#10 - Back to a Gold Standard?

Unknown: 0:16

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Adam Rice: 0:33

Hello, everyone, and welcome to episode 10 of the applied MMT podcast. As usual, thank you for listening. In this episode, Ryan and I discuss a recent dust up on Twitter between the MMT community and Richard Murphy. We also talk about the Republican proposal to put the US back on a gold standard and what that would mean, we then go into public versus private solutions to the real estate issues the country is facing. Ryan then brings up a concept that he's calling the real resource dividend, which I find really interesting. And I think it's a great way to frame the concept. And then finally, we talk through some of our thoughts on job guarantee. Apologies for the delays and recent episodes of podcasts. Both of us have been really busy. We do have a special guest joining the show soon. We are super excited to publish this episode. And we hope you'll enjoy it when it does come out. So without further ado, here's episode 10 of the applied MMT podcast. We hope you enjoy. Thanks again for listening. So Ryan, do you want to do you want to tee up this this kind of Richard Murphy fiasco that that was drummed up on Twitter in the past few days.

Ryan Benincasa: 1:48

Yeah, sure. So there was a big Twitter spat, between Richard Murphy, who's a, I guess we'd call MMT. Adjacent. He's a very much a tax enthusiast. He's a British guy. And so he set but he's fairly influential as as it pertains to Economics and Public Policy, political economy, so to speak, over in the UK. And so

Adam Rice: 2:23

here's an accountant, professionally.

Ryan Benincasa: 2:27

I think I think that's right. Yeah. And if that's not his profession, then that's that's his background. And I forget the name of his book.

Adam Rice: 2:39

It's the joy of tax is his book, The Joy of tax? Yeah.

Ryan Benincasa: 2:46

And so I, you know, I don't know a lot of the, the background, and I don't want to I don't, I don't want to, you know, ruffle anyone's feathers or anything else. But, but it was a fairly public kind of, you know, infighting between the MMT community, or I guess someone who's kind of MMT adjacent versus, you know, more hardcore MMT people. And so his big contention, and let me just back up and say, I'm sympathetic to this argument that he makes. And it's something that I sort of wrestled with, when I first learned about MMT. And his point is that, you know, the MMT Money Story essentially says that, The, in order to get the, the, the money, the government's money accepted, it has to first impose a tax in that money, you know, of account in that currency. And it's the, you know, and it functions as the monopoly supplier of that which it demands, be paid in taxes. And that's essentially, you know, what, what we say, MMT like, that drives the currency creates demand for the currency. And Richard Murphy's contention is that, that's ridiculous. People don't wake up in the morning and say to themselves, hey, I need to go to work, because I need to pay taxes, and you know, the only, you know, I need to get the government's currency so that I can pay my taxes. And that's why I go to work. That's why I have a job, that's why I perform labor, etc, so forth. And he's got a point. And it's, again, it's something that that I sort of, sort of had to had to work through when I started learning about MMT. Like, none of us think to ourselves, oh, we have to pay taxes. And that's why, you know, we work and be productive is we can make our tax obligations, that's not what goes through our heads, you know, every day or you know, when we wake up in the morning, but he's also missing a critical point. And, and the MMT community also acknowledges this, but what he's missing is that the the taxes drive money MMT Money Story essentially says that the hardest part and Hyman Minsky had this famous line, anyone can issue money, the or create money, the hardest part is to get accepted. And what MMT says is that, in order for the, in order to get the government's money accepted, it first imposes attacks, and in that currency, and, and after that, the money circulates and becomes entrenched and, and, you know, you get the network effects and everything else that that, you know, people generally associate with, with why, you know, certain currencies are used versus others. So, it's, it's not that that's what constantly drives the demand for the currency is the taxes. But to get the money accepted in the first place, the government has to impose a tax in that money. And that's what creates the initial sort of demand for it, right, like Warren Mosler Randy Ray, you know, they'll say, they'll equate it with like, the original sin is to impose that tax liability, right? Like, we're all born with this original sin tax liability that we have to pay, and it can only be paid in, in the government's currency for which it's a monopoly supplier. So, you know, but and so that is what happens at the beginning. That is how the government gets its money accepted, it's coercive. You know, there's no denying that. And, but once it is accepted, then, you know, it circulates as money, it functions as a medium of exchange and a store of value. So I think that's a really important distinction to make is differentiating between the Money Story, what happens at the beginning, how the dollars get accepted in the how and why they get accepted in the first place. And then, and thinking about that as separate from, you know, your average day to day, it's not necessarily that, that, you know, I go to work because I have to pay taxes in that currency, although that is true. It's not necessarily, you know, psychologically, how people think about, so I'm sympathetic to Richard Murphy's argument, but I think, I do think he's sort of either cherry picking or, or not. I don't know if he's being intentionally sort of difficult, or if he's just not really grasping that. That idea. But, but yeah, so that was sort of a unfortunate. I mean, you hate to see, you know, own goals, so to speak.

Adam Rice: 8:28

Yeah, in fighting infighting?

Ryan Benincasa: 8:30

Yeah. Yeah. It's like,

Adam Rice: 8:34

I was gonna say, I think it's, I mean, I don't think anyone would argue, you know, from the MMT side that, you know, the reason people use dollars is because they are the reason people seek out dollars, because they have to pay taxes on them. Like, that's just obviously untrue. And obviously not the case that the people are actively seeking out dollars, because they have to pay their taxes in dollars. I think the point is just that the reason that people use dollars in the first place is because that's, that's what tax obligations have to be paid in. And we can see that that's the case. You know, like, when when, when Europe, when the countries in Europe that adopted the Euro shifted to the euro, the way they made that happen is they started imposing tax obligations that were only payable in the euro. And all of the bank accounts shifted to Euro balances from, you know, the prior national currencies. So it's not like, right, it's not like, you know, people actively said, Oh, I have to pay my taxes in this now. It's just that was a natural consequence of the institutional structure that was imposed.

Ryan Benincasa: 9:40

Right, exactly. Out of that is such a great point. And I'm, I'm really happy that you brought up the Europe example, because it's like, yeah, no, that was not a free market decision. Or, or any, or like, there's a reason why Italian banks don't issue lira anymore. Right? Right. So it's like, well, what is that reason? Why did it is because they have to meet tax obligations in New Europe and that and that is the sort of what what gets the currency accepted? And from there then it sort of, you know, becomes accepted and, and, you know, the, you know, it becomes an accepted medium of exchange and, and store value and stuff and, and there's network effects and everyone uses it and so that, that begets more people who use it. So, yeah, you know, it's a little bit, it's a little bit silly to write like, this is so this is so avoidable. But anyway, I just thought it was worth acknowledging, because, you know, we want to make sure that we're, we're staying on message over here.

Adam Rice: 10:57

Agreed. And I think that this, I think that's kind of just a silly, a silly thing to nitpick, if you're going to nitpick MMT because anyone's making the argument that people wake up and think, Oh, I have to find, you know, I have to find a way to pay my taxes in this currency. And that's why I'm going to choose dollars over Bitcoin or whatever it may be.

Ryan Benincasa: 11:19

Right, right. Oh, I did see something. I think it was Odell Beckham. Like he, he's one of these, these guys. He's, you know, these professional athletes who was like, Oh, I'm gonna take my salary in Bitcoin, which is, which is like, a ridiculous thing to do for for any number of reasons. But I think I saw something where, you know, he was supposed to make half a million dollars or something. And, you know, he basically like, like, they, they can't just, they can just pay you in Bitcoin, right? Because they're not an original issuer of, of Bitcoin. So, so they, you know, his salary had to be, you know, converted from dollars to Bitcoin. And, and then paid to him, but his, his income was still so, so even if it was, you know, if he got $500,000 and of income that was immediately converted to Bitcoin and, and, you know, sent to him or whatever, he still has to book$500,000 worth of income. So, essentially, his and then after I think he owed, you know, highest bracket possible. So, I think he owed somewhere somewhere close to like,$250,000 of tax liabilities. And I think the value of his Bitcoin had, you know, gone from, like, I guess, 500,000 to like, I don't even know, like, basically, he ended up with like, $36,000 or something like that after tax. Because he still had to pay the full, right, you can't, you can't offset your tax obligation, like he had to pay the 50% or whatever it is, for the full 500,000. And so after making that payment, then he was leftover with I think, $36,000.

Adam Rice: 13:41

Yeah, mark of a great currency.

Ryan Benincasa: 13:46

Yeah. But it was just so fun, because it became a meme and got sent around and stuff. And we were like, laughing about I'm like, Guys, this is literally, this is this is MMT. In a nutshell, right? Yeah. The reason you want dollars is because you know, you have to pay is certain liabilities and dollars. And that's how it works. That's why, you know, if you like you have FX risk if you if you use a different currency, right? Like that. It's there, that liability doesn't change, the nominal value of that liability doesn't change. So, you know, yeah, if it works in your favor, it's, it can be great. And if it goes against you, it's terrible. Totally.

Adam Rice: 14:35

All right. So I think I think we can put the Richard Murphy thing to bed. The next thing we want to touch on tonight was the Republican proposal to put the US back on a gold standard. I haven't read a ton about this. I saw some headlines. Do you do you have more details on this?

Ryan Benincasa: 14:55

I don't have that many details about the proposal, the specific bill that was written. But all I would say is that it's completely insane for the Republican Party to propose this because essentially like Like, every, every single commodity based currency that's ever existed has failed in the history of commodity currencies. And it would, it would do incredible harm to our economy, because all of a sudden, we wouldn't, we wouldn't be able to conduct the type of spending programs that, you know, we're able to conduct. And guess what, when you when you're financially constrained, because you have this self imposed, idiotic financial constraint in the form of a current, you know, a gold peg or whatever. You can't, you know, if you can't do the the type of fiscal spending that you want to guess what that that means lost sales for businesses, and households, and municipalities, right. So it's not, it's like, extraordinarily anti business, anti capitalist to put this into place. Because, like, you're going to, you're going to stifle business creation, and, and entrepreneurship, and innovation and all these other things that we need in order to create a better world and create the technology that'll help us, you know, live a more prosperous life and make sure that, you know, we, you know, can lift people out of poverty and that people are fed, and people have health care. And, and, you know, that we have, you know, we're funding artificial intelligence so that we don't, you know, get get taken over by China one day, right. Like, all this stuff, like would be would be restrained if we had, you know, a commodity based currency. And it's just, like, not reasonable, from a public policy perspective, to do something like this. And it's just, you know, self imposed restraints, for what, for some sort of political gain? I don't, I don't really understand it at all, but, but, you know, there's, people have a fetish for hard assets, and I just, like, do you understand that at all?

Adam Rice: 17:39

I mean, I, you know, I don't adhere to it, I think there's something, you know, for whatever reason, people think that, you know, if I own this rock, if I own this piece of gold, then that's somehow more real than than owning, you know,$1 that can be created at will, essentially, versus something that, you know, can only be dug up from the ground, or there's a finite amount of it. I personally don't really care. But I can understand why there's some appeal to it. You know, I can understand, like, this idea that, like, I have this thing that I that is scarce, that I you know, that more can just be created. I obviously disagree with it, but I get I understand the appeal to a degree.

Ryan Benincasa: 18:39

Yeah, I guess, like, okay, so this is something I thought of recently, but taking that logic, do you? Do you think that a paper dollar bill is, is like, intrinsically more valuable than a than $1 on a, you know, on a, on a Bank Ledger or an electronic, you know, bid or whatever, is? From that perspective, a paper dollar is hard compared to, you know, you know, a ledger dollar.

Adam Rice: 19:21

That's true, I've actually never thought about that, that like a versus versus a paper dollar, and one of them is a tangible asset.

Ryan Benincasa: 19:31

Right, right. And technically, I know, right, like, it's infinitely, you know, more tangible than then you know, $1 in a checking account. And you know, that is a direct liability of the Federal Reserve a paper dollar bill that is state money or how high powered money it's equivalent with with a with you know, a reserve $1 in your checking account is actually a claim on the bank's reserves. So so it's actually like one layer removed from what so but it's just like fun like you hear about oh, like we need hard currency. It's like okay, so what we need more paper dot dollar bills instead of, instead of

Adam Rice: 20:18

Yeah, I mean, you know, By that same token, though, I do sort of sympathize with that thought, just because there are less points of failure for $1 Like a, like a paper dollar than there are with a, like a checking account. Like, I kind of understand why someone would want to have like $1,000 or $10,000 in cash under their mattress, if stuff were to really go bad, and there were bank failures, and like, you would still have access to your money. So I totally agree, I understand. Yeah.

Ryan Benincasa: 20:52

Totally, totally agree. And, and I totally empathize and, and actually kind of agree with that. But it's just funny to me that, that dollars get railed on because they're quote, not backed by anything. But like, is $1 bill in your, I mean, a physical dollar bill is, is a lot more tangible than, than something in our in a bank account, you know, but no one makes that comparison. Right?

Adam Rice: 21:20

No, that's true. That's 100%. True. That's funny. And also, just like, as if, you know, for whatever reason, if if the world you know, if there was some kind of apocalyptic scenario that having gold with some somehow give you an upper hand, yeah, having a rock under your bed would would give you an upper hand in that scenario?

Ryan Benincasa: 21:42

Yeah. I mean, first of all, gold is such a, it's such a inefficient medium of exchange, right? I mean, there's a reason why the so called paper market, you know, came into existence is because exchanging pieces of gold is horribly inefficient, and cumbersome, whereas, you know, exchanging pieces of paper, or just keeping accounts on a ledger is way, way, way, way, way, way, way more scalable and efficient. So that's why that exists that are part of the reason why that exists. Well, really, that's how money has always existed. But once again, to say my other point about gold. Oh, well, okay, so my father in law is a is a jeweler. And what he made a funny comment to me one time where he was basically like, yeah, at this point, if we went back to a gold standard, like, nobody knows how to, like, there'll be so much fraud, he said, because, because all the experts that would be able to tell whether something is is is, you know, real gold or not, are are like, diamond doesn't know, there's there's like not there's not really around anymore. Right there. You know, they've all died off because there weren't need, you're not needed anymore. Right? Yeah. We haven't used gold as you know, a currency for over 50 years. So all like the experts that can verify the authenticity of the gold, there's not a lot of them. So how could that possibly be be like a, you know, there just be tons of fraud and counterfeiting and stuff that doesn't really, you know, bode well for gold as like a, you know, a currency. It's ridiculous. It's just like, the most impractical eating I've ever heard.

Adam Rice: 23:44

I was gonna say, like, even in practical terms, you know, let's say the society were to collapse and you had a few bars of gold under your bed, like, how are you? How are you splitting those up? How are you agreeing on on, you know, like, transaction values? How are you doing any of that? It just it never

Ryan Benincasa: 24:04

it's never made any sense. But it kind of goes yeah, it's just like, this hard asset fetish that people have. You know, I was it so my, my boss and I were recently chatting and so this one company that we were looking at, it's a pretty interesting story. So they were a they basically had a bunch of company owned salons, like like barbershops salons and so it's a brand I think it's Supercuts is one of their brands. The company is called Regis Corp, they're actually publicly traded. And so they went they switch from like this corporate owned salon model to this franchise model, right. They're just converting all of all of their salons are are going to be franchises and these master franchise arrangements now. So all the company does the you know, the, the remaining corporate entity does is just collect I'm like 6% off of every franchises. top line. And so they got a they refinanced a loan that they had with Bank of America last August. So that kind of, you know, there, it's kind of a hairy, risky distress kind of situation, because COVID happened, sales plummeted, and they had some management shakeup and stuff. So, so it's got, but it's an interesting sort of story. And so I was chatting about it with my boss, and he was like, Yeah, you know, I'm really surprised that Bank of America made that loan. And I was like, why he's like, Well, you know, What, is he said, he worked at Bank of America, you know, decades ago. And he was explaining to me that, you know, back in the day, right? Like, if a bank like Bank of America wanted to make a loan, they would actually go through the balance sheet items, and say, okay, like, you know, cash, okay, 100 cents on the dollar, we will, I think it's like, accounts receivable, 80 cents, you know, inventory 30 cents, you know, real estate, I don't know, 50 cents, what? What have you so so the idea is like, Okay, you're looking at the real, quote, real hard assets, and lending against those tangible, kind of real assets. And I pushed back him saying, like, you know, I don't really, I don't really see why that would be a superior form of lending. At the end of the day, these like, people, people need to get haircuts, the, you know, the salons, these barber shops, you know, they were very financially healthy, you can actually look up, because there's all sorts of rabbit holes and stuff go down public information on franchises. So, you know, your typical franchise for this particular company would make, you know, 250 $270,000 a year in revenues, you know, 14 15% operating margins, and, you know, they were generally fairly healthy, they had healthy balance sheets and stuff, so, so you can probably feel pretty good that, you know, once things, you know, kind of got a little bit back to normal, I mean, hair doesn't stop growing, right. So, people who are gonna, who are gonna keep getting haircuts, and generally speaking, you know, it's kind of hard to cut your own hair at home and stuff. So the barbershop model makes sense. So you've got, so you've got this contract, right? That says that, you know, where there's precedent for you to be able to enforce it, and you get a 6% override, you know, or 6%, skimmed off the top of all the revenues that the salons generate in a given year. To me, that's a very, that is way more valuable than, you know, some, some real, like real estate that has to be converted and or is distressed and has to be converted either accounts receivable or, or by accounts, receivables is probably money, good, but, but like, you know, inventory of, you know, some some hair clippers or something, it's like, who's gonna buy that? You know, I mean, it's so it's just, it's just interesting, it's just interesting, this sort of obsession with so called hard assets, and this is your lending against the hard asset. And I would just also pointed out that, you know, your, your property, your real estate, commercial real estate property or whatever, in worth aiming, if, if you don't have a, you know, if you don't have legal title to that property, right, if you don't have a contract, or, you know, a court that's going to enforce your, your, your legal title to that land, right. So that's just there's nothing hard versus soft about that versus, you know, a different different type of contract. Right. The, you know, the master franchise relationship is just another form of contract and it's like, okay, well, well, which, which asset is going to be able to generate, you know, better, more income for me the contract that that gets me, you know, you know, 6% of all of these barber shops, you know, five 5000 or more locations, I think in the US versus You know, a contract that guarantees my, you know, right to own a certain piece of land that we're right now there's currently a, an office building that, you know, no one wants to go to. Right. So, right, like, it's a hard it's a critical hard asset, really that superior

Adam Rice: 30:45

red point. Yeah. No, that's, that's a great point. That's a very interesting way to look at it. And I think that's a great point.

Ryan Benincasa: 30:58

So yeah, it's just funny, but yeah, on the topic, then of, of, of, you know, commercial real estate and offices and, you know, kind of distressed properties and stuff. So I'm looking at a deal right now. It's actually a company, you might have heard of them, they're called we work. I've heard of that. Yeah, so there's sort of an interesting transaction going on where we work. So basically, as everyone knows, they, you know, the founders guy of new men, convinced a bunch of people are really one but one guy to give him billions and billions of dollars to go and buy up all this commercial real estate, and build it out according to, you know, to make them sort of nice, you know, cheap modern office spaces and stuff. And, and then, actually, they would, they would sell the properties and lease them back. And then they would essentially find sub tenants to lease from them, which is sort of interesting, but neither here nor there. Anyway, the guy went, the guy was a total went totally crazy. Over his skis. The company was burning cash, they tried to go public in 2019. It's sort of like the cover the the poster child of, of, you know, some excesses. And, you know, the venture capital market pre COVID. And the IPO fail, they couldn't they couldn't go public. Because once the public investors took a look at the financials, they basically threw up, and so that that failed. So they kicked him out. I think they give him a nice little payout, probably, I think, I think he got like, hundreds of millions of dollars. So I guess good for him, but they put a new CEO, and they've tried to, you know, restructure the company, reposition the company's assets. And did he really? That is insane. I mean, that talk about I think, you know, a failure of the institution structure, I think you have a right. mean, that is just a failure on so many levels. If he walked away with a billion dollars, I thought, I thought he walked away with 100 million of cash, and like 500 million of stock. But I don't know, so long ago, I don't remember the details. But yeah, I mean, it's just, I mean, we could spend a whole episode or multiple episodes talking about what a embarrassment that whole situation was to American capitalism. But But yeah, so getting to the, to the current situation. So basically, they've had a new CEO, and they're, you know, they've really sort of focused on improving the unit economics of the business, you know, finishing, you know, building out their properties. And they're sort of advertising themselves as, like a subsidy, essentially, like a subscription service. And so it's interesting, the, you know, they're doing a tender offer for their bonds or bonds are trading at the stress levels, you know, below 50 cents on the dollar, which is a sign that, you know, the the market thinks the company isn't going to make it they're going to have to file for bankruptcy. And so in order to, you know, improve the company's liquidity and do leverage the balance sheet they're, they're actually doing a tender offer where there will a soft bank, the large the large investor, the guy who run by masa Stone, who gave Adam Newman billions, billions and billions of dollars, I think I've read that their entire, you know, between equity and debt, their entire contributed capital to we work was like 18 and a half billion dollars, which is insane. But they're sort of, they're converting, they own a chunk of the company's debt, the, you know, these these corporate bonds, so they're converting that debt into equity into stock of WeWork. And they're offering other bondholders to get not full without fully equities, but basically, to get a new form of debt, a new note, plus equity and, and I think warrants an exchange for their bonds. Right. So and this, and this, you know, we can kind of, I think, I think, you know, the credit theory of money or whatever, it's not that, you know, it's looking at money as, as a form of debt, and what defines debt is not necessarily it being converted, convertible into another currency, but that the issuer of the debt can, is the only one who can accept that, that debt back, right. So they, so in this case, like we work would be taking debt back by issuing new debt, and its place, and equity. So just like kind of, you know, some some things to think about in terms of MMT and stuff, but getting back to the topic of like, commercial real estate and, and that sort of thing. So, you know, um, I was reading about and thinking about we worked, or this new WeWorks business model, and so that, you know, they're describing, you know, how they have these subscriptions, and, you know, people can come and work there as they please. And so it's almost like, a, like a, I forget what they what they say it's like a platform, it's like, you know, space as a as a service or something like that. And it just sort of dawned on me, I was like, so you're a library? Essentially? Yeah. Without the books, right, like, your library the way

Adam Rice: 37:54

you're a private public space.

Ryan Benincasa: 37:57

You're taking what Yeah, exactly like you and I would go to the library in college to, to, you know, find a quiet space to work or whatnot. And we had resources area and space, you had rooms, you had computers, you know, other resources, like, like, that's what you're essentially paid for with. It's your it's just a private library for and so, I mean, it's not, it's actually not like, it's not that terrible of an idea. But it's sort of like, really, this is the best you could do, like, we already have these, they're, they're out in public. I mean, you know, it goes to show I mean, maybe, maybe we should be thinking more about, about, you know, repurposing some of these to become things like public spaces and public libraries. I mean, there's a lot of talk in the news right now about how there's a lot about all the distress in commercial real estate, a lot of which is held by, you know, smaller and regional banks and stuff who obviously been in use for other reasons. But, you know, I was sort of thinking about this. And I met with our largest client the other week. And so there, they were telling me, they're up in upstate Connecticut, their insurance company, and they were telling me this is actually pretty crazy. In in Hartford, which is either at one point was like the insurance capital of the US, right, there vacancy rate for Office progress in the city of Hartford. Is that like, 50%?

Adam Rice: 39:39

Wow, I'm actually honestly, not higher in Hartford.

Ryan Benincasa: 39:44

Well, the thing is, that's like the least space. That's not That's before taking into consideration how low of foot traffic,

Adam Rice: 39:55

right that they have. Right? So

Ryan Benincasa: 39:57

it's just it's terrible, right? I mean, you just have this it's completely wasted, unused real resources. And so that I, you know, part of our you know, I want to sort of get into this more in future episodes and stuff. But, you know, one, you know, if there's, if there's all this distress in the commercial real estate market, if there's there's offices that are just sitting around with, like, with 50% vacancy rates and stuff, if those, if those all come online at once, or it'll come online, ie for sale, the private markets don't have the balance sheets, they don't have the capital necessarily, to absorb all that. So you could just, you could just see how, like, this could cause significant stress and distress. In, you know, banks portfolios in all these people that hold, you know, these, these, the, these assets on their balance sheets, they can, you know, cause substantial impairments. And guess what, like that, that will if, if you have if people's capital is impaired, that is something that can lead to a real sort of credit tightening and economic slowdown, because people just don't have the balance sheets to put to work. And they have to, you know, that you get this massive slowdown and in lending and stuff. And so that is a potential, that's a potential big problem. It's not like, oh, eight global financial crisis level problem, but it's potentially a big problem. So, you know, with that in mind, would it make sense at first, you know, at some point for the, you know, the public sector to sort of come in and say, like, hey, there are real resources that are being underutilized right now. And, you know, if they, if this continues, and all these properties come online at once, and get fire sold, whatever, and always have parents and stuff, as, you know, slow down and credit and lending and unemployment spikes and stuff, that doesn't do anyone any good, right, that just means you just lose permanent productivity. So why not think about, you know, the public, the public sector, basically, you know, I think we should look at opportunities for the public sector to come in, and basically, establish a floor a bid for some of these under underutilized assets, like an office property that, you know, we work says, Well, I can't, you know, my model only works in, you know, real in, you know, Class A commercial real estate markets, I can't do Class C, or D, or whatever, distressed markets, like in Hartford, so why not have the federal government come in and say, Hey, like, let's repurpose these assets, maybe, maybe we can create, we work type, you know, essentially libraries, right, like, so people can have working space that, you know, they can use as they please, rather than being locked into a long term lease and have these ridiculously high fixed costs, right, only the federal government could afford to do something like that, or convert them

Adam Rice: 43:40

affordable housing.

Ryan Benincasa: 43:42

But yes, that was gonna be the next thing. Yes, affordable housing. daycare, right, or elderly care, like they're like, that is like, not everything is, you know, not everything, you know, really works well as, you know, a private market solution. So we have needs, we have public health needs like, like housing, affordable housing. And at the same time, we have often, you know, we have these properties that are sitting there vacant, again, there's no private market bid for these assets, or maybe there was a bid but, but, you know, it's so it's so ridiculously low, that, you know, the, you know, the owner just doesn't have any desire to sell it. And so, you know, they just hold on to it and, and, you know, it just goes under utilized and, and unused. So, you know, the federal government in that case, if it if it has a public policy need which is to you know, get more people shelter, then it should come in and it should, you know, lift it you know, that that, that that floor of what it should be willing to pay, you know, for so that so that the the owner doesn't doesn't take a complete ban. If and, and, and the lenders end up and you know, they become impaired and you get a financial crisis. Right? I mean, you could you could you could figure out the right number, the right dollar amount where it's like, okay, yeah, like we can, you know, you know, the government isn't looking for an economic or financial return, it's looking to, you know, improve public well being. So that's sort of the purpose. Another way we can think about. Exactly, exactly. And I kind of want to finish off with talking about, you know, in that same vein, like talking about what I've coined the real resource dividend. And so the idea is that, okay, you know, I mean, they teach in business schools and everything else, like, okay, when you're a company should be run, essentially, to maximize, you know, the returns on invested capital or, or returns on equity or something. And so that's sort of like the whole basis of, of the capitalist system is, right? It's like these unit economics, it's saying, okay, per unit of input, what's my unit of output? And how can I, you know, if I'm, if I'm generating higher return on capital, or return on equity, whatever, you know, then that means there's, there's fewer real resources going in, per unit of, of out of real resource output, right. So that's sort of like the, what I would argue is sort of like the, the quote unquote, magic of, of a capitalist system. What I would say, is to though, is that, you know, if, if a capitalist of a business owner, entrepreneur, or what have you, if they're able to figure out a way to, you know, improve their returns, you know, return on capital return on equity, whatever it is, if they're able to find ways to improve that maybe that means, you know, they have to shutter a factory. Right. And, and, and maybe that's the fire some people and, and, you know, but But by virtue of, you know, because we out sourced a ton of our manufacturing over the China and so the only way for them to stay in business, for them to be economic is to, you know, unfortunately downsize their their assets and, you know, lower their cost structure. So, when that when something like that happens, I just don't think that we have to think of it as being this devastating thing, if, if the capitalist is able to hit their return targets by virtue of, you know, doing something like that, right. Closing up a factory or something. What that does, is, it creates a real resource dividend to the public sector, right, it frees up those real resources for public sector use. And what I would argue is has been happening in this country for decades, is that the private sector, and I'm not I'm not trying to say that, like private sector does everything right, because it's definitely not true. But the private sector, in general, has been freeing up real resources. And, and you can also give it, and this is a terrible analogy, because it conflates real resources with money, but let's just go with it. If, if a company pays out a dividend check, right, they're essentially returning capital to their owners. So they're sending these these these checks back to the owners, to the shareholders, that they can then then cash and, and use as as money, right? So if if the company sent a bunch of checks back to their shareholders, and those checks just kept piling up, and the shareholders never cashed the checks, then they didn't actually realize the benefit of the of the checks that they received, and they can't actually use them as money for real spending. Right. So what I would argue is at the public sector because of this stupidity, that's been pervasive about deficits, both budget deficits and trade deficits. The public sector has essentially been receiving these real resource dividends from the private sector for the last I don't know for the 50 years, right. And it has refused to cash those checks. And that's how I think we can, we would that's what I think we need to change. Right? When, when, when the private sector business decides to shut its factories and lay people off, they are delivering real resources back to the public good, right? If they, if there's no private sector bid for those real resources, whether it's through employing people, the people who've been laid off productively or, or repositioning the, the, you know, the factory to do something else, right, maybe maybe turn into a research lab that where you can conduct, you know, try to cure cancer or, you know, try to do studies on on climate systems and see if we can, what we can do to combat climate? I don't know, I'm just, I'm not an expert in that field. But, but basically, there's no bid for those resources. So the workflow there's,

Adam Rice: 51:17

there's a limited bid for those resources. Exactly, exactly. Right. So it's the case and the case of like, you know, bringing it into the into the real world. It's like, okay, if we believe that chat, GPT, for example, is going to cause a lot of people to lose their, their employment currently, then the government could step in, and employ those people where they're needed, at least temporarily.

Ryan Benincasa: 51:49

Exactly, exactly. And but I think Mosler has talked about this before, where like, there if somebody's unemployed, there is no bit like the market doesn't clear and the unemployment exists, because because the government as the currency monopolist intentionally restricts the supply of dollars. And as a matter of public policy, and therefore, those transactions can't i can't clear and and the system is in default is how I've heard him describe it before. Essentially, and Stephanie Kelton writes with us in the in the deficit myth, how it's, it's musical chairs, were intentionally taking chairs away. And forcing people you know, some people are going to aren't going to be, you know, they're not going to be able to sit on any chairs, there's only enough chairs left for them. So you can't have a market that clears at any sort of price or livable wage or what have you. In that type of situation. You need to have an employer of last resort, or a buyer of last resort, who can come in and use up and it's not inflationary, because inflation happens when essentially the, the government and the private sector are competing with each other for the same real resources. If there's no bid, there's no competition from the private sector for some sort of real resource, and the government should come in and put those resources to work. Right. There's no, that doesn't cause prices to go up. Totally, totally. I

Adam Rice: 53:45

think that I mean, I think that's a great way to think about it. And I mean, that's, that's the way MMT generally thinks about it, but I think that was very well said Ryan Yeah, very well said. Alright, dude, I actually I gotta get going. But it was it was great chatting, as always. And we do have a very special guest coming on the podcast next week, which I'm looking forward to. So very exciting. Very exciting. So thank you guys for listening. And we will see you next time. Thanks.