Rebel Economist Says Everything You Know About Economics Is Wrong | #NovaraLIVE

Welcome to Navara Live. I have another special episode for you today on the state of the UK economy, ahead of Rachel Reeves' budget, of course.

Um, a couple of weeks ago, I did an hour-long interview with Martin Wolf. Very much someone who speaks from within, um, the economics establishment, even if he's somewhat critical of it. Um, I think it was a very interesting conversation, lots of views. Um, however, lots of you were asking for someone who was outside of the economics establishment for my second interview, someone who was a bit more of a rebel, and I have acceded to your demand.

Um, Professor Steve Keen is an economist who has spent his entire career calling out what he sees as the fatal flaws in mainstream economic thinking. Um, and he has a popular YouTube channel where he regularly makes those arguments. Um, I know a few of you are already subscribed to that YouTube channel because we've had a number of requests for Steve Keen.

Um, one thing Steve Keen thinks economists get wrong is the nature of banks and money. So, he thinks economists have systematically underestimated the importance of banks in the financial system and how too much private debt creates financial crisis. Um, as you'll hear in the first part of this interview, I'm totally persuaded by Steve on this point. He deserves a lot of credit for predicting the 2008 financial crisis when other economists didn't.

Um, what I think are his more controversial arguments, um, concern his beliefs that governments don't really need to worry about deficits. Um, this comes from sort of Steve's alignment with Modern Monetary Theory. Something that comes up a lot again in comments, um, and sort of really divides the left, actually, MMT. Um, and it's a debate that's especially relevant today. That's because, um, Rachel Reeves's decision not to raise income tax has spooked the markets, who are now selling off government bonds. Um, Steve Keen thinks governments shouldn't be scared of the bond markets. I'm slightly less sure.

Um, in terms of the interview, for the first half, we talk about money, what it is, how it's created, private debt, and financial crisis. Um, at times, it's quite technical, but I think it's really valuable to understand and also explains why house prices are so high. Um, in the second half, we have more of a debate on, um, MMT, Modern Monetary Theory, and government debt.

Um, before we get started, I will draw your attention to the next IRL, or Navara IRL, Navara Live, um, on the 25th of November. Ash Sarkar and Moyo Mlan are coming to the Contact Theatre in Manchester. Um, they'll be speaking to Lanre Bakare, author of *We Were There: How Black Culture, Resistance, and Community Shaped Modern Britain*. Um, Lanre will be talking about the underexplored history of Black Britain outside of London, touching on the extraordinary Black lives who agitated, organized, and created during the tumultuous Thatcher years. Um, as is traditional on the show, um, he'll be helping Ash and Moyo to solve your dilemmas.

Now, over to the interview. Steve Keen, thank you so much for joining us on Navara Media. Pleasure to have you on the show.

>> I'm delighted to be here. Thank you very much for the invite.

>> Your podcast is called Rebel Economist. Um, so I suppose to begin, what makes you a rebel economist?

>> I could start by saying I understand mathematics. That might help. Uh, the mainstream economics which has dominated the profession since 1870, in my opinion, should have been shut down in the 1960s at the very latest. Uh, there's so many empirical and logical uh anomalies to the theory that it, it just doesn't work, but it's been preserved because of the inertia in economics, which is unique to that discipline. Uh, so we have a conventional theory of economics which has permeated society and politicians as well, which is completely false, but quite convincing if you don't know that its underpinnings are false. So I'm, I'm a rebel because I've given up waiting for the profession to ever get come to its senses of its own volition. And I think the best, the best way is to attack it from the outside and saying, if we really wanted to get decent economics, it'd be the best thing we could do is shut down every last economist on the planet, including me, as it happens, uh, and that engineers and biologists take over and and build a decent model of how a capitalist economy actually functions, because the models we have are just completely, they're convincing, but they're completely wrong at the same time.

There's a danger of getting quite technical quite quickly, but I suppose to a to a lay audience, um, what is it that you think that mainstream economics gets wrong, um, that you get right?

>> One of the simplest ones is how money is created. And, uh, if you read textbook economics, you'll be told that there's a thing called the money multiplier, which also is based the model that also called the fractional reserve banking model, and that is one which economists happily explain it in their textbooks and say that's how the money is created. Uh, Austrian economists rile against it because they say that's actually fraud. Uh, in fact, it's a false model. It doesn't even apply, uh, because to lend out reserves the way that the textbooks teach that banks lend out reserves does one of two things. It either violates the laws of accounting if you try to imagine that banks lend reserves and put that into people's deposits, or the only way it actually works is if all loans are in cash, and that's not been the case for at least 150 years. So, uh, it's just simply having a, a grounding in the actual structure that enables the banking system to operate. That's double-entry bookkeeping. I happen to have invented a software package that enables me to build these models. Conventional economists use supply and demand diagrams like we use them for everything else and think it helps them understand the banking system. It means they generate myths. So, for example, they will say that government spending crowds out private the private sector, uh, and reduces the money supply. It does the exact opposite. It, it provides more money for the private sector to spend, uh, and it is, uh, it, you know, it, it does not reduce the money supply. It actually increases the money supply. So conventional theory literally tells you the exact opposite of what applies in the real world.

And so, as far as I understand it, because let's bear down on this point about how money is is created and the nature of banks, because as far as I understand, that's one of your big interventions is on the role of >> banks.

>> It is, yeah.

>> And as far as I understand it, the mainstream analysis of looking at banks and money is what's called the loanable funds model, which is that we put our savings into bank accounts, and then banks lend out those savings to other people. So, yep, there's this set amount of savings in the bank. Um, and then it's the banks, in part via fractional reserve banking. So, there's some extra money they can, they can lend out as well, but they lend out this money to people who want to buy mortgages or to people who want to invest in in businesses. There's a relatively fixed supply of savings because that's just what we're all saving in the bank. Um, and so therefore, these different purposes to which money could be put are all in competition. So if, if the government um borrows these savings, that means there's less savings for the private sector to borrow, for example. And you think that's incorrect. You think that actually when a bank makes a loan, the bank is not just lending out someone else's savings, but the bank is creating money, I suppose, essentially out of thin air. Um, and I suppose explain that to me. How, how is it the case, in your understanding, that the bank is creating the money out of thin air?

>> It's not actually thin air. Uh, this is one thing which I think it's a, it's a flippant term which makes it easy to distinguish from the idea of banks lending somebody else's money to you, which is the loanable funds model, but it's also diminishes the status of what's going on because if you imagine, if you imagine you're lending to a friend, I don't recommend it, by the way, but if you do lend to a friend, uh, what happens? Your bank account goes down, so there's a negative, and therefore you're lending out of your account, and then it goes into your friend's account. So lending between two individuals who are not banks is one bank account goes down, the other goes up, and the one that goes down is being lent out of, in that sense. And that's so that's you're not lending out of nothing, you're lending out of a bank account which has a fixed amount of money inside it. So there's obvious constraints on how much you can lend. What happens in the real world is that, uh, banks have the reason a bank is a bank is that it's the only institution in society that is allowed to mark up both its assets and its liabilities at the same time. So if you apply to a bank for a loan, and there's obviously going to be some assessing whether you can repay the loan and so on as part of that process. But once the bank agrees that you, they either think you do, or they want you to think you do, that you can repay the loan. Uh, they say, okay, we're going to put a sum, uh, a liability against your name. You've signed a loan contract. Let's say it's for a million dollars. We record you owe us a million dollars. So our assets go up by a million, and we put that in your bank account. So your bank account goes up by a million. So that's not a, that's why it's the saying banks lend out of nothing. It isn't that they lend out of nothing. They, they don't lend by running down one account and increasing another. They lend by increasing debt and increasing deposits at the same time. So the classic statement which was first made by, uh, actually the first time I've actually found it said, it's by the effectively managing director of the New York Fed. He said, loans create deposits. So loans go up, deposits go up. There's nothing going down. Uh, so that's why it's not, uh, out of, you're not lending out of something, but you're not lending out of thin air either. You're increasing an asset for the bank, you're increasing a liability for the bank at the same time. And that's how banks create money. And it's incredibly simple. It's not a complicated model.

And I suppose the thing to understand in terms of the money supply is that there is now a million pounds out in the system that wasn't there before. Um, because I now have a million pounds which I owe the bank, but it's going to take me about 30 years to pay it back. But the person I've just bought the house from has a million pounds in their bank account. So we can say, sort of, the money supply has increased by a million pounds until that debt gets paid down, at which point it will sort of disappear again. Is that, am I on the right track?

>> Yeah, that's exactly the right track. I mean, when I work at the aggregate level as well, of course, when you're doing your model of the macroeconomy, what happens in terms of reserves between different banks disappears. Unless you want to complicate your model and include reserves inside there, which you can do. But fundamentally, if you're looking at the aggregate creation of money, the active bio bank of saying we're going to issue a loan increases the, uh, loans, obviously, it increases the, the bank accounts as well at the same time, and that's how banks create money.

>> Let's talk about, in case sort of our audience are watching this and thinking, what the hell are they talking about? This is all quite technical and abstract. Let's bring in a historical example, and I think what your analysis gives a particular and interesting perspective on. Um, so Alex, can we bring up graphic two? So this is long-term real house price trends. And this is something that lots of our audience will will care a lot about, the fact that housing is is way too expensive. This is actually a graph from your Substack. Um, and this was very interesting to me. You can see that from 1850 to 1980, house prices doubled. So that's house prices doubling um over a period of of 130 years. What then happens over the next 40 years is that they triple. So instead of doubling over 130 years, they triple over 40 years. So clearly they're just massively going up in price after 1980. You've got a line there to represent that that's when Thatcher came into power. Um, we can take that graph off now. Um, so I suppose there are three types of explanation I've heard as to why that happened. Now, the first one, um, is sort of probably the one that people will most standardly hear, which is about the supply and demand for houses. So, so what happened um in from the 1980s onwards is that we, we stopped building enough houses, maybe because we stopped building council homes, and demand for houses went up, maybe because of immigration, although that only really started in the '90s, but or or because more people wanted to to live in cities, for example. So you've got demand outpacing supply, and what that leads to is an increase in house prices. Um, now, someone with a, a more unconventional view, but who our audience will be very familiar with, is someone like Gary Stevenson. Now, he says the big thing that changed in the 1980s um is that inequality increased. Inequality meant that there were very rich people who were just racking up piles of cash. And what do people with piles of cash like to do? They like to buy up assets. So there was this new, um, I suppose demand created for homes, but not to live in, but to own as as assets, and that's what pushed up house prices. Now, as far as I understand, what you think is that what happened in the 1980s is that there were restrictions taken away from the banks, which made it much easier for them to lend to people, especially to lend to people for mortgages. And what that did was created much more money in the system, because every time they put out this loan that they're essentially creating, you know, a million pounds if the house costs a million pounds, whatever. Um, that money all chases after these houses, and then because it's been made easier for banks to give out loans, and therefore for banks to create money, you get a, a sort of asset spiral or an asset price spiral in the housing market. >> Um, is that, do you sort of see where I'm coming from? Do, do you think that's a fair assessment?

>> No, that's that's a fair summary. And like, there's there's a certain amount of truth in each of the other explanations as well. Uh, so you know, obviously, if you get any wealthier people, then housing becomes a speculative asset. Like, I, I took a, a tour of journalists around, uh, London about six or seven years ago with colleagues of mine who like to expose the extent to which Russian money has driven up house prices. So there's massive numbers of people who are buying London houses in particular, just as a, as a way of parking money, legally obtained, maybe, uh, maybe illegally, uh, and and that's the way that they get appreciation out of it. So we've turned housing from, uh, a long-term human service of accommodation into a speculative object. That's certainly part of it. Another reason that things matter for housing is that housing has always been hard to supply. Uh, if you want a new car, I mean, literally these days, the, the length of time that it takes to manufacture a car in a factory from, you know, starting point to the other end, you measure in minutes these days, not in days, let alone, uh, weeks or months. But to build a house, you're looking at three to six months construction. It's still a craft industry. So that means that the supply is much more rigid, and you can actually understand the supply, the situation by forgetting about the supply side of things and saying, it's, it's demand that's going to give you the volatility of the price, because you know, it's, you can, there's a first approximation, you can treat, you can treat the supply of housing as fixed, okay, vertical, if you want to think of supply and demand curves, and I highly recommend not doing that, but if you do, you draw, you draw a vertical supply curve, and then what's going to determine the price and the change in prices is going to be the demand, demand, and where's that demand come from? Now, when we live in a world in which banks are allowed to create money, which they are now, uh, then it's the demand is borrowed. You borrow at least 80% of the money you're using to buy a house. Used to be 70. Now it's 80 or 90% of the money is borrowed. So it's the change in the level of mortgage debt that gives you the level of demand that enables the current price level to be sustained. So it then turns out to be the change in new mortgages that gives you the change in prices. And this is specifically my argument. Um, nobody made it before I did. Since I've done that, other people have come in and verified the empirical analysis, but fundamentally, the thing which gives us rising or falling house prices is rising or falling levels of new mortgage debt.

Let's talk about an analysis and I suppose sort of in my introduction I've spoke about the fact that you sort of foresaw the financial crisis coming before other people did and this is very much related to your analysis of the importance of private debt. Um, so what you can see here is US private debt and and government debt. Um, and um, our audience will be able to see this is this is going back 200 years. Um, so so from the 1800s, um, private debt sort of it starts high, comes down, but what what's relevant here is before the Great Financial Crisis, or I say the Great Recession, sort of in the 1920s, um, private debt gets really high. So it spikes at about 120% of GDP. Um, and then before the 2008 financial crisis, private debt also spikes at around 160% of GDP. Um, lots of people sort of suggest in the mainstream assume that it's government debt that causes those crises, but in fact here, um, government debt was very low, both in 1929 and in 2000. We can also bring up a UK-based one, um, which sort of relates to what we were talking about with Margaret Thatcher. So that comes into power, um, government debt stays fairly low, but private debt skyrockets. It hits about 180% of of GDP in 2007. Um, and and that's when we get the financial crisis. So I suppose can you explain why you think private debt is what matters more than government debt when it comes to financial crisis? What's the mechanism here?

>> Okay. Well, the simplest start of the mechanism is the credit adds to aggregate demand and income. And this is something again which, uh, my, my side of economics is is oriented that way. But it wasn't until quite literally 2017 that I worked out what the mechanism is because if you, the mainstream will tell you, and you can find Ben Bernanke saying this incessantly, that private credit has no impact upon the macroeconomy. So if you want to find it, turn to page 24 of his essays on the Great Depression, and you'll find him saying there, rejecting Irving Fisher's explanation of what caused the Great Depression. Irving Fisher said it was a debt deflation. And what he says there is that the general attitude of the economics discipline was that private changes in private debt should have no significant macroeconomic effects. Now, that comes out of their model when they treat banks as being just intermediaries that enable Steve to lend to Michael or vice versa. And what happens when, when I, if I lend to you, my money account goes down, your account goes up. If you repay me, your account goes down, mine goes up. There's no change in the aggregate amount of money. So the change in debt that occurred, whether it's increasing or decreasing, and call that credit, has no effect on the macroeconomy. That's a myth. Okay? And this is why I say it's so important to know that banks create that banks do the lending. So if a bank lends you money, uh, its asset goes up, the debt, your deposit account, your asset goes up as well. And you don't borrow for the sheer pleasure of being in debt. You borrow to spend. So when you then spend that money, you're spending includes the money that was originally in your account, then that turns over, uh, plus the change in the change in your account caused by the change in debt. So credit, in a world in which banks create money, which is the world we live in, increases both aggregate demand and aggregate income. And that's in when you also look at, uh, the world in which we live, most of the money that banks create now is to buy assets. They don't finance working capital for corporations. Unfortunately, they've got caught up in a speculative mania that characterizes the last 50 years. Uh, so they, they lend for asset prices as well as lending for commodities. So the, the main way that that credit now goes is rather than going into, you know, working capital for corporations to build new machines and so on, uh, it goes to buy buy houses, and that directly drives up house prices. So credit is part of aggregate demand and aggregate income, and it's the predominant form of purchasing that buys assets.

Again, in terms of bank liberalization, the argument made, um, I mean, I wasn't around, but I imagine the argument that was made by sort of Thatcher and the people around her was that if we liberalize the financial markets, what that means is that it will be easier for businesses to get loans, and when businesses get loans, they can invest and they can sort of grow as a business. Um, what in fact happened was, um, banks were still not particularly keen to to lend to businesses. They do it sometimes, but what they were very keen to do was was lend to people to buy houses. And the reason they were very keen to lend to people to buy houses is because they thought the house prices are just going to keep going up. Um, because they recognize that they're in a bit of an asset price bubble where sort of people are creating more credit, house prices go up. Um, so then people want to buy more houses, and it's sort of this spiral. So I suppose can you, I mean, you were around, I suppose. So, so I suppose can you explain, was it their argument that loosening bank regulations would increase investment to business, and why was it the case that actually all that lending actually just went into pushing up assets which already existed?

>> Yeah, I mean, there's there's a, you know, there's an orientation in conservative political and economic thought that liberalizing, getting rid of government regulations makes the system work better. That's the basic attitude. So deregulation is a very conservative, uh, attitude about, you know, how to make the economy work better. Uh, but what we tend to deregulate is the financial sector. We don't necessarily deregulate the industrial sector. We deregulate the financial sector. And that, uh, what that meant was in terms of the, uh, the, the, um, the feedback effect you're talking about, that didn't happen with building societies because a building society had a bank account at a private bank, and when it lent you money, what happened was it, its account went down, your account goes up. So that is literally the type of lending that textbooks teach. That's loanable funds. There's no change in the level of money supply, and in the aggregate, there's no increase in demand coming out of credit that way. But when you let the banks do that, and that's the major change that occurred under Maggie Thatcher, around the, around at the beginning of the 1980s, then that meant that they would, they'd lend by increasing their, their asset of debt, and that increases their liability of deposits. That does increase the money supply. And then what you get was effectively, if you've ever been to a rock concert and the singer puts the speaker too close to the, he puts a microphone too close to the speakers, you get an amplifying feedback effect that leads to a scream. That's fundamentally what happened because once you let banks lend for housing, then the monetary demand for housing went up, the, uh, prices of houses rose as well, and that then encouraged people to come back and buy, borrow more money because, hey, the house prices are rising, let's hop on the escalator and go up with it. So it enabled an amplifying feedback, and again, if you think about in terms of this like an engineer rather than an economist, that's bad design. You don't want that sort of amplifying feedback. You'd work out ways to dampen it. But economists who literally don't understand dynamic systems just think that would deregulate. Uh, we'd have more lending to firms. There'd be more economic activity. Uh, what it led to is more Ponzi schemes. And the reason the financial crisis happens when it does is because the house prices stop increasing in price. And so, so this whole system works so long as all of this new debt is backed by rising house prices. And the moment the house prices stop rising for whatever reason, say a few people can't pay back their their mortgages, the whole thing collapses. And that's what happened in 2008. It becomes an issue of timing because if you, if it was happening, we know this in the American situation, you know, the idea of ninja loans and things like that. We know they were making loans to people who simply couldn't afford them. So that got to be outrageously bad behavior by banks. But that works. So they say, just hang on until you can flip it. Now, that means there's a time issue. How much flipping is going on? How long before you manage to sell your property again? So, as you had high levels of house prices and higher levels of debt, that flipping time extended. And once you got to the point that people couldn't flip to sell and paid off the debt and then get back in the game again, when they couldn't do that, they were forced into a bankruptcy sale or a distress sale, and bang, that undercut the market, and it collapses. And that's what we saw particularly in the American case, of course. Uh, and so this is the outcome of fi of financing an asset price bubble. It will ultimately break when people can't hang on to the assets long enough to be able to profit from rising asset prices.

Is this a historical story? Are we saying what went wrong before 2008 that we had way too much private debt? Um, have we now deleveraged? Do we now have much less private debt, or, or is private debt still still a problem in the UK?

>> Still a problem everywhere. And this, this is a point about the private neoclassical economists not understanding the banking sector. They ignore private debt. I mean, this conversation you're having with me is probably one of the first you've had about private debt in years, I imagine. So they don't even talk about it. And in fact, after the global financial crisis, the response of Bankei, and at that stage he had his hands on the till as Federal Reserve chairman, he thought it was a really good idea to do quantitative easing because they would, a, drive up asset prices, and that was the problem, asset prices were too high, and B, he wrongly thought that the banks could use that excess liquidity to make more loans. So rather than what happened during the 1930s when there was massive deleveraging, we've still got an extremely high level of private debt compared to that peak level. So in the American case, and I, I know this fairly well, uh, the American private debt level peaked in 1932 at the figures become hard to work out because there's changing recording standards over time. But relative to what we regard as the the Federal Reserve's current way of measuring debt, the debt peaked in 1932 at about 140% of GDP. It fell by two-thirds. So when you begin the sec, the post-war period, the level of private debt was about 50% of GDP. Now it rose from 50 to 170%. Not being watched by neoclassical economists because they don't think it's necessary to look at it. And then you reach that peak in the global financial crisis of 170% of GDP. They tried to keep the debt level high. They thought it was good to increase the level of private debt when had a crisis caused by too much private debt. So the level of deleveraging after the global financial crisis, rather than being like two-thirds reduction, it's about a 10 or about a 15 or 20% reduction in the level of private debt. So we've got far too much private debt still, and this is a major reason why demand in general is stagnant out of the private sector, because having reached this high level of private debt, banks are unwilling to lend as freely as they did before the financial crisis, and into firms and households are unwilling to borrow as much as they did beforehand. So credit-based demand is now quite stagnant. This is the reason, one of the reasons the economy is stagnant compared to what was happening before the global financial crisis. But yeah, private debt is still far too high, and if we want to do a proper reform, we have to reduce the level of private debt. And of course, that's not even being considered by mainstream economists.

Let's move on to a topic which is very relevant to today. Um, because, um, the financial markets are selling off government bonds because Rachel Reeves has said she won't increase income taxes, and that means that people seem to be suspicious that the deficit will continue to rise, or at least that inflation, um, will rise. Um, I know that sort of this analysis of government debt being a big problem and us being and having to be, let's say, terrified of the bond markets is a mistake. Um, so I'm going to play a clip which you played on your YouTube channel and argued against. Um, so it's actually from a month or so ago, but it's very much relevant today. It's Ed Conway on Sky, um, talking about, um, fears about how the government debt is is going to rise in the coming decades.

[Clip plays]

So that was Ed Conway explaining what many people think is a big problem for the UK economy, which is that at the moment it seems as if we're spending more money, or the government is spending more money than it's taking in tax, and that ultimately that means that the UK government debt is going to forever keep on rising. Um, and we've seen today, in fact, that financial markets seem to be worried about that, because um, the, the interest they demand for government loans, or for government bonds, sorry, um, has increased. So, very mainstream analysis, what he's putting forward there. Most people seem to accept it, but you don't. Can you sort of explain why you think Ed Conway there was wrong?

>> Yeah. Um, it starts from the fact where are when are the bonds sold such they create revenue for the treasury? Okay. And the answer is that that's happens in primary bond auctions. So the government requires the treasury to issue bonds equal to the deficit plus interest on existing bonds. And when that auction takes place, it takes place at the central bank. And it's, it, I can go into a bit of detail later on here, but there's the, the banks buy those bonds with reserves. And the amount of reserves that are outstanding right now are 300 times the level that's necessary to buy the bonds that are sold at each auction. So that's never a problem. The problems arise with the secondary market because that's where, uh, that's where the interest rates vary quite radically, and it's the, when, when the bonds are sold on the secondary market, it's not actually the treasury that gets the revenue, it goes to the, when, when the bonds are sold there, the revenue goes to the private banks that sell the bonds to the non-bank sector. So you have to distinguish the two. And once you do, you see, yes, u all sorts of volatility can happen in the secondary market, but that has no impact upon the treasury itself when it sells the bonds. And if I can think of an analogy which might make more sense to people who work in the finance markets, uh, people often believe amateur investors often believe that when they buy a share, they're helping out the company. Okay? No, they're not. They're buying it off another speculator. The only way you get money to a company through a share offering is through an initial public offering or an equity issue. So yes, when you buy an equity issue, you affect the amount of money the company gets. Uh, when you buy it off the secondary market, you have no effect whatsoever on the on the company. It's varying the price on the secondary market. And the same thing applies to the government. So when the government does a primary auction, uh, that happens at the level of the central bank. There's absolutely no danger of that ever being undersubscribed, and the bonds will be, the bonds will be all the bonds that are offered will be sold, and and sold several like oversubscribed. Uh, but on the secondary market, all sorts of volatility can occur. It doesn't affect the government in the same way that the volatility of a share price doesn't affect the revenue for a company, uh, except during an IPO.

To take this from a, a different angle. Um, so the argument I often hear from sort of Modern Monetary Theorists is to say that we don't have to worry about, to, to a large degree, or we don't ever have to worry about people not wanting to lend to us because we print our own currency, um, and we borrow in our own currency. So it's never going to be the case, um, that the government tries to sell a bond and no one wants to buy it, because, you know, as a last resort, the Bank of England can just buy it, like they did during, um, the co-pandemic. But then, and I buy that, but isn't the issue then, and, and sort of to go back to that Ed Conway graph, that if we're constantly spending more money than we're taxing, you will get inflation, um, because you're, I mean, as you say, government spending, government debt pumps money into the economy. And if we're pumping money into the economy and the overall capacity of the economy hasn't increased, then you'll have more money chasing the same amount of goods. And so, isn't the problem here? We're sort of saying we don't have to worry about whether or not we're we're earning enough revenue to to account for our spending. Isn't the problem that if we sort of forget about that, then we could end up with runaway inflation?

>> That's always the paranoia about what's going to go wrong with government deficits. Uh, but again, let's distinguish paranoia from analysis. And like, look at the American situation, for example. Now, the American, uh, economy, the American government since 1900 has on average run a deficit each year of 2.8% of GDP. Uh, if you leave out World War I and World War II, it's 2.6%. It, it, it's that's the standard situation. The government runs a deficit. You haven't had hyperinflation in America. You've had hyperinflation in Weimar, Germany. You had it in Argentina. You had it in Bolivia. I think you had it in, you know, um, Venezuela, Zimbabwe, etc., etc. In every last case, that was because it was a, there was a destruction of physical resources in one sense or another, and the government then continued to print money to paper over that gap, and then that's what led to the absolute explosion in the money supply, and you had hyperinflation coming out of that. But hyperinflationary events are extremely rare, and they're normally associated with, like, you know, you lose the rural valley in after World War I, uh, you have the, uh, you, you have the, um, farmers being kicked off their land in Zimbabwe. You have incredible, uh, polit-economic inequality in Argentina, and people putting money, uh, overseas in bank overseas bank accounts, and Argentina having a huge trade deficit. All these things are cases of economies where other issues lead to the symptom that people associate just with running a government deficit. But the, again, this is not understanding the scale of what's going on, uh, with the government money creation, because we, we, we live in the, one thing I will agree with. We live in a mixed economy. Okay? Live in a mixed economy. You have two forces of money creation: the private banks and the government. Private banks create money by lending out more than they take back on repayments. The government creates money by spending more than it takes back on taxation. And so long as those are within kept within range of the physical productivity of the economy, you don't get runaway inflation. What you do get out of our current system, where the level of fiat money creation is far higher than it was during the 19th century, is you, you rule out deflation. So you don't get huge bouts. You get inflation, not because the rate of inflation is higher now than it was before central banks and large governments. It's actually lower. What you don't get is the deflation that used to occur in the 19th century. And believe me, you don't want to experience deflation. Deflation in the Great Depression is what caused the private debt ratio to rise so much between '29 and '32. In the 1800s, there are periods where the rate of deflation hit as much as 20% per year. And that was, you know, they called them panics for a reason. So the large governments ruled out the panics. And people stop, if, if they realize that it, it takes a catastrophic situation to lead to a Zimbabwe-type outcome. We're not talking catastrophe. We're talking a managed approach to have a system which is a combination of fiat and credit money-based. And so long as you don't get involved in a world war, or have the outrageous, uh, corruption that occurred in Zimbabwe, uh, or the outrageous social inequality in Argentina, you won't get that inflation.

>> There's two issues. So there's, I suppose, the real fear-mongering about would we get hyperinflation and something akin to the Weimar Republic, and just, would printing money right now add to inflation which is already quite high? So for me, the argument about sort of printing money and monetary financing was a lot more attractive in the 2010s, because then we had, sort of, we had high unemployment, we had very low demand. There was clearly extra capacity in the economy. At the moment, we have inflation that's already running at 4%. Um, unemployment is very low. So the idea that we could print money and put extra demand into the economy without creating inflation higher than 3.9%, which, you know, for most people, people really don't like inflation, right? So, so I know there was an argument for a while to say, like, we should be less concerned about inflation, um, because unemployment is a bigger problem. Well, when inflation rose after 2020, governments were really punished. Um, so the Biden government lost, the Conservatives lost, lots of people's analysis was that's because people really didn't like prices rising. So if people really don't like inflation, really above 2% or 2.5%, then isn't the idea that we should put more demand into the economy now, sort of without pulling out taxes? Isn't that a mistake?

>> That is an issue you've got to take seriously. I, I agree. Um, but the, the, the flaw in the thinking is that people think any deficit at all is a bad idea. In, in fact, as I said, you have to have a deficit to have government money creation at all. And therefore, what you're saying, you people say we should have, you know, a balanced budget, are saying there should be no fiat money creation in a fiat money system. That's going too far. Okay? You, if you want to have a, a balanced system, you'd say, what's the ratio of fiat money to credit money right now, and let's maintain that ratio over time. And then when you, that way, you'd have a, a lower level of government, you, you wouldn't be running, you know, huge, huge deficits, but you're running a deficit to create the fiat-backed money. And there's also ways in which if, if you try to, you know, cut back on government spending, what you end up doing often is cutting back on the building of the infrastructure and the long-term assets we need to maintain a private, uh, commercial system. And that can actually increase costs. And, and the, the classic in that case is you see what's happening in China right now. China's running deficits of up to 10% of GDP. A lot of those deficits being used to build infrastructure, and we've all, you've all seen those amazing, uh, videos of bridges being built incredibly rapidly by high-quality technology. Uh, when those bridges are built, uh, that reduces the costs of transportation, reduces the, uh, effort involved in the private sector, can actually enable the private sector to work more efficiently, more effectively. And that then means you're going to have lower prices coming out of that. So it, you, you have to think about these intelligently, not in a knee-jerk way. And what I find objectionable about this whole debate, as soon as you mention a government deficit, people scream Zimbabwe at you. As soon as you talk about, uh, uh, money spending, what about inflation? Uh, there's knee-jerk thinking, and it's about time we gave up on that and started thinking systemically instead.

>> Is what you're putting forward maybe a straw man of Ed Conway and even Rachel Reeves? Because I don't think Ed Conway and Rachel Reeves are saying that unless we run government surpluses, so we're literally making more money in in taxes than we are spending. I mean, outgoings, there will be a crisis. They're saying that the deficit is already big. Well, I suppose it's about what was it at the moment? It's, it's, uh, 5% or so, is it? If, if the deficit is already 5% or so, if it keeps going up, then we're going to be in trouble. So, they're not saying we need to move to completely balanced budgets. They're just saying if the deficit gets too large, we could be in for for a problem. Um, and so their argument, as far as I understand it, is for for low deficits. And then in terms of sort of are they spending to increase the productive capacity of of the economy, Rachel Reeves in her fiscal rule explicitly says that it's only current spending that has to be matched by current revenue, which is, you know, for things like pensions and benefits, which is is hard to argue do do much to increase productive capacity. Um, and that actually borrowing, well, borrowing to to spend money on infrastructure is is fine. So are you only disagreeing with a straw man version of Ed Conway and and Rachel Reeves, is the question I'd put to you?

>> Well, no, not when I see the simulations they do about an increase in the level of government debt to 700% of GDP. That's only possible if government deficits don't create money. Now, as you know, I've done this very simple model, my Rebel software. Complicated for people seeing it the very first time, but

It's an incredibly simple model. When you show that the government doesn't actually borrow from the private sector, but it, uh, it sells bonds in the first instance to the banks, uh, you get an increase in money supply, which doesn't happen in the model that Ed was showing coming from the OBR. And you don't get the runaway level of government debt coming out of it.

So it comes down to just simply being wrong about the accounting. And I'm not blaming Ed for that at all because he's, you know, he trusts the, he trusted the economist, the OBR, to know what they're talking about. I'm saying they don't have a clue. They're using the wrong model of banking. And the wrong model is what generates the panic levels that they see of government debt in the future. When you correct that model with the same levels of deficits, you get nothing like the level of debt that they're telling us we should all panic about.

In your model, again, I know you've got this, this complex mathematical model. I mean, you say it's simple, but for, for a mind like mine, it's somewhat complex. Um, but as far as the big difference between your model and their model is that you think that that government deficits will increase growth and so therefore, um, the, the debt to GDP ratio won't actually sort of increase in a catastrophic way because it will be matched by increased growth. Is that not only the case if the deficits are going on productive parts of the economy? So if they are going on building bridges or improving education, then yes, um, it might be the case that we can continue to run these deficits and and not end up in catastrophic debt. But if it turns out that actually all of this government spending is going on, as I say, pensions or end-of-life healthcare, um, things that, it's, it's hard to argue do contribute to the productive economy. Is it not the case that those things do have to be paid for by taxes and and and that therefore, um, the fact that Rachel Reeves is going to come back in a couple of weeks' time and say, "I, I'm covering this by increased tax rises." Is that not completely necessary?

>> No, it's not completely necessary. Uh, it's again, this is an issue about what does the government actually do? And the conventional textbook thinking, and certainly libertarian Austrian type attitudes as well, is the government does everything worse than the private sector. That's not true. There are some things the government does better because it's not trying to make a profit. And that includes, for example, providing healthcare. Uh, that's the reason the NHS was formed in the first instance because healthcare isn't just your health. Your good health enables good health for other people. And if you just relied upon the private sector providing it, you're going to get less work on health, certainly less on, uh, covering sanitation and things of that nature than if, uh, if, if the private sector does it. So there's a timing issue. And, and there are many, many things that we now rely upon in a sophisticated society which the private sector will not supply enough, enough of, because the benefits for those things like education, health, and welfare, for that matter, uh, wash over to other people, uh, not just those who receive the money. So you do need to have the government creating these things as a matter of course. But yes, also at the same time, I'll use a more apt example. If the government ran a deficit so it could send more bombs to Ukraine and weapons to Israel, uh, then that would not increase the productive capacity of the UK economy, and you would suffer, uh, rising debt for no benefit, uh, for the UK economy in those, those two cases.

If, again, it's spending it on high-speed rail, if the British can ever work out how to do it. Uh, or, you know, improve, getting rid of potholes, uh, providing education so you have an intelligent workforce rather than a dumb one, and frankly, we're heading in the dumb direction these days, then all that stuff benefits everybody. And it's stuff, you know, the private sector, or you should know, the private sector won't provide a sufficient volume of it because the benefits accrue to more than just the buyer.

Is there a danger with confusing two, two arguments? Because I'm not, I'm not saying the government shouldn't spend money on healthcare or education. Yeah. I mean, obviously it should. But should that not be funded by taxes instead of by printing money? Um, because that's how we avoid inflation.

Well, taxation doesn't fund the government. This is a point which MMT people make fairly heavily. And, uh, you know, whether you like MMT or not, I, I work from strict accounting in doing this. That's why I invented my Ravel software so I could do this sort of stuff. Uh, but the, when you look at what taxation actually does in a systemic view of the financial system, what tax, what taxation and bond sales actually do is prevent the bank account of the government at the central bank from going into overdraft. That's the impact of taxation plus bond sales. It isn't actually financing the government. The government could spend and then not, uh, sell bonds and, uh, not do taxation. It ended up with a massive overdraft at the Bank of England, but it, it wouldn't, uh, it wouldn't be unable to spend. It spends by passing a law in Parliament and then telling the, uh, people whose manage the accounts that are authorized by those laws to create the money and send it through the financial system. So the taxation isn't paying for government services in the first instance. What it's doing is taking out of circulation an enormous amount of money which would cause runaway inflation if you didn't do that. So you go back to the 1920s when government spending was 2 or 3% of GDP. You didn't need to tax incomes because 2 or 3% of GDP was a reasonable rate of growth for the money supply from the government's point of view. When you're talking 20 and 30% of spending, which is what we're looking at these days at a minimum, then yes, if you don't take that out of circulation, you are going to get rampant inflation. So taxation reduces the money supply which is created by government spending. That's what it actually does. I'm actually, I would actually like to get rid of income tax and find another way to do that because I think a huge part of the confusions we get come out of the fact that it's being taken out of people's incomes. That was justified in the old days on the argument you're financing government spending. You do the accounting and no, you're not. It's just how you take excessive government money creation out of circulation. I'd rather do it by transaction taxes and things like that.

Just to go back to the point about sort of, does, do, do taxes finance spending? Now, I think I agree with you on a technical level that the government, you know, the government doesn't actually have to tax to spend when it's spending. It can print the currency itself. And then it taxes to take demand out of the economy so that we don't get rampant inflation. But is it not the idea that you have to tax before you spend or that you have to tax the same amount as you spend? Is that not a bit of a sort of self-imposed constraint? So, because it's always difficult to know how much demand you'd have to take out of the economy to stop inflation, right? You could say, "Well, we'll print this much and then we'll take out just enough money that we get 2% inflation." And that's a very difficult calculation to make. So instead, they work by this rule where they say, let's sort of act as if, um, we can only spend what we borrow. And that is a sort of self-imposed constraint that stops inflation getting out of control. Am I thinking about this the right way? Do you understand what I'm saying?

I think that's a reasonable way of thinking about it. Uh, but again, I mean, there's so many errors in how people think about government spending, uh, that it's, it's irritating as hell if you actually know the accounting. And on that front, I mean, in terms of people understand it is myself and Richard Murphy and the MMT to some extent, then it's daylight, uh, in terms of understanding. So the people who are making the decisions don't have any of those perspectives, and they're panicking about stuff which is not worth panicking about.

We brought him up again before in, in, in terms of sort of different perspectives. Gary Stevenson, because he's very much not MMT and he's got a video called "What is Money?" on his YouTube, which is, which is pretty much counter to MMT. So his analysis of what happened in the 2020s, or the early 2020s, um, in COVID was that the government printed a lot of money, which it did, um, and which it then transferred to, to ordinary people, um, and that caused inflation, mainly, it caused asset price inflation, because that money trickled up to wealthy people because they own the assets, and then they used it to buy more assets. So that's his sort of analysis of what happens if you just print more money. And so he, he thinks to avoid that, to avoid printing money, ultimately increasing inequality, what you need to do is, is tax the rich. And, and if you're going to increase spending, you do it by taxing the rich. That's his analysis. How do you differ from that? What do you think happened in 2020? Um, and why do you think he's wrong?

>> Oh, in terms of taxing the rich, I think it's a good idea, but the trouble is the rich are very good at evading tax. And this is the, this is the issue. The hassle about taxation as a way of taking excessive government money creation out of circulation is that the, the poor and the middle class can't evade tax, whereas the rich can. So what ends up happening is the burden of taxation falls on the middle class and the poor, not on the rich. And that is part, huge part of where social conflict comes from and the breakdown of resources and so, you know, public resources and so on. So I'd rather find another way to tax them. People talk about land tax. Gary wants a wealth tax. Uh, I would be in favor of a transactions tax. And transactions are much harder to evade than, uh, taxation. Tax is much harder to evade than an income tax. So things which minimize the extent to which the rich can evade what the rest of us can't evade. That's what I'd be willing to consider.

Another thing that I suppose has counted against MMT in the public consciousness is Liz Truss. >> Because Liz Truss basically said, >> "Look, our, our debt isn't that high anyway. Um, I'm going to do a load of unfunded tax cuts and hope for the best." And there was a bit of a mini financial crisis. And, and that's very explicitly the argument being used by Labour to say we have to stick to our fiscal rules because we don't want what happened to Liz Truss to happen to us. Now, clearly you, you don't think what happened to Liz Truss is an argument as to why we have to sort of stick to fiscal rules and keep the bond markets happy. Um, so what do you think happened to Liz Truss and why is that not a challenge to MMT?

The main thing that happened to Liz Truss is that she was screwed by the Bank of England. And the, what actually happened there is said, because the Bank of England is run, run conventionally, it's, it's, its research staff are neoclassical economists. The people on the Monetary Policy Committee swallow the same textbook economics, and they believe that putting up interest rates reduces inflation. Now, what putting up, I'm very dubious about that unless you have an incredible increase in interest rates which tanks the economy, which is what happened under Bach, back in the 1970s and and 80s. Uh, yes, okay, you can control it if you crash the economy with high rates, but the kind of fine-tuning stuff that they're doing doesn't actually affect inflation all that much. What it does do is reduce the value of existing bonds. And the, the reason that those Truss occurred is that banks, after they've been involved in the primary options, then sell those bonds to other non-bank financial institutions, and those bonds become part of the assets of things like pension funds. Now, as the Bank of England put up interest rates, that devalued the long-term bonds that those organizations held. So you go from like a 1% rate of interest rates to 5% for example. Then on a 30-year bond, that's going to reduce the value of the bond from say, a thousand pounds per bond to 300 or something of that scale. And that means that any organization which have bought these bonds and, and, and, uh, then the rates go up, their assets fall, they're about to go bankrupt. So that was the dilemma that came at Liz's Truss. She managed to trigger that, that effect on the value of bonds held by non-banks, uh, long-term bonds held by non-banks. That's the main danger. And again, this is something which comes out of conventional economists not understanding the economy. They understand a model of the economy which is wrong. And in that model, putting up interest rates reduces inflation. In the real world, that doesn't. But that's what actually almost brought the financial system to a halt. Uh, it wasn't Liz Truss being the, being the lettuce, it was the Bank of England and the putting up interest rates to control inflation which caused you financial disaster for non-bank financial institutions.

>> Um, let's end with your recommendations and what sort of your understanding of the economy suggests Rachel Reeves should do.

>> Um, so let's, let's do this as three policies. If you could choose three policies that Rachel Reeves will introduce, um, in a couple of weeks' time, what would they be?

>> Well, one would, this isn't going to happen in a million years. Okay. But I'd introduce what I call a modern debt jubilee because the main problem that I see with the financial sector is too much private debt, and we need to get rid of that albatross of private debt around the private sector. And we can do it by using government money creation capability. So if we, like I've done this, I've done the numbers for the American economy, and the rough, roughly the level of household debt in America is 100% of GDP, and I would like to get that down to zero. Okay? Let it rise to maybe 20, 30% after the event, but let's get it down to zero. That would mean giving every American adult $100,000. And then those who have debt, and that's the majority of them, would be required to pay their debt down by $100,000. That reduces private debt. Those that don't have debt would be required to buy bonds that back these, uh, the modern debt jubilee. So they would then get an asset which gave them a return, and that would reward them for for not taking place in the speculative bubble that has driven house prices as high as they are. So that would be a way of drastically reducing private debt, enabling the private sector to spend more freely, uh, when they do at the moment, because they wouldn't have the debt levels that make people conservative and spend more slowly. Uh, that would be, that would be, uh, one very deliberate policy. So a modern debt jubilee, that ain't going to happen.

The second is I want to prevent the private banks from causing yet another speculative bubble, which is what they did after Fran's deregulations. And that's an idea I call the pill, which used to be a better joke than it is these days, back when the pill was a popular form of birth control. But the pill stands for property income limited leverage. So I would impose the pill as a rule on banks, and that rule would be that the amount of money lent to buy an asset like a house can be no more than say, 10 times the annual rental income of the house. Now, given how extreme house prices have got to be, that ratio now is roughly about 20 to 1. So I would try to ring that ratio down gradually over time. I wouldn't do it in one hit, I hope, obviously, but start 20 to 1, 19 to 1, 18 to 1, and that would be reducing the amount of money which can be used to, um, buy a house, and that would help deflate house prices to make houses more affordable. Now, at the same time, that would cause chaos for baby boomers whose whole future is tied up in rising house prices. So I'd want to adjust the impingement of that policy, which would definitely reduce house prices by another one that would make housing more affordable for the poor who currently can't even get into the housing market to begin with. So that's what I call the affordable housing assoc, uh, authority. And what AHA would do is have the government create money for it in exactly the same way that a deficit does. And then the Affordable Housing Authority would lend money to people who currently can't get a housing loan. And that's pretty much anybody below the median wage, maybe even the average wage these days. They can't even get into the market. So give them interest loans from the government at a zero rate of interest. Okay? The reason we let banks run the mortgage market right now is we think, "Oh, they've got the money." Well, even though they don't have the money, they create it and they charge interest for it. And that's a major reason why interest rate, why, why house prices are so unaffordable and, and, and people are living, you know, hand to mouth these days once they take out a mortgage. Uh, take that away by saying people who can't currently get into the market can buy now with a low, with a no interest loan. They've still got to repay it. It'd still be, if you didn't pay, you, you'd face penalties, but that would be a way of enabling people who can't currently get into the market to do so. And that would, to some extent, attenuate the impact of falling prices caused by the pill.

So to put those three policies together, and the objective really is to restore what's called the golden age of capitalism. Back in the 1950s, private debt levels were extremely low. Uh, people spent more freely. We had lots of innovation going on at that time, financed by people investing out of cash flow. That's the world we need to get back to.

>> I'm actually really sold by the debt jubilee. Um, because I 100% >> Okay. >> Yeah. I'm, I'm, I'm, I'm a bit more skeptical about the government deficit stuff. Um, I mean, I think, as was clear from our conversation, but the idea that there's a big problem with private debt, um, and that we need to get rid of that debt, and I, I think your debt jubilee is a really good example of how that could be done in a way which is sort of doesn't create too many winners and losers. Um, so, so I think that could be sort of politically and economically possible. Um, I understand the argument about sort of bringing house prices down by not allowing mortgages which are more than, um, 10 times or a certain proportion of rental income, which is basically trying to get us back to something which is a bit more like before Thatcher, right, when when mortgages weren't huge. Um, that would create a problem though, because there's lots of homeowners who would hate it if the price of their house collapsed. I suppose it's the, the, the one that seems more radical there is is the the AHA, the affordable housing act, I think you said, um, which is the idea that the government will give interest-free loans to people to buy houses if they're interest-free, but inflation happens, presumably that means the government's losing money. And who, how, if you can get a, a loan from the government, sorry, why would that, why would that increase the price of houses? I suppose.

>> Oh, because it means that people like the, the bottom end of the market, which you, people can't buy into anyway. I'm thinking that to the north of England, obviously, is a place where, uh, people can't even afford to get into the market. So you've got depressed markets up there as well. Uh, it would just be a way to enable people to buy houses. Okay. Uh, and because you've got, uh, you, you'd have a fall in that, the pill would cause a fall in house prices. The modern debt jubilee could also cause a fall in house prices. Those two together, you don't want them to go so far that people who've, you know, the baby boomers in particular, who've got large amounts of housing assets, you don't want to drive them into bankruptcy. So, they benefit out of the modern debt jubilee by getting cash. Uh, and that would make up for the notional value of their houses falling. The falling house prices would also make possible for people at lower income levels to buy in. But at the moment, the barrier for them is they can't service the interest. Take that barrier away. You'd have to mix the three policies very carefully. It's like a recipe. You need to get the combination right. But if you do, you could drastically reduce the level of, of, of, uh, of private debt, reduce house prices without bankrupting people whose assets are mainly houses, and enable turn to money to be spent buying goods and services rather than buying assets. Because a huge part of what we've got ourselves stuck in now is a world where people are all speculating about financial assets and they're not buying goods and services. A capitalist economy is one that produces goods and services. And that's what I'm trying to restore.

Just on the sort of the house prices thing. So if you bring in this mortgage policy where you can't get a mortgage on a house for anything, um, more than say, 10 times rental income. So, if my, if I've got a house worth a million pounds in London, which I don't, by the way, um, I don't have a house, but if I had a house worth a million pounds, um, and I wanted to sell it, and I could, in theory, get, you know, 20 grand a year, um, in rent for that house, then that would mean that no one could get a mortgage of more than £200,000 for that house. So the price of that house would massively fall. I don't see how the, how, how giving interest-free loans to low-income people would would help bring up the price of that house. And so I'd still be really pissed off, um, as someone who, you know, potentially got my own mortgage to buy that house.

>> Yeah. Well, that's why you need a mix of the policies. You can't just do it with one. You can't just have things going in one direction. So, you do need to have a, you know, shuffle three policies together. Uh, because we, we've made a mistake. We made a huge mistake by letting private banks dominate lending. It was much better when we had building societies doing that. And we've let private debt go to astronomical levels. It went from, you know, in, in America's case, from 50% of GDP to 170% because we didn't think it mattered. We were wrong. Okay. So, you want to reverse out of a mistake. Yes, there's going to be challenges in doing it. But this is a combination of policies that I think could be intelligently used to bring, bring house prices down relative to income. So, you want to restore, to some extent, the ratio of house prices to incomes that applied in the 1970s. That would be the target to try to reach there. But you don't want to bring it down so quickly that you bankrupt anybody who's borrowed money for the houses. You want to reduce the debt level as well. And you want to provide demand coming out of people who want to live in a house rather than gamble about its price. So you need a combination of all those policies. I'm not saying it'd be easy, but it'd be a damn side better than what I expect is in Liz Truss's budget.

>> I agree with you in terms of bringing down levels of private debt, and I do find it completely insane that mainstream economics didn't see the rise in private debt >> after 1980 as a problem. And you did. So kudos to you there. Um, Steve Keem, thank you so much for your time. We've had a few requests and for you to come on. So it's great to get you on. Um, really, really interesting conversation.

>> You have to think about the economy dynamically. And the huge problem with mainstream economics is they think they're doing dynamics. They're not. And we, until we think in a systemically dynamic way about the economy, we're always going to make mistakes like we've seen dominating economic policy for the last half century.