1:22 mins

The Problem Podcast

Jon Referees an Economist Battle

When economist and Fed exec Thomas Hoenig told Jon on this podcast that printing money was a bad idea, economists Stephanie Kelton and Rohan Grey took to the internet to start an Economist Battle (it’s more fun than it sounds). Now they’re here to tell Jon about a new approach to economics called Modern Monetary Theory, and why printing money maybe isn’t so bad after all. But first, Jon discusses trespassing bears and the current situation in Ukraine with staff members Tocarra Mallard, Alexa Loftus, and Deniz Cam.


Episode 17 Transcript


Miguel Carrascal: Beautiful, guys.

Jon Stewart: I have to say one of the more humiliating rituals of the podcast [ALEXA LAUGHS] is the clap, [LAUGHS] that we have to do in the beginning. It’s to calibrate us. And there are, I would say, second grade classes who would shame us in their ability to clap together as opposed to us. Very difficult to coordinate.

Tocarra Mallard: I wouldn’t argue with that. [ALEXA LAUGHS]


Jon: We’re excited this week we got a week, boy. We’re going with Alexa and Tocarra, as you know, been on the podcast many, many times. Previously, they are writers on the program, but first timer, ladies and gentlemen, from the research department, which is the department that comes in and says, “You know, that’s f***ing wrong —


Jon: — “what you just said, the thing that you just said? Completely wrong.”

Deniz Cam: Yes.

Jon: Deniz Cam. The show is the problem with Jon Stewart. It’s on Apple TV+. Did you guys know we were back next week?

Alexa Loftus: Yes.

Tocarra: Yeah

Jon: Oh, you did know? [ALEXA LAUGHS] OK, so you actually you read the memos that are sent to us on email rather than just jamming them into your spam folder.


Jon: So we’re back next week, March 3rd. First episode is all about GME and Wall Street and Citadel and the Apes. And Man, what a f***ing show. It’s a fun one. How are you guys? How is everybody? First of all, everybody is good? Deniz, Tocarra, Alexa?

Deniz: Feeling great.

Tocarra: Good, yeah.

Jon: We do have a good podcast. We’re going to be talking economics. So every time we do a podcast on economics, other experts will will chime in and say “that guy didn’t know what the f*** he was talking about, and you don’t know what the f*** you’re talking about, either you got to talk to this guy.” So we talked with Thomas Hoenig, who used to be the president of the Fed in Kansas City and was like a little bit of, you know, an outlier in terms of where they kept the interest rates and all that sort of thing. Well, we got some response from some folks who are leading authorities on modern monetary theory. MMT Stephanie Kelton, Rohan Grey. They’re going to discuss their understanding of the Fed’s role. And I’m telling you, man, we are down a fed and economic rabbit hole and I am unarmed and have no idea, like we’re in such headier waters than I know what to do with financially. But I’m loving how these conversations are leading to further. It’s like a beautiful escalation of knowledge.

Tocarra: So, Jon, if this conversation is the rebuttal.

Jon: Mm hmm.

Tocarra: What was the gripe with the original conversation? What do you think that was missed?

Jon: I believe it was, “he doesn’t know what the f*** he’s talking about.”


Jon: So we got to a point where I was discussing why the Fed has like a money cannon that it can just fire at will at Corporate America, $120 billion a month. All these things, and I was just saying, why can’t they fire that at people?

Tocarra: Yeah.

Jon: And basically what we ended up getting to is he was not for that.

Tocarra: Got it. It’d be interesting to point the money cannon at people like, what would it look like if we all had a little bit of that f*** you money, right? So we weren’t stuck in situations we didn’t have to be like, “Oh, I have to have this job or be in the space because of health care, because of child care, because I need it,” like we all had a little bit of that f*** you money. That’d be great.

Jon: Oh, you know what would happen, Tocarra?

Tocarra: No I don’t.

Jon: Inflation. Inflation would run rampant.


Tocarra: What a tale.

Alexa: I mean, there was that story about the woman using her stimulus check to hire a hit man. I mean, that’s what happens when you give people money.

Tocarra: Are you kidding me?

Jon: Moral hazard.

Alexa: Moral hazard, exactly. Men die.


Tocarra: That’s not the worst thing that could happen.

Jon: Hey, wait a minute. What happened here?

Tocarra: Sorry. That was an interior thought. I apologize to the room.

Jon: Hello, man here. [ALEXA LAUGHS]

Tocarra: I am so sorry

Jon: That is the econ episode that’s coming, but so much more is going on in the world. I don’t know where you kids are at with it.

Alexa: Yes.

Jon: Has there been anything bubbling up on your minds? I know Russia has semi invaded a small part of Ukraine. First of all, did you see Putin’s, I don’t know what you’d call it a, if you can call it a press conference?

Tocarra: I think you would call it a press conference.

Jon: Where he was just like, “You know, what we did wrong is to give up the empire.” [ALEX LAUGHS]I don’t think I’ve ever seen a dude who’s like, “You’re right about the communists. They were terrible, but the czarists? Muah. Love it.”

Alexa: I personally have been more consumed with the news that there’s a 500 pound bear ransacking California homes. It’s broken into 28 homes since July.

Jon: The bear?

Alexa: The bear, and they’re shooting it with paint balls.

Jon: What?

Alexa: They have tasers. Nothing will stop this bear from breaking into houses and eating your finest Marie Calendar’s fettuccine alfredo.

Jon: Let me ask you a question, is he only breaking into celebrities’ homes when they’re at the Super Bowl?


Alexa: The bear is in the Bling Ring.

Jon: Is this a Bling Ring Bear? So this it’s very interesting. What do you guys think of the confluence of the fact that a giant bear is invading spaces? I mean, Russia is known as the —

Tocarra: Oh my gosh.

Alexa: Wow.

Tocarra: The symmetry. So truly, what is going to happen to the bear?

Jon: Den, you have an understanding of Europe and its goings on that I think we don’t, having been following that more closely.

Deniz: I will tell you this, in the past week, I found myself Googling, “Why is Putin doing this?” I truly do not understand. And then I was like, “Oh, is this thing really going to happen?” But one thing you said about like the idea of an empire. So I’m Turkish, right? And we have our version of like Putin, who is Erdogan. And he loves the idea of the Ottoman Empire. So I feel like these, like autocratic leaders, love the idea, like the nostalgia of the Empire from like the nineteen hundreds. And it’s like, it’s too late, bro. But also, like Putin has the power to do it. Thank God, we don’t have the power to do it. We just stir the pot in the Middle East. But you know, who knows what Putin can do? Like, we’re talking about a nuclear power.

Jon: I had thought we had moved past all this, that the whole idea of nuclear weapons is that nobody was going to get Hitlery anymore. Nobody was going to be like Souderton land. Hmm. That would look nice as my porch.


Jon: Like the idea that he could, that you could just say in the middle of what would you consider modern history. By the way, Ukraine isn’t real. Ukrainians aren’t real. It’s actually ours. I thought the whole point of NATO and nuclear weapons and deterrence is that this won’t happen. But you think that actually this will be a contagion that Erdogan will then be like, “Well, if you’re going to be empirey, I’m going to be empirey.” And then China will be like, “Hello, Taiwan,” and then the whole f***ing thing. And then we’re back in what we consider history.

Deniz: But how far did we even go? Like if you think about it, like the conversation about like who decided that countries cannot own nuclear weapons? It was the US and Russia, the countries that have the most nuclear weapons.

Jon: Get the researcher off the call.

Deniz: Ok, I’ll stop. I’ll stop.


Jon: Let’s go back to the comedians.

Tocarra That’s truly the problem with nostalgia, though. You think it stops at movies and TV shows and fashion. But really, you have these people in power being like, remember when our country used to do this? That was fantastic. I remember in the 2012 Olympics, they were doing the opening ceremonies and one of the British folks, you know, introducing countries like, “Gosh, remember when we were an empire and all these countries just belonged under the umbrella of Great Britain. That was a great time.” I still remember thinking, I cannot believe this psychopath is saying this on international television.

Jon: Wow.

Alexa: I am very anti-nostalgia personally.

Jon: Yes.

Alexa: If it’s in the past, I don’t want to talk about it. I don’t want to think about it. I’m moving forward. It’s like, can I just go somewhere without hearing a Modest Mouse “Float On”? You know what I mean?

Jon: That’s hilarious.

Alexa: Let’s forward.

Jon: Do you think this is nostalgia? Like, here’s what I think happens. It’s these countries feel like they’ve been humiliated somehow that by losing their empire, that that’s considered a humiliation, that he is in some way. It’s the same thing that got us into trouble in the 1930s and 40s, which was Treaty of Versailles, and they were like that humiliation. And when a country feels humiliated, it’s really easy to drum up that nationalistic fervor about, “We are not the weak bear, we’re the bear that breaks into f***ing houses in Redondo Beach.”

Alexa: Hank the tank.

Jon: Hank the t — Is that his name?

Alexa: Yes.

Jon: For Real, that’s his name?

Alexa: Yes.

Jon: Well, how could they have not seen that coming?


Jon: You name somebody “Hank the tank,” what do they expect him to do?

Alexa: Is a prophecy.

Jon: It is a prophecy. [ALEXA LAUGHS]

Jon: So, this whole idea is, it really does show, though, the weakness of Russia. I know that it’s of cold comfort to Ukrainians right now, but you don’t make this move unless you’re trying to salvage yourself and something. This is a move that you make when you feel broken, not when you feel powerful.

Tocarra: So you don’t think this is about Putin cementing his legacy?

Jon: Listen, you know, Deniz was saying she googled, why would Putin do this?


Tocarra: Yeah.

Jon: You know, I do that whenever I see him without a shirt on.


Tocarra: On a horse.

Jon: On a horse. I always Google, “Why would Putin?” I mean, not for nothing, but I don’t know if he’s seen recent men’s health magazines.


Jon: He’s not uh. You know, that’s one of those where it’s like “dad bod” or “Vlad Bod”, I should say.

Alexa: Oh, hashtag Vlad Bod.

Tocarra: That’s going to be trending.


Jon: I’ll let myself out.


Jon: But I don’t imagine like cementing your legacy. You couldn’t do that unless you felt like, the country that you ran had been humiliated. If you felt that Russia was this power on the world stage and you had a great pride in it. Would you really make a move like that to annex another area as your legacy? Like to me, this doesn’t end well, like that legacy. He doesn’t go down in history now as a great man who restored the Russian Empire. He goes down, I think as a guy that destabilized the entire world order and ultimately will pay an enormous price for it. And the Russian people, I think unfortunately, will also pay an enormous price for it because if we’ve learned anything from empire, they’re not sustainable.

Tocarra: Yeah.

Jon: They’re just not.

Deniz: And I think part of it is also like Putin in the past couple of years, like, there is serious pushback, there’s serious opposition. And like, there’s so much, you know, alleged corruption. So when you feel like they’re going to come for you, what do you do? You even go crazier. You know, you point out like a different enemy and you try to like, bring your country together. So I think it’s just like, Jon, you’re right in the way that it could be him just panicking and he’s like, let’s do this thing so that like people forget about all the things that I’ve done. I mean, I think like the fact that there’s like a very strong opposition there right now shows you that like people have access to some information, right? But I think like it’s also scary to like, speak up like I know from Turkey, sometimes like you tweet something and then two seconds later, like the cops are on your door, like knocking on your door. So it’s like, do you want to live? Or like, you know? Do you want to fix your country and I don’t know, I would want to live.

Jon: I have always said this. The cancel culture in Turkey has to end. Now are these mostly liberals that come to their door in Turkey after a bad tweet?

Deniz: Ah, no.

Jon: What do you think? I mean, this f***ing Russia thing? Boy, does it have echoes on it of a World War, I mean.

Tocarra: Yes.

Jon: I’ve never seen in the modern era a country do this.

Deniz: Yeah. Like, I think about this a lot and I’m like, we’re truly at the mercy of like a few psychopaths in the world who have so much power, like the fact that like someone can be like, “Oh, let me like, you know, press this button and bomb whatever.” It’s just insane to me.

Jon: It’s really wild. You know what? It struck me and I was curious about this. Like, he could just be like, “I’m going to recognize these two areas and I’m recognizing them. They exist and they’re ours.” You’re just like, “Can you just call s*** like that?”

Alexa: I also do think it should be harder, like the button for nuclear bombs. There should be more than buttons. [TOCARRA LAUGHS]

Jon: It actually, Alexa. So this is you actually need two people. [ALEXA LAUGHS] Both have to do it at the same time. And you saw how hard it was for us to clap at the same time. [ALEXA LAUGHS]

Alexa: I think it should be like a month-long journey. You have to like, find something in a cave. You know, it’s like —

Tocarra: Like the twelve labors of Hercules.

Jon: Or a scavenger hunt. It has to be a scavenger hunt.

Alexa: Yes. And then while you’re looking for it, you have to reflect, you know? And then by the time you find it, you’re like, “Well, maybe I’d rather just chill in this cave.”

Jon: Alexa, so, so often the key to world peace is just a simple idea, like a list of items you and a friend have to find. [ALEXA LAUGHS] Boy, does this seem like. It’s the beginning, it’s not the end, it’s the beginning of a truly volatile and bloody and terrible period. And as we always say for people like have we learned f***ing nothing like from any of this? On that note.


Tocarra: Sleep well. [ALEXA LAUGHS]

Jon: All right. Good night, everybody. All right. So we’re going to go from people ringing on doors and taking students away to our discussion about how the entire economy is a mass delusion. [ALEXA LAUGHS]

Jon: All right, we’re going to talk to Stephanie Kelton. She’s modern monetary theory, senior fellow at the Schwartz Center, professor of economics. Rohan Grey is an assistant professor at Willamette. We’re going to talk to them and we’re going to learn an awful lot about why Thomas Hoenig can suck it


Jon: And why I — no, that’s not what we’re going to learn. But I’m looking forward to hearing what they have to say. So here we go.


Interview with Stephanie Kelton and Rohan Grey

Jon: Today’s podcast is a rebuttal. It is a further clarifying of a former podcast that we did. Our guest today. Very exciting. Stephanie Kelton and Rohan Gray. They are some of the leading authorities on what’s called modern monetary theory, which is kind of a new approach to economics. I’m delighted.

Stephanie: Thank you for inviting both of us to come and talk to you about this.

Jon: I’m delighted. All right. So let me roll it back and we’ll start a little bit at my interest in this. In 2008, when the economy collapsed and the government came in and they bought toxic assets and they bailed out the economy at the corporate level rather than at the homeowner level, I complained about that to the Secretary of Treasury at the time, Tim Geithner, and his response was — because generally, the crisis was caused by not mortgages, but derivatives of mortgages, bundles of mortgages. Whereas if you had made the eight percent of mortgages that were underwater that caused the collapse of the derivatives made them sea level, it would have been a lot less money. Nobody would have lost their house and you would have fixed your other problem because those bundles would no longer be toxic. And then I started learning about how the Fed also has this quantitative easing program different from the toxic relief program.

Jon: And it occurred to me that they spend. Billions and billions and billions and billions of dollars on corporate America. And not a lot of money on Labor America. And so I did an interview with a gentleman named Thomas Hoenig, chairman of the KC Fed. And he had been voting no on quantitative easing from the Fed, which is their policy of pumping a good deal of money into the economy. And he and I had a spirited discussion where I without the knowledge of economics or the language of economics or the verbiage of economics. Was trying to understand why the Fed can just bring this money cannon to corporate America and not also maybe let, as we say, in the old neighborhood, let the people have a taste, have a little taste a little something from the money cannon.



Jon: I guess I’m confused as if we can print money. You just said we’re the only —

Thomas Hoenig: We can buy an asset.

Jon: OK.

Thomas: Any asset by printing money.

Jon: But you can’t pay debt by printing money.

Thomas: You can buy debt by printing money. So —

Jon: Or you could just buy back our debt.

Thomas: Well, because all you’re doing is —

Jon: I feel like I feel like you’re having trouble. It’s like talking to a monkey. You’re like talking to a monkey. And trying to figure out, “how do I communicate with this monkey?”.

Thomas: No, no.

Jon: I don’t know what to do.

Thomas: No, no. I totally get it’s confusing.


Jon: And Stephanie and Rohan were lovely enough to comment on it, which made me think that neither of you has a fulfilling life. Because this is the part now we get to it. How did this, how did any of this come to your attention and explain to me how this came about?

Stephanie: So I, you know, I listen to the podcast and I’m on Twitter, Rohan’s on Twitter, and there was quite a bit of chatter about this. You guys pushed some buttons, but you didn’t push the buttons that were pushed for me. And I think for Rohan, you got a lot of people chatting.

Jon: We were on the wrong buttons.

Stephanie: No, no, no. I think that a lot of the interest in some of the commentary was surrounding, you know, the impact, potential impact of the Fed’s quantitative easing program on inequality. But I wanted to take up a different part of the conversation and I listened to the whole podcast and then I felt very sad. And —

Jon: Wow. That’s our goal. Any time you can listen to the whole podcast and feel sad, I’ve done my job.

Stephanie: Misery loves company. So I reached out to Rohan and I said, “I feel very sad and I would like you to experience the sadness with me. Would you listen to it together?? Really, that’s what we did —

Jon: And Rohan you got sad as well?

Rohan: Yeah. Look, I’ve been a long time listener of your work, Jon, and it’s made me cry so many times I figured, you know, it’s been a while COVID. You need to let out a bit of that emotion. So why not?

Jon: I’m going to give you guys a chance to un-sadden yourselves by telling me what I was getting wrong there and where you thought the conversation should have gone? What was it that saddened you both as you were listening to me talk about Fed policy with Thomas Hoenig?

Stephanie: Well, I don’t think it was so much listening to you. It was the missed opportunity of what you could have potentially pulled out of him had he given you. I think, you know, more candid answers frankly to the questions, yeah. And so they felt like missed opportunities, but you were clearly on to something and you were asking probing questions. And you’re not a monkey. You’re not a monkey, Jon. You had him, you had him.

Jon: I had him on the ropes.

Stephanie: He didn’t want to be as forthcoming as both of us think that he should and could have been.

Rohan: Yeah. I mean, I think the starting point is that we often think of the Fed as the sort of only institution in the federal government that has any monetary firepower. It’s the one that can do anything in a crisis. But the reality is, and I think COVID has done a great job of demonstrating this, that it’s the fiscal firepower, it’s the budget side of things that really has the power to actually save, you know, real people’s incomes, save industries to invest. And one of the big questions is if we accept that we can do things with the budget and we should be, what is the role of the Fed and how do they relate to each other? And when it comes to things like protecting financial markets from having a liquidity crisis or regulating financial institutions. Yeah, it makes sense. The Federal Reserve might be the place you look to. But when you look at what the Fed is doing when we say this sort of Fed injected trillions of dollars into the economy, one of the things that it’s doing is buying up assets. So the first thing to think about is there’s always two assets involved. There’s the sort of money that goes in and there’s whatever’s coming back out, going to the Fed.

Rohan: So if somebody said to me, “Hey, you’ve got trillions of dollars, but all you can do is buy other dollars,” that’s going to be very useless to me if I’m trying to protect homeowners or people who’ve lost their incomes. So then the question I think we have to ask ourselves when we look at what the Fed does with quantitative easing is what is it buying up? And this is where I think you started to get on something really interesting.



Jon: So let me maybe formulate it this way. There’s a certain orthodoxy to how we have to get out of it. Right.

Thomas: RIght.

Jon: A slow raising of interest rates. A tightening of monetary policy. Maybe they burn off some of the money should there be a rethinking of that orthodoxy, and the reason why I ask it is you talked about debt, right?

Thomas: Right.

Jon: To me, and clearly, I’m a layman and don’t understand the intricacies of it. It feels made up that this monetary policy feels like a delusion of some sort. And why couldn’t they just cancel that debt and have the country carry less and then tighten the policy? If you raise interest rates on big debt, right, then we’ve got all this pressure on making those payments. And why not have the Fed cancel the debt and then raise interest rates to reset the playing field?


Rohan: You know, he sort of said, “Oh, it’s very complicated, you silly little boy,” you know, but I think the reality is you are identifying a real question, which is if the Fed can swap Treasury debt for money and it basically has very little —

Jon: And they can print money.

Rohan: The Treasury is printing the Treasury debt and the Fed is printing the money to buy up the Treasuries print —

Jon: Correct.

Rohan: It’s like mom issues like IOU and then dad takes it out and then gives you cash from your wallet. What’s the actual thing going on there? What’s the effect on the economy? And Tom says, “Well, if you understand it like I do because I’m a very serious economist, remember, then all you’re doing is swapping one kind of government IOU for another.” Money is an IOU. Treasury debt is an IOU. Therefore, all we’re doing is swapping yellow for green. It’s exactly the same. And on one level, he’s not wrong. He’s not 100 percent wrong.

Jon: OK.

Rohan: But on the other side, you were not wrong either. Which is, is there a difference between Treasury debt and money? Yes. Is that difference quite small at an economic level? The way that Tom was saying yes, but isn’t big at a social level, at a political level? As you were saying? Absolutely. So if we have trillions of dollars of government debt out there, people hold that as money. You ask Goldman Sachs what’s in their cash account. They’ll think you’re talking about Treasury debt.

Jon: OK.

Rohan: Because for them, Treasury debt is money. So if you’re swapping Treasury debt for dollars, it’s like taking money from your savings account and putting it in your checking account. Do you have less money? No. But from a political point of view, from a cultural point of view, you solve the national debt. We’ve sold our grandchildren’s crisis.

Jon: That was the point I was trying to make. So I was trying to ask him who holds our debt? He said, “Well, China holds our debt” all these other —



Thomas: It would be in different countries around the world. And so do you owe this money throughout the world? You can’t just stop paying on the debt.

Jon: Couldn’t you just quantitative ease our debt? What’s the difference of making that money available to Goldman Sachs as it is to making that money available to China? Only one would lessen our debt. In other words, you just print that money and pay debt. If this is money that we’ve created out of thin air anyway. What’s to stop us from creating tension? You know, I used to make fun of Paul Krugman for his idea of a trillion dollar coin. You know, and now I feel I feel myself saying, “Hey, man, let’s just get 10 trillion dollar coins. Give one to China, one to Europe. Are we square? Good.” And then we start again because this whole thing seems manufactured.


Jon: Swap it for them, for the debt. And then at the very least, we’ve bought back our mortgage. So now we can never foreclose on it, even if interest rates go up. We have a lot more control over our debt. Does that make sense?

Stephanie: I think one of the most important things you were trying to get out of him was the idea that this thing we call the national debt, and this is Rohan’s point. We have yellow paper and green paper. We have dollars and we have treasuries, but they’re thought of very differently. We don’t think of the green paper as debt conventionally, but we think of the yellow paper, the government bonds, treasuries as debt.

Jon: And that’s what the Fed is buying. They’re buying treasuries, they’re buying bonds, they’re buying debt.

Rohan: Yeah, in Tom’s mind, they’re the same because he thinks up at that central bank level. So for him, they’re just different liabilities on a balance sheet. But down with us, you know, with the public, these are entirely different worlds. Do you know the stock of public money in circulation, Jon? How many people know that? There’s the national debt counter. There’s no national money counter underneath. Nobody’s counting them.

Jon: And they’re increasing that supply by $120 billion a month. Still.

Rohan: No grandchildren involved. No China involved, no bond markets involved.

Jon: It reminds me of the way our government says you need to pay for. So any time we have a crisis or something crucial that the public needs, the government will say, I’m sorry, we have discretionary spending. It’s this amount. If you want to add to that, we either have to take it away from somebody else or create a pay for. OK, well, also, we want to go to war. Oh, OK, so what’s our pay for? Yeah, that we’re not going to have a pay for.

Rohan: Freedom pays for itself.

Jon: That we’re just going to put out there and we’re going to pay for it. But we’re not going to. That’s going to be just debt that we don’t even think about. We don’t add it to anything. It just is. And that’s the part that seems like, well, you just get to decide then what goes on our budget and what’s just air. That’s the part that I was trying to figure out.

Stephanie: That’s the politics. And you’re exactly right. And the way that I usually try to say it is, you know, there’s all this conversation about finding the money. We want to have health care, child care or we want to have a Build Back Better agenda and all the rest of it say, “how are you going to pay for it, where will you find the money?” And I always try to say, “Look, if the votes are there, the money is there because the votes are what kicked the money out.” So just as you said, every time the Defense Authorization Act comes up every year, they kick the money out. There’s no hand wringing. They don’t pause to have a big debate or discussion. Manchin doesn’t stand up and say, “Wait a minute, I’m concerned about grandchildren.”.

Jon: No pay for, no nothing.

Stephanie: Almost all United States senators, it’s the most bipartisan thing they do, is vote for the defense authorization each year. And not only that, they say, you know, how much did the Pentagon request? Oh, we feel extra generous today. We want you to have $20 billion more than you asked for.

Jon: They gave them another 20 billion. Meanwhile we’re trying to get veterans health care from exposure to burn pits? You cannot believe the s*** they’re putting these guys through. They’re going to cheap them on the back end. It’s as though that’s not part of the cost of war. It’s crazy. And I’m just talking about the Fed and maybe it’s not their purview or anybody else, but why can’t they do a $120 billion of municipal bonds for infrastructure if you’re just buying bonds and debt and treasuries, why not buy infrastructure? Why not use that money rather than just to keep banks hoarding cash? Why not put it to use?

Stephanie: Many years ago, I went to Washington, D.C., at the request of Republican Congressman Ray LaHood, who went on to become transportation secretary right, Illinois and LaHood wanted to do exactly what you just said. I mean, the man really wanted to invest in America’s crumbling infrastructure, make these investments. And he said we ought to use the Fed at the Fed ought to be buying these bonds at zero effectively zero interest rate and facilitating the financing and so forth. And a colleague of mine, Randy Ray and I, we wrote something about this and then I was asked to go to DC and meet with officials at the Fed and walk them through and talk about how this would all work. And so I went I got to sit in Alan Greenspan’s chair. We had a lovely chat, but at the end of the day, they said to me, we prefer to see it go through Congress. And I said, But it’s kind of being six of one half a dozen of the other in these ways that I showed them through the balance sheet entries and so forth. And they said, Well, we prefer the half a dozen to the six because one keeps us out of it. And the other one integrates us into this process. It explicitly says the Fed is now financing other kinds of things, and they don’t want any part of it.

Rohan: Yeah, there’s a big commitment at the Fed to not be seen as picking winners or losers, which is why in COVID, when they did for the first time establish this municipal lending facility, they hated it. It was barely used. They made it so difficult that only one or two states municipalities actually took advantage of it. To go to your earlier question, I think there is a little bit of a difference between government, federal treasury debt and state and local debt in the sense that the federal government’s debt is guaranteed by the same full faith and credit as the US dollar. So it really is almost the difference between a large denomination bill and a small denomination bill. With these others, you’re sort of picking up the tab for state and local governments, which is a good thing.

Jon: But isn’t the other side of it too, though, that state and local governments can’t run a deficit in the way that the federal government can? So if the Fed were going to do that, it would actually be more impactful and it would allow it because so much of the federal spending is really to cover holes that exist within state and local municipal funding.

Rohan: If you asked members of Congress whether or not New York City should run its own defense force, I mean, putting aside the size of NYPD, they say no, that’s a federal job. It’s too important to be left to local governments at the state —

Jon: National security, for God’s sake.

Rohan: Well, then why not for infrastructure? Why not for education? When the answer to why this —

Stephanie: Healthcare.

Rohan: Yeah, why there’s something unique about the federal government? It has the power of the purse. That printing press, we’re all using that system, right? It’s their world. We just live in it.

Jon: So here’s where we get into where I thought, this is sort of the difference and a very basic understanding I have of supply side economics and demand side economics. And I’ll explain it as best I can without knowing what I’m talking about, which is how I do things. [JON LAUGHS]

Jon: All right. We’ve had supply side economics for, I don’t know, 40 years. And in the last probably 15 years, really hyped up with the Fed pumping a tremendous amount of liquidity into it, keeping interest rates down. It’s basically just inflating larger assets at the high level. You’re saying to people saving your money means nothing, but investing it in the stock market or in real estate is everything. If you keep interest rates low and people can’t get four percent, five percent, six percent on savings, their only choice is the stock market or real estate or something else. And generally, money is flowing in there and inflating it. The dividends and the buybacks and all those other things that are occurring are creating more and more inequality. Now, supply side economics would say. And that’s going to trickle down and create economic growth and development, right? $1.9 trillion tax cut. Zero percent interest rates. Total deregulation. And what did we gain in GDP or median income? Very little. And inflation doesn’t do anything. So basically, all that supply side money doesn’t seem to stimulate the economy in any way. Now the pandemic occurs and we go just f***ing give everybody six hundred bucks. The economy goes 10 percent, 12 percent growth. Suddenly, inflation’s a problem. It makes you think we could have been growing the economy with far less artillery and keeping an eye. It’s only when workers get money that inflation becomes a problem. Explain to me in economic terms what I just said and then grade me and then just tell me if I’m going into the next year’s class.

Stephanie: All right. So what you’re talking about are the two different policy levers. The fiscal policy lever is what you described, giving people money, using Congress to pass legislation. What we just did, the thing you started with is monetary policy.

Jon: Correct.

Stephanie: It’s the central bank. It’s the buying of assets. It’s the zero interest rate policy and all the rest and the deregulation and the tax cuts. That’s all very Thatcher, Reagan’s supply side trickle down. So you’re quite right. We have done this. We have run this experiment over and over again for some 40 years or so. The evidence is in and not just here in the US, but around the world. It does not work. I think some might say as it’s designed to work, which is to widen income and wealth inequality by shoveling all of the gains to the people at the very top who, by the way, don’t tend to turn around and spend that money back into the economy. It gives us a slower growing, just crappier economy where fewer and fewer people get ahead. Wage pressure isn’t there because the labor market never runs really hot because the economy never really runs close to its, you know, kind of potential. And so we have relied on central banks to basically steer the economic ship. You guys figure it out, you use your interest rates and your what did you call it, Rumplestiltskin skills.

Jon: Alchemy.

Stephanie: And you take care of it. Yeah, you’re alchemy and fiscal policy. We’re just going to worry about trying to keep deficits down and and all of that sort of stuff. So it is in large part, the reluctance to use that fiscal policy lever and to leave all of the responsibility to the central bank to try to engineer some kind of economic growth. And what do they have? They have an interest rate tool that’s the primary tool, so they do what they can, which is lower and lower interest rate, which if it works, Jon. Monetary policy works by driving people into debt because the purpose of cutting interest rates is to induce the rest of us to borrow and spend. Whereas fiscal policy works by driving income into people, like you said, 600 bucks. Here you go. You own it free and clear, and you don’t have to pay it back. So they work very differently. They serve different constituencies, and for 40 years.

Jon: But Stephanie the economy. They say 70 percent of the American economy is consumer spending. Why would you stimulate it at 15 percent of the economy, when 70 percent of it is driven by spending? You could stimulate that with such a smaller gun.

Rohan: When you were talking about low interest rates causing inequality and you mentioned savers and people needing a place to put the retirement money. And I think this is a really important point because when you and I think of high interest rates, it’s a sort of double edged sword, right? On one hand, our savings account is maybe earning more or things like that. But on the other side, our mortgage is higher or our credit card interest rate is higher or something like that. And so there are ways around the world, you know, I’m from Australia. There are ways where you can create public pension systems, public savings for consumers. But what we have right now is a system where if you want to pay a higher rate for, you know, mom and pop savers, retirees, those kinds of things. You also have to pay a higher interest rate on all of the hedge funds, all of the other investment funds that hold Treasury debt. And so you have this hostage situation where low rates are seen to be the cause of A. inequality and B. starving savers and pensioners from their money. Whereas the reality is we should have high rates for them, but maybe zero rates on all those investment vehicles.

Jon: Then there’s no stipulation. So —

Rohan: No, there’s not there’s no distinction between the two. It’s not pension bonds and non pension bonds, it’s just bonds. And a lot of them are held by investors who are not —

Jon: And I’ll give an example of this easy money policy is what allowed the American airline industry to become flush with cash. And so during the time, this is after 2008, they become flush with cash. They do a ton of stock buybacks just to, you know, kind of re enrich their shareholders and then the pandemic hits and they don’t have the cash on hand. So we’ve subsidized their golden parachutes, but not the industry that we rely on for transportation.

Rohan: So I think the really difficult line to try to draw is not to say we should just throw interest rates super high, because that can put people into bankruptcy from debt and things. But we do want to not have that easy money that you’re talking about. So how can we put tighter financial conditions, more restrictions on Wall Street, more restrictions on these big companies?

Jon: So if the idea is we can print money when we need it. But the only time we ever use that is when the financial system or the big banks need it. It’s the only time we’ll really print it is for them in this pandemic. We did it on a more Keynesian level. And suddenly inflation ran amok again, putting labor over a barrel, which is to say, See, we tried. We gave you guys a little money. And look what happened. It doesn’t take into account the externalities of supply chain problems in a pandemic. It doesn’t take into account that we never planned for that influx of money. So it kind of had nowhere to go other than consumer spending. So how do you battle the perception, at least, that when you do have a more Keynesian approach, it immediately destroys commodities like gas, groceries and everything else that the people who are struggling rely on in the first place.

Stephanie: So one thing is you look around the world and you see countries that did far less than the United States. We had a tremendous response in terms of fiscal policy right to deal with the pandemic and the economic fallout. About five trillion dollars from March of 2020 to March of 2021 was committed through Congress. So you see all these countries that didn’t go anywhere close to where we’ve gone. Germany has inflation running at a 40 year high. China has inflation running at near 40. And these are the things that you’re talking about energy prices, supply chain bottlenecks, the, you know, problems related to the shutting down and reopening of different parts of the economy at different times. These are kind of the inevitable growth pains.

Jon: So correlation is not causation in this case.

Stephanie: That’s exactly right. But you’re right to say there is a real risk that Keynesian economic policy and that the policy response this time, which was so much better than the policy response after 2008, will come away with a real black eye. If people don’t get a better understanding of why the inflation is up at the moment, if if we start pointing our fingers and saying, well, this is what happens when you try to help people stay in their homes and be attached to their employers and have some income to pay, the bills can’t do that ever again. This was the punishment.

Rohan: If you think about where the inflation is showing up, you know, one of the things to look at is where are the real resources there, otherwise potentially being deployed? So if somebody comes to a bank and says, “I want to build a school” that’s going to need laborers, it’s going to need bricks, it’s going to need other things. Say there’s somebody else in the next booth at the bank and says, “I want to build a casino.” It’s the same labor. It’s the same bricks. It’s the same electrical engineers, et cetera. Now we don’t have a mechanism today to work out where we should put the blame between a private loan, private credit and public spending. We say, Oh, look, we spent a lot of money on school building and now there’s inflation in construction. It must be the schools. Meanwhile, all those casinos being built next door get off scot free because that’s not taking place on the government’s balance. So when we look at demand, we need to look at all the sources of demand, not just the public balance sheet. Otherwise, we’re always inevitably going to blame. The one thing that we change this time, and of course, no one saying we need to cut military spending by a third. That’s not the part of the budget they’re going to blame at the end of this. They’re going to blame helping average people. We have the resources. But right now, private actors are hoarding them or using them in private markets, and they’re not available for public use. We need to make them available.

Jon: You know, it always strikes me that when you talk about that policy, it’s OK for the government to intervene. You know, you said earlier about winners and losers. It’s always OK for the government to intervene on corporate behalf. You know, Walmart is allowed to or a lot of those companies can pay less than subsistence wages. But the American taxpayer subsidizes that with social services. Why can’t we — and food stamps is basically a subsidy program for Kraft. You know, it’s it’s government money, so we always make money available for corporate America. It makes me come around to this idea of, you know, a universal basic income that is maybe smaller than what we thought about, you know, in other ways. But, we are subsidizing corporate malfeasance, like that’s where a lot of our money goes, so when you talk about our debt or even, you know, the deficit that’s running every year, a lot of that is based on underemployment under education and there being no constraints. We always talk about we live in a free market system, but nothing about the system seems free market to me. It seems to be intervened on at all different angles. It’s only that if you intervene on behalf of workers, is that called socialism. Everything else? That’s just. You know, it’s crony capitalism, but it’s never called that.

Stephanie: You know, we’re going to subsidize in some respect, the federal government is going to try to find ways to deal with the inevitable problems of poverty.

Jon: The collateral damage of capitalism.

Stephanie: Right. But whether it comes in the form of food stamps or some other form of income payment, I don’t think that’s fundamentally challenging and getting up the issues of a Walmart being able to continue to underpay workers. The way you do that, I think, is to create an alternative workplace so that if you had something like, let’s say, a federal job guarantee and everybody had a right to a job at a good wage with decent benefits and the rest. That’s the way you apply the pressure to the Walmarts and the other, you know, Amazons and so forth of the world to make structure.

Jon: But Costco. Doesn’t Costco basically do the same thing as Walmart? They just pay better. It’s kind of the same —

Rohan: This goes to your question. You know, I think Stephanie and I both believe that, you know, people who have low incomes should have more money as a, you know, unequivocal point. But in my opinion, when you think of the future of a universal basic income, it’s sort of that old line. People say it’s easy to remember to imagine the end of the world than the end of capitalism. So imagine you’ve got an Amazon gift card forever. That’s a UBI, in a sense, because you’ve got your money, you can buy everything you want and it all goes through the Jeff Bezos machine and all goes through the Walmart machine. Now, if you go back to the beginning of COVID, there was a point. Remember the hand sanitizer shortage it seems so long ago now.

Jon: That was my hoarding of hand sanitizer that caused a lot of that.

Rohan: You and Donald Trump, right?

Jon: That’s correct.

Rohan: There was a serious conversation at that point about whether or not we could repurpose perfume factories because the underlying chemicals and process was largely similar. Now in that moment is that socialism to take over Christian Dior and Chanel to help people not die? Or is that just a national defense of our lives policy? And whether or not we’re willing to do that, I think, is a really big question. And if we could envisage a production side alternative to these companies, not just a demand side, we want more money in people’s pockets, but we want them to be producing.

Jon: Is the argument against that that, A. the government will naturally not be efficient enough and shouldn’t own-

Rohan: Have you seen the post office?

Jon: And also that it will hold such a competitive advantage against other companies. But is there another way where you can hold companies? Look, they get the benefit of our stability and our infrastructure, but none of the responsibility or accountability they can hold all their money offshore. They can comparison shop for the lowest interest rates around the world to hold their debt. They can take their workers as long as they’re not a service economy. They can take their workers and shuffle them off to a place where the standard of living is much lower. They’ve got every advantage and none of the responsibilities and accountability. And so is there another way that isn’t coming up with a competitor for them? Is it just holding them to account?

Stephanie: I think you can do both. You can do both. And we should do both. We have to. These problems are so multifaceted. The hollowing out of our communities through trade deals written over the years, the tax laws being rigged and written over the years, our labor laws, our environmental standards, all of it. We need a holistic reform.

Jon: By the way, we do that. I didn’t mean to say like, it’s just overseas, like we undercut each other in America.

Stephanie: Sure.

Rohan: One thing that I will give serious credit to the Biden administration, their push on antitrust has been incredibly heartening to see because one of the things you’re talking about is if we’re going to let you to have these benefits. And I think one of the biggest benefits that we never talk about is limited liability. If you set up a corporation, you can take on all this risk. And if that company goes under, you just walk away, you just start another company. That’s one of the biggest handouts from the public to —

Jon: It’s socialism, it’s socialism of losses. They privatized its profits, but they socialized their losses.

Rohan: And the justification is we wouldn’t have any investment. We wouldn’t have any risk taking if we didn’t do it. OK. So we’re publicly subsidizing risk in the market because we think that’s a good thing. What do we get in exchange? What does the public get back for this having that conversation, the quid pro quo, if we’re going to bail you out every time there’s a crisis, if we’re going to give trillions of dollars of lending and support services, what are we getting back? Do you think maybe we could get back a slightly cheaper internet rate or something? You know, what’s the minimum level.

Stephanie: Prescription drug costs.

Rohan: Yeah, that’s right.

Jon: But that’s a fantastic point. Why don’t we subsidize risk for people? You know, one of the things that makes it so difficult for people to get out of their situation is child care, health care. You don’t want to leave your job because you’re not going to get health care. We make it impossible for people to take risks because they’re treading water to just stay afloat. Yet for corporations, we say if we don’t backstop you, you’ll never take a risk. So why don’t we do that for people? Why don’t we view people as human capital to be invested in in that same way?

Stephanie: This is what basically FDR wanted in the second bill of economic rights to provide certain protections safeguards for all Americans. So health care, you mentioned housing, education, the right to a secure retirement, the right to a job with a good wage attached to it. These were the things that FDR fought for and the Democratic Party for many years fought for as part of the party platform. You know, basic protection, safeguards, rights, economic, an economic bill of rights. And it did, you know, the party just sort of at some point stopped fighting for those things.

Rohan: I mean, to give one example, my wife is a second grade teacher. She had to get a master’s degree to even be qualified because we want quality people looking after our kids that master’s degree at a public university in New York ended up causing, incurring about $50,000 worth of debt. Now there’s no way in hell she’s going to pay that back relative to the interest rate. And right now, scholars like Lee Karen have shown that the Biden administration could cancel tens of thousands of dollars of student debt, all of it if they want to, with the stroke of a pen. They cannot blame Republicans for that. They cannot win congressional intransigence for that. That is purely an ideological commitment to the idea that higher education and not just sort of studying the classics under a tree, you know, pondering philosophy and plato, but getting the skills you need to be a nurse, a doctor, an engineer to do those things, you have to become a debt slave for the rest of your life. And we could change it tomorrow, and they just don’t want to.

Jon: So this is the flip side of easy money. They always tell you this if you don’t get a bachelor’s degree, man, your life is over now. They don’t mention that a high school, a white high school graduate, has more wealth than a black college graduate. That’s a whole separate conversation, but basically a bachelor’s degree is the ante. And that’s going to be 100,000, 200,000. That’s your ante to get into the world and is it? And we’ve seen an astronomical talk about inflation. The inflation in education is that of, is that the danger of easy money? Because they know people have nowhere else to go. And they know they’re going to do whatever they’ve got to do to get there. And so they know they’re going to have customers who will desperately take out loans and they can inflate their administrative costs and they can inflate everything else, and they can have an endowment of $3 billion and still be inflating their year to year costs.

Stephanie: They really get you with you need the extra letters behind your name beyond the bachelor’s degree.

Rohan: Master’s degree and bachelor’s degree.

Stephanie: Yeah, and then they make it very, very easy to borrow tens of thousands of dollars to to get those degrees. But what they don’t do is really anything to ensure that there’s a there’s a job with an income that’s going to be high enough to allow you to ultimately get out from under that debt. On the other side.

Jon: So what’s the foundation of what you guys would recommend is the reset, if you’re recommending a reset? And what are the tent posts of that in terms of what that would look like when you think about monetary policy and congressional appropriations? And, you know, corporate policy, what’s how does that work?

Rohan: I think when it comes to higher education, I think this goes to the same point we were talking about with the COVID crisis, which is, do we want a system where you have to go into debt servitude to be able to get a higher education degree to do, you know, the basic services we think are necessary, like nursing and education? If not, then at the very least, we need to commit to making that free and cancel existing debt. Say this was a huge mistake. We went the wrong direction. We want to turn the page, but the next day or even the same day, we need to reform the way that we are financing higher education. People joked at Harvard University is a hedge fund with a university attached to nonprofit status, right? We need to think about that process. There are ways to provide, you know, cheaper goods for everybody that require us to take a bit more active intervention in how those markets and industries are structured.

Jon: If modern monetary policy is maybe an effective tool or a new way of looking at things. What are some of the tent posts of what it would look like? Otherwise, I don’t think either one of you is just saying, “Yeah, we can just print money and use it for whatever we want.” But it’s a reprioritizing and is seemingly being more agile and less doctrinaire in how we use monetary policy and legislative agenda.

Stephanie: Well, I mean, most of the focus is on fiscal policy, so it’s on what we can do legislatively through Congress. And I think what we did and what we have seen Congress accomplish over the course of the last 20 months or so is just astonishing right? That you can with the stroke of a pen. One provision in a single piece of legislation, the child tax credit. That one provision lifted more than 40 percent of all the kids living in poverty out of poverty in this country.

Jon: Which is why we had to end it. Stephanie, we have to end it. We have to stop it.

Stephanie: You know, so, Jon, it’s like we have everywhere you look in the economy, you will find deficits that matter. You will find them in education, you will find them in infrastructure, you will find them in housing, you will find them in child poverty and senior, you know, ability to retire with dignity and all the rest of it and on and on. And you’re quite right that you can’t solve every problem with a piece of legislation, but the budget is a way to express our values as a nation. It is a way to prioritize, and it is a way to begin to fund some of the long standing, underfunded and address deficiencies in our economy. So we have to figure out what our priorities are. I would go back to that economic bill of Rights that I referred to earlier, I think is a very good blueprint and a very solid place to start, start with the jobs, start with a job, with a good pay with health care and a right to housing and an education.

Jon: And you’re saying deficit spending is the way to address this. It’s not a necessity that that drives inflation, and it’s not a necessity that it saddles future generations with debt.

Stephanie: It’s not a necessity that it saddles future generations. It is not the case that deficits are inherently inflationary, but it is true that deficits can get too big. And one possible way for that to materialize is in the form of inflation. So again, you can’t spend willy nilly. You can’t drive trillions and trillions too rapidly into a very narrow hole. You have to figure out over what period of time can I safely make these investments in infrastructure, and you have to be able to resource what it is you’re trying to do. Rohan said it earlier, if you want to do infrastructure, you have to be sure that you have available to you the contractors, the engineers, the architects, the steel, the machinery.

Jon: But that you can get ahead of. That’s the kind of thing that planning that if you have a list of priorities.

Stephanie: Oh, Jon, you said the —

Jon: What should I leave? I’m just going to go.

Stephanie: You said the p word.

Rohan: You’re not getting invited back to the Christmas party now.

Jon: I should leave.

Stephanie: Yeah, this is very, very.

Jon: I apologize.

Stephanie: This is the scary word because you just said planning, you have to plan. Yes, you have to plan for prosperity. And by the way, boardrooms are invented for the purpose of planning. That’s what corporate America does. They go walk into the boardroom for the purpose of planning. So we have to be willing to plan for prosperity. We have to be willing to do that.

Jon: Let me ask you a question, though, about what you said about legislative priorities, because there is a part of me that feels that democracy and especially our system is analog in a new digital world and it’s not agile and we did in the middle of a crisis, do what we can. But as far as the structure of capitalism and the government moving forward, it doesn’t seem particularly suited to addressing the public’s needs. It seems more suited to status quo and keeping those that are winning, winning more and keeping those that are losing entrenched. Can we also use the power of monetary policy for those kinds of effects that can help bridge that gap?

Rohan: This is where I think your conversation with Tom to sort of go back to the beginning was so helpful because until we’re clear about what’s actually going on and until the people who know how this works can be honest with someone like you asking very authentic questions, we are not going to have those changes. So, for example, let’s make all fiscal spending deficit spending financed by new money creation, the trillion dollar coin idea that you sort of laughed at ten years ago. Now you’ve come around, let’s have that be the basis of all fiscal spending. If the Federal Reserve wants to tighten financial conditions or manage inflation, let’s make sure it has the right tools to do that. Let’s combine with other agencies, like the antitrust divisions, like the planning divisions, to make sure we don’t hit those inflationary barriers. And let’s simplify a lot of this stuff to the level we can have conversations with the public so that it’s not something that the monkeys feel so dumb they can’t have an opinion on.

Jon: But don’t you think it’s purposefully complex and purposefully obtuse? They don’t want transparency in any way.

Rohan: Those central bankers, they’re trained in the art of very careful language. You make a central bank announcement. All the markets pore over each word like it’s a hermeneutic religious text. So demystifying that through things like media, through things like this podcast is so important because otherwise we’re in the Catholic Church. Speaking Latin, we’re in that phase of economic theory.

Jon: Although they were very good with fiscal policy, I have to admit.

Rohan: They had great music. You got to give it to them.

Jon: Tremendous. How does what you’re saying differ from sort of more standard Keynesian economics? Or is it different?

Stephanie: So it’s different, Jon, I think it’s different almost from beginning to end.

Jon: OK.

Stephanie: It really is. We are not talking about occasionally priming the pump to get the economy back and running and then turning everything back over to the central bank, which is really what mainstream economics is about. You turn to fiscal policy in a moment of crisis. It’s like on the wall with the glass. The thing is, it says break glass in case of emergency. Otherwise —

Jon: You’ve got to land the plane. That’s what they always said. Got to land the plane.

Stephanie: Yeah, you do not touch fiscal policy. You leave macro policy making up to the technocrats at the central bank and you sit back and you hope that by dialing the interest rate up and down, you will somehow end up with an economy that produces opportunity and good wages and so forth for everybody else. And it won’t work. It won’t work. But that is mainstream Keynesian economics turn the dial mostly the interest rate dial use fiscal policy for an emergency. Put it back in the box, work to bring down the deficit. So we are saying something completely different.

Rohan: And when it comes to jobs, for example, the mainstream central bankers theory for decades now has been that there’s a level of unemployment that we have to tolerate. It’s sort of like saying, Well, I’ve got a class and two out of 20 of my kids. I’ll never teach them, you know, they’re unteachable. Let’s just give up on them. They call it the non-accelerating inflation rate of unemployment. It was literally a way of saying if we push unemployment below this level, it’s going to cause inflation. So we’re comfortable with calling five percent unemployment full employment. They just threw that five percent away and they said, “Oh, that’s as good as we can get. So that is full employment and —”

Jon: Why isn’t on the consumer level that when you stimulate that a little bit, it creates this inflationary pressure. But when you stimulate it at the corporate level, there is no pressure. It just makes sense then that they’re just hoarding it.

Rohan: The assumption there is that if the workers have more jobs, then they’ll be able to tell their boss to go, f*** themselves and demand a higher wage. And if they do that, then wages will translate into higher prices in consumer goods because companies will take that higher wage cost and put it straight into prices. Let’s not talk about their profit share, which is often many multiples of their labor costs. They’ll just translate it.

Jon: So that’s the thing. What’s the lever you could use? So to me, that’s the only driver, right? It’s like when they say, let’s drop the corporate tax rate. Well, now that’s the new high tax rate they’ve become accustomed to. So unless you drop it, I mean, you almost foresee a point where they’re like, “Look, we’ll pay you to stay here. Don’t worry about tax. We’ll pay you.” It’s extortion. So how do you get a company if a Walmart says, “OK, I’m going to pay these guys more, but the only way I can make it up is I’ve got to jack prices up.” Why is that billion dollar profit, not in any way? That’s just, that’s the standard. What are the levers that can deal with that?

Rohan: We can regulate prices directly right now. The Bank of England’s governor, the central Bank of England, has literally said two or three days ago the workers should try to ask for less wages to keep inflation down so they’re comfortable regulating the price of labor. They’re saying the price of labor is too high. We should keep it low, but they will not regulate the profit margins of businesses directly. So that’s one thing we could do. We could just say there’s a level of profits beyond which we don’t want to allow if it translates to higher prices.

Stephanie: It’s been done historically, excess profit, taxes and so forth. In countries with different cultures-.

Jon: They do a luxury tax in baseball, pays too much money on the thing there’s a luxury tax. If you make too much profit, there should be a luxury tax.

Rohan: A handicap in golf, you know.

Stephanie: You know, in Japan, their culture is very different, obviously, but they do. There’s a practice that’s pretty effective and well known, and it’s called jawboning. And the government can quite literally just sort of say something that is, in a sense, shaming companies for, you know, even thinking about raising prices. They just go, “you don’t want to do that. We’re watching you.”

Jon: That depends on a culture that can be shamed. I’m not so sure we have that.

Stephanie: Exactly.

Rohan: Well, we do have the full muscle of the American federal government in the event that shaming doesn’t work.

Jon: That’s my point. How the heck could they do $120 billion bond buys every month? How could they do quantitative easing? How could they do tarp and not have stipulations about —

Stephanie: We allow it.

Jon: Yeah.

Stephanie: We allow it.

Rohan: We get the democracy we deserve, that kind of thing. But Lina Khan at the FTC, for example, is trying to start doing this. So I think connecting what we are talking about that the macroeconomic monetary level with that direct price market. That’s the sweet spot, that micro antitrust with the macro, full employment, you know, public goods —

Jon: And using monetary policy as well as legislative impact that was the part that I was trying to get to. We’ve got this giant weapon and we only use it in one direction for, because we feel like politically, if the stock market goes down, it’s devastating. And B that they’ll just leave that, oh, the corporations will just leave if we don’t, if we’re not nicer to them. Bonkers. I don’t want anyone else to have to go through what you guys went through, which is to listen. Point by point and do it on the internet. Is there anything else that you felt like, I really wanted to make sure that I got through to this person from his conversation with Thomas Hoenig or about kind of the policies that we’re talking about?

Rohan: I mean, I think, you know, I think your initial instincts were good, we can have nice things and this idea that we can print money for the billionaires, or for the banks and not for the people is bad. It’s not a coherent idea. And anyone that tells you so is gaslighting you.

Stephanie: The central bankers get very worried, and, you know, when, when the bailouts happened after the financial crisis and it became so clear to everyone that the central bank did have a money cannon and that it could just unleash and, you know, it was trillions of dollars. And in those years and people started to scratch their heads and say exactly what you said, “why for them?” Why did you aim that cannon only there? And you started to hear people across Europe and elsewhere say, “What about a people’s quantitative easing?” What about QE for the people? And that’s what really rattles the central banks because people are starting to say it about the European Central Bank. There are proposals to say, “Listen, we got a climate crisis. We have to have something like a Green New Deal. Where are we going to get the trillions that that’s going to require?” And they go, “Wait a minute. I remember Mario Draghi, when he was the head of the ECB, said that we can never run out of money.” I remember hearing him say that I remember-

Rohan: Neel Kashkari, the Minneapolis Fed last year said, “we have an unlimited amount of dollars at the Fed.” And I said, “When do you hear the word unlimited coming from a central banker except to bail out the banking system?”.

Stephanie: When Bernanke said, you can find this video online, too. And Bernake said “it’s not taxpayer money. We just use the computer to mark up the size of the account.” And people went, “when you use the computer, why would you use the computer to mark up the size of my account?” And that’s when, and that’s when people like Jerome Powell have to remind us that the Fed does not have the authority to do that, that that they could be given the authority. But at present, they don’t. The marking up of your account can happen when Congress provides the instructions to the Fed. We’re sending out checks. Help us mark up these accounts and that’s how it happened.

Jon: These are the guys who like crypto. Sounds like magic. You know, meanwhile, they’re just like, presto change-o trillion dollar.

Rohan: Yeah, that’s right. Larry Summers is on the board of a number of crypto and fintech firms, but then he has got, you know, nothing but contempt for sending out $600 checks.

Jon: It’s just it’s bonkers, right? I really appreciate you guys coming on and engaging with the conversation because it really feels like very staid thinking is holding this back. So much appreciated to both of you for coming on and talking about it.

Rohan: Thank you for having us.

Stephanie: Thank you, Jon.


Writers segment

Jon: So there you have it. Modern monetary theory, I thought, fascinating, really interesting. You know it. It just seems so. The idea that we could, cause so much of our social safety net and so many other projects is like “The Hunger Games,” like if, oh, if you want to do that well, then guess what? F***ing kids don’t get school lunches anymore and you’re like, “Well, I don’t want to take those away, but I really wish I had childcare.” So much of that could be solved through some of these efforts where you could fund some of the things that make life so difficult for people in the United States and the idea that that could be done. Without breaking everything like it, always curious, like when the Pentagon is like, “we need to go to war and we need our money,” and then the government is like, “F*** it, fine. No pay for go. How much is it?” Trillions and trillions and trillions of dollars. And then when a kid comes in and is like, “I get hungry around 11:30” and then the government is like, “Well, to do that, we’re going to have to let old people die.” So —

Alexa: I mean, it’s both heartening and disheartening that we could have it all.

Tocarra: Mm hmm.

Jon: I did anyone else here feel the need to break out into song? [ALEXA LAUGHS]

Tocarra: As in, didn’t we almost?

Jon: But that’s it’s so f***ing true, Alexa. Like, it’s so infuriating that there are certain parts of our economy and our, you know, military, industrial complex and everything else that just never has to worry about paying it back. And you wonder, well, what’s the mechanism for that? Well, the mechanism for that is we can print money.

Tocarra: Yeah.

Jon: But when it comes down to individual suffering. Everybody’s at a loss. Nothing we can do. You know what you got to do? You just got to suck it up. Well, why doesn’t f***ing Raytheon ever have to suck it up?

Tocarra: Yeah.

Alexa: Totally.

Deniz: Well, what was so fascinating about that chat was also like, it’s almost like you pull the curtain. And the man behind the curtain is the United States for every single thing, you know, we’re the ones who decide to print, we’re the ones that decide what we call debt, what we call money. So where it’s all the part of the same machine run by the same person. But for whatever the reason, we act like they’re different actors and they’re not.

Jon: And then we decide what tranches different debts go in and we just assign those debts, you know, when Hoenig was talking about like. “But if you pay, if you just print that and pay off the debt, then what are you calling that?” You’re like, “A debt alleviation, I guess.” [LAUGHS]

Jon: And they’re like, “And what do they get?” You’re like, “Money?” “What do we get?” “No debt?” He’s like, “That doesn’t work.”

Alexa: It’s just also purposefully complicated. You guys, we’re talking about how it’s purposefully not transparent. Or central bankers don’t want transparency. And that keeps us all in the dark about what any of this means.

Jon: Or they chalk it up to moral hazard. If you help people, that’s moral hazard. But if you help corporations, hey, man, it’s the economy like they really. The amount of leverage that the larger players have on the general population is so out of whack. And it has to be rebalanced in some way. And the fiction of it all always brings me back to “Beavis and Butthead.” There was an episode of “Beavis and Butthead” where they were doing a chocolate bar sale, and they both had two containers filled with chocolate bars. And I think Beavis was like, “Ha, I’m hungry.” [ALEXA LAUGHS]

Jon: And he gives Butthead a dollar for a chocolate bar. And he eats it. And then, you know, Butthead’s like, “I’m hungry.” And then he gives the dollar that he just got to Beavis for a chocolate bar. And they just pass the dollar back and forth until all the chocolate bars are gone. And the whole time, I’m like, “That’s our economy.” [ALEXA LAUGHS]

Alexa: Yeah.

Tocarra: Yeah.

Alexa :Also, this whole time you’ve been holding back on a perfect “Beavis and Butthead” impression.

Jon: Back when I grew up in the 90s. [ALEXA LAUGHS]

Alexa: I don’t want to hear about it.

Jon: No? It’s nostalgia. [ALEXA LAUGHS] You weren’t. It was, that was basically the cover charge to getting into a comedy club. [LAUGHS] You have to demonstrate a “Beavis and Butthead” impersonation acumen that had to be very high. This is an interesting thing about nostalgia. Getting back to Russia is the other thing about it is. You gloss over all those things within that, that where it’s like the nostalgia we in this country have for like people that have it in the 50s, like, you mean segregation and they’re like, “No, I mean Little League with Black children.” [LAUGHS]

Jon: You know, and you’re like, “oh, okay,” like nostalgia covers up so many of the ills to the point where you’re like —

Tocarra: Yeah. [LAUGHS] Something else that I thought was really interesting from that conversation was. I think it was gosh, I can’t remember who brought it up, but FDR was Bill of Rights, second Bill of Rights for the people. 1944, which I wasn’t really familiar with, but I am very familiar with the Black Panther Party’s 10-Point program, and they’re actually very similar. Education, land, employment. Like, I just I couldn’t believe these two things that I, you know, are seemingly would be are considered radical today. Still, in 1944, in 1966, it’s like we just want to protect the people, the workers. And I now I want to figure out, where did that end? When do we stop caring about labor and people and workers, and —

Jon: When it started, I think, when it got portrayed as radical, when think about this. The same mantra that FDR wanted to use in 1944, the Black Panthers used in 1966. Look at the perception of those two groups and the Black Panther Party has been rehabilitated to some extent in terms of what it was that they were striving for. But back in the day, that was like there’s a race war coming and the Black Panthers are leading it. And, you know, everybody thought that they were working to overthrow the United States. You know that was the picture of that. And then if you really kind of want to blow your mind, think about how FDR’s first new deal, basically excluded Black people completely.

Tocarra: That’s true. Yeah.

Jon: And so Black people adopting the very tenets of the new deal for themselves was in 1966, an utterly radical move when it was mainstream and political for white people in the 1930s. It just, it shows you.

Deniz: I think about this a lot in terms of like America, as someone who’s been here for like only 11 years, but like you see this extreme individualism in every single asset of our lives and the economy is one, right? Like we won’t help you. You have to find a way. And I just feel like, you know, when do we change that? Because like, clearly we’re helping somebody, right? Like what they said was instead of buying back bonds, we can invest that money in infrastructure. Why are we not doing that? Like, who decides that that’s not what we’re going to do. And I think it has something to do with like what we think our morals are, which is like more individualistic than anything else. But I don’t know what would also like move the needle on, like caring for each other, and I think that will be caring about labor.

Jon: Well, you know, Deniz, it’s interesting because I didn’t realize you were a communist, you know? [LAUGHS]

Jon: The interesting thing about this is.

Deniz: Look, I’m trying to like, get a green card. I’m not saying that love capitalism. I paid my dues.

Jon: Understood, understood. It is the I mean, there are so many inherent contradictions in the American story, but one of the greatest ones is. We are the greatest freedom loving individuals in the world who can do anything we put our minds to as long as we don’t do it together because that’s socialism like we’re unbelievable individuals, but if we work together, that’s f****ed up. It’s the strangest. It’s nonsensical, and I think we’ve all sort of grown up on the idea that exposing nonsense is the antidote to nonsense. And boy, it’s a much harder fight than that. And all you hope is that it’s not one step forward, two steps back that occasionally you get two steps forward and only one step back. But you’re you’re I mean, you’re dead on right. And I’m always interested in people’s observations who have not lived here and grew up steeped in that ethos because it must seem insane to some extent.

Deniz: It really does sometimes. Like, why am I here? And I’m like, OK.

Jon: Wait, did you just send in? Was that a resignation letter? Here’s why you’re here. If you were to tweet that in Turkey, they’d come to your f***ing house. So —

Alexa: Yes, there we go.

Jon: And then we also have blessings. So it’s very complicated. It’s very, very complicated. Speaking of very, very complicated. Are you guys familiar with a gentleman named Rob Christensen by any chance?

Alexa: Yes.

Tocarra: Oh, absolutely, yeah.

Jon: So Rob is a writer on the show. He’s going to share his thoughts on his hometown. And it’s a segment that Rob is calling “greatest city in the world.” Please adjust your volume accordingly. The last part was not part of the title of it, but I know when Rob speaks, it gets very loud, so adjust your volume accordingly.


Jon: Here it is.


Greatest City in the World Segment

Rob Christensen: Yo, this is Rob Christensen, and I’m here to tell you about my hometown, the greatest city in the world, New York City.


Rob: One of the first things you’ll notice about NYC is that it’s covered in dog urine. Sure, some people don’t pick up their dogs poop, but dog urine is just accepted as part of the sidewalk. This is New York City, the greatest city in the world.


Rob: NYC is a place where you got to spend $3 million to own a house with no parking. And every single day without fail, a dog will urinate on your front door. I’ve seen dog owners exit their own apartment building, then allow their dogs to pee on their own apartment building. You disgust me. I love you. Best place on Earth, baby. I’ve been dining in a fancy restaurant, looked out the window and watched a dog urinate all over the window. I was sitting next to. But that don’t faze me because I’m a New Yorker. We’re tough. The meal costs 600 bucks, but the view of the dog d*** is free. I couldn’t live anywhere else. Greatest city in the world. Have you ever slipped on a frozen puddle of dog urine? Well, deada**every New Yorker has. And we’re proud of it. That’s why we’re so resilient. Forget about it. New York is the only city in the world where a Bengali immigrant and a Wall Street CEO can both let their dogs piss on my car, which is covered in parking tickets because of alternate side of the street parking rules. We’re just built different here.


Rob: Right now, I’m not saying that every dog owner in NYC is a bad person. No, that’s actually exactly what I’m saying, because I say whatever I want as loud as possible, because that’s the New York way, greatest city in the world.


Rob: And regardless of all the dog urine, I got to say New York is still way better than Los Angeles because L.A. it’s covered in human urine. Good luck with all that. Enjoy your palm trees. Peace!



Jon: Well, that is it everybody. That is the show for this week, we want to thank Stephanie Kelton and Rohan Grey for teaching us about MMT. Thank you to Alexa, Tocarra and Deniz for joining today. We obviously have more content from the problem. Check out our newsletter, subscribe at our web site. The problem dot com. Check out the Apple TV+ show. It’s coming back next week, and that’s it, man. We’ll be back next week. Goodbye.

Alexa: Ta ta.

Tocarra: See ya.

Deniz: Bye.


Jon: The Problem with Jon Stewart podcast is an Apple TV+ podcast and a joint Busboy production.