Season Premiere with PJ Pierre on MMT, Macro and Fiscal Dominance

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Sep 21, 2023

PJ Pierre, a global macro trader and MMT expert from Denali Asset Management, shares insights into Modern Monetary Theory and its implications for fiscal policy. He challenges the traditional belief that taxes must precede government spending, discussing how this view shapes economic perceptions. Pierre explains the mechanics of currency issuance and the risks of inflation, alongside the critical role of banking in MMT. The conversation also touches on fiscal dominance, labor market trends, and the impact of government investment on economic innovation.

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INSIGHT

MMT's Monetary Sequence Insight

Modern Monetary Theory (MMT) describes the monetary system as starting with the government imposing a tax payable in its own currency.
The government spends currency into existence before it collects taxes, challenging conventional views on fiscal constraints.

INSIGHT

Government Spending Not Revenue-Constrained

Government spending is not mechanically constrained by tax revenue because it can issue currency.
However, unrestricted spending has real consequences like inflation or currency collapse.

INSIGHT

Real Resource Limits on Spending

Government spending is limited by the available goods and services for sale, not taxes.
Real resource constraints affect inflation and the economy's productive capacity.

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In this episode, PJ Pierre, a leading voice in the field of Modern Monetary Theory (MMT), joins the ReSolve team for a deep dive into the complexities and implications of MMT. The conversation explores the role of government in fiscal policy, the impact of deficit spending, and the potential consequences of MMT on the economy.

Topics Discussed

• The discussion begins with an examination of the conventional belief that government must first collect taxes before spending, and how this view influences perceptions of government solvency and private investment.

• The conversation then shifts to the sequence of government spending and taxation, and the implications of a floating exchange system.

• PJ Pierre provides an explanation of how the government can issue currency and the potential consequences, such as inflation or a collapse of the currency.

• The role of the banking system within the MMT framework is also discussed, highlighting the complexity of this economic model.

• The conversation delves into the concept of fiscal dominance and the potential for the Federal Reserve to lose its monetary policy tool for regulation.

• The episode concludes with a discussion on the impact of inflation and the role of demographics in economic demand.

This episode offers a comprehensive exploration of Modern Monetary Theory, providing valuable insights for anyone interested in understanding the potential implications of MMT on fiscal policy and the economy. PJ Pierre's expertise provides a nuanced perspective on this complex economic model, making this episode a must-listen for those interested in economic theory and policy.

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