Grumbine: Can we have too much money?
Wray: Yes, we surely can. Usually, our problem is that there's too much bank money, and the usual consequence is a financial crisis.
Obviously, Steve and his guest are talking about the nation, not their own wallets. In this episode, he welcomes L. Randall Wray to Macro N Cheese for the eighth time to talk about Randy’s new book, "Making Money Work for Us: How MMT Can Save America," which will be released in America in November.
Our listeners know they can count on Randy to explain MMT principles clearly without drowning us in a sea of wonkiness, but, also, without oversimplifying the subject. Consider the above exchange... and then this:
Wray: Money cannot cause inflation. I can state that unequivocally.
MMT understands that those two statements are not contradictory. Randy talks about the banks financing too much speculative activity that goes bad, usually resulting in a financial crisis. Extensive government spending – when it’s targeted, as in a job guarantee – does not cause a crisis, does not cause inflation. He contrasts this to the wrong kind of government spending, and describes how it is inflationary (cough, UBI).
Steve and Randy go through the other questions that MMT is uniquely able to answer in a way that isn’t disconnected from our real-world observations. What is money and how is it created? What does it mean when you say “taxes drive money”? They discuss deficits and debt – and why it is that the few times the US repaid part of the national debt, it led to a depression, except under Bill Clinton, when it led to the great financial crisis.
You’ll want to listen to this episode just for the discussion of the Fed and the banks. The CEO’s should all be locked up.
L. Randall Wray is a Professor of Economics at Bard College and Senior Scholar at the Levy Economics Institute.
www.levyinstitute.org
