Jason starts the show with investment counselor Adam as they talk about George Gilder, one of the keynote speakers at Meet the Masters. On the second segment, Jason welcomes Modern Monetary Theory expert Dr. Randy Wray. They discuss basic concepts of MMT and its relevance on today’s society. They look at job guarantees through MMT programs and look at the future of the US economy.
Investor 0:00
I kept reading and listening and then went forward in the podcast that I went to your website. And I looked at the site see half of the different properties and the numbers. I started learning about the numbers and what they meant. And being the skeptic I am and being a techie, actually with a program to go and scrape your website and other people’s websites and redo the calculations just so I could prove it out myself. And eventually, I came to the conclusion that real estate is a great deal.
Jason Hartman 0:26
Hey, I’d like to introduce someone whose voice you’ve heard on the show before and that is Chad, and we have a fantastic little YouTube raffle for you Chad. What’s it all about? Yes, we have an exciting opportunity coming up for you to be able to win a free ticket to meet the Masters coming up in March or a $500 travel allowance. Here’s what you need to do to be able to win one of those things. We will be selecting a winner on March 4 when the contest ends. And all you have to do is go to the YouTube channel which is youtube.com. Slash and Jason heart Real Estate, subscribe if you haven’t already, then pick any video to watch. There’s a variety of categories everything about real estate investing from finding the right markets, analyzing real estate deals, the economics or real estate investing property management financing, there’s a whole wide range of videos that you can choose from, and choose one that you think would be interesting to you watch it, and then go to the comments section. And comment just a quick one sentence comment on something that you learned from that video. And make sure to include the hashtag j. h live in the comment and that will enter you into this raffle. Okay, so that’s really easy. You just go to youtube.com slash Jason Hartman real estate, subscribe to the channel, and then watch any video you like. And make a comment below the video of one thing you learned include the hashtag j h live and that will enter you in the raffle to win a free ticket to meet the masters or a $500 travel allowance. This ends on March 4, so be sure to get it done before March 4. We look forward to seeing you at meet the masters. Thanks for joining us, Chad. Thanks.
Announcer 2:13
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution. For real estate investors,
Jason Hartman 3:03
welcome listeners from around the world from 165 countries. This is your host, Jason Hartman. And this is Episode 1100 and 39 1139. Thank you for joining us. And I’ve got Adam here with me today, as we introduce today’s guest, Adam,
Adam 3:20
how are you? I’m doing well. I’m doing well.
Jason Hartman 3:23
Good to have you back in. Well, hey, before we introduce today’s guests, we’re going to talk about one of your favorite topics. Your new favorite topic, modern monetary theory that
Adam 3:35
Facebook groups people. Yes, yes, yes.
Jason Hartman 3:37
So I invite I this is funny. I invite Adam to this economics Facebook group that I’m in. And I really liked this group because I get some interesting ideas, some of which I talked about here on the show with you listeners. Adam responds to a post very humbly and says he’s interested in modern monetary theory mmt and the host Just kick you right out. says he doesn’t want to argue with socialist like you, Adam. So
Adam 4:06
Oh, well, I’m you lose them.
Jason Hartman 4:08
Yeah, yeah. See, now I hate socialism. But we’re still friends.
Adam 4:13
And what I’m what I was preaching, it’s not even socialism in some regards. So yeah, if you want to talk to me about it, you can talk to me about it at meet the masters. I booked my flight and got my ticket and everything last week. So I’ll be there. You can come talk to me about it. And you know, just in all fairness to
Jason Hartman 4:27
Adam, he’s not really a socialist, but I kind of tease him about it, you know? Anyway, it’s good debate. Anyway, hey, before we get to our guest today, so who is our guests, we’re going to we’re going to talk the main topic of the show is modern monetary theory, and mmt. And of course, we had Mike Norman on before that was a big interview. Everybody really liked that. Even though he hung up on me at first, but then I got him back on the phone. He did the interview. But before we do that, we’re going to go to the opposite side of the spectrum. And I gotta tell you, Adam, I just read a New York Times article about George Gilder from 2003. And I think you read the same article because I pass it off to you. And the he is so fascinating. Now, I’m super excited about having him as one of our keynote speakers at meet the masters. Not enough of you listening, understand how significant of a thought leader George Gilder is, I don’t want to say was, maybe it’s fair to say he’s kind of past the peak of his career. I mean, you know, he’s in his 70s now, but he’s a big deal. When I first met him on a Forbes investor cruise, going through Scandinavia and Russia on crystal cruise lines. That must have been about 1920 years ago. And, I mean, he was the most revered guy. How many newsletter subscribers did he have Adam, I think it was like 110,000
Adam 5:59
or whatever. peaked at around 110,000.
Jason Hartman 6:02
Yeah. And I want your folks. Yeah, a mere 110,000 newsletter subscribers, right? So a huge newsletter following. And I think his newsletter back then was like $390 a year. So folks do the math on that one, and understand what a big deal George Gilder was, I believe he’s written 32 books, the most famous of his books, wealth and poverty published in the 80s was one of Ronald Reagan’s favorite books, I believe, right?
Adam 6:33
Yes. Apparently, he’s one of the most quoted people that Reagan ever had, like Reagan quoted him the most of anybody alive. Yeah, yeah. Amazing. And he was a speechwriter for what Nixon and for Nelson Rockefeller and George Romney. Wow. A couple names you might have heard of before. Yeah, this
Jason Hartman 6:51
guy’s had quite a career. And he is one of our keynote speakers at meet the masters and you’ll all get photo ops. with him, you know, it’s just going to be a great time. If you bought you know, elite level access tickets, you can hang out with the speakers in the green room and so forth and think that VIP is included in that too. So VIP or elite, you can hang out in the green room. I believe both of those include that. So it’s going to be a pretty awesome event. What else can we tell people about George Gilder before we go the to the opposite side of the spectrum and talk about nmt?
Adam 7:25
Well, he was big enough that he had 110,000 subscribers, but he also was big enough that when he spoke he was one of those people kind of like Buffett, when he spoke the market reacted that they said in this new york times article, he would mention a company and say, Hey, they’re doing all right. And they would their stock prices up at 100%. And this was back in you know, 9899. So you think Well, back then he was a big deal. Well, there was an article whenever I was researching him from Forbes from last February actually, by Rich karlgaard where he interviewed him about blockchain. So right he has he might be seven nine years old, but over the past 20 years, he hasn’t left the field. Now, he’s still learning. He’s, he’s up to speed on everything.
Jason Hartman 8:07
Oh, yeah, no, he’s he’s incredibly knowledgeable. He’s a real intellect. You know, we had rich Carl guard on the show. You know, he’s the editor of Forbes magazine. And, you know, he’s been on the show before. It’s amazing. How interesting. I mean, guilder has some really interesting theories. You know, back in the day, he talked about the blogosphere than the telecom. He coins these words. You know, like you said the stock market reacted to his recommendations. He sure has a way of pissing off the feminist. The National Organization for Women said he was a chauvinist gave him an award to that effect, which is not really true or fair, in my opinion, but it’s kind of interesting that you know, he had that much PR and what else can we tell about him he’s, um, there’s a few other things I wanted to say about him before we
Adam 8:58
get started. Interesting that One of the articles I read basically showed that he forecast basically cutting the cable that people stop watching TV. And they’re going to have everything essentially on like a portable device which we have, right. I know a ton of people who have cut cord.
Jason Hartman 9:17
And what’s interesting about that cord cutting concept, in other words, people getting rid of their TV subscriptions to just have internet and streaming services. That’s what that is referring to. And the New York Times article from October 19 2003, is the revolution is coming, comma, eventually. And so guilder was just early on a lot of this stuff. You know, a lot of his predictions did come true, but they came true a little late. And hey, when you make predictions, it’s all about timing, folks.
Adam 9:50
Especially around the 99 2000 timeframe.
Jason Hartman 9:52
No, yeah, the.com bubble, and bust. Oh, but here’s the thing I wanted you to know. He used to get 100 thousand dollars to do a speech 100 grand was his speaking fee. And folks, let me tell you, we are not paying him that much. Okay. But that’s very significant. And Merrill Lynch valued guilder Publishing at 150 to $200 million. And they were going to do an IPO on that company. And Wow, that’s amazing. He really has done some amazing things in his career. And, and this article is quite interesting.
Adam 10:32
Yeah. And if you don’t want to necessarily pay for your ticket or your light, you can always enter the YouTube promotion that we have going on. And there’s no excuse not to come and see this guy speak.
Jason Hartman 10:42
That’s right. That’s right. And then of course, Tom wheelwright will be there. Rich Dad advisor talking about taxes and, and what real estate investors can do to really decrease their tax liability. Taxes are the single largest expense in all of our lives. And then myself And some other speakers we have will be covering the big boring and profitable idea that you’ve heard us talk about on the past few episodes as well. So it’s going to be a great meet the masters. I’m just super excited about it. Come out and see us Jason Hartman comm slash masters, Adam, anything else before we get to our guest, I’m excited for the interview. Alright, let’s talk about em empty once again, and see how that applies to us as real estate investors. Here we go.
Jason Hartman 11:37
It’s my pleasure to welcome Dr. Randy Ray. He’s a senior scholar at the levy economics Institute of Bard College, past president of the Association for institutionalists thought and the author of several books including his latest why Minsky matters in introduction to a maverick economist, modern monetary theory a primer on macro economics for solid monetary systems and understanding modern money, the key to full employment and price stability. Randy, welcome. How are you?
Dr. Randy Wray 12:08
Thanks a lot for having me on.
Jason Hartman 12:10
Yeah, good, good. And I didn’t mention some of your past bio and resume. It’s pretty phenomenal. You’re a professor in Kansas City and quite a few other things, too. We didn’t. We didn’t dive into those Minsky Is this the economist nobody’s heard of?
Dr. Randy Wray 12:26
Well, every time there is a major financial crisis, people will write about his work. And after the global financial crisis, many many economists wrote about him and including Paul Krugman, he wrote a one of his columns titled, The night we read Minsky,
Jason Hartman 12:43
what really sort of typifies Minsky was at the fact that he predicted the Great Recession so many years in advance,
Dr. Randy Wray 12:52
but he developed this theory of why it is the capitalist economies tend to fall into these finance You’re crazy. So he developed what’s called the financial instability hypothesis, which explains why what he would call a run of good times, that is, you know, where everything seems to be going just great, eventually develops a conditions in which a crisis becomes likely and you know, will occur. So that’s what he’s best known for. He also had a longer sort of an evolutionary view to how the economy evolves, or very long periods of time that he developed beginning 1950s. And that’s why I could say that even back in the 50s, he foresaw the global financial crisis of 2007 in the sense that he explained how the capitalist economy was going to evolve with the whole post war period, from a very robust financial system in which a deep crisis really was virtually impossible, to the point where it became essentially inevitable
Jason Hartman 14:01
when Minsky talked about those cycles of you know why things seem to be going well, and then it sets up all the problems that we’ll be facing, you know, a few years later. How is that different from the business cycle that the Austrian economists were talking about?
Dr. Randy Wray 14:15
First, this sort of a long term trend, but even his financial instability hypothesis, were not simply a theory of a business cycle. It was a theory of the transformation of the financial system. And so, and the financial crises don’t necessarily occur. In the business cycle downturn, you can ever financial crisis that is not connected at all to a downturn, the 1987 stock market crash did not result in a recession. Or you can have the two things occur at the same time and when they do the outcome has very much worse. So in 2007, we not only had the worst financial collapse since 1929. We also had the deepest recession since the Great Depression. So those two things, when they do occur together, it’s very, very hard to get out of them.
Jason Hartman 15:14
So give us a little primer if you would. We’ve done exactly one other episode in about 5000 episodes total on modern monetary theory, otherwise known as mmt. And it has many critics out there. I take it from the title of your book, you’re you’re a believer in this idea. Everybody thinks different things. I’m like high EQ, some like canes, you know, whatever. Right? What is mmt? And why is it a good theory?
Dr. Randy Wray 15:43
Well, there are, let’s say two aspects or two levels of argument and mmt. So the first level is describing the way things actually work. And the second level is policy proposals. And at the first level, what we wanted to do was to explain how the monetary system actually works, and especially focusing on the most misunderstood part of the monetary system, which is the role that the government’s money plays in the financial system. And so that then leads to describing how fiscal policy and how monetary policy actually work. And believe it or not, economists really did not, and most of them still do not have a good handle on how the government really spends their is so much misunderstanding. So what we’ve tried to do over the past 25 years, is to improve that understanding. And let me just say, for the most part, we are not claiming when we’re doing this, that we’re doing something completely new. We have gone back through economic History and through the history of economics. And we’ve shown it’s actually very, very easy to find, let’s say smart people in the past who have said exactly the same thing that we’re saying today. It was unfortunately, last, I would say, from 1960 until the mid 90s, when we tried to recover it. So a big part of what we’re doing is recovering, understanding that was even common in the past and it was lost in the post war period. Okay, so
Jason Hartman 17:37
what is it, like, say that like Keynesianism, right is, you know, the prime the pump idea, right, that, you know, the government sometimes needs to pump money into the system to kind of get it going, right?
Dr. Randy Wray 17:49
What
Jason Hartman 17:50
does mmt fundamentally say like how things should work? Just a very broad strokes, very kind of high level. All what it is, and
Dr. Randy Wray 18:01
well, when use the word should we have now moved to the second agenda, which is the policy proposals You see? Right. So the first is the description. And what I’m saying is that what we’re arguing somebody separate from the the Keynesian idea of priming, what we are doing is explaining how government actually spans. And so let’s go back to the period when Keynesian ideas were developing right at the end of World War Two. During World War Two, the US government’s budget deficit went to 25% of GDP. The deficit was 25% of GDP, government spending was 50% of GDP. The government debt ratio coming out of world war two was 100% of GDP. Everybody at that time understood that there’s nothing necessarily wrong with running a deficit. everyone understood that pay signal Again, amount of government spending was sort of paid for by printing money. And everyone understood there is nothing wrong with this right right here, Joey Ramone, who was the president of the New York Fed, which is the most important branch of the set, of course, wrote a paper entitled, taxes for revenue are obsolete. We do not need taxes for revenue purpose, why I agree we can just use inflation as the tax right. But no, it’s not inflationary, not necessarily inflation it. He said we do need taxes to serve other purposes, including fighting inflation. So he does list that as a reason to use taxes. But what he’s saying is, governments don’t really spend tax revenue, say they spend first and then if they have increased demand too much, they tax away. Some of the demand, it’s perfectly legitimate to argue that you need taxes to fight inflation. And that was his point. It’s not legitimate to argue, again, spending itself is constrained by your tax revenue. That’s what he meant by saying it’s obsolete, right? In other words, so the government just very simple for World War Two right to finance that huge project called World War Two, the government can create money they can print, in other words, that that’s okay. But I think the reason most people would say that’s okay for a time is that it’s temporary, right? They’ll bring things back into line. When the crisis ends. I think many people will deal with what you just said Rama would not okay. He is not arguing in a war he is saying the war has actually taught us this okay. We now understand that taxes are not For revenue. Now, what I said is, you know, we’ve gone back in time and looked at, well, let’s say, all the way back to the American colonies, American colonies issue paper money. It was the first significant issue of paper money in the West. China had done it earlier. But in Western societies, this was a new thing. The American colonies were prohibited from issuing coin, so they really had no alternative. England would not let them issue coin so they issued paper money. And whenever one of the colonial Congress’s would issue money, paper money, at the same time, they would enact a Tax Act called a redemption tax. And they understood that what they did was they spent the notes into existence, and then they taxed them back in redemption and burn them. So what I’m saying is they understood the revenue is not to give you the money to spend You spend the money, and you use the taxes to take the money out of the economy, so cause inflation. This also is the same idea that Rama was putting forward a couple hundred years later. So the purpose of the tax is to get the money out of the economy so that it won’t cause inflation. It’s not for revenue crypto,
Jason Hartman 22:21
that’s that’s really quite interesting, actually. Because so the government is basically realizing or or the government in, you know, in cahoots with the central bank is realizing that look, all these dollars, we printed her out there, we want to do a recall because they’re going to cause inflation because classical definition, right, you know, too many dollars chasing a limited supply of goods and services. So we got to recall some of that money through taxation to keep it from being inflationary.
Dr. Randy Wray 22:51
Fascinating. That’s right. That’s right.
Jason Hartman 22:53
But that’s not all of them empty. That’s just one element.
Dr. Randy Wray 22:56
No, but this is extremely important because Okay, if I propose to you, I don’t know, green New Deal, or anything else. If you agree with me, you know, yeah, actually, there’s some aspects of that proposal that I like.
Jason Hartman 23:14
Yeah, I want to take a train the Hawaii high speed train that
Dr. Randy Wray 23:18
what what is the very first question anyone will ask you, let’s say you appear at a press conference, do absolutely know with certainty, a reporter is going to stand up thinking they’re very bright, and ask you how you gonna pay for it. Okay, right. What rumble is saying what the American colonists understood is, you pay for it by issuing money. That’s how you pay for pay for by printing,
Jason Hartman 23:47
right? And all the Austrians will say you’re crazy because you’re gonna cause all this inflation, right?
Dr. Randy Wray 23:51
That’s right. We know the answer to that. And you already gave the correct answer. Well, we
Dr. Randy Wray 23:57
didn’t say bye a
Dr. Randy Wray 24:02
correct answer that we will withdraw the money out if it proves to be inflation.
Jason Hartman 24:07
Just one sec. Let’s look at like a maybe an example of that. I don’t know the numbers offhand, you probably do but the government during the financial crisis and immediately following it, I don’t know, I think during Obama’s term, we added about, you know, $8 trillion, something like that. We’re worried about 2022 trillion now, I think about a trillion a year. Did we recall all of that through taxes? I don’t know what the tax revenue is. I can’t remember that’s not a figure I pay much attention to, you know, did we recall all of those dollars? Or are we in a position now where there are more dollars out there, and it’s going to take a few years to recall them. And that’s why we’ve already had some inflation or in the last 10 years, what’s giving us a kind of a breakdown of what’s happened
Dr. Randy Wray 24:50
at the peak of the crisis. The budget deficit did go to $1 trillion in a year, okay. And so that is the net addition And we take money to the economy. So that’s net of the taxes that it got. Because this the deficit spent, I don’t know, 3 trillion and got 2 trillion in taxes. There’s 1 trillion that’s out there. Let me just add one footnote. So that was the fiscal policy part of the, say, bailout of the economy. The Fed actually created $29 trillion over the course of the bailout of the financial system, it actually land and spent $29 trillion dollars into the financial system, right, save the bank. Yeah. And, you know, a lot of that is still left out there in the form of excess reserves of 4 trillion held by the banks, and the Fed is trying to figure out how to get those out of the banks now. Anyway, what I’m saying is the fiscal part actually was extremely small compared to the monetary policy part of creation of money to try to save The economy. Now, that trillion dollar deficit added to the outstanding government debt stock. So that that is now you’re right about 20 trillion. There’s about 20 trillion in government bonds out there in the global economy, about 40% are held outside the US about 60% and held within the US. So most of the dollars that were spent in all of the deficit that eventually led to that $20 trillion of debt that’s accumulated. Most of those dollars were used to buy the bonds. So the dollars were replaced by treasury bonds that are now sitting out there, in our economy and around the world. The question is, did that trillion dollar deficit? I think the peak was in 2009. Did that lead to inflation? And the answer is clearly no, it did not lead to inflation. In fact, Said missed its inflation targets every year and still misses them. Because inflation is too low.
Jason Hartman 27:06
Let me just give you a little devil’s advocate on that for a moment. You know, I always try to ask, compared to what? And so what I might argue on that, I mean, you know, tell me from wrong, we might have had a lot more deflation like that was already baked into the cake. had that not been done.
Dr. Randy Wray 27:26
So it actually didn’t cause inflation it was just below the target. And it was we were already so underwater in such a deflationary spiral that we did have some inflation it’s just compared to what it’s where we are in the cross, it kept us kept us from perhaps major deflation. We had a major deflation in the 30s. And recovering from that was very much worse than our recovering from this and I’m not saying we did a good job this time, right. By my reckoning, we still haven’t quite recovered. 10 years later, but the Great Depression was, I think, objectively much worse than this. So no one will disagree with you on that.
Jason Hartman 28:09
Some would say they would argue that when I had Mike Norman on the show, I got a lot of feedback on that interview. It was a really interesting interview. You know, he’s a big promoter of mmt. And, and then I had Peter Schiff on before, right. And Peter Schiff is like, I call him the master of the sound bite, but he’s just always wrong. I don’t want to say always, but a lot, you know, but he sounds good. It’s very convincing guy. And Schiff would argue, and it seemed to make sense, he would argue that, like Mike Norman’s idea is sort of fantasy land that you can just print your way out of every problem, you know, I mean, at the end of the day, that’s not a sound money policy is it to just, you know, buy whatever you want, just print whatever you want and buy it. I mean, that can’t be a system that actually works in the extreme right? You can’t just create prosperity out of thin air. Okay, well, can you?
Dr. Randy Wray 29:04
You definitely can do better than we did the test is did we have for this period of 10 years of recovery? Did we have unemployed people who were willing to work? It we have firms who had excess capacity, who if there had been sales opportunities, would have produce more to sell more. That’s the test. And I think it’s pretty clear that we did have excess capacity and we had people who wanted to work. And we have gone 10 years with almost no private investment, because demand has been so sluggish that they are not investing. Even when profits were very high, firms wouldn’t invest because they can’t see the sales. So I think the evidence is pretty clear. That if we had spent more we could have done better. Now. Let’s say that we’re living In an economy that does not have much productive capacity, that is not very technologically advanced that doesn’t have an educated workforce, then I would agree with you is trying to spend your way to prosperity is not necessarily going to work. If you don’t have the real resources that can give you prosperity, spending more is not really going to help much maybe over a very long period. In other words, the mmt philosophy doesn’t work in Zimbabwe, or even Venezuela, or you know, where you don’t have. You don’t have a way to really pull society up by like a highly educated workforce that can create new technologies
Jason Hartman 30:45
sounds like well,
Dr. Randy Wray 30:46
spending alone won’t do it. But you know, I’m not going to say anything about those particular economies because I don’t know enough about them. But let’s say we know they have websites.
Jason Hartman 30:55
We do know that
Dr. Randy Wray 30:56
right? Yeah, you can definitely get inflation by something. Ending when you don’t have the resources to buy. Okay, but let’s go back to a country I do know, which is the United States in 1929. In 1929, the US was not a developed country. Maybe we were better off than Zimbabwe is now today. But we were not a developed country. And then we had the Great Depression. So we weren’t a developed country and demand fell by about 50%. So output fell from a developing country standard to, you know, absolute poverty and even starvation. And so Roosevelt comes in and they fumble around for a while, but then they settle on a new deal. They put people to work. These people were not well educated. They did not have high skills. Yeah, but they don’t.
Jason Hartman 31:50
They don’t infrastructure. I mean, that was needed at the time. Well,
Dr. Randy Wray 31:52
yeah. But can Zimbabwe build infrastructure? Well, we took we took workers with very Little skill, very little education. We built thousands of schools, we built thousands of airports. We built thousands of public building and
Jason Hartman 32:10
system.
Dr. Randy Wray 32:12
The biggest damage that had ever been built in the United States up to that point in time. Sure. We did all of that with a very backward country by spending more,
Jason Hartman 32:22
but we weren’t backward relative to the rest of the world. I mean, we were pretty much in the same. We were really we were
Dr. Randy Wray 32:29
okay. Now there are parts of the country that we’re not that I’m talking about the United States. Think about the projects that they didn’t Appalachia, in Tennessee, these were very I don’t want to sound like I’m biased parts of the country. But objectively, these were not developed parts of the country. These were places that had no roads, but there’s no electricity near they’re still
Jason Hartman 32:51
not exactly the centers for culture and technology. Yeah, what else silicon Appalachian.
Dr. Randy Wray 32:59
Okay. But relative to the developed countries in Europe, we had parts of our country that were more third world than they were. And and we did move a long way toward developing and we became by far the richest most developed country on Earth at that time. Today, we’re being left behind.
Jason Hartman 33:22
Yeah, yeah. I mean, there were a series of lucky things that America had no question about it. You know, we had two oceans to protect us from the war and all sorts of things that were very unique to America. And so we got to win the Industrial Revolution. But that’s sort of another topic. What else do you want to say right now?
Dr. Randy Wray 33:42
Well, that was the descriptive part. So the government is not constrained by finance. Okay, it can put constraints on itself but wants to say, oh, but we got to balance the budget. That’s a self imposed constraint. The economy doesn’t constrain the government that way. So we always can afford to put our resources to work. So that’s the first step of mmt. Understanding how you can use the financial system to put all of your resources to work. Yeah, the second part is the policy proposals. So what kinds of policies would make sense? And so the thing that mmt is most known for the policy proposal is the job, the it, the job guarantee uses this understanding of how the monetary system works. To answer the question, can we have full employment? Can we afford it and how can we do it? So we’ve come up with the proposal for a job guarantee to ensure that all the labor resources get utilized. So that that is a policy proposal. Okay, so
Jason Hartman 34:49
one one thing I do want to say this is what I meant to say before about the Great Depression is the difference. And I think it’s a pretty significant one is that when we have these make work programs Part of the New Deal, people were actually doing work that created value in the economy for decades to come. Obviously, we’re still getting that value today. But now we have this welfare state where we’re paying people not to work. You know? How did we ever get to millions and millions of young people on disability? Where’d all these fake disabled people come from? I mean, you know, it’s just everybody’s just gaming the system, it’s a scam. I think that’s what bothers people.
Dr. Randy Wray 35:28
It bothers me to I’m opposed to offering welfare to someone who wants a job. I don’t think it’s in their interests. And it’s definitely not in society. Well, but a lot of people don’t want a job.
Jason Hartman 35:39
They don’t even want a job.
Dr. Randy Wray 35:42
That is a different matter. But first, let’s give a job to anyone who wants to work and let’s give them some work to do that will benefit society. And what we need now from a job guarantee is probably not Hoover Dam. That’s right. Probably not what we’re going to employ people. As you said, you know, our technology is advanced, we don’t build dams with manual labor anymore. We use huge machinery. So we got to find other things that are useful for people to do. Do you have an example
Jason Hartman 36:14
they have something in mind that
Dr. Randy Wray 36:16
part of it could be care for the environment, part of it can be care for communities, and part of it can be care for people. So this is focusing on, let’s say, the non infrastructure types of spending. We do need infrastructure, but it’s questionable. How many of the currently unemployed would be useful, building new infrastructure. So we’re trying to focus on things that can be done by people who don’t have those kinds of skills or maybe physical abilities and so on. So what we’re formulating is care what this could range from you Care for homebound, senior citizens care for children care for the communities, environmental cleanup and retrofitting buildings, housing mainly. Okay, that kind of category that was done by Roosevelt’s New Deal to planting trees. We need trees again.
Jason Hartman 37:22
All right, it sounds pretty great. I mean, the government can just print money, create projects, hopefully those projects are well managed. And there’s not a bunch of fraud like yours and Medicare and stuff like that. And Medicaid, you know, those projects are well managed and successful. I get the idea of investing in the future. There’s no question about it, it, it just scares me that, you know, you run that metaphorical printing press, and sort of seems like a bit of a fantasy land expectation that everything’s just going to be great. You know, if you just we don’t have any fantasies. We would not have the federal government set up these programs and try to run them. Okay, what Tell us about that.
Dr. Randy Wray 38:06
We would decentralize it. We want jobs created in every community because it makes no sense to move the unemployed around, right? We want to give them jobs where they are. The communities that have the highest unemployment rates also happen to have the greatest needs for projects. So you match the unemployed to the projects and the communities that need to be done. You decentralize the project proposals so that community groups, possibly local government, possibly state government would formulate most of the projects I would prefer to have not for profit community groups, do everything they can do, to create as many jobs as they can use fully use and also So as they can manage, and then see if we need a role for government to play, we might find that we actually don’t even need the government to create any jobs. Okay, well, that sounds good for me that that would be the last resort. Okay, let the community organizers who know the needs of the communities and know where the unemployed people are and what their skills are. Let them organize the projects, put forward proposals, they need to be approved. This is going to be federal government spending. So the final approval is going to have to be somewhere maybe in the Labor Department, and the national government, but we want it to be approved at the community level, maybe a regional level or state level. Okay,
Jason Hartman 39:44
got it. Got it. Okay, so that’s all logistical stuff. Yeah. So I want to ask you one quick thing before you go. What is your prediction for the future, you do have some thoughts about what’s coming in the future. And I just want to let you express those
Dr. Randy Wray 39:58
in the last global financial crisis that began in 2007. We essentially bailed out the financial system, pattern them on their bottoms and told them go back to doing what you’ve been doing. And they did. They’ve done pretty much the same thing they did between 2000 and 2007. And so you know, the definition of insanity. Yeah, keep doing the same, just keep doing the same thing and expect a different result, we will not get a different result, we’re going to get the same result we are going to crash into another global financial crisis. And I’m just hoping this time, we take the Roosevelt tact, which is basically you eliminate most of the financial system, you fire all of those people who caused the crisis. Well, that all agree with
Jason Hartman 40:47
what but that, you know, that’s exactly what Roosevelt did, and we could have done at this time. The problem is, you know, once you build them out, you can’t get rid of them. You know, see, here’s the thing I always refer to Wall Street is the modern version. of organized crime, right. And I think the way to solve the Wall Street problem, at least in part, and you’re going to totally disagree with this, I bet is to deregulate Wall Street, because then there will be competition. There’s no startup culture hardly at all on Wall Street. It’s all these just big entrenched entities. And the barrier to entry is so high, the regulatory barrier is so high that nobody can come in. And if you look at the opposite coast, and you look at what’s going on in Silicon Valley, where the barrier is very low to create a new technology, and you know, you don’t need a bunch of lawyers and accountants to, you know, go into that world. There’s all sorts of innovation and competition, right. There’s there’s new products also. Yeah, but there’s a tremendous amount of fraud to as we’ve been finding out in the last couple of years. You know, I do agree with you that having the government backstop these huge criminal organizations are criminal is is a big source of problem so I definitely would remove the government backstop. But the problem with the view that competition is the answer is that fraud is always the most profitable game in town. Read the book by my former colleague, Bill Black. The Best Way to Rob a Bank Is to Own One. fraud. Always when fraud always when you can’t compete with fraud. I like to quote everyone liked this quote, if you have a gun, you can rob a bank. If you have a bank, you can rob the world.
Dr. Randy Wray 42:34
That’s right.
Jason Hartman 42:35
sad,
Dr. Randy Wray 42:35
sad. I just don’t buy the argument that unregulated banks don’t work out because unregulated banks, you will have nothing but fraud.
Jason Hartman 42:45
Well, I will say completely unregulated I just said reduce the barriers. And I’m not necessarily saying the banks directly. I’m saying the ability to go public. We saw that under the JOBS Act a bit, you know, I mean, there’s all sorts of new innovation in that crowdfunding space. And and of course, there’s some fraud, no question about it. But you know, that was the first real revision to the Securities Act of 1933. For God’s sake. I mean, how long did it take us to get anything new in that world? And there’s a whole, you know, native startup culture that came out of that.
Dr. Randy Wray 43:18
So, you know, I’m just saying not completely disagreeing with you that a lot of the regulations are by designed to protect the biggest institution, they protect them.
Jason Hartman 43:27
And I don’t disagree with that. Give them a monopoly. Yeah, yeah, exactly. Yeah, good stuff. give out your website and tell people where they can find you.
Dr. Randy Wray 43:34
I guess the best website would be the levy Institute. If you just do www.levy.org it will get you there. That’s not the official URL, but that one will say you there. There are hundreds and hundreds of working papers and policy briefs and policy notes and I wrote my share of them. They can also find Hyman Minsky’s writings there. The guy we were talking about at the beginning. And there’s a fair amount on a mentee and all that stuff.
Jason Hartman 44:02
Good stuff. Well, Professor Randy Ray, thank you so much for joining us. Appreciate the discussion.
Dr. Randy Wray 44:07
Okay, thanks a lot.
Dr. Randy Wray 44:09
Join us March 23, and 24th for the 2019 meet the masters of income property.
Jason Hartman 44:14
Let’s break this down and look at some of the strengths of income property
Dr. Randy Wray 44:18
as an asset class. Now, I found that this event is really helpful because I am totally a newbie to real estate investment. And so I picked up so much information.
Jason Hartman 44:28
One of the great things about it is it’s so fragmented, right? embrace the fragmentation. actually been learning a lot about the tax benefits to real estate and a lot of I’ve been investing actually well over 10 years now. And I learned a lot of new things today.
Dr. Randy Wray 44:48
The other advantage of this weekend is networking, meeting new property managers meeting new area specialists and then seeing the product they have to offer that changes here by you.
Dr. Randy Wray 44:59
Register now with your apartment comm slash masters
Jason Hartman 45:05
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Dr. Randy Wray 45:09
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Jason Hartman 45:11
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Dr. Randy Wray 45:19
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Jason Hartman 45:21
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