Interesting question. A third of my undergraduate degree was in economics or political economy. Personally I think economists are externalizing the ecological costs way too much. Our economy is from ecology - so my phrase for this is, "I am highly leveraged against civilization" - meaning I am assuming a HUGE cost from our abrupt global warming crisis because you can't eat money. The arctic ice is almost gone - economists and physicists ignore this. But regardless of all that - Hudson is advocated government creation of currency as the basis for MMT. Mosley seems to think that whole topic is not viable - meaning that private debt and private banking is not wrong and not a problem. So he says some kind of job guarantee is the answer - provided by government spending.
The key point in Mosley's talk is "Debt to GDP" ratio in terms of MMT. Not sure why it took him so long to get to that point. This is the same point that Hudson emphasizes - so Biden's Inflation Reduction Act was investment in infrastructure for production (energy and transportation - just like Eisenhower had done with interstate building and housing). Reagan-Clinton-Bush-Obama as Neoliberals were focused on financial derivative speculations that led to the Great Crash of 2008 from which we have never recovered. The Tariffs have already brought down imports at the shipping docks by 40% so now we face a Great Depression.
Mosley is not mentioning the military budget. As Noam Chomsky emphasized our economy is socialism for the rich but our tax spending and 80% of our debt spending is for military contractors!! So this is to prop up the PetroDollar as the global currency. Hudson does focus on this problem since obviously it's not efficient to have an overextended military empire of bases that rely on genocidal war policies to force other countries to use the U.S. dollar as banking and loans, etc. So Hudson is perfectly correct to emphasize that the tariffs are simply accelerating the move by China to not need to have a surplus of U.S. dollars to buy U.S. treasury bonds.
So the problem is China can't unload them so fast to tank the value of the U.S. dollar because otherwise the U.S. dollars received back from cashing in the Treasuries would have no value. There still has to be an exchange of those dollars. So China is simply reinvesting the dollars into industrial trade and investment agreements in other countries. This helps poor countries pay off their debts in dollars.
The Debt Forgiveness plan of Hudson means that eventually the private Banks will have to ERASE their debts that governments owe to them - via the central bank dynamics.
As Nomi Prins emphasizes - it's not just the U.S. Fed private banks but also the central banks of other big industrial economies that have followed the U.S. Fed policy. So this is why we have the rise of fascism just like we did in the 1930s because you have this financial speculation increasing government debt that increases inflation as "debt deflation."
Late Capitalism is not going to "forgive the debts" as the student loan debt forgiveness showed - even the common person completely freaks out against public "free education" since they already paid too much for their education. Corporations are the true reason education is so expensive since Reagan set up a 100% tax deduction for corporations to control science as a public subsidy to corporations. This gets hidden as public-private research in labs that the students don't even know they are subsidizing!! I exposed this when I was a graduate student at U of Minnesota but having a couple op-eds does not really cause much focus.
But production and consumption are not the entire economy. Modern Monetary Theory (MMT) was formally developed in the 1990s, with roots that can be traced by Abba Lerner’s theory of functional finance, and by Hyman Minsky and others seeking to integrate the financial sector into the overall economic system in a more realistic and functional way than the Chicago School’s monetarist approach on the right wing of the political spectrum. A key point in its revival was Warren Mosler’s insight that a currency-issuing country does not “tax to spend”, but instead must spend before its citizens can pay tax in that currency.
MMT was also Post-Keynesian in the sense of advocating government budget deficits as a means of pumping purchasing power into the economy to achieve full-employment. Elaboration of this approach showed how such deficits created stability instead of the instability that results from private-sector debt dynamics. At an extreme, this approach held that recessions could be cured simply by deficit spending. Yet despite the enormous deficit spending by the U.S. and Eurozone in the wake of the 2008 crash, the overall economy continued to stagnate; only the financial and real estate markets boomed.
That occurred in the United States in the final years of the Clinton administration when it actually ran a budget surplus. But with a public sector surplus, there had to be a corresponding and indeed identical private sector deficit. So the effect of that policy was to leave either private debt financing or a trade surplus as the only ways in which economic growth could obtain the monetary support that was needed. This built in structural claims for interest and amortization that were deflationary, ultimately leading to the political imposition of debt deflation and economic austerity after the 2008 debt crisis.
I actually just heard a fascinating "Eurodollar" youtube channel analysis claiming the TRUE cause of the 2008 global financial crash was due to LACK of U.S. dollars in Europe to prop up the Eurodollar... or something to that effect. Liquidity crisis in the Eurodollar. But I don't think it can be separated from all the highly leveraged junk real estate derivatives or whatever...
Warren Mosler (born September 18, 1949) is an American hedge fund executive[1][2] and entrepreneur. He is a co-founder of the Center for Full Employment And Price Stability at University of Missouri-Kansas City
So both Mosler and Hudson are at the SAME economics department!!
Michael Hudson
Well, for many years I was at the center of the university that promoted modern monetary theory, the University of Missouri at Kansas City. And that was created with a contribution by Warren Mosler to bring the faculty there. So yes, I’m one of the original modern monetary theory faculty people.
And the theory is that it’s not really a theory – it’s the description of how banking really works. And I guess the leaders outside of academia are Dick Cheney and Donald Trump. They said that deficits don’t matter, we can simply do what banks do. Just like when you go into a bank and you take out a loan, the bank doesn’t have to have any money in it. It will write you a loan and it will deposit money in your account. And so, the bank asset goes up by your deposit and your asset goes up by the deposit. The bank has a credit to you, the loan IOU that you signed at interest. And the debt, what it’s had to borrow the money from the Federal Reserve, or something. Banks create their own credit money.
Governments can do the same thing. The government can print whatever it wants. In fact, every time there’s a war, like World War I, all the observers thought that World War I was going to end in six months because governments would run out of money. Well, they didn’t run out of money, they printed the money. Just like America printed greenbacks in the Civil War. And the people don’t have to borrow money at all.
For instance, I was the advisor to Canada in the late 1970s, and there was a controversy over should Canadian provinces borrow money from Germany and Switzerland. And you had the banks saying, “Let us, for a commission, arrange for you to borrow at very low interest rates from Switzerland and Germany. You’ll borrow the marks from them and you’ll only have to pay maybe 2% instead of the 6% or whatever you’re paying today.” So, they convinced the gullible provinces to pay money.
Well, the government hired me to write a monograph Canada and The New Monetary Order for one of their research institutes and I pointed out well, “When the province of Alberta, or wherever, Saskatchewan, borrows money from Switzerland, what happens? The Swiss bank puts the money in the Bank of Canada. The Bank of Canada then prints the Canadian dollars and turns it over to Manitoba, or wherever for spending locally because the provinces are not going to spend Swiss francs or German marks, they’re going to spend Canadian dollars.” I said, “Well, no matter what happens, the Canadian government’s got to print these dollars. What do you need lenders in Switzerland or Germany to lend you money for?”
Well, there was a meeting with the banks and they said, “Well, you need us to be honest brokers. We decide who can afford to borrow money or not?” And I said, “Let the government decide that. We don’t need you at all. You’re telling them to borrow money, anything that will make you money. You’re just a bunch of goddamn crooks?” And they said, well, “They need our advice. The governments are not that competent. Government is bad – private enterprise is good. We’re private people.” And they even trotted some Jesuit priest in that said, “That way goes to the gas chambers. You can’t have a strong government. Hitler had a strong government. Look what he did. Why do you want to send Canadians to the gas chamber and not let this nice bank of Nova Scotia arrange a loan in Swiss francs?” That actually happened.
And the result was that the banks – I’m sure there was personal bribery there because we’re talking about Canada – they borrowed Swiss francs and German marks at a time with the Canadian dollar was worth more than the American dollar. It was up to about $1.10. Well, within three years, the Canadian dollar had sunk to 80 cents for the US dollar, and much more against the German mark and the Swiss franc that went way up, and the provinces were broke
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