 Good afternoon everybody and welcome to the SAAS Economics Summer Lecture Series. My name is Sara Stefano, I am a lecturer in the Department of Economics here at SAAS and I'm also a co-organiser of the series alongside my colleague Tobias Franz. It is my pleasure to welcome you to the first lecture of this mini series that we have organised for Term 3, which is our summer term. So the purpose of this series is to present some of the recent work that some of our colleagues in the department and also their collaborators have been conducted in recent months or years. And of course we are all here today to listen to Kostas and Nicolás talking about MMT. But before introducing today's lecture and today's speakers, I would like to draw your attention to the other two lectures that are upcoming in our series. So as you can see hopefully on the slide on your screen, the next lecture will be on the 2nd of June with our colleagues Sophie van Hullen and her collaborator Fouad Mohammed Abubakar. And the talk will look at why Ghana doesn't get the full value of its cocoa beans and how this could change. So essentially this will be a talk on the financialisation of agri-food chains, looking specifically at the case of cocoa. And then the last lecture of the series will be on the 16th of June with Moussakaan, who's a professor in our department, and he's been leading a larger project on anti-corruption. The name of the project is ACE, and so he will be talking about this work that he has been doing with a large team. So if you're interested, of course, you're welcome to join us also for the coming lectures, and we will share the details to join on social media and via our mailing list. Okay, but coming back to us. So our first lecture is on a very popular topic, which is the Modern Monetary Theory, also known as the MMT. And we're really honoured to have Kosta Zappavitzas, who is a professor of economics here at SOAS, and also Nicolas Aguila, who is a researcher at the Centre in the Interdisciplinary Parallel Studio, the Politicas Publicas in Buenos Aires. They have been working, so Kosta Zappavitzas has been working on MMT already for some time, and for those of you who might not know, I would like to draw your attention to their work on this topic. So they have a paper published in the Japanese Political Economy Journal on a Marxist critique of MMT, with reference to Eurozone and Greece. And they also have, for those of you who don't have a lot of time to read long academic papers, a nice blog in developing economics that provides a bit of a summary of their critique. So today they will focus on a bit of a new and different angle, which is the current US Monetary Policy, and this is part of a book they're working on, on capitalism after COVID, essentially, and they might tell us something more about this in a moment. So before I hand over to them, what is going to happen next is as follows. So Kosta Zappavitzas and Nicolas Aguila will talk for about 45 minutes. You can put your questions and comments in the chat box throughout, so even while they're talking, but also, of course, after they have finished to talk, I will collect the questions and comments and put them back to the speakers after their lecture. And I would like to say, so this webinar is open to everybody. And this is how we want to do things in our department. So because this is the ethos of our work, making our work available to as many people as possible, especially now that we are all into this online teaching and researching and living mode. But we're also aware that MMP is a very popular topic at the moment, and people have very strong views of a different nature. So I would like to request that everybody formulates questions and comments in ways that are clear, constructive and helpful. So I will be a very strict chair on this. And on this note, I think without further ado, I'll hand over to Nicolas. Thank you. Let me stop sharing my screen so that he can share yours. Yeah. Okay. Thank you so much Sarah for the introduction and for the invitation. It is great to be here and thank you, Tobias, too, for organizing this. Yeah, so can you all see my screen, right? Perfect. So, as Sarah mentioned, this presentation comes out of a paper that we wrote a few months ago. And there we try to contrast Marxism and MMP regarding money. First, it's important to say that we are part of the same approach in opposition to the mainstream broadly to the anti-quantity tradition. And we share a lot of the criticisms to the mainstream and also a rejection of austerity policies. So today, our criticism aims to be constructive and establish a point or a bridge for dialogue between the two traditions and does not seek to destroy or classify them as enemies or anything like that. It's true that there are substantial differences in how we understand money and how MMP understands money, and these are worth presenting and contrasting and discussing. Particularly, we focus on the ontology of money and what is money for each tradition, because we think that there is an overemphasis in many cases on an economic policy, both by mainstream critics of MMP as well as by derelict critics of MMP. And we think that MMP policy conclusions are rather a coherent result of their understanding of money. So tackling policy without really discussing what is the underlying notion of money. But it's a little bit superficial or not fully fulfilling. So instead, we try to focus on the ontology of money that is what is money for us and for them. Then we extend that to how we understand more money and monetary sovereignty compared to them. Then the role of the state in the ontology of money and finally on economic policy. And in particular in this presentation, we will focus on US monetary policy and also fiscal policy during the last year. So I will start with the first two points and then I will leave the floor to Costa's so he can complete the presentation. On the ontology of money, MMP is also called neo-chartalism and this is because they update the chartalist theory of money which was originally proposed by NAP and INES more than a century ago. They also bring insights from Keynes, from Miski and Abalernar and other authors. And they come up with this neo-chartalist theory which is also called tax driven money or money as a creature of state. This comes out of a paper from Abalernar. But I think that it will be more appropriate to call it money as a creature of the law. And I think many MMPers will agree with this. So they depart by criticizing the mainstream. We all know this story very well so I will go very quickly. The mainstream story is based on an allegedly society of barter that was supposed to exist at some point. But this society had a problem, the famous double coincidence of one's problem because if I produce, let's say, bread and I want beer, then I will have to find a brewer who is willing to trade his or her beer for my bread. And that was inconvenient. So rationalations agree on using another commodity, a third commodity which historically was different commodities, but in the end is precious metals as a means of exchange. So for the mainstream money is, first of all, a means of exchange that results spontaneously from the market and is sort of available for what it is truly a barter economy. So turtleism says that this is not about true that this is a historical fiction and we agree with that we Marxist agree with that. There wasn't any barter societies. And turtleism says that instead what used to happen was that individuals will transact and then they will just register their mutual obligations, and eventually they will settle them using their own commodities or, or, or other commodities, but barter was not existing. And this is so much so that the sort of the or this form of organization was not merely circumscribed to what we will now call economic transactions, but it was broader than that for example included what we will now call legal obligations. One key example is the Bergell or Bergell, which was a practice used by Sharpanic tribes in which they constituted an assembly that had the authority to settle mutual claims. For example, if I were to kill your brother, then you will try to kill me back or kill my brother back. And in order to avoid the escalation of conflict, an assembly will gather and will say, okay, I, that kill your brother, I owe you something. And this assembly will impose a unit of account. And they will impose the amount that corresponds to that particular fence. For example, I kill your brother now I owe you three cows. And I say that in that very same moment in which the state authority is creating money, they, they are by imposing the unit of account. They are choosing the thing that will become money. This is not a medium of exchange that arises spontaneously in the market, but it's rather a unit of account that is legally determined by the public authorities to mutual, to measure mutual debt obligations within a community. And they, they follow gains and they understand that modern money has been essentially the same for some 4,000 years at least, and this, this quote is what gives the name MNT or modern monetary theory comes from, from this remark by, by gains. So, while this has been true for the last 4,000 years they say that, that the specificity of modern nation states is that they impose a liability in the form of a tax obligation. So they have the power to tax all of us, and they say what they will accept in payment for those taxes. And by doing that, they are creating the unit of account that will become money. In effect, they are forcing us to pay taxes in something that they choose. And because of that, we have to get our hands around that, that thing that the state chooses. We later start using it for our things such as a medium of exchange or sort of value. But first of all, money is again a unit of account that is imposed by this tech through taxation. So, from a Marxist perspective, this is, this is not, not correct. Mostly because it, it erases the specificity of money, believing that money has been the same for 4,000 years kind of blurs the historicity of money and of capitalism. And for, for Marxists, money is not at all something trans-historical, but it's a properly capitalistic thing. This is a thing that fully emerges on under capitalist conditions. So, Marx clearly acknowledged that money emerged in pre-capitalist societies, but it is so at the point of exchange between societies and not as a result of the internal relationships proper to those societies. This is the case because in those societies, the products of labor did not take the form of commodities. So, there was some planning mechanism operating behind that makes every individual know what was his or her role in society and what he or she will get in exchange for his or her labor. For example, you were bound to a land and then you had to produce in that land and you will keep some of the output and then you will give the resting taxes. And if you need other things that you don't produce, you will find a way to produce them or we'll register them as debts as we previously discussed. But in general, there was no generalized commodity exchange. For sure, there was a unit of account to measure these mutual debts that existed out there, but that unit of account cannot be properly considered as money. So, money in those societies only existed properly at the point of exchange between them. And in capitalism what happens is that commodity exchange is generalized. This is the first society which functions under the basis of generalized commodity exchange. In our society there is no planning mechanism, so each of us produces whatever he or she wants, which doesn't have to be like a thing, it could be ourselves, our labor force. For example, I decided to become an economist, but I could have done something else. And then in order to see whether the product of our work is socially validated, we need to go into the market and sell whatever it is that we produce. And then money plays a key role because money is an object that has been assigned by society with the capacity to say whether our work is socially useful or not. So money plays a really role of articulating a society which is based on individual producers producing privately and without coordination. So money for Marxism emerges first of all as a universal equivalent, allowing to exchange all the different commodities and linking all the different labor in our society, and subordinated to that, it plays a role of measure of values, of means of exchange, and etc, as we all know. But all of these functions come into existence without needing the state intervention or the intervention of any other authority external to the market. This is rather an endogenous plot from the market in an interpretation that is totally different from the mainstream story. It does not rely at all on barter societies or anything like that. It just relies on an understanding of how capitalism is organized and how labor has to be coordinated. So moving into the second point of the criticism which is that of world money, our understanding of capitalism leads to conceptualizing capitalism as a global system. And as a global system, it requires world money in order to allow the exchange of different products of labor in different parts of the world. It presents some challenges for chartalism as their understanding of money is based on the power of the state to choose a unit of account through taxation. And then there is no international or super national state with the power to do that, then it cannot be any world money, money must necessarily be something national that remains at the local realm. And derived from that, monetary sovereignty cannot be anything else but a policy choice. And a state conceptualized monetary sovereignty is based on five points. The national state choosing a unit of account, the national state imposing obligations in that unit of account, the national government issuing currency and accepting it in payment. The national government issuing obligations denominated and payable in that and a flexible exchange rate. And these are all policy choices. And this is a rather coherent result from, from their understanding of money in my view. But for us, this is not at all the case. Monetary sovereignty is not at all a choice but rather the result of the hierarchical structure of the international monetary system that subordinates certain countries. So you can fulfill all of those requirements and still not be monetary sovereignty, because you need to access war money in order to import means of consumption and means of production that you need in order to develop. So countries that are at the bottom of the monetary pyramid, they have a subordinated position in the international financial system. And therefore they are not a monetary sovereignty. And this is a result of structural factors and not a policy choices. Costas would you like to take the front up. Yes, please, but you left to help me with the, with the slides right because you've got commandable. Yeah. Okay, I want to, in a sense, wrap up the theoretical part of the discussion of MMT and then give an example of US monetary policy for obvious reasons. Which I will repeat when I come to it. State economic policy in some ways is the main issue of contention between MMT and its critics. Not so for Marxist theory, may I say, but when I read things that post-Kenshin say about the MMT, for instance, or other critics it always comes back to that. And that to me is a limitation. It is like saying the ontological argument doesn't matter. Let's discuss the things that are important, which is what would happen if the rate of interest goes up or goes down or whatever it is up and down economics, you know, but this, that's not the case. I mean that what you say about state economic policy depends on your view about where money comes from and what it does and how it connects to the domestic economy and how it relates to the international economy, the world market, as Nico explained. So from this perspective, and given what is already been said by Nico so far, our point is this, for MMT, if we could sum up policy as far as the MMT is concerned, basically the argument as we understand it is that taxes are not necessary for the state to finance its expenditure. Taxes are basically a way through which the state facilitates the circulation of money or fiat money. Basically, if the taxpayer is to be able to pay, the state which is the monopoly issue of money must have provided the means of payment and so the state must have engaged in expenditure prior to collecting taxes to allow the people to pay the taxes. So government, the logic of this is the government spending is not financially constrained either by tax or by debt. Government can always finance its deficits. It's used as an argument for functional finance, which is an older argument goes back to a learner, it doesn't come from MMT but it's a sort of old style, a kind of Keynesian current, where basically again, the argument is that fiscal policy doesn't have a financial constraint but a real constraint. In other words, the availability of spare resources. So as long as there are spare resources, there is no limit, real limit to fiscal policy and there will be no problem of inflation while spare resources are available. The limit is inflation. If the resources become unavailable and that's the true limitation of fiscal deficits. So if, if output is below full employment, then there is no risk of inflation the state can create money to bring about full employment and that is the foundation of the job guarantee proposal the most important proposal. In terms of policy, the MMT has to make about the real economies at work. And matching the job guarantee for MMT micro economists. It's very, very important that the state determines the interest rate at parks it close to zero basically that in a nutshell is the understanding of our understanding of MMT fiscal policy analysis and obviously I repeat the argument by MMT is not that the state can create money without limits, and there are no limitations to fiscal policy it is that the limit is the availability of real resources. Until that is reached. The state can expand fiscal policy in some ways is traditional it sounds like traditional fiscal Keynesian policy because that's what it is. It is traditional Keynesian analytics. For Marxist theory on the other hand monetary theory but more broadly, government policy analysis. It is of course true that the state is not financially constrained in a way that is similar to a family or an enterprise. It is a false analogy. The MMT is right to say that it's a false analogy to think of the state as a family or as an enterprise of course the state is not that. And the state gets back what he has spent. In the first place, however, what the MMT ignores, and it's very, very important for Marxism is that there is production, and the state is not a producer. The states. Yes boost demand, but it's demand is basically a claim on the output and the value produced by others. If we set aside nationalized industries. The creation of value and output however follows its own internal logic. It isn't simply due to the logic of aggregate demand expanding and so on and that logic of production is summed up by profits by profitability and investment based on that so if the state is the direct the economy if we're going to have guarantees about jobs and so on the state must intervene on the supply side to. It's not good just intervening with the demand side from the Marxist perspective now, having said this more often. And as far as claiming output and value is concerned through states intervening with the demand side. It can take the form obviously of fiat money which the MMT stresses but they can also take the form of taxation and the form of borrowing all three from from the Marxist perspective are legitimate ways of claiming the output and value of others for the state with historical historically different validity and very, very different outcomes in terms of their impact on production and on distribution, privileging the creation of fiat money. So the definition of taxation or borrowing is arbitrary taxation is a legitimate means of state policy. At the very least for distributional purposes but also in order to secure resources to to to proceed to with what the state wants to do. So this in terms of the analytics of it. All that's fine for developed countries, advanced countries in developing countries, the MMT comes a cropper, because the argument that the MMT can the argument that developing countries can expand demand and meet the provide the job guarantee by creating fiat money. If you tell a development economist this, I mean, you would get 10 seconds of toleration on this one. So, it's obvious that these arguments about fiscal monetary policy need to be adjusted in terms of the hierarchy of currencies in terms of the structures of the world market, and therefore, in terms of economic dependency and power. You can just change it, Nicole, please. We can talk about these things for a long time but let's let me discuss a little bit the empirical relevance here, because the MMT and MT theories make quite a lot of put quite a lot of emphasis on empirical arguments though. There's a lot of the big debate that one can have about how they use empirical information. The paper, Nicole and I looked at the Eurozone and particularly the case of Greece. We did that because, well, some of us had personal personal experience through that. But also because it's interesting and MMT also discussed it at the time and you can see the importance of it. There is a monetary event of profound significance for the trajectory of the European economy. The last 10 years and the possibilities of alternative policies, which at a certain ending. I will repeat this here. All I will tell you is that while we were engaged with it, in other words, trying to implement different monetary policies in practice. While we were engaged with it, but also afterwards, when we come to look at the experience of Greece and assess what happened, the MMT is relevant. It might as well not have existed. I mean, and that was clear at the time. It's not that I or anybody else were against it. It just didn't matter. It didn't connect with what was happening in practice and it didn't because the problems that were faced by a government that wanted to follow different policies then were problems of controls of a banking, read the nomination of the currency and its costs, market or provision, you know, supply provision and fundamentally a problem of class and international power relations. These are absent when you look at it. It just basically relevant. I think that is it may. What we're proposing to do now in the next 10 minutes is have a look at us monetary policy now. And we do that for two reasons. First of all, because what's been happening in the US, the last year and actually longer than that is extraordinary. And a lot of people think it's a confirmation of MIT. Because we're writing a book on it. Nico and I and several other researchers, some of them from some of them broadly associated with capitalism after COVID and obviously the US experience is of paramount importance. Let's have a look at some of the monetary dimension of the US response to COVID the last year or so. And let's consider it in light of the MMT arguments. So if you could just change the thing, Nico, please. The first point to to make is of course that there is no doubt that the state controls the rate of interest. The MMT is right on this. And there is no doubt that the Fed has acted as the driving force of short term rates of interest to be more precise. You can see what actually happened and the way it happened is is interesting I've summed up the movement of interest rates you can see that the rate was brought sharply down and within basically in March of last year and then it's been kept down and successfully done very close to zero. So we've got the situation in which the Federal Reserve keeps the interest rate close to zero. Now I want to come back to that because it's an extraordinary phenomenon in the history of capitalism with all kinds of outcomes, which MMT doesn't seem to appreciate. So there is no doubt that the state can do that and he has done it. How if you could just change the way in which he has happened is of course through an enormous expansion of system open market account. Of the Fed, this is the latest evidence on it from early March. And what you can see briefly, it's a snapshot, but you can see two things which are crucial for how the thing occurred. The Fed drove short term interest rates down by operating through Treasury bills fundamentally through the issue of Treasury bills basically repo operations. So they drove interest rates down very quickly through that. What occurred afterwards, however, and it brings us to March 3, 2021 is of course not Treasury bills particularly that's not a striking thing the Fed continued to operate through Treasury bills but that's not the striking thing. The striking thing is of course the issue of notes and buttons by the US government and the acquisition of those and the acquisition of mortgage backed securities. These two elements are the vast bulk of Fed assets if you can just show us the next. This is what the Fed balance sheet looked like a little while ago. You can see the assets at the top and you can see the point I made to you about the expansion of Treasury notes and mortgage backed securities that basically the two dark blue and pale blue elements that's really what's what's done it. And that has also driven affected long term interest rates. The state then in a way has been able to operate on short term interest rates and long term interest rates and long term interest rates are a different story. Part of the reason why they've been able to do that is of course the availability of large volumes of private loanable capital. In the markets, but that doesn't appear here in terms of instruments in terms of state intervention what you see is state acquisition your provision of loanable capital by the central bank. The striking thing is two striking things about this. First, the emergence of this policy straight after the crisis of 2007 2009. The tremendous increase of the policy in this crisis. It really is a turning moment in terms of where we are it really is a development that the likes of which we've never seen before. But now commands seven and a half trillion dollars worth of assets which are about a third of the US GDP has never been a central bank this that size before. And it's like a BM of the at the heart of the US economy. In effect, the US financial system. The core of it has been turned public. That's basically what this indicates. It is, it is not true that the at the heart of it in the money in the money market is is effectively private it's become to a large extent public. The way in which he has become public is through the acquisition of these assets and the on the liability side, you see what's happening bank reserves have increased and as have also notes and coins if you could just show us the two. Here is the asset side which is how I summed it up for you. And here is the liability side. Just in this crisis. So, the central bank. What I think is converged as not only the monopoly, the monopolist of fiat money issue, which the MMT stresses, it is, but absolutely dominant presence in the in the financial system that is not a permanent condition that is a new condition. I think that this to be a confirmation of what MMT has been arguing well it isn't because Marxist theory, Keynesian theory, monetary theory has always known that this can happen. It's not new. What is new is the historical context in which it's happening, and we'll go to discuss the reasons for it and to see the reasons for that. You need to see the next diagram, which shows you the US budget deficit. Which really drives the point home. The US budget deficit reached 15% of GDP in very soon in 2020. And that is what has driven the expansion of the asset side of the central bank if you go to the next piece of evidence. This shows you the, in a sense the sources and uses reconciliation table of the US Treasury. It's the last piece of information that issued for February. You can see what the US Treasury has been doing in 2020, and it is obvious that the US Treasury has been borrowing enormously you can see the increase in April June 2020. And not spending it the Treasury has been sitting on huge surplus until early 2021. The borrowing by the Treasury is obviously what created tight conditions in the money markets I'll come to it and the Federal Reserve intervene to keep interest rates down. Basically the Federal Reserve acts passively here to facilitate fiscal spending by the US government as is apparent. And all that will pan out in 2021 we don't know yet. Note that the Biden administration will not spend money yet. There's still a, there's still a surplus. How they will spend money and what this will do the rate of interest I will discuss in a minute but if you just go to the next. So to sum it up. Initial Fed intervention to lower interest rates in March 2020 through repo transactions stability prevailed after it was as I've shown. The interest reach is 15%, which is about three trillion. And it is the largest since the Second World War. Initially it was properly funded through bills but then through notes and bonds as I've explained and I've shown you in the balance sheets. That obviously exercised upward pressure interest rates and that was offset by system open market account purchases by the Federal Reserve. At the moment that the treasury still sits on a large surplus. What will happen, we don't know, but it is reasonable to expect upward pressure interest rates again during the obviously happened during the first quarter 2021 and during the second quarter. And part of the reasons of course inflation expectations as the as the central bank. These bonds. Why we'll have a look at the next. The outcome of this is an enormous growth of the federal debt, I mean, it really is astounding the way the federal debt increased, you can see from the perspective of the federal debt. The transformation of the policy of the central bank. The transformation of the central bank itself, you can see it begins with the last crisis. Just as the balance sheet of the central bank was transformed after the crisis, so is federal debt and you can see that in this crisis he really went through the roof. Now, federal debt. MMT will tell you, doesn't matter. That's one of the key arguments as I've explained well, not so fast. If you go to the next one. Until 2019 the federal debt of the United States was roughly 40% held abroad 40% 43% held by domestic institutions and 17% by the Federal Reserve. The debt held outside federal institutions. I know the Federal Reserve is a federal institution, or at least the shooting thought of that but technically doesn't come into there is plenty of there's another 25% of debt which is held by formerly federal institutions in that sense. So this is the reference is the reference to the net outside the federal system that so 40% is held abroad 43 by domestic institutions and 17 by Federal Reserve. One of the policies of the last year is that the Federal Reserve holdings are 25% of that in other words is direct monetization of the expenditure by the US government this year is that without risks. Well, if you think of the global situation. That's not the case. The question that the increase in the debt and the transformation is composition poses a risk for the dollar's world money. Function agreement of the interest rate has already been negated as a key price, as I've explained in the interest has been pushed down to zero. In effect, the money market doesn't work in the way in which you'd expected to work in a capitalist system. The outcome is facilitation of private credit expansion and bubble conditions. MMT has got very little to say on that. But we saw what happened precisely because of this is the growth of debt, driving of interest rates down to zero, the, the, the expansion of debt and the financial markets in the US and globally. And on an incredible spray, which doesn't fit at all with the fundamentals it's, it's basically driven by monetary policy. And obviously, when debt is transformed in this way, other than the threat to the dollar. We all this income and wealth distribution in the United States. It's not irrelevant that the debt has increased and it's held in this way not all debt is kept by the Federal Reserve. Last four portions of debt held abroad and held by domestic institutions, the United States must be able to keep domestic land is ready to buy the debt and foreign land is ready to buy the debt. The performance of the last year creates risks in disrespect. So, if we pursue it a little bit more, but just show you some of these outcomes. The growth of debt that I mentioned to you during the last year is obvious, the debt of non financial corporations increased tremendously during the last year, it's a real job. It's unprecedented actually for a short period of time. You just much of this has been through bank lending. And that's in contrast to the previous crisis. And in contrast to what has been happening up to the pandemic crisis, where banking bank debt has been increasing but steadily, what happened in 2020 is an incredible jump. And obviously, the counterpart to that is the counterpart to the Fed balance sheet if you just show us the next. The jumping in M3 which is the main measure of the money supply, which again, increased in an unprecedented way. Finally, last piece is of course what I just mentioned. The financial markets stock markets in particular. It's extraordinary. There's no other way to describe it. It's extraordinary it's manufactured by monetary policy it's manufactured by by by by federal reserve policy whereby the collapse of March 2020 has turned into a bubble to end all during the last year as you can see from the standard pool. Now, I want to finish by asking, then, is Biden's package, the sign of an MMT era now, we went to the Biden era now right it isn't simply that is also even more of a fiscal expansion. It is, it is too soon to assess what's happening in terms of a system shift in the United States, it is possibly, it is possibly the end of neoliberalism, possibly, but it will be too rush to rush to to conclude that right now. The question is, does it confirm MMT for us that's that's the question now. Increased fiscal expenditure crisis and investing in infrastructure partly monetized is as old as the trees in capitalism. It's nothing new. Right. The real question here is the size of it. That's really what makes it different the size of it and what it means for the central bank at the heart of the US economy now MMT supporters are not very happy with what's happening so far they're critical they seem to be arguing that Biden should be spending more and faster. There's been debate within the Democratic Party. But I can see two things which are of crucial importance. Biden doesn't say anything about the jobs guarantee, though he's got things to say, apparently, about the labor market. And obviously Biden is talking about increasing taxes, which is not an MMT thing so. So in both these respects this isn't really an empty moment per se. This is a moment whereby the most important government in the world has shown that it can use fiat money freely when the chips are down and he has learned how to do it. It's a learning process they learned how to do it in the last crisis and this time they've done it in space. The last question is, is this policy sustainable. And here you need a little bit of Marxism for that. Well, formally it is. Yeah, formally it is sustainable for a period. Formally it is sustainable for a period, but obviously what has happened so far, certainly from the demand side and the money side does not resolve the structural problems facing us capitalism and creates new tensions which I've indicated so far it is financially I've indicated so far it is financialization based primarily on state debt rather private debt as basically another way of looking at it. We've got permanently low interest rates, which have boosted asset speculation and a bubble and there is a disconnect between stock markets and a contraction of GDP stock markets going through a bubble and the contraction of GDP which is without precedent. That in practice taxation will be vital in the period ahead if this policy is to be maintained or if policy similar data to be maintained taxation will be vital in the period ahead. Something will probably have to be done about the stability of financial markets, there will be, there will be an adjustment how violent it will be it's difficult to tell but there will be an adjustment. The real issue, which MMT doesn't have very much to say is what will happen in the side to supply. What's interesting about Biden is that there are some sounds and noises that the US elite is beginning seriously to think about intervening on the supply side through changing the infrastructure of the country and possibly in relation to the labor market. Nothing particularly radical has been heard yet. This isn't Roosevelt, this isn't the 30s. There is no talk of nationalizing parts of production and intervening in that in that way nor is there any talk of dramatically changing labor rights. But that is where they critical, that's a critical issue. And on that the MNT doesn't have much to say. I'm sorry to say. Thank you very much that's it. And we'll look forward to discussion. Thank you very much Nicholas and for fascinating and rich talk. So there are already some questions in the chat box. So if okay with you, perhaps I'm going to put a couple of them to you. And I'll give you the chance to respond and then we'll go to the next round. So there is a question from Luis, who says, you state that from a Marxist perspective, money is not a creation of the state. But raises spontaneously out of the dynamics of market capitalism. However, you stress that we should not understand these as a similar to the traditional account of the origin of money as a solution to the problem of double coincidence within a barter economy. Could you elaborate how the Marxist theory of the origin of money differs from that traditional account. So a question on the initial part on how we can theorize the money from different perspectives. And then there are a couple of questions from Aguilos, who says many thanks for your presentation. Do you believe that the era of low interest and low inflation in the US of the last decade will be a thing of the past. Secondly, do you think Biden's package poses a good natural experiment to disprove MMT, if inflation rises in the near to medium future. So perhaps we can start with these questions and then we can move to the following ones. Any of you who wants to start. Maybe we could start and go ahead please. Yeah, I will start with the first because I didn't fully hear the viewer to but then I will read them and reply after cost us. So the first question is basically about the difference between the mainstream approach and Marxism. There are actually many differences. Perhaps the most important one is that the mainstream does not have a theory of value. It's just a theory of prices. So for us money is a way in which values expressed so that a fundamental difference while for for the mainstream is just a mean of exchange. It's just a veil to another wise bar their economy for Marxism monetary relationships are at the very core of what capitalism is and cannot be thought just as a mere bail or something like that. Because of that, our basically the mainstream theory of money is just a theory of the functions of money or the roles of money. They do not really have a theory of what money is. When you ask what means your economy is what money is they will reply to you is a minimum exchange store of value and into back up. That is basically the functions of money but that is not what money is. Unlike that Marxism does have an answer to what money is, which is what I previously discussed the way in which capitalism organizes and links together different parts of labor. I think to that, there is. There is a very extensive literature on where money comes from within the Marxist tradition in fact Marx Marx proclaimed for himself that he was the first political economist to answer the riddle of money. Okay. In other words, where does it come from. So there's a long debate on that. What makes Marx and the Marxist discussion different is that the account that he gives and the debates they have followed have to do with what he calls the development of the form of value. As opposed to the substance of value, right, the form of value and how that happens and it's a it's a deeply philosophical debate he draws extensively on Aristotle. He acknowledges that indirectly, but he draws more on Aristotle than he acknowledges actually, but it's so it's, it's a deeply philosophical debate and he has to do with the, in a sense, the evolution from within of the form of money when commodities begin to interact with with each other. What does one retain from this, that when you get commodities interacting with one another, you're going to get money, you're going to get money spontaneously emerging through the interaction, not because of the solution, or an outside force but because of the spontaneous interaction of commodities, it's actually a remarkable thing, what he tries to do and what he does and there's no, there is no, there is no similar analysis anywhere in the corpus of economic theory. Various complex problems arise there including Russell's paradox, for instance, of money emanating spontaneously among from within a set of essentially equivalent commodities, but that's how he does it. And the key thing is here is that commodities come before money and commodities create money. I say this because a lot of people get very confused about that. Yeah, when you get money, you get commodities, you get money because you get commodities, because you have commodities. Okay, that's, that's fundamental to how Marx and then you have commodities, you have money, when that, when that situation arises, the state can intervene and can do certain things with money. The state is very important, but it assumes that money exists in the first place that fits very well with the historical record. You can find what the NMT asserts and so on. It fits very well with the historical record. Now, not much about the theory, the deep ontological stuff. Now, the questions that were asked by Angeles on current policy are also very, of course very important. And obviously we're going to move into discussion of US policy per se. The real question is, are we going to get inflation. That's basically the real question. We know that the state can maintain interest rates down to a very low level. And we know that when this happens, we don't necessarily get inflation in Orleans. This is look at Japan. Right. The Japanese have parked interest rates very, very low for decades, you don't get inflation. In fact, what you get is a pronounced inability to have inflation. The real question is, are we going to get inflation in the US? And will interest rates remain low? The state can keep interest rates low for a period. It can do that. Would there be inflation? The US is not Japan. And that's why we mentioned what we did about world money. Right. The US is not Japan. There are different, different factors impinging on US monetary policy that have to do with its own debt. And how does US debt operates globally and therefore affects the dollar? Okay, so it is connected to the ontology of money. It is not beyond the bounds of probability that there will be inflation. At the moment there are no serious signs, although already as I've indicated markets are beginning to push interest rates up in the few months of 2021 because of the fear of inflation. It is not beyond the bounds of probability. It is too easy. It will be too glib to assert that this won't happen. And one easy way of looking at it and establishing why that might be is of course to look at the supply side. You can think about it as a engine, not as a Marxist in this case. Look at the supply side. The money has been boosted enormously partly monetized. Will the supply respond? Will the supply side respond? There is no guarantee. We showed you evidence of increased indebtedness by US corporations. That means survival of zombies. That's basically what it means. Increasing corporate debts that we showed you before basically hide huge numbers of zombies that have been allowed to survive because of that. Together with the financial explosion in the stock markets. There is no guarantee that the supply side will be able to respond. There is no certainty that there will be private investment increasing and output increasing meeting the boost in demand. We will see in practice. If that happens, then yeah, we will get the reversal of policy. The US is not Japan. We will get the reversal of policy and we will get a new set of conditions to tackle. But it's still too soon to say Biden seems to have all kinds of aces up his sleeve. So we'll have to wait and see what other things he reveals. I hope I'm answering you. Thank you. Nico, if in the meantime you have the time to catch up with these questions, then you want to add something please do. Yeah, just a few quick points. Since the global financial crisis, we've been seeing a decade of really low growth and truly the global economy was in a deeply complicated state even before the pandemic stroke. What will happen with inflation and interest rates and any other variables really will depend on if there is a sort of a change in supply or a more radical departure for the model that was prevailing before corona or not. So if your policies just giving money to zombie firms, then you will only push the moment of recognition into the future. If there are bolder policies that seek to go into a green transition or to revitalize the care economy or develop productivity and which was really the growth productivity was really low during last decade. In the meantime, we might see something different, but if not, yes, it's probably that it's probably that it's a point inflation will remerge because like you are just keeping things as usual with more money on top. I have a question on where this is a natural experiment that could disprove m&p. I don't think so. Basically, because as we argued, by this package is not fully m&p. So if it goes wrong, it cannot be attributed to m&p. And also because even if the package ends up in inflation, which I doubt, or at least for for some time. It was not this problem either m&p does not say that that you can bring money and there will no inflation and and that's it. They say that there is a limit with the real availability of resources and then at that point there will be inflation so at most what it can do is say that m&p's estimation of the difference between real output and potential output or or you want to call them was closer than what they thought it was and there was less room for for policy but not more than that really. Thank you very much Nick. Sorry. Can I just say, I mean, can I just say something that I saw a question. I'm going to put all of them to you. You're ruthless, right. I think we can do it. If I can, I mean you can put them to me. I just want to take that last one that I can see on the theory because I think it's an important question. He says, if you for those who can't see that endogenous theories of credit but what's the theory of credit remarks and perspective. Mark seems to have a history not a theory of credit. Well, right. Actually the question is very very important because it goes to the heart of a fundamental distinction in monetary theory between credit theories of money and monetary theories of credits. So it's a credit theory of money. As we've explained, essentially tells you that money is based on some form of credits, or some sort of some sort of promise some sort of external obligation and relationship which might be more commercial or not. Right. So it's a credit theory of money. And MMT is a proud of that and they think it's novel. It's not novel. It goes back centuries. Okay, so that's a credit theory money should better head on of them for instance. Okay, so did others before that. The Markson tradition, the way we've explained it. You can sum up as a monetary theory of credit. In other words, first comes money, then comes credits. As MMT would have it first come credit relations, then you get money. So first comes money for the Marxist tradition money's a more fundamental category credit comes afterwards. So there is a theory of credit. There's a very deep and rich theory of credit in the Marxian over and the Marxian tradition and actually the theory of credit structures credit differentiates between forms of credits and considers their impact on accumulation very complexly and differentiates between credit for instance that arises among businesses. In other words, trade credit, which I think knows, but it's fundamental particularly in developing countries. In the first instance, credit is trade credit in developing countries but also in developing countries, and then monetary or banking credit, which is of course the lending of money. It is for this reason that I said that interest rates at zero negate the function of the credit system from a Marxian perspective the credit system is a definite structure. This is a general accumulation. It acquires banking forms. Why you get banks is a complex question which we don't have discussed now. And then you have money markets. In other words, key markets in which banks trade with each other that's the pivotal markets of the credit system, the money market which of course the MMP doesn't particularly discuss. Then you get other markets, right, of credit. Where trading must take place fairly freely if the thing is to function in ways that would be compatible with free market capitalism. That's precisely what's not happening and hasn't been happening the last decade. The money market in other words the market between banks fundamental interbank market partly but also big operators market is dominated by the central bank. What is the moment the central bank is sucked in the money market and drives the rate of interest down to zero right that's how it's done it, the short term rate of interest. But when that happens in the bank transactions. It's a default. It's a deformation, and you can get that you can see the implications of that in terms of what pension funds work. Those of how all other institutions work when when interest is go down to zero. I'm not advocating high interest rates please don't misunderstand me, but you've got to, you've got to appreciate what's happening around you. This is the theory of credit profound theory of credit by Marx and actually tells you what's happening right now and where the structural problems might be as long as the state maintains the central bank to this size and dominates the money market in the way in which it does, you're not going to get properly functioning, the property function credit system, and what you're going to get is bubbles, zombies, and the survival of banks on the back of public funding that is connected. To the theory of credit. That's about lines. Thanks, Kostas. Nico, would you like to add anything on this question posed by Sal, the last one in the chat box. Yeah, maybe shortly. I think that marks doesn't have a theory of great just a history of great. If you look at volume three, there is an extensive discussion on on great which he didn't finish, but there is a long Marxian tradition that elaborates on that. And as Kostas mentioned, the important point is, what do you consider money and what do you consider great so great theories of money, think that everything is great. And while for, for, for money theories of credit, there is still an absolute anchor. So if credit is a promise, it is a promise of what it is a promise to pay money. And if you have a great period of money, then you can never answer. That is the absolute anchor beyond structuring all those process promises around that everything has an answer, for example, which is the anchor is the states capacity to tax. So, because of that, the states it's the liabilities of the states that at the top of the pyramid. But for us. Even currencies which for Marxist theory or for some strands of Marxist theory that I agree with core national currencies are a form of credit money, not money. They are still promises to pay money. So, I will say that and then of course, yes, there is like a structural relationship between different promises with different acceptability, because they have different capacities to fulfill their promise. So at the very bottom you have promises made by enterprises then bank credit money market credit and finally national currencies which are a form of center bank rate. So that structural that there is a structural theory of credit which is the Marxist theory of credit. Thank you Nico so I'd like to go back to a question that was put earlier by Netzen, which I think is quite important if I'm developing countries and I'm sure I'm biased because I work in the global south myself but but Netzen says, I do understand the critique where and whereby MMT is said to not consider international power relations. However, MMT years like don't go some basilla have written on the use of MMT in developing countries. So, basically MMT is a framework of understanding where monetary sovereignty can be viewed on a sort of spectrum in this sense that they do recognize that that monetary sovereignty is not necessarily a policy choice, which is your critique. Would you would this understanding of sovereignty of sovereignty of sovereignty sorry question the validity of your critique, or is it merely superficial because it does not explicitly consider power dynamics. I know don't go quite well. I work with him. I respect his work. Everything he's done, particularly in relation to the role of the French Frank in West Africa. And the modes of exploitation through the monetary union operated on the basis of the French Frank. It's a fair attempt. And he's basically a Marxist attempt. It's actually to Marx's eyes MMT. It is to, it is to interpret sovereignty as a range as a, as a spectrum. Yeah, yeah well if you're if you're saying that then we could begin to agree, because obviously for from a Marxist perspective when you look at the, at the world market. Yeah, there is a spectrum of sovereignty, because of course for us, there's a hierarchy, and, and the spectrum is interrelated in the sense that the hegemonic power is more sovereign than other parts precisely in other words, in other words, lack of lack of sovereignty for some countries is the necessary outcome of sovereignty for others. Okay, so, so there is, there is a range of sovereignty indeed and there is a range of power that can be exercised of a monetary affairs, depending on a variety of things which have got nothing to do with the narrow monetary issues, right, narrow monetary issues that derives position of a country in the world division of labor, from the structure of its economy the structure of its experts and impulse that is role in the capital markets, and so on. If MMP goes down that path, then we can begin to communicate even more fully internationally but that's not how the MMP began. That's not how MMP became known that's not how MMP made this case and became globally influential. That is a recent development and it's a recognition of the weakness, recognition of the, of the lacuna, of the gap, you know, so it's a good development, long may go down that way and then we can begin to communicate because they will be moving closer to the reality of world markets. Yeah, I totally agree with that I think that it is great that MMPs are dealing seriously with the problems of developing countries. And they are doing some interesting work. And I think that both Dongo and also Fadal Kabuk, who also works with developing countries, they accept this definition of monetary sovereignty, they don't negate it, it is still for them a policy choice. They accept the book of neo-chartalism and other things that are part of the MMP package such as sectorial balances approach or the functional finance. They accept the whole of that as a framing and then they also accept the definition of monetary sovereignty which it is totally consistent and a consequence of the neo-chartalist approach. What they do say is that what developing countries should do is to gain monetary sovereignty. The fact that they define it as a spectrum that's not negate that it is a choice. And how they can achieve that? Well, by stop borrowing in foreign currency, stop engaging with the IMF or other international organisms. And instead what they should start to is mobilize their own resources to produce the food they need, to produce the technology they need, to produce the energy they need. And I think Fadal Kabuk has this notion of sovereignty, energetic sovereignty, food sovereignty and industrial or technological sovereignty, which is good as far as it goes. But I think that misses decades of discussion in developing countries and the history of attempts to do that, for example, ISI. So I'm from Latin America so I know very well the discussion that structuralists and dependency theorists had around that and whether it was possible or not. And to merely just say that states in developing countries can mobilize their own resources without any problem. It's a bit simplistic in my view and doesn't really engage with theories coming from this area. So, nevertheless, I think that it's great that they are starting to deal with these issues and probably as they go on, they will start moving forward in these criticisms that we made and yeah, we can dialogue as Costa said. Very interesting. Thank you. So there was another question on US inflation by Bassett, but I think Bassett has left the meeting so I'm going to move to the question put by Michael, who, which is again on theory. So Michael says, could you more explicitly draw out the links between the ontology of money and the policy conclusions in respect of the US? It seems to me that the critique of MMT rests more on a Marxist analysis of production versus exchange rather than the ontology of money. Okay, now we're going to go into deep waters. Very, very important part of Marxist theory of money is the evolution of the form of money. The form of money is very important. In other words, is the money a commodity? Is the money use a commodity? Is it some form of banknotes? Is it some form of bank accounts? Is it some form of central bank liability? What is it? For Marxist theory, these different types of money operate differently. They're not the same. It is actually misleading simply to group them into the category of money. Obviously, they're all forms of money, but how they behave and how they relate to accumulation depends on the form because the form results from different economic relations. Okay, commodity money is a very simple, original, ancient form of money. Bank money, credit money is the result of basically capitalistic relations that place banks at the heart of commerce and production. The state issued credit money, modern, basically high-powered money, is credit money of a kind. It's created by a bank, but that bank is public. It's a public bank. It has a backing of the state. It doesn't operate commercially. It's not driven by the profit motive. It's driven by planning. It plans the economy and that's how it creates its liabilities. And it has the imprimatur of the state behind it. So it has elements of fiat. So it is a kind of fiat money, but it isn't fiat money in the way in which the French state created fiat money 200 years ago when they had a printing machine and started putting banknotes out. It's not how it works. That kind of fiat money and U.S. contemporary fiat money work very differently. Okay, work very differently. So the ontology of money is related to what's happening now, but in this long and involved mediated way, you mustn't expect to find a direct immediate connection between the derivation of money through commodity interactions and what's happening in the U.S. market today. The forms of the U.S. markets today, the forms of money that we see today are highly evolved, credit-based fiat forms of money. That's why, for us, we can communicate with MMT. The MMT see this. They recognize this and that's how they discuss it. They discuss the functioning of it, but they immediately think that all money is like that. All money is the creation of the state. No, no. What you see today is the outcome of a long historical evolution which corresponds with the evolution of capitalism. What you see today has got very little to do with capitalism 250 years ago in terms of its institutions, its large corporations, the way it works globally, and domestically. So in that context, you've got to be thinking of contemporary money as state issued fiat money, state backed fiat money with credit characteristics created by the central bank, the money that I showed you before. Four and a half trillion on the balance sheet of the Federal Reserve, and then privately created credit money by private banks, which is connected to this fiat money. The key point here, for Marxist theory, is whether this money is convertible into anything else in an obligatory way. The key transformation historically is that this kind of money has stopped being convertible into anything of value necessarily. That's really the big change. It's a change that has characterized capitalism in the 20th century. It's a change that began by the state. It's a change in the sphere of money. It made money convertible into anything of value produced value. And therefore, it freed gave degrees of freedom to the central bank in operating in operating fiat money. The characteristic feature of the last 40 years since Bretton Woods is that the ruling elites of the leading countries, the advanced countries have learned how to do that, how to operate that they didn't know in the beginning, you got inflation in the 70s, dramatic inflation in the 70s. Volcker emerged and suppressed it. They've learned how to control it. And what's astonishing in the last 10 years, that's the balance sheet I showed you. They've also learned how to expand the balance sheet without precedent. It's an experiment. It still is an experiment. We don't know what the final outcome will be. But what is happening? It's happening in front of our own eyes. That's how the world moves, right? So in terms of the question, the ontology of money is of paramount importance, but it's mediated. Don't expect to find a direct link with the original argument about where money comes from. Niko, would you like to come in? Very shortly. So I fully agree with what Costa said. So we tried to show how empty policy conclusions came from its ontology of money. Basically, the idea that the money comes is issued by the state when the state dispenses. And no taxing nor issuing debt is a mechanism of state financing, but rather a way to destroy money. And really, the state brings money into existence and then it has the ability to create more money to command real resources until they are fully used. And then it can tax or whatnot to destroy money. So we try to show that this ontological understanding of money has its problems and because of that, the policy conclusions as well. But there is no straight line from our ontology of money to policy conclusions. For two things. First, because as many Marxists said, you need concrete analysis of the historical concrete situations in order to do that. And second, because to do that, you really need the whole understanding of contemporary capitalism that comes after. And that's not the right policy conclusion from chapter three of volume one, you read the three volumes and much more in order to do it. But as Costa said that that requires to understand the forms of money, the historical articulation of money is not the same today as it was under the written rule system that that it was the common standard. And it's not and it's not the same. If you are doing policy in the US, or if you are doing policy in a developing country and because of that, many of the things that mp says, we also recognize that they can happen and they work like that in some historical context for some countries For example, Costa mentioned how the Fed was concerned interest rates and creating money well into inflation and so on. So, so but yeah, the point is that there is no straight line between our ontology of money and our policy conclusions. The analysis is much more complex. Thank you both. So we have a couple of minutes left, but shall we try to do even the last of the very last question with very brief answers. So the last question is from as far as the value commodity money marks the fence on labor value embodied in the commodities that right. If this is so how does credit money relate to the labor theory of value. So I think yeah, if you can do that in one minute, so that would be perfect. Then you give me the Nobel Prize if I can do that in one minute. This is of course analytically and theoretically, this is a $64,000 question right of course if you, if you also connect money to value theory as you must do and not just for Marxism but also for mainstream theory and so on because the values are very, very closely related to each other mean for the Marxist theory it's a formal value money is a formal value. So, how does one tackle that I can tell you my view, which is based on years of working this with the basis of Marx and so on. So, there is a fundamental difference between commodity money and simple fiat money. Simple symbols representations of money that a state can create and credit money. There's a world of difference. Most money today is of course credit money and that's the true capitalistic money money created by banks private or by the state credit money is fundamentally a promise to pay. It doesn't contain value, whereas commodity money does from the Marxist perspective and that is a fundamental difference but that's not the only difference. Okay, because as I indicated previously, the way they operate is very, very different. One is created in the credit way. The other is created through commodity interactions not credit money to come back to what use the question is doesn't contain value. It's a promise to pay. That's what makes it flexible, stretchy, right, and peculiar in its operations. It also makes it one or two or three stages detached from value. Right the determination of the value of credit money and it's functioning in terms of accumulation is highly mediated by a number of institutions precisely because of this. It doesn't contain value itself. And that last the last point I will make here that it also gives content to the point I made previously credit money does not contain value. It's a promise to pay. It's a piece of paper or an electronic signal, right, which acquires maniness because of how people use it, and because of the institutions. And therefore, whether a formal connection exists with something of value produced of value or not is a paramount importance, whether convertibility exists into a produce commodity, necessary convertibility or not is a paramount importance. It's a kind of anchor. An anchor doesn't exist. Then the relationship of credit money to value production is mediated by institutions, the state policy, and a lot of luck. And that's the kind of capitalism that we're living through. That's that's what makes it and that's what Keynes meant by managed money, the era of managed money. And that's basically what is happening and that's how we should understand it. Incidentally, MMT would do well to acquire this kind of theoretical understanding of it, instead of going back 4,000 years. Great. That was two minutes. Very good. Good on the short list for the Nobel Prize. Niko, we are out of time but if you want to come in, I think it's fair to give you the time. Thank you. Yeah, okay. So fantastic. This was a great lecture. Really nice to see and listen to you both, Niko and Costa. And thank you all for joining us. Thank you, Costa, to remind you that this was the first lecture in a mini series that we have organized for the summer. And the next one is coming up on the 2nd of June, with Sophie van Hulden and the Fua, the bubacar on financialization of food chains, looking at cocoa in Ghana, always at 5pm UK time. Great to see you all and have a good evening. Lovely to see some of our current and former students as well, I must say. Thank you so much. Thank you all. Bye now.