my mind there are two possibilities, right? When we have these types of programs, these spending programs, either the government isn't going to raise taxes, in which case, even under the Modern Monetary III standards, we're going to have an increase in inflation. Unless, right, we do, as Randall Ray also suggested, this is a possibility, we could have price controls and just ration, right? He states this as something, oh, we've done it before and acts like this was not a problem, right? Or alternatively, the government does raise taxes, in which case, right, the government is slowly replacing the private sector as the economic driver, right? So what is the path, right, then that we're put on, if we accept this theory, it's a practical matter, okay? I'll end there, thank you.