Unknown: 0:16

The content of this podcast is for informational purposes only and should not be construed as financial or investment advice. The views and opinions expressed in this podcast are those of the hosts and their guests. They do not necessarily reflect a position of any associated employers or organizations.

Ryan Benincasa: 0:34

Hello, everyone, this is Ryan from the applied MMT podcast. Today's episode 17 features a lively conversation with Charles from MMT Twitter. Charles has been an activist for years, and has deep knowledge of MMT. He set up the original debate between Warren Mosler and Bob Murphy, which is available online and has served as a catalyst for many to question the merits of the Austrian School of Economics and embrace MMT. Unfortunately, Adam was unable to join us this time. But we'll be back for upcoming episodes. We recorded this on Friday, August 11. So without further ado, please enjoy our conversation with Charles. Hello, everyone, and welcome back to the applied MMT podcast. My name is Ryan, I'm your host today Adam is not going to be joining us today. He's got some, some family stuff, but pretty excited. We have an amazing guest with us. Charles from from MMT. Twitter is here to talk about his his background, and how he got into MMT. And, and, you know, we're we're gonna have a fun little conversation. So, Charles, thanks for joining us, man.

Unknown: 1:56

Hey, now, thank you. Yes, I forgot. Thank you, Ryan, I really appreciate being invited for this. I don't get many opportunities to vent and sit down with somebody like this on a recording. So thank you. Um, you know, to begin with, I'd like to kind of talk about Warren's most more Mosers thesis that the Fed has it backwards, which is pretty much you know, it's it's proven correct at this point. You know, we've given them enough time, they're always going to ask for more time. And, you know, but the reason these people think it works is the poker era, and we need to slay this dragon. And, you know, Warren has made the comment numerous times that there's no central bank studies that support what Jerome Powell is doing has been doing. There's, you know, they don't they don't have it. There, you know, there are studies done, you know, that seem to show some sort of correlation between, you know, rate hikes, and then deflation following. One of those studies, Jason Furman shared on Twitter. I can't remember the threat or the or the name of the authors, or the title of the study, but it was a Cross Country Study of the effect of rate hikes on inflation. And what's interesting, if you read the paper, and I'm assuming Jason did I don't know. He, but he's sharing it as evidence that this is this, our thesis is correct, you know, rate hikes are going to work. And while I read the freaking paper, and it found over the short term that rate hikes cause higher inflation. It found in the long term a correlation between rate hikes and lower rates. But it does not there's there was nothing, there were no fiscal controls. You know, it's just comparing all these countries and not looking at their budget positions.

Ryan Benincasa: 3:57

Uh huh.

Unknown: 3:57

You know, in, which is, you know, I don't know how you leave that out. But, you know, we hear all the time from the anti MMT crowd, you know, deficits are bad. You know, all deficits cause inflation, and then, you know, two minutes later, like, oh, we need to raise rates. You want to cause what you say is bad. And, you know, it's so frustrating because these people talk out of both sides of their mouth. They're extremely arrogant. They can be downright, totally dismissive. And they won't stand on their feet and debate, you know, an MF tear. You know, it's just, we just don't see it. I think Stephanie's probably scared a lot of them away from her. She's, you know, has done some of those debates. That's what she likes doing. She doesn't even she doesn't like talking to friendly audiences. She likes going into the lion's den. Is that right? Oh, yeah, she she she She adores her. She likes to hunt. She likes managing the hostility and proving people wrong and you know, and that's why she went to all those professional gatherings. You know, she was talking to CPAs auditors things way outside of, you know, the economics profession. But she was doing that for years before Bernie made her the chief economist for the minority and on the Senate Budget Committee,

Ryan Benincasa: 5:33

got it. And I realized that oh, yeah,

Unknown: 5:36

she she was all over the freaking country in various books. And but yeah, she, she's, she's, she's marvelous, you know, when she's going against this. And she's very polite, and she does it in a very professional way. You know, she's, she's not insulting anyone, she's very patient. I am none of those things. So let you know that the MN academic mn tears, have professional reputations they have to protect, and they have to preserve academic. What's the word? Respect, right for their fellow academics, right? So they can't, you know, hey, you're an idiot, you can't talk like that, you know, and it's, we wouldn't want our professors to talk about that. Right? Where does that, you know, you know, I'm none of those things. Okay, so, Furman is a total fraud. I mean, let's just be let's just come to terms with this, this Obama era economists, I mean, him and Larry Summers, you know, they're a reason, you know, they were the ones putting all the pressure in the media about this. Jamie just wrote about it. Paper about August 8, where he just kind of squares the blame at that group, wanted to cause unemployment to get inflation down. And the whole time team transitory was like, Well, you know, you know, the transitory narrative, what came out, and then things kept happening, it kept making things worse, we kept, you know, all through 21 and into 22. You know, where inflation peaked in the summer. You know, we had a series of one off price level changes, right, one after the other, and it's like, okay, it's a one off thing. Okay. But now we're higher, and then another, now we're higher. And you know, what really sort of turn the tide was the supply chain issues got resolved. And then in the summer of last year, we know Biden went to Saudi Arabia on a high level diplomatic mission. And this is, you know, after what was President having during the campaign pledge to, you know, put the son in place MBK, I forget, forget his acronym, but he killed Jamal Khashoggi. And, you know, he was going to use that to isolate him. Well, that didn't work. So what it looks like is Biden in. I can't remember I can't remember his name. But they came to some sort of agreement where Biden would stop pressing on the, he basically traded justice for Jamal Khashoggi for lower oil prices. And it was right after that meeting, that prices started to fall. And Saudi Arabia is a price setter, it's a gas station, it sets the price. And then it lets its refiners by whatever quantity at that price and the world is short, without Saudi oil, right? And, and because you have this foreign monopolist, you know, when they raise prices, it's basically like producers in the US now can go chase after they're the buyers of the Saudi oil, right offer them a slightly lower price but higher than what they were charging. And so it's it's what sets off all these price increases, even though Saudi Arabia isn't the sole supplier of oil. It you know, we there will be a shortage without their oil. Right. They're the swing producer. Yeah. And, and, and yeah, they have the lowest cost of production, it's some of the best oil in the world, whatever. And most of it doesn't even come here. But anyways, I don't want to get too far off track, but we saw the transition to you know, it was all coming down. Right. And, but then the rate hikes started in quarter one, quarter two and 22. We had negative GDP prints. So it really looked like that post war slowdown after coming out of a war. You know, you're pulling back on government spending. People haven't the economy hasn't fully like reopened yet to for consumers to you know, use the dollars that they've piled up. And so, you know, we had inflation but we also had recessionary impulse with the lower GDP and some of this despicable you know, adjustments taking place, with government spending falling out, you know, but nevertheless, we had two negative GDP prints in a row everyone was screaming, fashion. Employment stays high. I, some of that is probably in firms being afraid to do layoffs again, you know, because then they're, oh, then they got to rehire them again. And it was a very competitive labor market. Right. So Right. I felt like in 2001, there was a lot of panic hiring going on, like, employers were just freaked out, like, we got to add headcount. Now they're hiring one, and they'll, they didn't care what your background look like. But anyways, um, so so, you know, when, when Powell started to raise rates, you know, GDP at this debt to GDP, you know, it was over 100%. And Warren is always, you know, pointing to that right? The debt to GDP ratio now is much higher than it was back then in the 70s. And this interest income is basically overwhelming. Any negative effect on the credit expansion or bank lending? I like to use the term credit expansion. And now, what we saw initially with the credit expansion is the composition of lending changed. So yes, people stopped buying homes stop getting mortgages, and that's continued. But other loans now got made in more abundant quantity quality, and commercial loans for real estate are still pretty, you know, gangbusters. Now, the properties themselves that are that are out there, you know, there's a lot of worry that some of these are underwater assets, right, because you got to empty office buildings. But, you know, that's not all the commercial loans to get made, you know, that people are building. I live in Dallas, every frickin major intersection to Hatice field or something. Something's getting built right now. All over, and I haven't seen any sort of decline in this activity. Matter of fact, the housing development that has been in progress for several years, they finally just broke ground on building it, townhomes, it's right by my house, I was like, I'm gonna happen, you know, so. So, you know, the textbook, the neoclassical monitors, whatever, whatever crap they're smoking, that's supposed to tell them that the rate hikes have way more control over the consumer than we observe in reality. Right. And so what really happened with the credit expansion is the composition of the loans we may change, because we continue to see bank credit go up. Now, we have seen some, some changes since the SBB debacle. Which, frankly, you know, the issue wasn't the rate hikes. It was stupid collateral rules at the Fed. Right. And, you know, and we, this is always the problem like the, you know, Stephanie uses the parlance, and common language of break stuff, right. And, you know, the Feds gonna break stuff. Well, you know, it's not the rate hike, it's their stupid collateral rules. I'm not saying that some firms can't survive a higher interest rate. I know that right. But, you know, a Ponzi firm definitely can't and should Ponzi firms even exist? Should we be worried about that? You know, that's different subject matter. But, you know, SVB failed, and the other low regional banks that failed because of the stupid collateral rules. So they've got assets on the books made treasuries, right. And they go to the Fed, and the Fed says, We'll give you 80 cents $1.75 $1. Right. And and these are, what do you call it? Mark to mark to market? Mark to maturity? Right. Yeah, they do that then then then they would have to realize the losses that they have on those bonds since the rate hikes right. But they're as the bank they're allowed to keep it to maturity and hold it as the maturity value, right. So the market as as that assets so you know, that that's what caused that little banking Hiccup and we've seen some changes with bank portfolios shifting. And everyone's noticing this and going, Oh, my God, the banks are weak. Now they're losing deposits and blah, blah, blah, and they're actually getting stronger. And we, you know, we've seen there the banks bottom line, they're, they're, you know, reporting, income reporting, in 22, as soon as the radar started, all went up, quarter three. record profits. Yeah. And so I, you know, I, you know, I don't want to be like, Oh, Stephanie's wrong, right, but the poor land to break stuff needs to be in the context of the Fed stupid collateral rules. Now I know that they've changed things. I don't know if it's, you know, fully sufficient, you know, in case of a crisis, but a liquidity crisis can happen on a sunny day. Right. You know, it, social media rumor can get started and, and you know, and we got in the mess we were in with the banks large part because the stupid FDIC was encouraging these these uninsured deposits, right, because that's first in line for losses before the FDIC insurance kicks in. Right. So, um, you know, so, so, you know, going over all that, but but, um the rate hikes really save the economy, part of partially, you know, there's other factors too, but they really saved the economy from crash, right? We've had additional government spending that got added, you know, a lot of Ukraine spending was one off on, you know, $100 million, you know, and they're just Okay, cool. There goes, and Congress disapproves nobody questions where the money comes from. But that's gone out. And, you know, some of that's going to US defense contractors, you know, and so that ends up, you know, adding to our GDP. But, um, but, you know, we've seen the deficit rise. Yeah, it was falling through quarter two of last year. And then it bottom, in the rain, I started and then you had additional government spending on top of it. And now that and now, the deficit has gone up significantly. And these people are like, Oh, my God, that deficit has got so high, and it's like you cause this goldwind guy over with the Pete Peterson Institute. I mean, if there's not a more punchable face in Washington, I don't know, this man is a complete and total hack. He gets paid to just go out there and just cause fear and loathing and hatred amongst our population. And he loves the rate hikes. And agrees it says that, you know, Powell, you know, they don't cause inflation, well, then you're saying deficits don't cause inflation, right. So that's when death when, when, when it's when it's interest rates when it's interest income, leading the deficit, okay, that doesn't cause inflation. So you're saying though, that they don't cause inflation, per se. So this is a complete 180 and flip flop from one of the largest deficit terrorist organizations on Earth, one of their chief spokesman, right? And, you know, media doesn't know how to pick up on this stuff and listen to what the words that people actually say, right, but you know, that guy, I see his face on Twitter, my blood boils, you know, I, you know, I'm an atheist, but, you know, I go to church every now and then, just to remind myself that most people are actually good. Like, I don't like waking up every morning. That sounds helpful. Yeah, I don't like waking up full of hate and rage. You know, and it gets to a point sometimes where it's like, the only people I care about are my family and my friends. Fuck everyone else. And, you know, people like that, like I would, you know, I'm married, I have a child have student loans, mortgage payments. I can't do this, but a younger B, you know, that's the kind of guy I would jump in the street. Right. And, you know, Mark, and I can't I can't spell his last name. goldwind, I think. But anyways, I'm ranting again, I got all hot and bothered. But I'm

Ryan Benincasa: 18:37

sorry, here for man, just

Unknown: 18:40

so in none of these people have any evidence, all they can point to is the Volcker era, he raised rates up to north of 15%. And inflation fell some time after. Right. Right, you know, as Warren is labored for 40 years to point out, you know, we had an oil, price shock, you know, things went, prices went from three to 40. You know, which is, you know, what, 12 times increase? That's a huge, you know, at that time with the price level where it was, that was a huge increase. Yeah. And it worked its way through the economy, and cause the inflation relative valuations, you know, and then the government ends up spending for the higher prices that are in the economy. And then now that now the inflation gets institutionalized. You know, I'm feel like I'm talking to multiple streams all at once. But, um, Warren's point about the price level is, you know, the government it, it's about the price is paid when government spends or lends, but lending is really a subset of government spending. Right, right. And I like to use the term government star, because that I like to do that. So people ask, Well, what the hell is that? Well, I'm talking about the normal government, the ECB, plus its agents. So to me, bank lending is a form of government spending, but it's to acquire financial assets and not for public purpose for you know, building buildings and paying wages and But, um, but yeah, war, you know, Warren's view is that, you know, the price level starts with government, right? It's a monopolist. It only it can set absolute values. Markets determine relative values.

Ryan Benincasa: 20:34

Exactly.

Unknown: 20:36

Yeah. So all right. I'm a little off track. Let me, let me think for a second.

Ryan Benincasa: 20:41

Hey, Charles, I just one comment on that. And I haven't I haven't talked about I don't think I've talked about this with anyone, but when I was, so my wife and I, we, we bought our, our house couple years ago. And I remember, you know, I was kind of going through, you know, the contract and all these different details, you know, because you have to get it, you know, price for the, for the mortgage and stuff. And, and so they have a whole breakdown of okay, you know, the cost of the dwelling is x, and, you know, the land itself is worth why, and I just like the, the cost of the dwelling. Right? To me, that was intuitive. It's like, okay, like, like, that's a that's a price that I can go, you know, look up, you know, how much will it cost? What the, the, the raw materials, the labor costs are so forth? Like, like, I can wrap my head around that, but, but to me, like just the cost of the land, I'm just like that. What is that? That's just, it's just an arbitrary number, like, how can someone just say that something's worth something? And I think that experience has helped me understand and appreciate Warren's comments about the government as the price setter, because there is no, like land, there's no there's no cost of production or anything else, it's just there has to be someone that just comes up with a, you know, a method for, you know, measure, you know, a unit of account and says, okay, like, this is worth, you know, whatever amount of dollars, and then once you establish that initial arbitrary unit of account and valuation, then everything else denominated in that unit of account, will will, you know, you know, price itself out in the market, you know, accordingly. So, I think that's something where, yeah, of course, somebody has to come in and say, this is, you know, you know, in, in our currency, this is worth x, and then, you know, because someone has to set that price. And so I just think that that's a it's such an important point that I don't think Warren gets enough credit for.

Unknown: 23:14

Yeah, if you ask why. I'm having a hard time appraisers. Yeah, right. Hey, permit? Where are these appraisals come from? Oh, well, we're looking at the values of other homes. Where'd that come from? Well, that's from other homes. It's circular reasoning. Right? Right. Something had to say this is five this is this land is 10,000 an acre. And it's good. It started right. And, yeah, so yeah, and that's key and that this point gets missed a lot about when it comes to mm tears talking about inflation, talking about the price level, and it's perfectly okay. But there are differences between Bill Mitchell Warren Mosler Randy Ray, Stephanie, battle, you know, Fattal. And, and that's okay. We would this isn't a cult, you know, we we, you know, I like it when there's disagreement amongst them and tears about something. Oh, yeah. I do think this is at the you know, what makes you know, what the quorum and T is, you know, the funds to pay taxes by government securities comes from government spending. Right. Right. And, and, but the point that I've been making, that, Warren, you know, it's, everything I say, comes from Warren, you know, it's just me putting a little spin on it. And being a little bit more emotional and unprofessional about the way it's all inflation stories, there's a common element. And that's the government vowed paying those higher prices. If, let's say, let's say the government tells the economy screw you guys, we're not spending $1 Unless prices go down. You know, some of y'all need to start cutting prices. We're not going to spend$1 So that taxes are still up. You know, taxes are still in place, but the economy is now short the dollars to pay the taxes. This is an extreme example. And as a technical detail, the government couldn't do this, it couldn't refuse to spend zero, you know, it needs to provision the tax collection. Right, and to defend itself from revolt rights. But once you're at that minimum, you know, and you have that protection and and tax enforcement is credible, you know, then you can start the rest of the economy. And, you know, that, you know, it couldn't do that, if it wasn't the monopolist. You know, so people say like, oh, the currencies, people have a hard time with with the price monopoly. They understand the government, the dollar comes from the government. Right. But, you know, that's what it means. So if you're saying it doesn't have it, you know, if it's not a price setter, then you're saying it's not the monopolist. And, and, you know, I have seen some, you know, MMT discussion online where that deck starts to get confused. And, you know, but But yeah, your point about appraisals is, is very, I know where you're going with that right away. Exactly. In the Volker like to get back to, you know, let's slay this dragon the Volker, you know, we had, we had oil prices rise, inflation starts working its way through the economy. Taxes were also much higher. Right? Right. Right. And you had more marginal brackets at higher rates. So when income start to go up, because of the inflation, right? You know, now more tax dollars are coming out economy. And, you know, it's like a pool, if you've ever been in a public pool, public wave pool, you know, they usually have these drains on the side of the pool. And, you know, and that's in case they overfill the pool, like, well, we'll just run off right away, right. And that's kind of one of maybe the only legitimate functions of the income taxes, the progressive income taxes. And from an from a inflation fighting arena, it's like a forward drain. And, you know, I would like it where we got rid of these taxes. But if we're going to leave them in place, we ought to think of them as like an emergency valve. You know, in case we really screwed things up on the spending side, we have these, you know, high progressive taxes in place. As this this for draining case, we start spilling over just to give policymakers a little bit of time to then make other fiscal adjustments to deal. Yeah. No,

Ryan Benincasa: 28:03

that's a really interesting, let's just run with that for sets of really interesting thought. Because, I mean, that would definitely influence like business and consumption decisions, too. Because, you know, if, you know if businesses know that, okay, you know, the government just cut all the taxes, but they have this sort of emergency tax provision that they can, you know, slap on, you know, either at their discretion or maybe they have some, some predetermined like, you know, CPI hit X, then, you know, we're gonna have to slap on the tax, you know, they might think twice about raising prices.

Unknown: 28:45

Yeah, yeah, it Beowulf had this idea. Carlos lob, mucha. Okay. Yeah. I can't summarize. But um but so, you know, with Volcker in the Volcker so we have accelerating tax receipts, inflation soaring and strong growth is still there rates start them in the Volcker? They're already about five. Right. Right. And then he goes to his his, we're gonna target, you know, the money supply. We're gonna set the money supply, which is total ignorance. Yeah. Warren Warren was at the trading desk at the time, he watched this happen. He was embarrassed to be an American. All right. And then they ended up abandoning it, and then they because they had you couldn't do it ended up the New York Fed was having to do instead of, you know, the border Governor policy, but the the law now meet Paul, let me just correct my thought for just a second. So he, you know, he ends up raising rates, right. And, and, but the fiscal position of the government completely deteriorated while this was happening. And, you know, so people say, Oh, the rate went up. economy collapsed. Okay. rate hikes work, right. But it was the fiscal position deteriorating, that caused the recession in the crisis during that time. I've still remained elevated. And and, and so it made it harder to get back out of that hole. And then we'll finally when Jimmy Carter's deregulation came to fruition, and around the world, people that started pumping more oil because of the Saudi price hikes. Eventually the world was flooded with surplus oil. And the Saudis just drown their sales went down. Right. And they had to cut the price. And and then the inflation subsided, which was

Ryan Benincasa: 30:51

a garter deregulate the oil markets, or I thought he was running into gas market.

Unknown: 30:59

Yeah, we were burning oil to produce electricity. Okay, in the late 70s. Yeah. And, and, you know, this was, you know, the Texas oil, Texas Railroad Commission was like the price setter of oil in the United States. At that time, they said, the price is a, this is what you can sell it for. And they got away from that, you know, that's part of the deregulation is they're gonna let things you know, market prices prevail. And, and then, yes, the trucking industry got to be regulated. And, and then other energy, things got deregulated that details escaped me at the moment. But But yeah, the end result was just a ton of energy was released, you know, for sale in the market. And that, you know, we were able to overcome, you know, what, we were short, you know, without the Saudi oil, so then it took their pricing power away. And, and that's what ended, you know, the inflation, the interest rate situation made it worse. And, you know, the, the the back then, because the debt to GDP was what, 30%? Yeah, yeah, like the the interest expense was, you know, it wasn't enough to offset the the declining budget position to arrest its collapse to stall out that collapse a little bit. It just wasn't powerful enough. Now, today, though, you know, we're north of 100% debt to GDP. Right. And, and then, you know, we, we did see that tax acceleration, you know, in 2001, when the inflation picked up, and then first two quarters or 22. And then, you know, like I said, mentioned earlier that government spending was added on top of that. So, you've got additional interest income and additional government spending going in the economy with these rate hikes, whereas in the Volcker era was the opposite. You just had the rate hikes which, which, you know, was a smaller interest income effect. But you know, that, you know, we also, we have to remember Warren's point about the term structure of prices. And this and this gets into what I call, what I what I will, you know, warrants, warrants position, which may be a work in progress. I don't know, we'd have to have them come out here, right. But he did a he did a Nathan tank is put on an event called interest and inflation, the question and it was a brilliant seminar. It was like two and a half hours long. Warren did his presentation on, you know, what, you know, is price level analysis for us. And in the end, there was a brilliant q&a. Nathan was asked a question and honestly, he gave one of the most brilliant off the cuff responses I've ever seen anyone ever give to any question in human history? Okay, the guy went off for like 30 minutes. He's citing this and that, that it was like a PhD level response to the prices and where prices come from. And it was just absolutely brilliant. Warren was great in the q&a too. Interesting enough, this was the only video where that I know of we're Beowulf Carlos mucho was on camera. He asked a question about the New Zealand or Australian mortgage tax thing. Anyways, but the point I'm getting at is with with this, you know, CPI inflation is a look back. It's looking back from one period in the past to further period in the past, and what happened between the two of them, right? Okay. It's not what's happening right now. They don't know what the inflation rate is right now. Facing agents in the economy. Today. The Fed does not know they do not have that data. They have this book back data and it's an average, it's not, you know, what, what was inflation in 19, May of 1983? On May 16, they don't that they don't know that. All they know is some average level of change of continuous change over the period, whatever period you look at. Right, right. And then this information is a value, right? But we, you know, it, doesn't it, what what happens next is generally always more important what happened in the past, right? And, you know, Warren's definition of inflation is the interest rate, he believes that it's a better match for the academic definition of inflation is the interest rate itself. And if you, you know, and he has this concept of the term structure of prices, so, people looking out today at futures, looking to purchase, you know, looking to contract for delivery in the future. You know, they face a term structure of prices, there's a spot price today, and then there's this futures price, right? And right, mainstream econ, or mainstream finance will teach the equation for futures prices is going to be the spot price, you know, times a multiple, which includes the interest rate. So it's there, it directly raises the price of those futures. Yes, yeah. Yeah. Yeah. Yeah. Now, now, so. So today, I'm facing these prices, this this, this rate, the interest rate, but, you know, tomorrow, you know, something else good. Something can happen in the spot price. False. Right. And then, but, but then that day is the spot price is lower, but I still face that rate, that continuous rate of increase, you know, for the futures that I would purchase for tomorrow, right. And so, um, you know, I think it would be helpful if people thought of the interest rate is like a four inflation rate. Yeah, yeah, they may not be ready to just accept that interest of nominal rate is the policy or nominal rate is a real rate. It may not be ready to accept that. But I think if you frame it as it's the forward inflation rate, it'll get them thinking to house, you get them going to how CPI is the look back, okay. And then, and then if you really want to drive the point, home, look, CPI is a politically determined thing. There are methodological problems with it. And it's not all quantitative, they have to make quality adjustments, because the economy is constantly changing. It's evolving, new products that I bought today, are not the same as I bought last year, even if it's in the same category of products, right? So they've got to add, they've got to adjust for improved quality improvements, and then products as it changes over time. And, you know, now the math has gotten weird, okay. And there's decisions that have to be made choices that have to be made similar to what the monopolist faces when it's setting a price. Right. And, and so, so now, with the forward and the forward, inflation rate, the interest rate, we can observe it in futures markets, these are real markets in real time, there are many of them, these markets most closely aligned with what, you know, economists call the perfect competition, right. They're not in perfect competition, but there's many buyers, many sellers, you know, transparency, some transparency in the prices, right, as opposed. And they're in every single commodities market, you know, across the board, now, I would be a lot of work, but you could collate and collect all that. And then really build a giant data set and really observe, you know, how the, the interest rate is the inflation rate, and you can see it in the prices of all these different futures for these different items. And, you know, I'm not going to do all that work, but, you know, we can't do that with the price level itself. Right. It's, it's unobservable. You know, we, there's, it's too big. How big is the economy? 30 trillion, you don't like, you know, no, we'd have to have surveillance across the economy over every single transaction. It's not gonna Right. Right, right. So we there's no choice but to look at. If you're going to look back at inflation, you have to use a proxy, you have to have a, you know, an approximate, it's all approximation, right? Yeah. But when we look at the forward inflationary you know, we could get closer to you know, observing all of it and seeing all of it right, I'm not you know, this is this is a, these are math issues, and I did well in math, but I'm not a mathematician, so, you know, I might be saying things incorrect. And you know, somebody might messaging me on Twitter like how I'm an idiot. I'm an idiot on the internet. I I'm a redneck Yankee hippie. I fell into this by accident. I happen to be received about MMT in 2004. I was telling him for 2005 I don't know Dennis Kucinich, and was advised by Randy Ray and Warren Mosler. And he wanted to do the full reserve banking thing. And I think they were there to talk them out of it. And somehow it gets on the daily coast, I hear about it. It's coming from the percentage people and at the time, I was like a blue dog Democrat. Like, I was a Democrat, and I hated other Democrats. It was weird. Like, I agreed with the Republicans on economics, I just thought we could be nicer about things. And that was basically it. And but, you know, I read this, and I'm like, this is communist nonsense, you know, and then you flash forward to like, 2009. And by that time, I had opened my eyes a little bit more, I was very frustrated with Iraq War. You know, I kind of knew it was gonna be a disaster. And I, you know, but that was, you know, really into Obama, right? Like everybody else my age at that time, right? He was hope he was, right. But I was still reading more. And at that time, because it was so interesting. I couldn't figure out why it was wrong. I knew what was wrong. But I didn't know why I just kept reading to prove it wrong. And it just got worse and worse for me. A was it in 2000, I weren't shown up at Tea Party events. He's running for president as a tea party Democrat, gets up there and tells everyone we need to cut the payroll tax, we need to send money to the states. And we need a job guarantee, and relative approval. You know, his speech to the tea party in Dallas, was a year before his speech to the occupied Dallas Group in 2012. And which I helped, I brought him in to do it, his speech was the same was basically the same thing, you know. And he got the same level of applause. And I still remember like, at the end of his talk in Dallas, with Occupy Dallas, which I was a part of, towards the end. He was just having a ball. He was just sitting down with eight or nine hippies, and just just explaining everything in detail. And they were all just amazed by what he was talking about. his partner's wife, she's looking over at me, like, we got to get to the airport. And she's, she's giving me like, 30 looks because like, I didn't just get up and hop up and say, okay, Warren, you gotta go. But she, she, she said it. She looked at me. And I pause, I waited, I was kind of waiting for an opening, so I didn't have to interrupt them. And finally, I just had to run up there and like, you know, bear hug them and like, pull them off. I mean, he's a machine. He's, he's, he's, he's great. He's arcanes he's this generations version of, you know, Cain? Oh, 1,000%. Yeah. And not enough credit. When he when he passes away, there better be frickin statues built in, in a museum bill. Because he's, he doesn't he's not a lot more with his life and just MMT right. And he's his vehicles that he was producing in the 80s. With his car business, we're, you know, you know about work major manufacturers are today. That right? Well, you know, he, his idea was his, his idea was to get rid of weight and use different material in his sportscars. So he could get away with a smaller engine. But by using different material that was lighter, he could get a faster car on the road. And yeah, you gotta check them out. Yeah, go, there's a Car and Driver YouTube video. From a couple years ago, you can watch where they re interview him and they were brutal on him back in the 80s or 90s, when he basically put it took in a newspaper ad and said, I'll give$100,000 for your car can beat my Raptor. And so they staged in the event, they staged an event and they use one of his vehicles. But the brakes were jacked up or something it was all the clutch was out. And and the other vehicle was like brand new in other vehicle one. And morons like this is not a fair competition go to hell, like we need to redo this. And they were like, no, no, they just sort of buried them. But yeah, the I think the ends up building the Mt. 900 which is a very sexy looking car. And one of the first buyers was George Lucas star. Oh, really? Oh, yeah. Yeah, yeah. And he made electric cars electric vans, he made weird concept cars. He sold everything though. He said it was an addiction. You know, he couldn't make money selling the stuff and uh huh. Yeah. Cuz you gotta you know when you got to you got to You need that economy of scale? Right? Yeah.

Ryan Benincasa: 45:22

And, yeah, you're still bent, you're bending metal. It's yeah, it's expensive. It's low margin.

Unknown: 45:30

But you know, what I'm predicting for the rest of this year. One we have the main recessionary threat we face is the fucking Republicans in the House, refusing to pass a budget and causing the government to shut down. And there's no talk about this in the media, those two sides are way far apart. And, you know, I understand where limited government people are coming from where people want lower taxes. You know, I want the same, I believe in limited government, you know, there's, you know, but we can do the progressive things and have a smaller government than we have today. And lower taxes. I believe that, right. And, you know, because, look, they're not measuring the whole government, they don't think the unemployed is in the government or in the, in the unemployed, or in the government. That's not part of their calculations, the idleness that the government creates in the economy, that's not part of the government to them, but it is to me, it's waste. It's pure waste. Yeah, these people are the number one producers of it, and they're the ones bitching all the time about wasteful government. And so I don't know we need some, I'm worried about this. I am because that bill needs to be done by September. All right, government shutdown, we got weeks, and like, nobody's paying attention to it, right? No,

Ryan Benincasa: 46:53

I haven't read anything about Yeah, and the Freedom

Unknown: 46:57

Caucus is is gonna lose its shit on Mike McCarthy if he tries to do another deal. Now, so far, he survived the debt ceiling deal, so that I didn't, you know, he's, he's, he's gone further than I thought this was gonna go. But they're, they're not gonna allow it to happen again. And he's not gonna be able to compromise, there's, they're gonna He's gonna they're gonna demand cuts, significant cuts, or the votes aren't gonna be there. Now, the other thing is it could do and this is this would be weird, as you know, the Democrats will really have to save McCarthy from the Freedom Caucus. And, and, you know, and then meanwhile, we have Trump, you know, on the verge of prison, you know, running his mouth left and right, everything revolves around Trump. Right? You don't know how he's gonna respond to that. You know, and so, yeah, a lot, lot lot. Drama there. But let's say this wasn't the case. And, you know, we had the spending bill and it was done. Look. CPIs going about we know oil is going back up. I got it. You know, I have investments in oil. I'm up like, 4% Since March 2020. In yeah, there's one smart thing I've done. And yet, like,

Ryan Benincasa: 48:17

is it like mandatory like, Yeah, I'm in the state of Texas and like, you have to be somehow some shape or form invested in oil?

Unknown: 48:24

No, I just, I just knew at the time, I was like, oil is the cheapest it's ever going to be in my lifetime. So I'm gonna buy Yeah, I bought this. It's supposed to be a hedging tool, but it's called gush G U. S.

Ryan Benincasa: 48:37

Yeah.

Unknown: 48:38

I started Yeah, I started buying it was at 13. And now it's at like, 156. It peaked in November though of last year, and I was up like five 600% Trying to hold it basically until like another 10 years, basically, until the world burns up and we all die. I'm gonna try to you know, cash out before that. And, you know, I don't know. But that's my investment strike. I tried to invest in industries. I was I was doing a lot in tech with semiconductors and I haven't really bought I do have a couple battery stocks. And I wasn't a telecom I got out because it's the capital expenditures are just huge. And the stock prices goes up and down. It's just messy. Yeah. But uh, but yeah, I want the one thing that did attract me in the beginning was 5g, because, you know, everyone 5g talks about that anymore. Internet everywhere. Everything's gonna be so fast. Yeah, it was all fake news. Okay, it's a little faster. Yes, I agree. But the profits just haven't been there for the companies are doing No, no, no one telecom stock that I kept for a long while, and that was T Mobile. And, and I ended up selling it earlier last week. And, but yeah, I had 18 T Verizon, Ericsson, Nokia. And they did well through the pandemic, but then 2022 Or maybe before they started, everything started to go south on them. So I've exited positions with profits, but not as much as I could it took earlier. But, um, but yeah, so and I don't trade every day. I'm not day trader, I just want to feel good about something. I've done enough research, look at the prices, and I see a good entry point. I'm like, Okay, I'm in, you know, and then I kind of just see what happens. But yeah, I'm too busy. I can't day trade.

Ryan Benincasa: 50:32

Amen to that.

Unknown: 50:33

I want to, you know, sit computer all day work three hours make $30,000. That sounds great to anyone. But where's Where's I headed, though, with, oh, the future. And so CPI is going to bounce around oils going back up that feeds in everything, right? We're gonna see, we're still seeing increased government spending. And

Ryan Benincasa: 50:55

now it gets to, I think, three handle the other

Unknown: 50:57

day, and what what's this relative value story works its way through the economy, that government ends up paying those higher prices institutionalized? And we're not going to go down from here, you know, and then, and, and so, so yeah, see, CPI is down right now. But it is gonna, it is going to trend towards and stabilize around the policy rate, yes, over time. And it's not going to be a direct thing. But the policy rate is going to controls the direction of CPI and, and what Warren likes to say is the, the the forward, you know, the interest rate, you know, what it does the futures prices. futures prices themselves are not the price level, but they strongly influenced direction of the price level, right, where it's going from here. But, like, it's kind of weird, because like I said, if something happens, you know, overnight, you know, the Malaysians just discover, you know, 15 trillion barrels of oil. And, and, and they found a new discovery on how to get it out of the ground. And by the way, they're going to start pumping next week. Right, like that, could that could lower the spot price of oil tomorrow. Right. So, so, you know, and then and then and then, you know, so what's the inflation rate, then? Well, it's about what's gonna happen next. Right. So it's, it's always about the prices that you face. Like right now. And, and so I can see why people can get kind of weird about, you know, the forward inflation rate or in it certainly, you know, in the interest rate is, is the inflation rate like that's, that's just mind blowing to these monitors that Noah Smith, right, you know, the blue check PhD economist on Twitter. You know, they don't want to hear this. But you know, what Warren's talking about with the debt to GDP ratio, the fiscal dominance people have been talking about for decades. In fact, some of the people like Noah Smith, who claims the deficits problem cited fiscal dominance, it gets to a size if interest rates won't work anymore. And there's like, there's multiple interpretations of fiscal dominance and whatever. But you know, it's like the flu. But, you know, Powell was up there in testimony earlier this year saying, Congressmen asked him like, do you take in consideration the government's budget position when you're making fiscal policy? He's like, No, that would be fiscal dominance. But that's not all of what fiscal dominance is. It's not just the Fed sitting there going, Oh, we can't do this, because we need to help finance the budget for the government. Right. It's also where it what it's doing now. It can't raise rates to cool inflation it further, it furthers or extends the inflation and it neutralizes it right? And, you know, the example that Warren gives, he's got this other extreme example. You know, people have a problem with this. And it's like, oh, well, it's just not high enough. You gotta keep raising it, it'll get higher and higher, and then and then, and then everything goes away. And the more higher it is, the better. Right is an assumption that some people make now there's more nuanced arguments than that. But, you know, morons point is his extreme examples. You know, what if the government raised it raise the rates to 100%. The national debt doubles in a year, we go from 32 to 64 trillion. And then the year after that, we go to 128 trillion. So in the two year period, we go from 32 to $128 trillion. And you're gonna tell me these people are going to tell us that that's deflationary. All the time saying how the deficit causes inflation, the money supply causes inflation, to go, you know, like it's insane. And that's, that's what we're dealing. We're dealing with people like the fiscal dominance people. I made the comment on Twitter last night, they're either their heads are in the sand or they're dead. I don't know where these people are. Maybe they're academics that just aren't that famous and you Nobody stopped to ask them but you know, we the rate hikes people. It's a cult. These people are cold. The only proof they have there are books that they wrote. So, you know, like, it's in the textbook? Well, you wrote the textbook. So like we like, I don't know, I don't know how to break through to the masses with this stuff I've been struggling with for now 14 years, I feel like I've done everything I can. And look, frankly, there's better people out there to lead our movement to be a voice in our movement. You know, I again, I'm going to refer to myself as an idiot on the internet. But if I'm making any sense, that should be massive indictment on the intellectual bankruptcy in this country, the bankruptcy of leadership, the failure of leadership across the board, and it's in both parties. Like I don't want MMT associated with Biden anymore. This man is a he's a tariff man and he's a raid hiker, he they put all those rain hikers up on the board of the Board of Governors. And and, you know, as democratic quote unquote, democratic economists that were pressuring Larry Summers in in the fraud, that is Jason Furman. And a quick story about Larry Summers, so I saw him on TV yelling, you know, something. I can't remember the exact context. So the incoherent Yeah, something Jabba the Hutt like, and he, so I, I literally called his office at Harvard. Got him on the phone. I had to go through his chief of staff. And I had emailed beforehand, so they kind of like knew who I was there, kind of like, Whoa, this is interesting. And I came is like a representative of real progressives. And my, the plan was I initial idea was I was going to try to get Larry and Warren to talk in a video format, and have real progressive settlement. That was my, my plan, but I could sense immediately in his voice. He wasn't really, that's not his thing. He goes, he goes on TV. Those are the ratings are right. We have a fairly small following. But you know, maybe a few 1000 people out there. Maybe more. I don't know, Steve, Steven G has the numbers. But so then I just said, Hey, let's just get on the phone with Warren and talk about this. Because there were things that Larry was saying that I agreed with the tariffs, move the fucking tariffs removed the tariffs, people stopped the tariffs. FDR was against tariffs. Why is Biden continuing to double and triple down on them? You know, it's just maddening. We have this export led growth ideology. It's been there since Obama, like one of the Walmart, people in charge of the economy for a while and we're exporters, they want lower, they want lower wages, they want deflation, you know, they they want our products to sell. So, you know, they want what's the word? a weaker dollar, right? We were people can buy more of our stuff, man. Yeah, I don't. But um, but Summers is, you know, he's like, I'll call him I'll call him What's his number? And I'm like, Okay, here's his number. And then a follow up with his chief of staff. Oh, yeah, we're still gonna call Warren we were planning on and out and out. And I'm like, holding my powder. Like, I have all this stuff. You know, I'm trying not to bad mouth. Larry, on my Twitter account case, is Chief of Staff starts looking at it or something. And then also, Larry, there was some some agreement over the Saudis. I remember him agreeing with whatever, whatever I was saying about Saudi Arabia setting prices, he started to say, Yes, I agree, or something. And, and so I was like, okay, focus on that, you know, talk to Warren about, you know, tariffs, oil prices, and then, you know, then talk further about inflation and the sources of inflation. And so, anyways, I ended up calling back, like, three four times. Finally, Mom phoned the Assistant Chief of Staff, and this lady was a bitch. She kind of told me off and you know, and and, you know, so Larry was too scared to pick up the phone and have a conversation with Warren Moser. I mean, these people are total frauds right back that the media have Rosemount trust them out writes articles about them. It's in theory, they're pieces of shit. They don't we should not listen to any of them. And and it's over there. Their day is over. And you know, and you made the comment. I don't know if it was while we were recording or earlier. But yeah, there's high school students that have learned MMT that exist, they exist out there, and they've learned MMT and they can run circles around these PhD blue checkmark more on economy. myths that just run their mouth and all we hear is vomit out of it. And high school students. I mean, it this is not that hard. It's not rocket science. It's just deprogramming, because, you know, it's all, everything that MMT is, the resistance we face is it's just, you know, it's it's religion, you know, and we're heretics. And, you know, they don't want to hear that, you know, they want to burn us at the stake. But, um, you know, and I've made open challenges like this to economists on Twitter all the time, you know, there's the, I'll say something, you know, provocative, and they'll comment, well, this and that, and that it. I remember, though, they were yelling at me about the LM curve being flat, like saying that other economists have said that. And I remember this is Asian economist. He just he was gay got nasty with me. He's like, What about? You know, we said that too. That's not That's not new. And then, and then we keep talking, we keep talking. And then he brings up Oh, yeah, when deficits get high enough, it'll cause rates to go up. And I'm like, Well, hold on, we're arguing that you guys have been saying it's flat, and it doesn't cause rates to go up? Well, he's like, look at the 10 year rate after this, and he sends me this graph. And it's like, you know, it's a pretty big graph, that he's narrow down. And there's a small blip up, you know, in 10 year rate, and he's like, deficits caused this. And the whole time, I'm sitting here going, like, listen to the those rates, our market expectations, that could have happened because the fucking Fed Chairman started talking weird in the market and interpreted a different way. And they were confused. And And okay, we're, you know, 1010 year rate goes up. I mean, but, um,

Ryan Benincasa: 1:02:08

I mean, someone could have fat finger the trade. Yeah. I mean, such a small little

Unknown: 1:02:15

jump, like, it even went down, you know, point like, and and that's, you know, that's not it's not the deficit causing the rate to yield to jump. Right. That's, that's a portfolio shift thing. That's an expectation thing, you know, yeah.

Ryan Benincasa: 1:02:33

That's a good way to put it. Yeah. And, you know,

Unknown: 1:02:36

so I know, I've said, there's probably things I've said here that are maybe confusing and possibly incorrect. And for any errors I've made, they are my own. You know, so anything I've said, That's incorrect. It, you know, that I implied I got from Warren, you know, it's my mistakes. You know,

Ryan Benincasa: 1:02:56

Warren doesn't make mistakes. Well,

Unknown: 1:03:00

does he tells you, you know, yeah, you know, every few years, I'll go to warn. Kind of like, I don't know, you're breaking bad. Gus, every few years, he tries to like overthrow the cartel hitmen cartel leader? Well, every few years, I'll go to war. And I'll be like, Why don't we say it this way, you know, and say this instead of this, you know, and he gives me his ego. He lets me say my piece. And then he's like, explains why that's stupid and wrong. And, and he's right, you know, and his way of doing thing he likes to? He likes to use language. That's bulletproof.

Ryan Benincasa: 1:03:38

Yeah. Fit for the boardroom. He's very deliberate about

Unknown: 1:03:42

that. Yes. In this in the smallest amount of words possible. He wants to say that as much and be as clear as possible. Yeah. And it's a remarkable freakin talent. And he has gotten into trouble with some of our, you know, more left or socialist leaning. MMT brothers and sisters, but um, you know, he doesn't like the bleeding heart language. Yeah, like leading with it. And, but he'll concede that. You know, we, you know, he likes to say, it's the activists that I've helped spread him and tea, and they've said things in ways that he wouldn't have said them, but it's worked. So how can you deny that, but, you know, I know what the job guarantee he would, he would prefer, we didn't focus on the bleeding heart stuff. But I think you have to do both. You have to convince the businessman with the technical arguments with the common sense arguments with the board. But then, you know, that that goes over people's heads. Right. And there's a lot of good liberals and socialists out there that just aren't into tune into economics. And you got to pull out them a little bit emotionally. You know, I'm in I'm in sales, right? You know, so you know, it's got to know your audience, figure out what is going to move them to what you where you want them to go. And, you know, so So I appreciate both bleeding heart and a strong, technical just blow proof way of talking about MMT. But, um, and you know, I got I got He's he pulled me into this. And, you know, I haven't got to spend like, a lot of time with Warren in any one point. But like over 11 years or 12 years now it's a lot, right. And, you know, sometimes they'll call me like, like, I bet he'll call me after this. He hears this. And he'll have a critique or he'll say, good job, whatever. But that's great. Yeah, I've had some long phone calls Warren though, and, and good guy, good guy, just a great guy. I remember talking to him, we COVID hit. And really, yeah, and I was I just started with the legal division, like a couple of weeks prior, and was recruiting lawyers and paralegals, and I thought I was going to retire from that is, it was great. You know, and then COVID hit, and eventually, I was furloughed, and all the courts closed, our division was destroyed, and I got brought back now I do something a little bit different for my company. But yeah, he's he offered to write a letter of recommendation for me to get into grad school. And I appreciated that. And, you know, so so, you know, if we have worn we don't have this. In I know, a lot of people, you know, it's like, he started in 20. But then, you know, generations after have added to it and really further developed it. But um, you know, he's still needed when it comes to the price level when it comes to inflation, when it comes to talking about interest rates. And it's particularly with the Volcker stuff, because there's nobody else that does everything I'm saying about Volcker I learned But literally, he was in a, he did a video with some other podcasts a few months ago, and I must have just heard all that again, and repeat it, but there's nobody else like them. When it comes to, you know, interest rates, inflation, and, and the price level, I mean, there's it, you know, I like I love Bill Mitchell, he's, he's, he's great. He's been a really strong friend of real progressives. But, you know, I've emailed him a few times about the way he talks about inflation. And, you know, you know, we, we got into it, you know, and I brought Warren in and, and, you know, so it's okay, when there's, you know, it's okay, that, you know, we have our academics, and they may talk about things a little bit differently. And they may seem to disagree, and it may just be because they just need to hear it, you know, instead of reading it, you know, I'm an auditory learner. You know, tell me something I don't forget, I read stuff all the time. I forget, you know, it's just a blur. But, um, but, you know, like I said, we're not a cult, and it's a good thing. There's ongoing debate and there's different you know, groups inside of them and tea I, you know, I love Rohan, I love Raul and I love Nathan, and I love the everything they're doing up in New York and how they promoted it, and they're probably the most responsible for getting MMT in the news, getting news reporters to notice it, look at it, read at it, and that and that created the buzz on the internet. I mean, you can those those three needed an award, I don't agree with him on everything.

Ryan Benincasa: 1:08:33

Right. Yeah.

Unknown: 1:08:35

And, in some of its like, preferential, but I know, you know, they're pretty big advocates of public banking. And, you know, my point, I just would nationalize the banks, we have reserves and build additional ones seems like an environmental waste, you know, it seems like a failure, you know, the banks we have are already, you know, public private partnerships, why can't they behave? And, you know, Romans point is, you know, they have the profit motive, it's always going to be there to corrupt them. And, and you need a you need a public version of banking that doesn't have that motivation. And, you know, morons point is that with Public Bank, the insiders in the bank giving loans to their friends and not based on credit worthiness? Either wars, fine, I just, you know, I'm just trying not to, right, build things. We don't need waste more of the environment. You know, that's kind of my point. Yeah. You have any other questions for me, Ryan? I think we've run a little long. It's 315. Yeah, no,

Ryan Benincasa: 1:09:38

trolls. I think that's a good place to leave this off. That was a that was an amazing conversation. Yeah, know, I a lot to think about if I sucked or not, I mean, I mumble a lot. No, man, you were you. You were great. No, and the price level stuff is is awesome. So Charles, thank you for for joining us. And yeah, well, we'll be in touch soon. Thank you for listening to today's conversation. We hope you enjoyed it. We'll be back with more episodes this fall