Dr. Randall Wray on Minsky

31 October 2016Modern Monetary Theory innovator and torchbearer, Dr. L. Randall Wray is with us for most of the show in a deep dive interview on his book, Why Minsky Matters:  An Introduction to the Work of a Maverick Economist (here from Princeton University Press or here from Amazon). If you have been a listener for more than a couple of weeks you have undoubtedly heard me speak of Dr. Wray. I may have discovered MMT through Dr. Stephanie Kelton but it was Dr. Wray’s book, Modern Money Theory:  A Primer on Macroeconomics for Sovereign Monetary Systems, which entirely captured my imagination, gave me hope as to how we get to where we need to go and (finally) made economics make real sense to my very pragmatic mind. Still, even though this was one of our longest interviews to date I could have easily asked another hundred questions–Wray is that interesting. I think you will be fascinated.

At the top of the show Will takes just a few minutes to knock down the persistent Clinton bashing related to Honduras. People, facts matter. Really. Twitter is just loaded-up with Bros who are convinced that Hillary backed a war in Honduras facts not withstanding. …very frustrating. I take a similar ride only related to the most recent e-mails FBI Director James Comey detonated into the election, likely breaking the Hatch Act while he was at it. According to Kurt Eichenwald, of Newsweek, who seems to have an inside source, none of the e-mails involved appear to be either to or from Hillary. None of the e-mails appear to have been withheld by Hillary from the investigation. The FBI has had the laptop with the e-mails for weeks and they were told about the e-mail accounts involved in April! Director Comey said, in the bomb he sent to Congress, that he has no idea what is in the e-mails. He just thought he would blow-up the election for the hell of it!

Sadly, Will and I will be off next week. Will has an election-related job and I am, of course, busy making sure the Rabbit American vote turns out. We will be back on the 14th. Carrots! – Arliss

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8 thoughts on “Dr. Randall Wray on Minsky

  1. Great interview. Too bad Dr. Wray feels it necessary to couch MMT in terms of an accounting language that he admits, those who most need to embrace MMT, do not understand. Instead of partnering with like-minded advocates who use different frameworks with essentially equivalent goals (Congressman Kucinich- NEED Act, Positive Money in the UK) there is a tendency to be derisive, dismissive and squabble.

    1. I disagree but only a tiny bit. I think it is important to talk about MMT in many different ways. Different people with differing skill sets will be able to grab on to MMT if we continue to use a number of messaging paths. In this interview Dr. Wray spent time talking about the accounting specifically because I asked him about it. As a pragmatist and a numbers person the accounting approach is like comfort food to me. I know this is not the case for all which is why a variety of approaches is necessary and is, I think, your larger point unless I have misunderstood. (Apologies for the delayed response. The disastrous US election caused me to lose all command of language for a few days there.) Carrots! – Arliss

  2. Hi Arliss -Thanks for the reply. Definitely feeling a deep sense of loss in the pit of my stomach – maybe a loss of innocence.. A rock has been lifted revealing what was crawling beneath in the attitudes of a large number of Americans. But can’t make change without first facing the grim reality.

    My frustration is with the inability of progressives to frame the concepts so they can be easily digested. It really doesn’t matter how elegant a theory is if it won’t be put into practice. If you read the comments on MMT blogs you will see overwhelming evidence that level-headed sincere people are having a difficult time absorbing some of the MMT concepts. A balance sheet might be an efficient and clean way of documenting the process of money creation and transfer, but the concept of money runs deeper than just the accounting of it. In particular, it is who is given the power to create it and to decide on how to distribute it that really matters in my mind. If we want a true democracy, as messy as that is, I believe those questions should be left to the people.

    MMT has been around for awhile now with variations and precursors going back 100 years. I don’t see any evidence that it is reaching beyond the walls of UMKC. Bernie never mentioned it despite having Kelton as his economic advisor. More taboo than socialism? At least the Positive Money campaign is reaching out to the public for support. Is my frustration off the mark?

    1. Well, that’s why I wrote a book that is short, simple, has lots of cute drawings and is written by a rabbit. No accounting. Lots of carrots. More books to come. Also, I talk about MMT most weeks on the show (though not this coming one) and rarely talk about accounting. I do talk a lot about process and I spend a lot of time talking about MMT being THE method which will allow progressives to get the things they really want.

      Unlike other economic theories and like climate change, MMT is an observed reality. It isn’t a theory, it’s a fact. Just like climate change what matters is that it be recognized.

      I think your frustration is reasonable but I’m not sure you are seeing all that is out there. The MMT following is growing dramatically, particularly among millennials. I think that the UMKC team has done the hard and thankless 1st generation work. They have hurled the rock into the pond. Now it is all up to the ripples to carry it forward and I do think that is happening.

      However, I have spent almost a year staying away from New Economic Perspectives because the current moderator, who also writes most of the posts, has NO pragmatic understanding of politics and the site has become a place where anyone who doesn’t drink the Sanders/Stein Kool-aide gets bullied. These people think they are progressives but progressives are bent on making progress IN THE REAL WORLD. Radical left purists are the same as religious fanatics the world over. They no longer access rational thought and burn everything on their purity pyres.

      If you do listen this week you will find that I would have handled Dr Wray’s comment on Bernie very differently now than I did at the time. During the last third of the primary Bernie’s lies about Hillary did as much damage as anything else that occurred the entire election. I was glad to have Bernie in the race when he was running honestly and with integrity just as he had in the past. I was glad to have his ideas rise and shape the Dem platform and Hillary’s proposals but the venom he spread did damage no amount of his campaigning for her could repair. Many of those at NEP bask in their white privilege and can’t understand why the Democratic Party was NEVER going to nominate anyone who could not garner ANY substantial support from people of color and who only had one woman (his wife) in his inner circle. Bernie Sanders was never going to be the nominee and would never have won the general. That most of those at NEP can’t grasp this simple, obvious, pragmatic concept tells you that they have specialities and gifts which do not include an understanding of politics.

      I don’t think MMT is taboo, I think it is going to have to be spread by those other than the original inner circle with the exception of Stephanie Kelton. Dr Kelton had mastered ways of explaining MMT to all kinds of different audiences. People like architect JD Alt, who we had on the show two weeks before Wray, has written “The Millennial’s Money” to specifically explain, for millennials, how to use MMT as a tool to accomplish their goals. The book is a quick read and written for non-economists. My “Smart Bunny” series is intended to be short, simple and funny – but still accurate.

      If MMT is to take hold it will not be because those in DC suddenly wake up. MMT will take hold if millennials decide that they can use it to address climate change, infrastructure, education and the like.

      All I can do is to feed the information out to as many people as I can and hope that it starts people (and rabbits) thinking. Carrots! – Arliss

      1. “I think your frustration is reasonable but I’m not sure you are seeing all that is out there.” Well it could be that I’ve followed a circuitous route over the past year trying to navigate the maze of MMT interpretations out there. Always willing to recalibrate.

        I’ve actually read some of the “Smart Bunny’s Guide…” a year ago. Some feedback: What I find problematic is the attempt to redefine ingrained terms such as “debt” or “treasury bond”. My suggestion is that, once the concept is explained, the real descriptors should be used – maybe “investment” in place of “debt” or “interest-bearing federal savings accounts” in place of “bonds”. If anyone but the Federal government sells a bond, it is taking out a loan. Either the Federal debt is a debt or it isn’t. Semantics is so important.

        “Theory” is an unfortunate description, but economic policy has not so far been guided by the MMT concepts, so the empirical evidence is still not there to make the case to the people and politicians. Is the MMT description complete or are there other considerations that have not been accounted for that could lead to unintended consequences? I believe the concept of an infinite well of available sovereign money only limited by available resources is a very difficult concept for most to swallow. We’ve been taught that there is no such thing as a free lunch and sometimes MMT sounds that way, even if that is a superficial understanding.

        I am not sure I agree with your assessment of Sanders. I don’t need a politician that comes as a complete package, just one who has the humility to be introspective and can “grow” his inner circle to meet the challenge. I found his repetitive mantra against Clinton a little grating but he made a practical calculation and an assessment of his extremely varied audience. I believe even the unsophisticated like me saw Clinton as an apparatchik – a purveyor of the status quo that could not instill the needed vision. Sanders settled on a simple and clear message of change that could be digested – a more elaborate message could have overwhelmed the public. Trump did exactly the same thing but via the dark side. Many people who may harbor racist thoughts or prejudice, still have an innate sense of right vs wrong. I’ve seen people who consider themselves to be liberal exhibit racist behavior but would vehemently deny they are biased. I believe many of the swing voters who went along with this racist change agent would have preferred a Sanders’ moral version of change. He just was no longer there to oblige. Maybe I’m too generous with human nature but to believe otherwise is too demoralizing for me.

        Look forward to exploring your site.

  3. Paul –

    In terms of semantics I do think they are very important but I disagree with your take, the Fed understands “debt” in the same way as MMT people do. In MMT we aren’t redefining debt we re making it clear that it isn’t important. I’m not being facile there. It isn’t that debt doesn’t make a difference, it is that the difference it makes isn’t an important one in the ways people generally think. Debt is a problem in that being in debt to Wall Street is the same as underwriting Wall Street. Given, however, that Treasuries are often held by pension funds and the like, there is value in debt beyond just creating financial leverage for the economy. I do, almost always, describe “debt” as a two-edged blade and have repeatedly used the investment clock analogy instead of the debt clock.

    I attack the term “Theory” because it does not need to be proven. It is already the way the Federal Reserve runs and this has been the case since the Nixon Shock. There is a freaking mountain of evidence. What MMT has is a “forest for the trees” problem. Most people don’t know what they are seeing even when they are looking right at it.

    You speak of MMT as something which has not been applied which leads me to believe that you are mixing-up the progressive policy approaches of people on the MMT sites with the actual functioning of MMT itself. MMT is how money already works. It is how the Fed already works. It can be utilized in either a conservative or progressive manner. So far all parties (and even Bernie) have elected to stick with the old gold standard paradigm in their policy prescriptions. MMT is an observable description of how modern, fiat, sovereign, floating money actually is currently working. That’s all. What is frustrating is that if people understood what they already had it would be possible to do much, much more in terms of policy.

    Bernie was pressured terrifically and refused to grow his inner circle. He had no more than a passing interest in people of color. They were very clear about this throughout the election. I trust them to understand their needs. Additionally, he was incredibly dismissive of the disabled community.
    We had an activist, Ariella Barker, on and she was so eloquent about why she changed from working to elect Bernie to working to elect Hillary. Women’s groups were also not pleased. Bernie thinks of women’s rights as an after thought and women noticed. All of this would have prevented him from being elected.

    In retrospect, Will was probably right when he talked about Joe Biden being the most electable of the Democrats. Less baggage, excellent relationships with communities of color and long known as an outstanding proponent of the working class. And women love him. Joe didn’t run because he lost his son (who would have made a GREAT President in 2024) and he and his family decided that they needed to be able to grieve out of the spotlight. A campaign would not have been the place to be recovering.

    Hillary was never an “apparatchik” and if you had taken an un-Bernified, unbiased look at her you would know that. The policies the Bernie-or-Bust religious fanatics accused her of were almost without exception such a distortion of reality as to be wholly unrecognizable. They took hold because it is easier to get mad at a rally than it is to pay attention. The Bernie religious fanatics never managed to notice when they actually made their point and she changed her mind and decided to fully support them. They never took into consideration that a Secretary of State does not speak out against the policies of the President they are serving or have just served. Hillary came out against the TPP after she read the final draft and listened to voters. That was a perfectly reasonable, human, logical position but the fanatics couldn’t hear it over their own temper tantrums. Hillary listened, something she has a long and storied history of doing, and changed her mind on a number of things. That is what good politicians do. But the religious fanatics were blinded by their own fervor. Bernie negotiated a platform with Hillary, got a personal commitment from her (something she did not have to give him), and then threw his support behind her. But the religious fanatics burst into flames and called him a “sell-out.” No. Bernie was pragmatic. Unlike the fanatics, he knew there was a world of difference between Trump and Clinton. He knew that Hillary would move his causes farther forward. He had a commitment from her that she would support him in some of his biggest priorities and that those would become priorities for her as well. But still the fanatics squalled. Religious fanatics of all stripes are incredibly dangerous the world over. Bernie weaponized a whole bunch of bros who could never see past their white privilege to things which were actually more important.

    You know what is more important than student loans? Civil rights. Religious freedom. Freedom of speech. Freedom of assembly. Freedom of choice. Immigration. Yes, student loans are important and Hillary expanded her student loan platform to include most of Bernie’s ideas, but she had decades of work with communities of color and on women’s issues. Bernie had nothing comparable. He voted with the Democrats on most of those things but he did not put his energy there. He represents a state which is the textbook definition of white privilege, he didn’t see the need. His campaign was run that way from the beginning to the bitter end. Climate change is more important than student loans too and Hillary had much deeper and more detailed policies to address climate change. Bernie was incredibly superficial on the topic. Contrary to the tunnel-vision of the fanatics, talking to Goldman-Sachs is not the same as supporting Goldman-Sachs and Hillary always supported Dodd-Frank as well as considerably stronger banking regulations. It was there on the very first day her site went up. I looked for it specifically. Bankers would have hated Hillary but they have solved that problem now.

    You ARE too generous. You are coastal. I used to be. I was raised in one of the most liberal counties in the nation, Sonoma County, California, and my parents are way, WAY to the left and always have been. Then I moved to Indiana. I have been here sixteen years and one of the first things I was telling my friends back in CA after we settled in to IN was that the racism and sexism are palpable. In the first few days I was here a new friend told me that I really shouldn’t go by “Dr.” unless I could “deliver a baby or a calf.” He wasn’t kidding. People here despise you if you have an education no matter how quiet, polite and self-effacing you are. The anti-intellectual, anti-science excrement is thick around here and it always has been. The anger of this election empowered it and gave it permission to rise…and it did.

    …And I’m done being nice about it. Hillary was absolutely right when she called the bigots and the sexists and the white supremacists and the white nationalists “deplorable.” They are. As are any and all white people who were willing to risk the very lives of people of color, immigrants, anyone who needs health care and women who need to make a choice. It was a life and death decision not as metaphor but literally and every single white person who voted from their position of privilege without further consideration is deplorable as well. Markos, of DailyKos, is right, white voters voted as if their lives depended on it even though they didn’t. What makes that a deplorable act is that for millions of Americans their lives DID depend on this vote.

    There is a lot of horror to come. In this state the deplorables are painting swastikas on churches which have primarily black congregations and writing “Heil Trump!” just to be clear that hate has come into power.

    There is no going back. I am hoping that Keith Ellison, who endorsed Bernie but then worked hard for Hillary, will lead the DNC forward. It will give me comfort to have a black, Muslim at the head of the Democratic Party.

    I do appreciate your comments and thoughts. I wish WordPress had not eaten the post you made to the most recent show and my lengthy reply. I put some of that reply in here but not nearly as much. Should your comment resurface I will post it along with my reply.


    1. Lots to reflect on!
      Just for the record – I did vote for Hillary. I meant “apparatchik” metaphorically when contrasted to Bernie’s overt distain for the system which he symbolized in the term, “bankers”.

      I have to admit, I don’t understand the inner workings of politics, but I believe there are social upheavals that the political process can be completely orthogonal to. There are times when the “rules” no longer apply. I see Bernie as a Trojan Horse – I too feel his policy acumen has holes and weaknesses, but are you sure that a more sophisticated and well thought out approach would increase the chance of progressive ideas actually being implemented? Both Trump and Bernie have tapped into a subconscious frustration that Hillary did not (for me, at least). Unfortunately, as I said earlier, Trump’s vehicle was via the dark side of human nature. I believe that the President’s job is not to be a policy wonk but to be an inspirational leader who has the smarts to know there are those smarter than him or her to develop the tools to achieve the vision. I am an anti-zealot – I run from charismatics. At the same time, I believe that evolution is not sufficient – there is a latent movement boiling under the surface that needs someone to give it voice and focus.

      The very fact that Bernie took in Kelton as his financial advisor is a clear indication to me that he would have brought in the women and minorities to focus on all of the intersectional issues.

      I don’t believe bank regulation will solve what are systematic flaws inherent to capitalism. There are those who want to throw the “bankers” in jail – and I suppose there is a good case to be made for that, but isn’t it time to go deeper and question the need for that institution at all? If you read some of the memoirs of these repentant investment bankers you realize that the system is completely broken. By its very nature, capitalism MUST lead to condensations of wealth, a perfect positive feedback condition.

      I heard the Sam Seder interview with Kelton and I even sent her a congratulatory email when Bernie chose her. But if you listen to Seder as religiously as I do, you will notice that he rarely raises the subject – when he does its brief and in passing. MMT is just part of his menagerie. This is THE problem with the left’s ability to get their (our) message accepted and understood. They are very long on hand-wringing, analysis and society’s postmortems but very short on strategy and solutions. MMT (not very sexy) concepts need to be repeated over and over to progressives. If the left won’t plant the seeds, there is no hope of MMT being accepted from the “ground up”. (Sorry this is a major trigger point for me).

      Maybe you can elaborate on the concept of federal debt. Debt, to most people, implies something that needs to be repaid – in kind. MMT has proven over and over that it is absurd for the printer of money to “borrow” what it prints. So why hang on to that terminology? The semantics are self-sabotaging and lead to endless confusion.

      There is something to the notion that if something is broke, fix it, don’t discard it. I appreciate MMT’s explanation of the true workings of the Fed (as much as I can understand it), but in the back of my mind I keep hearing. “why?” If you could start from scratch, is this the way you would run the creation and distribution of money? (not a rhetorical question:-)

      Vegetarian – now I see the carrot connection! I was a vegetarian too until I dug a little deeper into what really happens to those “contented” cows and happy hens (and macerated male chicks) and what milk, eggs and cheese were doing to my body and the environment. We hone our human exploitation skills on the animals.

      Thanks so much for your insights and responses.

      All the best


    2. Arliss- I’ve reread your comment several times as well as Ariella Barker’s piece on her devastating interactions with the Sanders campaign. I’ve been privy to another attempt to reach out to him (this time from a progressive elected official) only to be ignored. Sam Seder blames Bernie’s failure to get nominated on his very late start in the campaign. Clearly this is evidenced by his crude support system and tight “inner circle” It may be that he really is a callous and narrow individual, but making that judgement while embroiled in a political war zone environment may not be fair. Just as many gave Hillary the benefit of the doubt claiming she would listen and embrace progressive policies and reform the financial system, it might also be reasonable to do the same for Bernie. The campaign messages are targeted and exaggerated. That’s what a populist candidate does and this was clearly a battle of the populists this time around.

      I have my own passionate issues which Bernie, Hillary and the left in general completely dismiss and ignore. My belief, however, is that with a true progressive leader in power, my concerns will have a chance at being addressed. To me, this is not about policy but a fundamental societal movement. Movements are unpredictable and impossible to control – driven by anger, emotions and fear. If infighting and recriminations take over, we play into the hands of the dark side.


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