Sept. 13, 2022

583: Why Modern Monetary Theory Loses to Basic Economics EVERY TIME

We go over the basics of MMT—its ideas of fiat currency, how it's different from other forms of money, and why it's so popular with politicians who have no idea what they're talking about.


On today's episode, I'm joined by Jon Miltimore from FEE to talk about why modern monetary theory loses to basic economics every time.

 

We go over the basics of MMT—its ideas of fiat currency, how it's different from other forms of money, and why it's so popular with politicians who have no idea what they're talking about.

 

We also discuss how these ideas have been used to justify policies in for thousands of years—which hurt working people and make things worse for our economy long-term.

 

Finally, we'll cover how the MMTers' theory has been disproved in practice and how we can use basic economic principles to understand the problems with their theory.

 

In our discussion, we'll look at:

 

-Why MMT is considered neo-Keynesianism

 

-How an understanding of money and banking are essential to understanding modern monetary theory

 

-The role of inflation in MMT and its effects on real wages

 

-Why inflation doesn't help workers in a recession

 

-How monetary policy affects unemployment

 

Learn more about your ad choices. Visit megaphone.fm/adchoices

Studio SponsorStratus ip: Don't let cyber attacks or old technology slow your company down. Learn more at Stratusip.net or schedule a consultation at briannicholsshow.com/stratusip

Stratus ip - Business Technology - Simplified



Support our Sponsors!

Support the program with a one-time donation or join our Patreon!

Take our audience survey for a chance to win a "Don't Hurt People, Don't Take Their Stuff" bumper sticker! 

 

 

Transcript

Brian Nichols  0:03  
center focusing on winning arguments. We're teaching the basic fundamentals of sales and marketing and how we can use them to win in the world of politics, teaching you how to meet people where they're at on the issues they care about. Welcome to The Brian Nichols Show. Happy Friday, if you're on The Brian Nichols Show, and thank you for joining us on of course on another phone bill. I am as always your humble host and returning guests to join in turn the program talking about all the insanity happening in the world of monetary, modern monetary theory, and more from fie. But first, we're gonna go ahead and give a shout out to today's sponsor, and that is Young Americans for Liberty, folks. If you want to go ahead and get out there and make a real opportunity to jump headfirst into liberty movement and make a real impact well, Young Americans for Liberty is currently recruiting campaign field staff to help elect pro Liberty candidates across the country as part of Operation win at the door. These principles candidates are dedicated to fighting for gun rights, keeping our troops home, parental rights and education, criminal justice reform, ending our senseless spending, and many other winning Liberty policies. And when I say winning, I mean it. Their work speaks for itself. These are the guys that pass constitutional carry in states like Indiana, Texas and Alabama. They fought the lock downs every step of the way, all while helping make Liberty win. So you want to help make a difference and get Liberty candidates elected across the country. If you want to be a part of the fight and actually make an impact in our insane political climate here in 2022. You can join one of these campaigns from now through November 8 Gas covered housing fully provided and you'll be compensated a total of $2,800 a month for your work on the campaign trail. So interested hit the Brian Nichols show.com forward slash ya L to apply and make a real change in this country today. That's Brian Nichols. show.com forward slash ya l let's make liberty when one more time Brian Nichols show.com. Forward slash ya ll All right, folks. So yeah, I teased his reappearance here on the program. So excited to have him. John Milton morefrom Fie. Welcome back to the program.

Jon Miltimore  2:15  
Hey, good to be here with you, Brian. It's been absolutely John.

Brian Nichols  2:18  
Thank you for returning to the show. It's been a little bit up. We were talking beforehand. Last time you were on the show. I just got settled here touchdown in Indiana. And yeah, I was not I didn't have my studio setup. yet. I was still working remotely from my laptop, or quote studio. So yeah, now we're settled in. And yet the world still is on fire. John, it still is on fire. I thought things were supposed to get better but seemingly not. So you thankfully had been helping lead the amazing team over at fie fighting the good fight and trying to restore some sanity when it comes to the conversation in the political world. Talk to us what's been going on over at the world of the Foundation for Economic Education.

Jon Miltimore  3:00  
Now we're just trying to keep things glued together. No, don't really, it's the best of times. It's the worst of times. I think there's probably a lot of times in history, when you can say that. Yeah, there's some there's some bad ideas out there going around. But I mean, it fee we're just trying to get people to understand that the virtue of liberty and basic economics, I think if you look today, they're not enough people study economics, economics, not enough people really understand what it is. So we try to get people to understand those concepts, try to find creative ways to do it. You know, you know, we're really trying to get young people to take some interest in these ideas, these fundamental principles that are really important. You know, like, there's ways to do that, that young people find interesting, you know, through pop culture through movies through literature. So fe, you know, we're, we get we got some talented young people, a lot of your viewers probably already know, you know, Brad Palumbo and Hannah Cox. I'm excited. We just are hazlit Fellowship. For those who don't know about it. It's a writing fellowship for young people, young students, you know, some recent college grads, we have a cohort right now that, I mean, I hate to, you know, get into hyperbole, but they really knocked my socks off. I could not believe how talented and bright a lot of these young folks were, that they they don't just understand economic theory, but they've read it in and out. And they they're understood understanding of philosophy at times was daunting. I haven't read a lot of philosophy. You know, in since college, it's out something you know, one of those things that I don't go home and crack philosophy books, but just a really bright group of young people. So we're really excited about that.

Brian Nichols  4:46  
Yeah, as you should be, because and you know what, I saw this too. We just talked about our episode sponsor their Young Americans for Liberty. I was down in Orlando, Florida back at the beginning of August and I got to see it firsthand to 1000 and plus young League, Liberty activists and into your point, knowledgeable not just about the issues, but specifically about the tenor of what the situation is right now. And being able to address the issues that truly matter, and really doing so in a way that meets people where they're out on the issues they care about. And that can be sometimes difficult. John, if we're gonna be really transparent, honest here, when you're talking about something as fun as economics. Yeah, you're really exciting and enlightening? No, but it's truly it is tough, right to get people excited about that. And yeah, that's something you guys have been able to do. And let's talk about a few really important articles I think you guys have put out there over the past few weeks. One that's actually was, I think, aired recently here over the past few days. And that is talking about modern monetary theory. Now. MMT, as more commonly known, really took off over the past few years, led by the folks out there like Alexandria, Ocasio Cortez and Bernie Sanders, and more of the folks in that camp. But it really hasn't stood up to not just its own merits, but also to the basics of economics. So talk to us, John, what is it about MMT? That had it doomed to fail at the onset?

Jon Miltimore  6:11  
Yeah, it's kind of funny, because we joke that MMT is kind of like the flat earth theory, in economics, like you won't find hardly any, you know, economists, virtually zero that that take the idea? Seriously, it's kind of based on this idea that we don't really don't need a budget, the government can, can just can just print money with like the government can actually run out of dollars, you can always print more. The funny part was, this theory actually started to gain steam, you know, just a few years ago. And really, you know, the author of that piece points out, it was kind of one of the things that that allowed the pandemic to happen, if remember, the whole basis for the lockdowns is we can just kind of print money, you know, send checks to people and everything will be okay. I think if we didn't have the Federal Reserve doing what it is currently doing, we never would have had the lock downs, it wouldn't have been on the table. So I think, you know, MMT is kind of important in that respect. You gotta it's an idea that even though most, you know, economists have both the right and left, you know, reject it. It had, you know, it's part of what we've seen here the last few years. And yeah, it has failed miserably. You know, we've seen basic economics show exactly what we've been saying would happen happened, you have, you know, 30% of the dollars in circulation right now were printed in the last, you know, 18 months, you know, 24 months, whatever it is, what's going to happen when you increase the money supply like that, well, you get inflation, and that's what we've seen. And so like, if you look, the Federal Reserve Board was just shocked by all this inflation. But there's a lot of people in our school of economics that no, this is exactly what's going to happen. And, and we got new inflation numbers out today. They were they were really bad. So they weren't good. No, they were not good. Like, if you look at it through the, you know, August was it was a little a little lower than July. But what we're really seeing is Lord summers just tweeted about this, you know, John

Brian Nichols  8:11  
0%, in July, demand striking,

Jon Miltimore  8:15  
you read these tweets, it's almost frightening when you see it. But yeah, summers, as you know, a heart former president of Harvard served as an economist in the Obama administration, and, you know, it was treasury secretary under Clinton, you know, he just had a great tweet, just saying these numbers, you know, showing that inflation is really heating up when you when you when you stand back and look at it in markets today reacted to that. I don't know if you're invested. Investors, you know, first saw, even before the opening bell stocks were tanking inflation is a really serious issue. And these schemes about you know, like saying that we can just abolish student debt, like, like, these are the reasons that that that we have this inflation, you can't sit there discretionary spending is a huge problem. Jerome Powell to his credit, finally, you know, he came up and said that, again, it's like saying the sun is hot. But we need to get this spending under control, or these numbers are gonna get worse, not better.

Brian Nichols  9:08  
Yeah, well, and it goes back we had a thorough Bush appear in the show, we're talking about what happened to our money. And really what happened to our money was government What did government do to our money, and you saw it was directly as an impact of the Fed and the results of the Federal Reserve going through, and this case over the past two, three years, especially printing with a $7 trillion on exorbitant number there, the money number just boggles the mind. It's beyond comprehension. And yet, we've gotten so comfortable with it, which is the part that scares me, you know, we're at $30 trillion, you know, creeping up towards $31 trillion. And that just blows me away. I remember working on a congressional campaign all the way back in 2012, believe it or not, and the main concern thing was around $10 trillion at the time, and that was too much. And now we're over, you know, three times where we were then and that that right there now only is that not sustainable. But, of course, you're gonna feel the pain. We're feeling that right now, inflation to your point month after month has been consistently increased from where we were in the years past. And yet, I don't get it, John, a lot of folks still seem to want to continue down this path of MMT, or at the very least, leaning more towards this, this Keynesian approach to economics. And I just don't get it like, how long can you just pretend that what's happening is not happening as a direct result of the policies you've been promoting for years and years and years, the writing's on the wall, we have the results right before us. You can't just say it's the free market, you know, it's things we can't control. No, it's literally your desire to control that has caused the problems we have today.

Jon Miltimore  10:50  
Yeah, I think that's why it's important to be, you know, to acknowledge the economic pain, when you when you see this inflation, when you see negative, you know, growth, domestic product, like we gotta be honest about that, not not trying to paper it over, politicians are going to always do that, right, they're always going to try to make it, you know, when our guys in office, we're gonna make it sound as rosy as possible. But it's it's real serious, but the pain is good. It's going to hopefully, you know, have us try to correct some of these things cannot be done. I'm not sure that there's really an appetite to do what's necessary, you know, time will tell, you know, it's funny, I was never a monetary guy like most of us are, I think that's probably to your question, why is this happening? People don't really want to pay attention to central banks, right? It's not where our attention is, we're, to the extent that people are focused in ideas, it's probably more in the politics and stuff like that. But I recall FA Hyack, saying your many years ago, that history is largely a history of inflation. And I kind of thought, Well, that's an economist is he? But you realize he's right. And when the more you look at history, you realize all these nations have come and gone all these civilizations that have come and gone. A stunning number of them, it's because of monetary policy, because you have politicians that corrupted the currency. We, you know, we got to make sure that we don't go that way.

Brian Nichols  12:12  
Yeah, well, and John, let you know, one of the problems, I think, too, is when you look at something like modern monetary theory, yeah, it might be, quote, modern and MMT. But it really has done nothing but revive a lot of old problems. And you're seeing that also carry over when you're talking about some solutions that are just as old as they were. And as failed as they were back when they first came up price controls wrote an article over that. Talk to us about price controls, you have this article over just erudite was yesterday, overhead fee, how price controls have failed for 4000 years? And yet we humans still haven't learned?

Jon Miltimore  12:48  
Yeah, you know, what kind of sparked that initially for me was Axios had a piece that they published a few days ago, that said, 70s, you know, price controls are back. And I was done to look at you have all these leaders around the globe, including Janet Yellen that are talking about imposing these price controls, to try to curb, you know, oil prices in Russia. And you know, it's funny, we have 1000s of years that show you know, price controls fell. You can go back to ancient Mesopotamia, before the code of Hammurabi actually, in see you had people trying to say, Okay, this is a one shekel of silver came by you this much grain, and one shekel of silver can buy you this much oil. And there's a reason the Babylonian Empire didn't last, I think, think price controls had a lot to do with it. But it's not just ancient Babylon, like you have like, like, you know, we look at the Greeks and all the history that produced it gave us the works of Homer, and Sophocles. But you see, in Athens, they had the same problem. You know, Greece wasn't a huge, you know, they didn't do a lot of farming there. And they had a highly regulated grain market. And it was riddled with price controls, and it caused all kinds of problems in the price. The penalty, I should point out for evading those those price controls was death. And there was trials in like 388 BC talking about because you had prices out of control, and they were going to try to blame, you know, a cartel that was kind of a legal cartel at the time, you know, for that. And so there's these famous trials, people know, you know, I bet you a lot of listeners would know anyway, about the the price controls in ancient Rome passed by Diocletian, that stretch stretching across the Empire. They were trying to impose price controls on everything, you could, you know, clothing, you know, all kinds of food, even labor. We know that a lot to today, right? Like labor controls aren't just popular, they're kind of accepted around the country. The problem is price controls don't work. And we have tons of evidence that show that the worst case scenario scenarios are really severe. You know, we look at the minimum wage Agency, okay, we see some states that have a $15 minimum wage. And, you know, there's there's problems with that, because it does lead to unemployment, you know, for people that actually can produce the last the least amount of value. But it gets much worse than that. You know, just writing this article, I came across the famine of Bengal, which happened under the British Empire. And it's really, you know, just crazy to look at this famine, it killed an estimated 10 million people. And there's very little, you know, out there on the internet about it, Adam Smith did touch on it in the Wealth of Nations. In pointed out that sure, you you had you had a some monsoons? You had some droughts, that kind of precipitated the shortage, but it was the price controls that led to this being a full blown famine. And so if you look, you know, again, this is something economists we there's very little disagreement on this, like you don't see any sort of credible economist saying price controls are good, yet they're coming back in strange ways. And I think if we don't understand basic economics, and price controls only make matters worse, and understand why they make matters worse, right? Prices are signals, that what too high prices, do they say, Well, boy, I better conserve that. Or, or maybe I shouldn't buy that or use that. That's one signal. What's the other signal? If there's high prices out? There, it shows, you know, it's really an incentive to produce things REITs have to invest to get stuff to market, high prices can they're a pain for consumers, but they can really help markets out there, you know, as one economic professor. I was told, like I used to say, in class, a friend of mine shared this with me, you know, like, high prices are the solution to high prices?

Brian Nichols  16:54  
Well, you talk about basic economics and how important basic economics is for folks to understand, you know, else is important for folks to understand basic financial literacy. I always talk about this actually, we just talked about this recently here in a recent episode, where we were talking about how you know, when we're talking about funding students and not systems, because there's a lot of folks out there who yet they haven't had the chance to learn the very basics, and the education system isn't built to go out and actually teach kids this. So let's talk about what you guys are doing over a fee to help solve that gap and fill that gap. And that is helping educate folks on financial literacy. John, what's that about? Yeah, no,

Jon Miltimore  17:33  
it's very exciting, I can kind of talk about it. Now. It's been in the works for a little while, but we have a new project called the heroes project. And basically, it's all geared toward financial literacy for young people. You know, I can say, when I was young, I didn't really know very well out how interest works, right? Like, you kind of know, like, the basics of compound interest. But, you know, I think a lot of the problems we see today is because young people don't have any understanding, right, they take out massive, you know, college loans, don't really think about, you know, how much you're going to pay on those loans in the long term. But that's just one one thing, you have all these ways that, you know, there's ways to make money, they like it, in a lot of this. I think their fees approach this, this is what I really like we're trying to do it, you know, it's not all about, like, how to make money. It shows like simple ways to do this, like through your habits, right? A lot of there's one writer I spoke to about this. And his first, you know, reaction was, well, he didn't want to really read about financial literacy as much as you want to write about emotional literacy. Because he said, you can't have financial literacy without emotional literacy. This point isn't so much about this is like just finding good habits in our lives. And cultivating good habits. You know, it is like, it's other things, like just understanding how to how to create passive income in your life, right? Like, there's a lot of times like, we have some capital, what do we do, you can put that and buy something that you use right away, or you can kind of, you know, put some capital together and find ways to buy things that are going to produce income for you over the long term. And I just think there's not a lot of people young or old in our country that really think about this stuff. There are some right, those are the entrepreneurs, those are the people that are always, you know, kind of the backbone of our country, you know, bringing things to us that that make our lives better. But but really, it's it to me an exciting project because finding creative ways to promote financial literacy and get people thinking about it, to me is is just a it's a great opportunity.

Brian Nichols  19:39  
Amen. Well, John, I can't thank you enough for for not only joining us during the show, but also all the amazing work you and your team over at fie are doing and now it's the time of the show. I like to talk about our final thoughts for the audience for the week. Now. My final thoughts are this folks at the end of the day, we talked about this in the past we're not selling an idea A product a service, basic economics but rather we're trying to help sell change. In this case, we're trying to help change people from where they've been either a in this old status quo, apathetic mentality or be more in this leftist, more Ken Keynesian approach to economics now, who are we going to have better chance of actually going after and winning over, it's gonna be the folks who are more apathetic. So instead of just trying to convince other people that they're wrong with their opinions, let's start talking to the folks who are maybe starting to ask them questions, and let's start answering those questions with some common sense solutions. Now, folks, if you're getting value from what we're doing here at The Brian Nichols Show, showing how to have these different conversations, so I'm going to ask you to do me a favor as well, please end the Brian Nichols show.com forward slash support, you can help support us financially two different ways. Number one, become a super fan $5 A month over on our Patreon, you get quarterly or other monthly Q and A's with yours truly, also, you get to help support the show on a monthly basis. And I definitely appreciate that. But also, if you want to go ahead and stead and make a one time Pay Pal donation, you can do that as well. $5 $20 $100, it doesn't matter, whatever you can do, I greatly appreciate it because it goes into The Brian Nichols Show. So we can have more folks like John and be able to have John come on the show to talk about the amazing work that he's doing over at fie. So folks, if that's something you get value out of, well, I would love to see your value in terms of some value. So Brian Nichols show.com, forward slash support. John, final thoughts you have here for the audience today?

Jon Miltimore  21:28  
Yeah, I'm encouraging everybody to check out our work@fi.org That's f e.org, you'll find you know, some of my writing there, but you'll find a lot of other things, you know, articles, but also some great videos. You know, we put together a really talented team, and we're gonna have a lot more voices on there. Like I said, the we have eight new has fellows that are really excited about, you know, bright minds. And I guess my parting thought is sort of something that we've been talking about it feels like, like the world is, it feels like it's a mess sometimes. And we you know, I think a lot of people in our movement are trying to find good ways, you know, to make the world better. And I think what we're talking about at fee is for me really inspirational, if you want to make the world better, make yourself better. And that's something our founding father Leonard Read was the founder fee, really stressed? It's, it's in a lot of his writings, which you can find it on our website. And it is this idea of you, if you want to make the world better, you know, watch yourself, what can I do first? What how can I be a better a better learner? How can I be a better teacher? How well do I really know know the ideas that that I think I know. And for me, that's been a challenge, like, like, it was kind of like a little convicting and saying like, you know, what we want, we want to be lifelong learners in Liberty, in philosophy and economics. And that means kind of like continuing to push yourself learn. And I think by doing that, what we're all I mean, that's really the key to, you know, our movement. I think that's how we're going to be the best evangelists for liberty and get people to see that, that these ideas are important. And that that other track is a dangerous one.

Brian Nichols  23:08  
Be a better learner, not a letter burner. I can't agree more, John. Alright, with that being said, talk to us. Where Can folks go ahead and follow you over on social media and continue the conversation?

Jon Miltimore  23:19  
You can find me on Twitter, Milton Moore 79 is my handle. That's where I am most, you know, like, I think it'd be like a social media. It's the place to be for me. I love Twitter. Twitter's a lot of fun. I'm happy to follow back any listeners and have it talk to some of your fans over there.

Brian Nichols  23:39  
Awesome. All right. Well, folks, if you enjoyed today's episode, do me a solid, go ahead, give it a share. And when you do, make sure you tag John and please go ahead and tag yours truly as well and be Nichols Liberty also, folks. By the way, did you go ahead and give us a five star rating or review yet? If not, well, no worries had the Brian Nichols show.com For slash reviews give us a quick five star rating review. If you if you're doing that, because you've heard us talk today about that on John's episode, make sure you go ahead and give him a mention as well over in the review. And I'll make sure I go ahead and share it to him as well. And oh, by the way, folks, if you were trying to catch all those different social media handles, don't worry. If you're on the podcast version of the show, all you got to do is click the artwork in your podcast catcher, it'll bring you right over to the Brian Nichols show.com where you can find today's episode, John social media links the entire transcript from today's episode, you can have the video version of the show as well plus, we have over on Odyssey and oh, by the way, oh 582 other episodes of the program. And by the way, speaking of other episodes of the program, did you catch my episode? yesterday where I went ahead it was you and me and we talked about call scripting 101. I actually showed you some of the call scripting I use when I'm doing my sales calls from my day job. So if you want go ahead and give that a check, because I promise you and use it not just if you're in the world of sales, if you're an entrepreneur, even if you're in the world of politics, believe it or not call scripting is important. So I'll go ahead if you're here on YouTube, I'll include that for you right here below. Otherwise, you can go ahead and find it over at Brian Nichols show.com. But with that being said, it's Brian Nichols signing off. You're on The Brian Nichols Show for John no more from fi.

Unknown Speaker  25:13  
We'll see you tomorrow for listening to The Brian Nichols Show. Find more episodes at the Brian Nichols show.com

Transcribed by https://otter.ai

Jon Miltimore Profile Photo

Jon Miltimore

Managing Editor

Jonathan Miltimore is the Managing Editor of FEE.org. His writing/reporting has been the subject of articles in TIME magazine, The Wall Street Journal, CNN, Forbes, Fox News, and the Star Tribune.

Bylines: Newsweek, The Washington Times, MSN.com, The Washington Examiner, The Daily Caller, The Federalist, the Epoch Times.

He previously served in editorial roles at The History Channel magazine, Intellectual Takeout, and Scout. He is an alumni of the Institute for Humane Studies journalism program, a former reporter for the Panama City News Herald, and served as an intern in the speechwriting department of George W. Bush.