The MMT Podcast with Patricia Pino & Christian Reilly #163 L. Randall Wray: Breaking Banks - The Fed’s Magical Monetarist Thinking Strikes Again
Fed's Role Evolution and Myth
- The Fed was created as a lender of last resort to prevent financial crises but ironically causes them now.
- Over time, the Fed adopted unproven beliefs it can control money supply and inflation through expectations alone.
Why QE Failed to Raise Inflation
- Quantitative easing increased bank reserves but failed to cause inflation as banks do not lend reserves.
- Central banks' massive balance sheets and asset purchases failed to boost inflation or expectations effectively.
Fiscal Tightening Causes Recessions
- Most recessions follow tightening fiscal policy, not Fed rate hikes.
- The Fed typically raises rates with near-perfect foresight of an impending recession.
Patricia and Christian talk to award-winning economist and author of “Making Money Work For Us” Professor L. Randall Wray about how central banks use [checks notes] *vibes* to “anchor inflation expectations”, why it keeps failing, and what might work instead.
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Order “Making Money Work for Us” by L. Randall Wray: https://www.amazon.co.uk/gp/product/B0BDCS46BG/
Order “Money for Beginners: An Illustrated Guide” by L. Randall Wray: https://www.amazon.co.uk/Money-Beginners-Illustrated-Randall-Wray/dp/1509554610/
Order the Gower Initiative’s “Modern Monetary Theory - Key Insights, Leading Thinkers”: https://www.e-elgar.com/shop/gbp/modern-monetary-theory-9781802208085.html
Free tickets for the launch of “Modern Monetary Theory - Key Insights, Leading Thinkers”, in London on 20th April: https://gimms.org.uk/event/book-launch/
For an intro to MMT:
Our first three episodes: https://www.patreon.com/posts/41742417
Episode 126 - Dirk Ehnts: How Banks Create Money: https://www.patreon.com/posts/62603318
All our episodes in chronological order: https://www.patreon.com/posts/43111643
All our episodes with L. Randall Wray: https://www.patreon.com/posts/44467066
Relevant to this episode:
“Magical Monetary Thinking at the Fed Killed SVB” by L. Randall Wray & Stephanie Kelton: https://stephaniekelton.substack.com/p/magical-thinking-monetary-thinking
“The collapse of SVB shows why monetary policy is the wrong tool to fight inflation” by Yeva Nersisyan & L. Randall Wray: https://thehill.com/opinion/congress-blog/3905479-the-collapse-of-svb-shows-why-monetary-policy-is-the-wrong-tool-to-fight-inflation/
Randy talks about how central banks had to give up on targeting money supply - and that’s because the money supply is determined endogenously. For more on the endogenous money view (the non-fringe, very mainstream view that bank loans create deposits, not the other way around), listen to:
Episode 43 - Sam Levey: Understanding Endogenous Money: https://www.patreon.com/posts/35073683
Episode 126 - Dirk Ehnts: How Banks Create Money: https://www.patreon.com/posts/62603318
Randy talks about US government bond issuance during World War II being a whole other story - for more on that, listen to these two episodes:
Episode 32 - Sam Levey: How Uncle Sam Paid For World War II (part 1): https://www.patreon.com/posts/30005574
Episode 33 - Sam Levey: How Uncle Sam Paid For World War II (part 2):
https://www.patreon.com/posts/30112818
Our Job Guarantee episodes:
Episode 4 - Fadhel Kaboub: What is the Job Guarantee?: https://www.patreon.com/posts/41742701
Episode 47 - Pavlina Tcherneva: Building Resilience - The Case For A Job Guarantee: https://www.patreon.com/posts/36034543
Episode 148 - Pavlina Tcherneva: Why The Job Guarantee Is Core To Modern Monetary Theory: https://www.patreon.com/posts/episode-148-why-73211346
Quick read: Pavlina Tcherneva’s Job Guarantee FAQ page: https://pavlina-tcherneva.net/job-guarantee-faq/
Quick MMT reads:
Warren’s Mosler’s MMT white paper: http://moslereconomics.com/mmt-white-paper/
Steven Hail’s quick MMT explainer: https://theconversation.com/explainer-what-is-modern-monetary-theory-72095
Quick explanation of government debt and deficit: “Some Numbers Are Big. Let Me Help You Get Over It”: https://christreilly.com/2020/02/17/some-numbers-are-big-let-me-help-you-get-over-it/
For a short, non-technical, free ebook explaining MMT, download Warren Mosler’s “7 Deadly Innocent Frauds Of Economic Policy” here: http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
Episodes on monetary operations:
Episode 20 - Warren Mosler: The MMT Money Story (part 1): https://www.patreon.com/posts/28004824
Episode 126 - Dirk Ehnts: How Banks Create Money: https://www.patreon.com/posts/62603318
Episode 13 - Steven Hail: Everything You Always Wanted To Know About Banking, But Were Afraid To Ask: https://www.patreon.com/posts/41790887
Episode 43 - Sam Levey: Understanding Endogenous Money: https://www.patreon.com/posts/35073683
Episode 84 - Andrew Berkeley, Richard Tye & Neil Wilson: An Accounting Model Of The UK Exchequer (Part 1): https://www.patreon.com/posts/46352183
Episode 86 - Andrew Berkeley, Richard Tye & Neil Wilson: An Accounting Model Of The UK Exchequer (Part 2): https://www.patreon.com/posts/46865929
Episodes on inflation:
Episode 7: Steven Hail: Inflation, Price Shocks and Other Misunderstandings: https://www.patreon.com/posts/41780508
Episode 65 - Phil Armstrong: Understanding Inflation: https://www.patreon.com/posts/40672678
Episode 104 - John T Harvey: Inflation, Stagflation & Healing The Nation: https://www.patreon.com/posts/52207835
Episode 123 - Warren Mosler: Understanding The Price Level And Inflation: https://www.patreon.com/posts/59856379
Episode 128 - L. Randall Wray & Yeva Nersisyan: What’s Causing Accelerating Inflation? Pandemic Or Policy Response?: https://www.patreon.com/posts/63776558
More on government bonds (and “vigilantes”):
Episode 30 - Steven Hail: Understanding Government Bonds (Part 1):https://www.patreon.com/posts/29621245
Episode 31 - Steven Hail: Understanding Government Bonds (Part 2): https://www.patreon.com/posts/29829500
Episode 143 - Paul Sheard: What Is Quantitative Easing?: https://www.patreon.com/posts/71589989?pr=true
Episode 147 - Dirk Ehnts: Do Markets Control Our Politics?: https://www.patreon.com/posts/episode-147-dirk-72906421
Episode 144 - Warren Mosler: The Natural Rate Of Interest Is Zero: https://www.patreon.com/posts/71966513
Episode 145 - John T Harvey: What Determines Currency Prices?: https://www.patreon.com/posts/72283811?pr=true
MMT Events And Courses In 2023
More information about Professor Bill Mitchell’s MMTed project (free public online courses in MMT) here: http://www.mmted.org/
Apply for Dr Dirk Ehnts’ Modern Monetary Theory and European Macroeconomics course at Maastricht University (July 31st - August 4th) here: https://maastricht.dreamapply.com/courses/course/183-modern-monetary-theory-and-european-macroeconomics
Details of Modern Money Lab’s online graduate and postgraduate courses in MMT are here: https://modernmoneylab.org.au/
MMT Academic Resources compiled by The Gower Initiative for Modern Money Studies: https://www.zotero.org/groups/2251544/mmt_academic_resources_-_compiled_by_the_gower_initiative_for_modern_money_studies
MMT scholarship compiled by New Economic Perspectives: http://neweconomicperspectives.org/mmt-scholarship
A list of MMT-informed campaigns and organisations worldwide: https://www.patreon.com/posts/47900757
We are working towards full transcripts, but in the meantime, closed captions for all episodes are available on our YouTube channel: https://www.youtube.com/channel/UCEp_nGVTuMfBun2wiG-c0Ew/videos
Show notes: https://www.patreon.com/posts/80479169?pr=true