4.4 • 645 Ratings
🗓️ 16 April 2020
⏱️ 7 minutes
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0:00.0 | So the way the modern monetary theory works is the idea is that Congress can increase the government's expenditures. |
0:07.1 | Right. |
0:07.4 | Because Treasury can, in theory, if you changed the way the Federal Reserve system works, monetize the debt. |
0:16.4 | So the way the mechanics would work under the current system is the Treasury Department |
0:23.6 | would first borrow the money by issuing debt and somebody would buy that and that |
0:32.6 | could be if the law were changed the Federal Reserve. So the Treasury could borrow money from the Federal |
0:40.3 | Reserve. The Federal Reserve gives the money to the Treasury Department, and then the Treasury Department |
0:46.3 | spends the money. And the point is there's no real constraint on that as long as the Federal Reserve |
0:52.3 | is willing to lend the money to the Treasury Department, |
0:54.9 | the Federal Reserve can create as much money as it wants. |
0:58.0 | Now, there are, of course, and modern monetary theorists recognize at least some of these |
1:02.9 | constraints. |
1:03.4 | There are constraints because money is sociological. |
1:06.4 | So if you start doing this, you're going to change expectations about the value of money depending on |
1:13.6 | how much you're doing this and whether you've restrained in any way your ability to do it in the |
1:20.2 | future. If you issue huge amounts of new money and there are expectations that you're going to |
1:27.2 | issue even more, |
1:29.1 | then people will decide that the money that you're issuing is not worth as much. |
1:35.0 | They will want more of it in exchange for goods and services that they are turning over |
1:40.9 | and accepting money in return for. |
1:48.1 | And so that's inflation. And you can get a lot of inflation if you damage the sociological consensus around the amount of money that there is |
1:54.6 | going to be because there is a supply and demand that work here, the value of one unit of |
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