The MMT Podcast with Patricia Pino & Christian Reilly cover image

The MMT Podcast with Patricia Pino & Christian Reilly

#144: Warren Mosler: The Natural Rate Of Interest Is Zero

Sep 14, 2022
Warren Mosler, the founder of Modern Monetary Theory, dives deep into the radical idea that the natural rate of interest is zero. He critiques common perceptions of interest rates, wealth inequality, and examines the impact of government spending on the economy. The discussion also tackles inflation dynamics, including the effects of the Inflation Reduction Act. Furthermore, Mosler reflects on Turkey’s economic situation and political influences on central bank policies. It's a thought-provoking look at the intersection of economics and policymaking.
53:55
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Episode guests

Warren Mosler

Podcast summary created with Snipd AI

Quick takeaways

  • In the absence of proactive government intervention, interest rates are likely to remain at zero permanently, challenging traditional economic assumptions.
  • The intrinsic value of a currency is fundamentally connected to government spending and tax policies, emphasizing the role of fiscal measures in economic stability.

Deep dives

Interest Rates in a Zero Intervention Scenario

In the current financial landscape, in the absence of government intervention, interest rates are likely to remain at zero permanently. This concept suggests that without actions from authorities, such as paying interest on reserves or issuing treasury securities, banks will lack the incentive to borrow and lend at higher rates. This means that what is traditionally viewed as a natural policy rate at zero is, in reality, a reflection of a lack of proactive measures rather than an established norm. The distinction is crucial as it highlights how the perception of asset price inflation can be misleading when rates adjust back to their base case.

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