TDS Time Machine | Money Talk - Conversations with Economists

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You're listening to Comedy Central.

My guest tonight, he is

the chief economist at American Compass.

It's an economic policy think tech.

He writes the newsletter, Understanding America.

He's the author of the forthcoming book, The New Conservatives.

Please welcome to the program, Orin Cass.

Sir!

i got markers all over folks

throwing them around thank you for joining us thank you for having me i i wanted to have you on uh i want to tell you i i really do enjoy uh your writing i follow the uh uh i don't know what they're called now substack blossom

substack uh and and i i read your books i always find them i don't necessarily maybe agree with all of it but I always find it really interesting in really good faith this is this idea of the new right

on on the economy can you explain what's the deviation from previous orthodoxy and sort of what that entails sure I think the best way to understand it is that you know we went through a period of 30 or 40 years where conservatives just had way too much faith in markets just trust that you get out of the way and you're going to get great outcomes and markets can give you great outcomes but they don't guarantee great outcomes.

And so conservatives have been seeing, especially over the last decade, a lot of the things we care about, things everybody cares about.

Do jobs pay enough to support a family?

Are we too dependent on China for everything?

Can we make computer chips in this country?

Markets were perfectly happy to give us really bad answers on those questions.

And so conservatives are starting to say, well, wait a minute, we actually have to care about this and we have to be prepared to do something about it.

Now, when you say this at the meeting with the other conservative economists, did they go, leave us?

Like, it really seems like that is fundamental heresy on, you know, I've listened for years.

The reason we can't do sort of social engineering or social policy or redistribution of wealth is the government's not in the business of picking winners and losers.

That is now

off the...

The new right is saying, actually, we do.

Yeah, I think that's right.

The new right is saying, actually, there are some things we really want to see win.

And that's what politics is.

What would politics be if you just pretended you sort of didn't care about anything?

You'd sort of have a lot of the very uninspiring Republican politics of the last few decades, I would say.

Now, you started, though, you worked with Mitt Romney, who was considered

the avatar

of that.

Was he open to this idea?

Where did it start to find traction for you that a more activist activist government, this sort of idea of economic policy as kind of social engineering, when did it start to gain traction?

I mean, for me, it actually started working with then Governor Romney.

Like you said, he was conventional in a lot of ways.

One of the issues I was responsible for with him was trade policy.

And we brought him the very typical, here's what Republicans say about trade briefing.

And he said, well, that's fine, but what are we going to do about China?

And to your point about all the other conservative economists in the room, they were,

what are you talking about?

We don't do anything about China.

If China wants to send us cheap stuff, we say thank you very much.

In the meeting, what does it sound like when the monocles fall out of the eyes?

Does it clink?

It just feels like one of those, like,

there is the...

Great Pupong!

The gasps can be disturbing.

Yes.

To your point, there's a lot of

religious fervor, frankly, on what I would call the old right about some of these ideas.

And when someone says something very common sense, like, well, wait a minute, maybe, you know, an authoritarian communist government that's trying to hollow out American manufacturing, like, maybe that's not really free market.

I was saying, I was like, wow, that's...

That's a really important point.

And I was the one assigned to go off and try to figure it out.

And what I discovered was that on the right of center,

really going back to the mid-1980s, there had just been no thinking about this.

There had been an increase in the- Of protecting that manufacturing base or our industrial center.

And then I think in COVID, you saw everyone kind of pause and went, oh, we don't have supply lines to make paper masks.

Like, we don't have anything.

Was that where

you saw it really get a foothold?

I think, you know, I think on the right of center, it was the China problem was active even before COVID.

Because I think, you know, one thing, and it's important to say, this is a fairly recent conservative phenomenon.

If you go back in the history of conservatism, even if you look at Ronald Reagan himself, Reagan was a trade protectionist.

He basically started a trade war with Japan because he did care about these things.

This was in the days of Japanese car makers were making cars that were cheaper, people were preferring them, they were dominating the market

in America.

And Reagan negotiated an outright quota that Japan, not even a tariff, hey, Japan will not increase the number of cars it sends into America.

And that's why we now have the American auto industry in the South.

Honda and Toyota make American cars essentially because somebody like Reagan was willing to recognize trade is good if it's fair and balanced.

But I'm going to mix things about whether or not that five years later it actually gave too much leverage to these Japanese countries and they got to drive very hard bargains for American labor in the South.

For instance, they didn't build them in Michigan.

They didn't build them where union labor was.

They built them,

they undercut union labor in some respects.

They did choose to go to states with non-union labor.

The way that the unions were behaving at the time was one of the reasons that U.S.

automakers were falling behind.

That level of inflexibility was a real challenge.

And that's also something that you saw Reagan really take on and confront.

So I don't think there are a lot of people in the American South today who would say, boo,

we wish these automatic.

Sure, come.

It was an enormous gain, and the investments have led to much higher productivity over time.

So I think that's the story of what we want to see more of.

Bringing that back and giving the country a resilience that losing that base actually costs us.

And this brings us to Liberation Day, which is April 2nd?

April 2nd.

April 2nd.

Mark it down, Liberation Day.

The Trump tariffs, we don't know what they are,

but we know they'll work and that we will live on Mars in, what, eight weeks?

I don't know what's going to happen.

Do you know what's going to happen on Liberation Day?

I don't know what's going to happen.

And I think that there has rightly been at this point a lot of criticism that the way that the Trump administration has been rolling a lot of this out is just leaving too many questions.

That if you want to do this right, you need certainty and predictability, clear communication.

All core values of the Trump administration.

Fair point.

One of the interesting things about the Trump administration is that the team he has around him this time on the economic side, so Secretary of State Rubio, Secretary of the Treasury, Scott Besson, his chief economic advisor, the U.S.

Trade Representative, he's really surrounded himself, I think, with a quite strong team that

thinks consistently about this.

And so, you know, that's something that.

Does he ever like ask them?

That is a fair question.

And that's what I think everybody's waiting to see is can we sort of get this moving in the right direction?

Because it is important to say that the direction is important here.

Right.

You know, really for 25 years, going back to when we let China into the WTO, we have pursued this model that says more free trade always,

regardless of what happens to American workers, regardless of what happens to American industry, we just want the cheap stuff.

And that has been really damaging.

You know, in some respects, though, we regard,

I think we're putting a certain

motive on China when in fact, like, these were corporations seeking the lowest water of wages and what they could pay people.

And certainly labor can't travel the way that capital does.

You know, I guess the idea is we levy these tariffs and then these corporations that had been seeking this will all go, oh, okay, it's not worth our while anymore, and they'll reinvest in the states.

Is that kind of the broad theory of it?

Yes, the idea is that corporations are going to respond to incentives.

And you go all the way back to Adam Smith and the wealth of nations and the idea of capitalism.

You want people pursuing profit to do that in a way that is also good for the society.

Where I think a lot of economists, and this is left and right of center, got it wrong was to think that's just always the case as long as they're pursuing profit it's going to be good right and it's only going to be good if it's within certain constraints if the things that are most profitable actually are things that are good for the country and the government decides sort of what those constraints are so they put guardrails around them I guess the question I have is Tariffs feel

somewhat, I don't want to say whimsical in the sense of, oh, he, you know, dances downstairs in a tutu and says, 25% on whiskey.

But they are executive actions.

And if you're a business making a, I assume their plans are five year, 10 year, 20 year,

if they could just be repealed by the next guy and it's not legislation, is that really an effective incentive for bringing back all that manufacturing?

I think that's a very fair concern, and ideally it would be done through legislation.

I think one of the things that's very encouraging is to see that that we are increasingly now seeing a new bipartisan consensus that we do want to change.

I'm sorry, I don't know that phrase.

Rose?

It started when President Joe Biden essentially kept all of Trump's trade actions.

Everything that Trump did on China, Biden kept and then even extended some.

But wouldn't like the CHIPS Act, right?

Wouldn't that be another way of incentivizing without setting up barriers that might be more unpredictable or might be flimsier depending on the whim of an executive?

Why don't they embrace that in the same way?

Doesn't that add to

getting the outcome you want, incentivizing, bringing those jobs back?

Why is that unpopular on the right?

Well, it's only unpopular with some on the right.

And I think it goes to where we started, which is this historical concern with the idea of sort of picking winners and losers at all.

Right.

And a lot of concern that, you know, what's going to happen if government actually gets involved in giving particular benefits to particular companies.

That being said, the CHIPS Act was bipartisan.

I think there were maybe 17 senators.

You know, J.D.

Vance has been a supporter of the CHIPS Act.

Right.

And so, you know, I think, again, that's a step in the right direction.

Would you rather see it through that kind of industrial policy or through, or is it a real balancing of all those various levers?

I think you have to do both because if you only do the CHIPS Act kind of thing, CHIPS Acts is great if you've got one thing that's really important.

Almost everyone agrees, you know,

steel and, you know,

so this becomes question now, right?

Do you really want Congress now going through and saying, oh, well, now we need one for steel.

Well,

do we need one for aluminum?

Maybe.

Well, do we need one for cars?

Do we need one for airplanes?

That's both cumbersome and something that's very difficult to do well politically.

Whereas one of what I think actually the benefits of tariffs is that they are quite blunt.

The tariff is sort of, if done well, a much broader policy that sort of shifts the baseline.

And so I think you need that if you want to shift the basic decision-making that businesses are going to make generally.

And if there's particular things you really care about, that's when you also want to come in and give them support.

Did it surprise you?

Because we talk about China as being sort of this ascendant economic power.

And by the way, it's not just the manufacturing base of America that has been hurt by that.

All the countries near China can't compete.

You know, all around there, Indonesia, Malaysia, you know, they're struggling with a very very similar thing.

But then why go after Canada?

Like what,

do you know what I mean?

Like it just, it all seems so weirdly vindictive.

And then you're like, and then we're going to take over Greenland.

Like,

it does feel a little less like rebalancing economic

inequities.

And we've decided on a new world order where big does what it wants and nation states

we go back to a little bit of that colonialist model or imperialist or whatever it was.

Is that the concern, I guess?

It's a fair concern.

I think there's some truth to it that's not all bad when you talk about this new world order idea, which is that the United States has been sort of championing this liberal world order

where we have essentially taken it upon ourselves to frankly absorb a lot of costs from other people.

So in the trade world, it's not just China, it's also Germany and Japan and Korea.

We are absorbing their production.

They get the job.

Why don't you think we're buying influence?

I would say, so

the Trump view is they're abusing us and using us.

I think the view I have is America wants to tell them what to do.

And so by leveraging our military might, we have sway.

But do we?

What have we successfully told Japan or Germany to do?

I mean, in general?

Yeah.

In the last two years.

I think they've cut down on it.

No, no, no, no.

This is a serious point.

I appreciate the joke, but

there's a reason you couldn't answer the question.

And this is...

Well, I don't know what we'd want them to do because I feel like...

Well, if we don't want them to do anything, then what are we maintaining the leverage for?

Because, well, the leverage is on when we want to go into Iraq.

I guess what I'm saying is what we want them to do.

That was great.

Listen, I'm not saying it was right, but you have a guy like J.D.

Vance goes to Greenland and shits on Denmark.

Like, Denmark lost as many people per capita in those wars as we did.

Like, they talk about, you know, Denmark's not defending Greenland enough, like, and we'll do it, but aren't we doing it already?

Like, they're in NATO.

So, I guess my point is, like, that stable world order hasn't mistreated the United States.

I guess I don't see us as victims of a con game that Europe has been running on us.

And like the idea that we want Germany to be able to fend off Russia on their own places us in a very tenuous position, does it not?

Why?

I have a book at home

about Germany and their position as a global military power where we didn't have sway and they did what they wanted.

I mean, it didn't work out.

Frankly, I don't put a lot of creatives.

I don't.

And by the way, it's also

in...

No, no, no.

I want to pick up on this.

20% of the Oscar winning movies.

The fun applause line that, like, oh, the Germans will just become Nazis again.

Like, that's a weird, racist critique of Germans.

I don't see any reason to believe that.

Let's be honest, it is.

Let's look at the actual German state.

On what basis are you saying this is like something about Germany that we can't do?

I think

there is an element within their society that they've deemed.

This is not me saying Germans will do that.

This is Germany.

This is, I didn't say they'll become that.

The leaders of Germany are fearful that they had this.

I don't think they are.

I think leaders of Germany really enjoy spending virtually nothing on their military, while the United States spends roughly 4% of GDP on ours, as we have been doing for decades with other countries in NATO.

So you're really, you think they're like freeloading on our...

on our military.

There's no question they're freeloading on our military.

You can say you like that they're freeloading on our military, but I don't think there's any dispute that that's what they're doing.

I guess I don't understand

the

idea that they're freeloading and we want each nation state to build up their military to the point, because to me, that makes it more likely if you build something like that, it's more likely you'll use it.

Now, that seems to be backed by general history.

When people rearm, they tend to do it.

and use it.

But I think the idea that Europe needs to like, I guess what I'm saying is this is a fine adjustment that's being made with a sledgehammer, if that makes sense.

I think that's a very fair point.

I think where we started on

just to

my five-year-old gets one point of pain every time.

See, I'll take that.

Look, the

The New World Order point that we started with, I think, is very important here because what the Trump administration, and I think this is certainly Trump's view, J.D.

Vance has spoken about this, Marco Rubio has spoken about this.

Their view is that this world order we tried to establish in which the U.S.

does take on these burdens, and in your view, we benefit from taking on those burdens.

I think it's a mixed bag.

I would not say it's purely benefit.

I think what we do spend on defense is kind of insane, and to have 850 military bases to project power across the world.

I wholeheartedly agree with that.

I think unleashing those forces through vindictiveness and

like blaming them for victimizing us is not the methodology.

Like everything else, like Doge.

I always hate that straw man.

Like we go, I don't like the way this is going.

Oh, you're not for efficiency.

Like that same thing.

Oh, you just want Germany to keep freeloading.

That's not what I'm saying.

And I think it's a misreading of that point and not being fair to the nuance of it.

I understand that there can be adjustments in that and that free trade can be rebalanced and all those other things, but they're breaking something that did serve us, maybe not phenomenally, but okay.

And we had a really strong hand in building it, and now we're pretending like they did it to us, and that feels unfair.

Let me tell you something.

When I come on your studio show.

I realize that's difficult to handle.

That's not so fair.

I didn't, yeah.

You know what I mean.

I saw you prep them and everything.

Yeah.

But talk about that a little bit.

Yeah.

So, first of all, I think you're absolutely right that the U.S.

did construct this system.

And I think if that doesn't mean that the U.S.

should not learn lessons, that doesn't mean that conditions don't change.

But I do think it absolutely creates an obligation for us to be thoughtful in how we proceed.

And I think it's a fair critique if we're not being thoughtful in how we proceed.

That felt like a very different answer than Germany and Japan freeload on us.

And, you know.

That's also true.

All right.

Would you, you know, do you think,

what do you think is going to happen?

Do you worry about the instability of not easing this transition, but is this a, and look, I've read the whole like Mar-a-Lago Accord, and I don't know if that's a conspiracy, but is the idea that there's some master plan of we create this chaos, we cause all this thing, to draw people to Mar-a-Lago where they renegotiate our nation's debt, is that something that you think is plausible?

Or is that what this is all about?

Is that why they're not doing it in a way that seems more

thoughtful?

So let me say two things about it.

The first is, I think a lot of the critiques of how it's being done are very fair.

And I think it's important to distinguish that from the discussion of the principles.

Because I think the principles are important, and we should want to have the right set of principles and not throw them out just because they're not being pursued in the way we might like.

When it comes to something like the Mar-a-Lago Accord, I think what you see people talking about and trying to move toward is to say, if we think this sort of liberal world order system, first of all, even if it was serving the U.S.

well at one point, is not serving it as well anymore.

Second of all, to some extent may just be going away anyway.

China is now rising as a peer competitor.

The U.S.

cannot be a unipolar hegemon like it was when the Cold War ended.

So if we accept that things are going to change, we should have a perspective on what we want to follow.

And something that I've been writing about a lot is trying to interpret and decipher what that might look like.

Because again, it's a very fair critique.

They have not been as clear about it as we should want them to to be.

What I think we should want, and what, like I said, folks in the administration like a Marco Rubio or a Scott Bessend, who I think do write and speak thoughtfully about it, have pointed toward, is the idea that we absolutely want a strong economic and security alliance.

It's not going to be the whole world, because China is going to have its own sphere as well.

But what we want to have within our sphere is a few things that in the past the U.S.

didn't necessarily ask for.

We're going to want balanced trade, where in the past we were happy to let the manufacturing go elsewhere.

We're going to want others to essentially own their own defense burdens.

That doesn't mean we're not partnering and working together, but that everybody takes primary responsibility for their own defense.

No NATO, no like alliance like that.

No, no, you can absolutely have an alliance like that, but the alliance is premised on if you are Germany, you are on the front lines of what the concerns in Europe are.

If you are Japan, you are on the front lines of the concerns with China.

It's not a matter of everyone simply turning and asking the U.S.

what the U.S.

is going to do.

And then the third element is keeping China out and recognizing that China, to your point, China's just been doing China, doing what's best for China.

but that that is not consistent with what the US and a US-led alliance would want.

And so if you want to get from where we are today to that kind of system, you are asking things of allies that they haven't been asked before.

And so the question is, how do you make that a credible ask?

Because I think it's fair.

I don't think that those are unreasonable things to ask,

but you are going to have to be willing to back that up and say, the old world, the old version is gone.

Let's talk about what the new version could look like.

And I think...

Do you think they prematurely blew up the old version, or you really felt like

it wasn't functioning?

in that way anymore?

I think the old version has been gone for a while at this point.

That in the economic sphere,

the idea of the sort of era of cheap goods.

The era of cheap goods, the era of the U.S.

being able to simply sort of exert its military will on the world,

the era of the U.S.

economies being so much stronger than others that we could afford to absorb everybody else's production.

You know, over the last 10 to 20 years, the

U.S., the typical working family, has not been well served by that deal, I don't think.

No question.

And this is where, so it sometimes gets, listen, people have differing viewpoints and it can get confusing and trying to, but here's where I think there can be great agreement.

Working people making living wages.

And I think that would be very surprising for someone on the center right to sort of agree with maybe the more progressive wing of the Democrats.

But that is absolutely a value that we have lost.

And do you think that's something that the right will follow you along with?

Because it's something I think the left has been screaming about for a very long time.

Well, I think we're moving in that direction.

I think it is a process of transition when a party reorients.

The term realignment gets used a lot.

We're increasingly seeing working people coming into the Republican Party.

We're seeing Republican leaders, folks like Marco Rubio, J.D.

Vance, increasingly, I think, speak credibly and seriously to some of their concerns.

We're seeing more openness to the labor movement.

You have the Teamsters president partnering with someone like Senator Josh Hawley on legislation.

And so I really do think that that is happening.

I think the politicians will always be the lagging indicator, right?

The folks in their 70s and 80s.

Right.

The folks in their 70s and 80s.

You're talking about the junior senators.

Mitch McConnell is unlikely to suddenly adopt all of this.

But if you look at- Don't count him out.

I'm going to go.

110.

He's going to be ready.

You have more faith than I do.

When you look at younger Republicans, both folks coming into the Senate, so I mentioned Rubio Advance, folks like Jim Banks from Indiana, Bernie Moreno from Ohio,

all of them are more focused on these kinds of issues.

And then when you look behind that at the sorts of people I work with, the policy wonks, researchers, writers, journalists, lawyers, folks sort of 40 and under

are overwhelmingly oriented in this way.

And so I have a great deal of hope that that as

that moves to be the center of the party,

you really are going to see a different Republican Party that still loves markets and wants them to work, but has a much better understanding of their limitation, has much more concern for what is happening to the typical working family, and wants to figure out how to keep their conservative principles, but apply them somehow to use public policy and make things better.

So socialism.

Essentially.

So I appreciate it.

One final question and then I'll let you go because I know we're busy.

The final question is this.

Are you concerned if they realign the trade?

Look, corporations are, as you said, they're profit-seeking and that's how they go.

Are you afraid that the globalization movement where they sought the lowest form of regulation and workers' wages will just be translated into this country?

So in other words, in the way that China might have undercut the United States, are you worried South Carolina and Texas undercut Wisconsin and Michigan and that this revitalizing the manufacturing base will fall prey to the same dynamics that we saw it fall prey to globally?

Is that a concern?

I'm not too concerned about that because that has always been a feature of American political economy.

We've always had that sort of competition between the two.

We can handle that disagreement.

We can, and I think that's the best way to think about more protection of the American market.

There's been this idea for so long that free trade and free markets are sort of synonymous.

If you like free markets, you want more free trade.

But free trade with China does not advance free markets.

It takes everything authoritarian and communist in China and imports it.

You know, now your companies have to compete with that.

And then now you need more safety net programs to support those who lose their jobs.

You need more chip sacks and industrial policy.

You have to respond in all the ways.

So many of the people that use those subsidies are actually working people.

They're not, this isn't one of those like lazy people sitting on the couch coasting on the government dump, like working people with one, sometimes two jobs that still have to subsidize it because they're just not paid enough.

And it's very, very similar.

But this is, listen, the book,

the one's a future worker.

This is your old book.

What's the new one called?

It's called The New Conservatives.

It's a summary of what we've been doing for the last five years at American Compass, developing the conservative economics of the new right.

And it will be out at the beginning of June.

And when you go back to them and you tell them how it was, you'll say like, Stewart was right about at least one.

I'm going to tell her, because I called Jon Stewart a racist.

I'm not sure that was smart.

It's all good.

The new conservatives are down with pre-order.

So start your orange Tuesday.

I'm just saying you're married sometimes.

Orange caps.

Good favorite.

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Our guest tonight, the professor of economics and public policy and the author of the best-selling book, The Deficit Myth, she's featured in a new documentary, Finding the Money.

MMT has always been a group of us that sacrificed a lot to make the professional decision to say things that are so different from what everyone else is saying.

Knowing that you're going to be not just challenged but ridiculed along the way.

You got to have some thick skin to get through it.

But if you're convinced that the work that you're doing is important and that the ideas will hold up to scrutiny, then you just keep pushing forward.

Please welcome Stephanie Kelton.

Stephanie, welcome.

Thank you.

Stephanie, it's a fascinating documentary.

I will say you are setting out, correct me if I'm wrong, to fundamentally change how people see money.

Yeah.

That's a big ask.

And we got about seven minutes.

I think a place to start is with MMT, right?

MMT, if you can help us define what MMT is, and I think what the narrative, what the narrative you're hoping to get across with MMT.

What is the new economic narrative?

It's no longer pull yourself up by your bootstraps.

What is MMT telling us?

So economics is widely known as the dismal science, right?

Because it's...

We've got to get better branding.

Well, that's what MMT is trying to do, better branding.

Because, you know, in the dismal science, it's all about scarcity.

And we can never have the things that we want because there's always this really intrusive problem, which is how are you going to pay for it?

Where is the money going to come from?

And the problem is that we treat money like just any other scarce good or service in the economy.

And what MMT is doing is saying, hold on a second, we're not on a gold standard anymore.

We have this thing called a fiat currency.

And it does make people nervous because a fiat currency sort of

opens up space and it's kind of like, wait, is money real after all?

And so MMT is an economic framework that tries to have an honest conversation, that talks to people like grown-ups, not insulting people by telling them that you have to treat the government's budget like a household budget and speaking down to people.

We want to be honest about the monetary system we have today, the capacities of the government to spend when you have a fiat currency and you're not tying your currency to gold and promising to convert into something that you could run out of, like physical gold.

So we're opening up a conversation where there are still limits and you still have to make choices, but we can have an adult conversation about how the government can actually operate its budget when it doesn't face the same kinds of constraints that a household or a business faces.

I mean I guess by that, I think that the big headline with this as well is the way we look at what the deficit means, correct?

Yeah.

Like, I hear deficit, you hear it in the news, you hear every politician talking about it, deficit equals bad.

Yep.

And the major narrative of MMT,

monetary, modern monetary theory, is deficit good, correct?

Every deficit is good for someone in purely financial terms, and I'll tell you why.

Because you're right.

We use this word and it sounds inherently like something's gone wrong.

If somebody's in deficit, there's a problem, right?

You don't want to turn on the sporting game and find the announcer saying that your team is going to have to come back and overcome a seven-run deficit if they're going to win the game.

It's always a bad thing, right?

But actually, if you think about what the government deficit is, it's just the difference between two numbers.

That's all it is.

So

what a relief.

I guess we'll find that.

Is everything fine?

Doesn't mean everything's fine.

It's fine in the sense that it's just a benign mathematical, like it's the difference between two numbers.

It's not even higher order math, right?

It's just how many dollars the government spends into the economy each year versus how many they take back out, mostly through taxation.

So simple math, if they spend $100

into the economy and they only take $90 back out, we label it a government deficit.

And somebody records it as a minus 10 on the government's ledger.

What we forget to do is to recognize if they put 100 in and only take 90 out, somebody gets 10.

So the government's deficit is matched or mirrored by a financial surplus in some other part of the economy.

Wait, hang on.

So did you guys meet backstage or something?

Because what the hell, what is MMT?

What's MMT?

What does MMT stand for?

You handle it.

So it's modern monetary theory.

And so, again, the currency, we're not on a gold standard.

We're in the modern fiat age.

What do we have to do?

What's fiat?

Is it a good car that I should get?

What you're walking around with if you've got some of this stuff in your wallet is a tax credit.

So those dollar bills that we're walking around with, we think of that as money, right?

And we can use it to transact, we can use it to buy and sell things, we can use it to make purchases of goods and services.

And money is good.

It's good to have.

Okay.

Generally, and it's really good to have when you've got to pay your taxes, because this is what the government expects us to hand over at the end of the day in payment of the government.

Okay, money is good.

I'm with you so far.

But let's do this.

What about that government deficit that you just mentioned, right?

And I said every government deficit is good for someone.

Why?

Because it's just a financial deposit into some other part of the economy.

The question is: good for whom and good for what?

The government can increase its deficit to do things like feed hungry kids, tackle the climate crisis, fix crumbling infrastructure.

All of those things are ways to use a government deficit that might have desirable results for people

and for the economy.

So, money is good.

Deficit is good.

I'm with you so far.

So, what's the problem?

What's the bad?

What's the problem here?

A big part of the problem is the way that we've been taught to think about these things, to try to stamp out deficits, to reduce them, to view them as inherently dangerous.

They're not inherently dangerous, and as I just said, they can be used to help us accomplish important goals in the economy.

So, okay.

So,

what's the next step?

Let's say we believe in MMT or yeah, MMT.

What's the next thing that, I mean, is belief enough?

Do I just have to pray to MMT and then it

what has to happen next?

Who else?

What has to happen next is that the people that we elect to represent us have to go in there and take decisions using the incredible power that they have called the power of the purse, that they've got to take decisions about whether to fund programs, whether to cut programs, not on the belief that they ought to be operating their budget like a household, but when these decisions come up about Social Security and Medicare or continuing with the Inflation Reduction Act and staying in the game on climate change and going even beyond what that legislation did, what I think gives me hope anyway is that we've demonstrated what we're capable of and that we can build on it and not revert back to old ways of thinking about austerity and the need to to reduce deficits because that's when you hammer your economy.

That's when people have a lost decade.

That's when all of a sudden, you know, the prosperity that is within reach starts to slip through our fingers.

So, when the IRS comes for my taxes, I just got to tell them, like, yo, deficit is good.

Don't worry about it.

Don't worry about it.

You need to, you know what you need to do?

You need to take some THC or some DMT and let the MMT just wash over you.

Let the paradigm shift come to you, Ronnie Jank.

Yeah, I think I'm in it right now.

I think you're in it.

Well finding the money will be released in select theaters nationwide and on demand May 3rd.

For more information go to findingmoneyfilm.com.

Stephanie Kelton, we're going to take a quick break.

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My guest tonight,

the president of the European Central Bank, please welcome back Christine Lagarde.

Thank you so much for being here.

We were just talking, last time that I saw you, you were the French Minister of Finance.

Great.

And then you moved on IMF.

I'm I came back.

And you came back, and then

now you are the head of the ECB, which is,

for context, similar to like what the Fed would be, I assume, for the United States.

That's right.

And

you lowered interest rates as well.

Yes, we started a little earlier in June.

Okay, I didn't know I was going to go there right away.

I didn't know we were going to do this right away.

Okay,

we only did 25.

He did 50.

You only did 25 pairs.

But then we did it again.

So that's 50-50.

Do you guys talk?

Do you say, I'm about to do 25?

And he's like, well, I'm going to do 50

two months later and make you look silly.

You don't coordinate.

No, we talk to each other, but we don't coordinate.

We don't.

Now, is this the basis points?

And we all know there's a certain oracle nature to we wait to see what the central banks will do.

And they always talk in kind of coded, mysterious language.

And then they say 25 basis points.

And we're like,

yes!

what is that

but but is it now is that the signal inflation has been defeated

it's

not quite we are getting there we are we are almost at target our target what are you pointing at my target

what's

my target is two two percent I want to get to two percent what is it now it's two point two

but I want to make sure that we are at two 2 and that we stay at 2% because that's regarded as sort of stable inflation and we look at that in the medium term.

So we don't want to have one month at 2% and then another month at 2.6%.

We want it to be steady, solid.

At 2.

At 2%.

And we're getting

very close.

At 2.

Who was the two chooser?

You know, interestingly enough, that was way back, and I think New Zealand was one of those that started it.

And we're all following New Zealand now.

That's what this is.

New Zealand one day went, you know what would be a good number?

Two.

Now, I think then all central bankers around the world thought, well, two percent, because then that leaves a little wiggle room to negotiate wages increases.

We're not exactly sure the statistics are perfect.

So there is, you know,

room to maneuver on all accounts.

And 2% is something that, you know, goes reasonably unnoticed as long as wages progress as well.

Right.

Although when we say 2%,

we've faced kind of a pretty large inflationary spike.

So it seems like these higher prices have a certain stickiness that the corporations have gotten accustomed to.

Like, well, the supply chains are a little better and things have eased, but

$10 for a taco and people are still paying it, so why not?

But that's the big difference between the level of prices and the increase in prices.

I see.

So when you've had regular increases in prices, generally it doesn't move down.

It stays at that level.

And that's when you talk about a level of prices.

Now, why is that?

Because, so, what caused the inflation in the first place?

Do we have a handle on that?

Yes.

Okay.

Shall we take the last big, big inflation wave that we had?

As an example.

No, no, but.

No, okay.

Yes.

But as an example.

Okay.

So what caused it?

You had three components.

One is you had

the worst pandemic ever since the 20s.

Yes.

The last 20s.

That's right.

Then you had...

So a shutdown of.

Shutdown of Now that would seem to be deflationary because it would seem like demand would disappear.

Well, some demand disappeared and some demand stayed, particularly when people continued to receive checks in the mail and had to be.

The mistake was keeping people alive.

No, no, no, no, no, no.

I get it now.

I get what's happening here.

All right.

Okay, so supply chain completely disrupted.

Yes.

First.

Second, we had,

at least in Europe, the worst war since the 40s.

Still going on.

In Ukraine.

Still going on in Europe.

So energy.

Energy, wheat, all sorts of commodity prices went down, especially given that dear Mr.

Putin anticipated that and weighed on energy prices, so they weighed on energy supply, so that prices started going up even before the war started.

He had planned that all along.

So energy prices were a big component in the industry.

So supply chain disruption.

Yeah.

Energy,

now that's in Europe.

We did not have that to the same extent, I would assume.

You had some of it, but not.

Yeah, you're right.

Keep going.

Because you have energy on site in the country, we don't have any energy.

Oh, sure.

You know why?

Drill, baby, drill.

Did you know that's our national anthem?

That's what we sing it before every ball game.

Suddenly we do.

So that's two.

We got two.

What's the third one?

Look, I would say three.

The pandemic, the war, and the energy prices.

So the three of them just pushed prices up in a big way and more so in Europe than in the US.

We went up on average in the Euro area, prices went up to 10.6%.

You never hit the double digit.

Right.

At least on average.

I would imagine certain commodities would go up faster than others that they don't.

It's not linear, I wouldn't imagine.

No, but it has a dribbling effect.

So if you have oil prices going up, it's going to have an impact on pretty much all other products because you find energy everywhere.

So give me a sense.

So oil prices go up.

How long does it take for that to insinuate itself into the supply chain system and create that

inflation?

It moves relatively fast.

So in a matter of four, six months, it's into the various prices.

Where there is a lag, which is much longer, it's on wages.

Wages take more time to respond to that increase in prices.

And it's, you know.

I don't know if you know this in America.

Wages have yet to respond.

We're talking about from the 50s.

Like, it's really, wages don't keep up.

It brings up an interesting point.

So

since the 80s, it feels like...

the economy flipped over to an investment economy.

That's right.

Rather than a labor economy.

It's much more capital intensive, and the remuneration of capital was higher than the remuneration of labor.

You're right.

And it's been a long time.

It's not just in the last 10 years.

No, it seems like the 80s were really that period of deregulation, and then it sped up there.

But our tools that we use, whether it's the Fed or quantitative easing or those kinds of things, are still working at that supply-side level.

In other words, like in 2008, we bailed out more on the corporate side

rather than the people side.

Well,

we secured the financial system to make sure that deposit of all the customers around the world were not completely lost.

So that was the key proposal.

Make sure that the financial system doesn't collapse.

And then you're right.

There was, particularly in the last six years, five years, since 2019 when

we had COVID, we tried to keep the economy afloat.

We tried to avoid the business.

And more demand side stimulus.

Yeah.

Yeah, yeah.

Certainly in this country.

Yeah.

And that's where maybe the rubber meets the road.

It feels like, from what I've heard of economists.

Yeah, you want to dampen demand if you want to keep inflation down.

Right, but at the same time, you increase demand by putting some fiscal

fuel in the middle.

But on the flip side, we kept people alive and in their homes.

Like in 2008, when they decided

on the quantitative easing and to give sort of that 0%

interest window and people were able to come in and borrow money at the corporate level.

Right, right.

At all levels, households as well, that's right.

Household.

But there was a horrible recession.

A ton of people lost their homes.

You know, it was crushing.

The lesson to me is stimulating on the demand side was a more efficient use of capital and also had the moral bonus of covering like

human needs.

Yes.

Yeah, rather than

so why does that seem now so controversial?

It's not controversial in my books.

Well, because you're human.

But these guys I'm talking to, they give me a whole like, that last trillion really screwed us for the next 10 years.

And I'm like, what are you talking about?

Well, everything has to be reasonable and sensible.

You don't want to overdo it to a point where you then have to sort of withdraw and

sponge the liquidities that are out there.

And that's the reason why at some stage you have to stop quantitative easing and you have to also stop the fiscal stimulus and support that you've given to the economy in hard times because times are getting better.

Do the central banks have mechanisms that can be more responsive on that

demand side, as you said, rather than it having to filter through the system more on that supply side.

The first tool that we use is interest rates.

That's the most efficient one and it's the one that has been traditionally used.

And certainly, if you raise it, will dampen the labor market.

Yeah, yeah.

And if you tighten, which is if you reduce the interest rates, if you cut, then it should stimulate the economy and it should encourage people having lower financing cost to go out, borrow, invest, and buy houses and things like that.

Right.

That's right.

I wonder, is there any school of thought that thinks, boy, we've got this thing flipped on its head.

And we would be such a more efficient and humane society if we stimulated more...

Like, I'm thinking about,

and you tell me if this is the wrong way of thinking about it.

Trump came in, $1.7 trillion tax cut.

Most of it went to rich people.

Cut the corporate tax rate from, I think, 35% to 21%.

So that's a 14%.

That's a huge amount of money.

Deregulated a lot of industries.

So I would think as a package that's trillions and trillions and trillions of dollars.

A lot of it went to stock buybacks.

It doesn't trickle into wages and the labor market, but it does pop up our deficit, making us less able to withstand

I don't know, a pandemic.

Because we feel like then we can't put that.

I'm a little bit scared when you talk about pandemic because I watched the interview that we did together in 2009.

What did I say?

Well, you said at the time, because we discussed the standing of the economy, and I kind of said things are getting better.

And then you closed the interview saying, unless we have a global pandemic.

Let me do adjusting a little to the

camera.

I just want to address something very quickly.

When she says I said that, she is not suggesting all Jews gave us the

best.

What we're trying to do is a man.

And I only say that because

there has been some confusion here in the United States.

But exactly right.

I'm wondering, as a central banker,

is there a way to look at the economy

less on the supply side?

How do we get labor to benefit more efficiently from all that money?

You know those things.

You have two components.

Capital, labor.

And you bring these together and you create value.

The two have to be compensated.

And for decades, capital

has been better remunerated than labor.

And the labor share in the value production has been reduced.

then it's a matter of give and take.

So if the labor market is tight as it is now,

it is for the labor to actually say, excuse me, I think that should be remunerated as well and probably better than it has for many, many years.

So it's a question of.

Is there a way to do it?

Negotiations, discussions and persistence.

Right.

Is there a better way?

Because

it seems like for corporate subsidies, they don't have to fight so hard.

Like, it seems like labor has to really fight for that seat at the table, whereas

the larger entities don't have to.

I think that the balance of lobbying forces is obviously skewed to one side.

Right, right.

In most countries.

So, you would recommend poor people get better lobbyists.

That would be.

What about this?

How about this?

Is there anything in corporate, like when you talk about buybacks, it's all in stock,

what if workers were automatically invested in that?

I mean, some companies do that.

I think the tech industry does a pretty good job of that.

You know, when you get hired there, you're going to be...

It's one case, one way to deal with it.

But it's a very small

component.

It should be a lot bigger.

Right.

Do you think when you forecast out, what I worry about is labor is kind of been on the back foot, and it seems like AI is going to further erode labor's position.

Is that something that you guys see?

That is a big concern.

And I think that the discussions that are taking place now actually in New York concerning the governance of AI around the world and how it should be enhancing

workers' position contribution to the economy rather than replacing workers is a vital discussion to be had.

Who's having that?

I think it's engineered by the United Nations and there is a group of thinkers and philosophers and experts in AI who are saying watch out because if there is no global governance on that, just as we have global governance on nuclear, not perfectly complied with, but at least generally respected,

at least there is...

I'm worried about that.

I happened to run into a couple of leading lights of the AI movement.

And I said, globalization

really hit American manufacturing and we're still feeling it and that's something that took decades to really play out.

It also benefited the consumers, don't forget.

No, no question.

That when you do that we did get much cheaper

refrigerator parents and everything.

Yes, yes, yes.

But

you know that played out over years and there are still areas where it's decimated and haven't been back.

It seems like AI will do the same thing to the more white-collar movement, but it's going to do it much quicker.

And I said, said, are you guys concerned about that?

And the guy goes, and he's one of them big hitters in that, and he goes, no, we'll be good.

And I was like, oh, we're all going to die.

Like,

this is crazy.

Will you adjust your?

I don't think we're going to die, but I think you completely,

well, we will at some stage.

No, no, no, I understand.

And by the way, me before a lot of people.

But we should really be concerned about AI because where you are totally right is that it will affect all jobs.

And sort of white white colored jobs which were not affected will be affected.

And we have to be prepared, we have to improve our skill set, we have to be able to master that tool and not be the servant and the object of that tool because it is fast and it's transformative.

Do you know what they told me?

It's already smarter than us.

Because it is what they do is it takes the 10,000 sort of years of human achievement and it swallows it in like six hours.

I'll tell you something.

This morning I wanted to check the price of butter because I thought you were going to ask me, well,

do you do your grocery shopping and did you notice that prices increase?

What kind of an animal do you think I am?

Christine Lagarde,

how dare you, if I may say so,

say.

I know your butler does the shopping.

So I check and I check with one of those terribly smart AI engine.

I say, what was the price in 2019?

What was the price in 2024?

I get the answer, and it's totally skewed.

I mean, it's cheaper now than it was in 2019.

And my recollection is, uh-uh.

So I tell this guy, this AI engine, I said, are you sure about your numbers?

Can you check, da, da, da?

Comes back and says, oh, terribly sorry, we made a mistake.

Yes, you're right, it's the other way around.

So that tells me one thing.

We have to be alert, we have to check the facts, we have to be, to exercise judgment, and we cannot be mistaken.

Does it tell you that?

Or does it tell you that AI is so far ahead of us that the plan was, I'm going to give the head of the European Central Bank the wrong butter figures, absolutely plummeting her career.

She's in charge of stability of Europe.

Europe is then plunged into chaos.

500 years of black death.

Oh, AI has got us by then.

You must be behind that.

I probably am.

The final question.

So we're coming onto a period, people were talking about the soft landing, it's still been rough for consumers.

Do you foresee within the next, you know, because I know these things take time, 12 months, 18 months, 24 months, a better stability building into this, obviously, government, but without some sort of terrible catastrophe?

Yes, I should think so.

Why do I say that?

Because I think that the tools have improved, the analytical models and tools that we use to anticipate and to try to measure are better, and because we've learned in the last few years more than we had in decades.

And the state of the world.

And we know that uncertainty is going to be with us, and we have to factor that in and make sure that we have tools to anticipate uncertainty, which is a big, big challenge.

Sure, we're anticipating uncertainty here in about eight weeks.

So

I feel you.

I feel you.

Thank you so much for joining.

It's always such a pleasure to see you.

Here it is, Deputy Bank President for Steel Lego.

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