Nathan Tankus explains currency value, exchange rates, inflation, & Venezuela. They discuss Modern Money Theory, power dynamics in Eurozone, significance of job guarantee, challenges in Venezuela, and debunking myths about the medieval economy.
Government can create money through spending, not dependent on tax revenue.
Exchange rates impact domestic economies, influenced by cost changes.
Venezuela's hyperinflation crisis rooted in structural economic challenges.
Addressing food dependence crucial in Venezuela, facing land inequality issues.
MMT stresses need for production structure supporting public spending.
Deep dives
Government Spending and Money Creation
Modern Monetary Theory (MMT) explains that the government's ability to create money through spending is not constrained by tax revenue. Instead, the government can issue currency to provision goods and services, as demonstrated by historical examples like British colonial territories. By imposing taxes to create a demand for the currency, the government ensures its value. The MMT approach challenges the traditional belief that taxes directly fund government spending, emphasizing the government's capacity to create money to meet public needs.
Exchange Rates and Imports
MMT examines the impact of exchange rates on domestic economies and imports. A depreciating exchange rate can affect prices, especially for imported goods like Marmite during the Brexit vote. While exchange rates can be influenced by various factors, MMT highlights the significance of cost changes in driving price fluctuations. Additionally, MMT advocates for a job guarantee program to mitigate unemployment and reduce dependence on imports, fostering economic stability and sovereignty.
Inflation and Economic Challenges in Venezuela
The podcast discusses the hyperinflation crisis in Venezuela, attributing it to a long history of structural economic challenges, including heavy reliance on imported food and limited export markets. The critical analysis acknowledges that while Venezuelan governments have failed to address these issues effectively, the root causes of instability stem from deep-seated economic vulnerabilities. The discussion underscores the significance of analyzing Venezuela's situation through an MMT lens to understand its complexities and potential solutions.
Venezuelan Government's Approach to Poverty and Food Dependence
The Venezuelan government aimed to eliminate poverty by importing more food; however, this approach did not address the fundamental issue of food dependence. Efforts to tackle food dependence included introducing ecological farming approaches and food co-ops, but these initiatives fell short. Land inequality and the need for effective land reform were highlighted, with a strong peasant movement advocating for land reclaiming, despite facing challenges like assassinations.
MMT Perspective on Government Spending and Biophysical Resources
From an MMT standpoint, having a production structure supporting public spending is crucial, emphasizing food and energy independence or a diverse export structure to counter imported inputs. The podcast underscores that government spending constraints are related to real and biophysical resources, suggesting that without a foundation for self-sufficiency in food production, the impact of an MMT-informed government's policies could be limited.
Implications of Quantitative Easing and Interest Income Channel
Quantitative easing (QE) involved buying long-term government bonds and adjusting interest rates to impact their relationship to par value. The discussion reflects on how QE influenced interest income distribution within the economy, potentially reducing overall income due to its impact on bond purchases. The conversation delves into the deflationary effects of QE and the complexities of interest income channels affecting various economic sectors.
Critique of the Myth of Barter and Insights on Money Emergence
The podcast challenges the myth of barter, highlighting how money emerges from social obligations, debts, and exchanges, rather than through barter transactions. It explores the historical perspective on money's origins and criticizes the idea of money introduced by external entities, such as the myth of medieval Jewish money lenders. The discussion emphasizes the importance of understanding the social and historical context of money creation.
Recommendation for Further Learning and Discussion on Liberal Ideas about Money
The podcast recommends exploring topics like the Minsky movie on Netflix, diving into monetary history, and the book 'The Myth of the Medieval Jewish Money Lender' for a deeper understanding of money's social and economic implications. It encourages questioning liberal concepts of money and advocating for a broader perspective that includes historical context and institutional analysis. The conversation aims to shed light on obscured truths and challenge traditional economic narratives.
Closure and Contact Information
The podcast concludes with gratitude for the discussion and invites further engagement by providing email addresses for continued correspondence. Presenters express hope for listeners to tune in for future episodes and welcome feedback or questions. The episode ends on a lighthearted note, acknowledging the lasting relevance of the discussed topics and the podcast's commitment to ongoing dialogue.
Christian Reilly interviews Nathan Tankus, research scholar at the Modern Money Network (MMN) in the US to find out how currencies work and what makes them valuable - and also about exchange rates, inflation, and what’s happening in Venezuela.
