Episode 223 – Messaging for Mainstream with Bijou Smith

Macro N Cheese – Episode 223
Messaging for Mainstream with Bijou Smith
May 6, 2023

 

[00:00:00] Bijou Smith [Intro/Music]: The BRICS system, the idea that they’re having an alternative global reserve currency or something like that, it’s not necessary. But, if you don’t understand it, it’s maybe a good idea to do that as long as you’re gonna remain ignorant of MMT. So, these countries can always establish payment systems where they just use their own currency, trade with each other, same as usual. They don’t need the US dollar.

You can’t separate the legal system from the currency system. And so if you narrowly think of MMT as just describing just the currency, you’re forgetting about all of the consequences thereof.

[00:01:34] Geoff Ginter [Intro/Music]: Now, let’s see if we can avoid the apocalypse all together. Here’s another episode of Macro N Cheese with your host Steve Grumbine.

[00:01:43] Steve Grumbine: All right. This is Steve with Macro N Cheese. This has been a really challenging calling, being an MMT activist and being a host of a podcast and also hosting a video podcast called The Rogue Scholar for Real Progressives. And I’ve met a lot of people during this journey, and one of them is my friend that I’m going to interview in a moment.

It’s all the way into tomorrow. He, he’s in New Zealand, my buddy Bijou Smith, and Bijou is the kind of friend that everybody needs to have. He’s supportive. He always takes the time to laud you for the things you get right and always gently correct you when you’re wrong. He always adds value, finds ways to fit in and add additional information and texture to conversations.

I find my relationship and friendship with Bijou to be absolutely invaluable and something I cherish very dearly. I have a few people like this. One of them also is Jeff Reisberg, who I’ve spoken to before on this show. I have many friends, but these two in particular are guys that I talked to on the side that I have a special connection with, and I wanted to bring Bijou on because the guy knows his MMT.

He works with Douglas, the MMT trader. He also does a great deal of online work and I can’t think of anybody better to talk to than Bijou. So Bijou, welcome so much and thank you for taking the time to be with me today.

[00:03:22] Bijou Smith: Oh, you’re welcome, Steve. I’m a bit sweating now from that glowing praise. I sort of feel like I have to earn it a bit, but so yeah, you gave me an outline of what you wanted to talk about, and that’s all really good stuff. But I have to say that being an online MMT activist is just not good enough for me.

So really looking forward to making this a whole lifelong endeavor. As I told the friends of the Macro Trader podcast and Applied MMT guys, Adam and Ryan, I was a physicist. Love physics, theoretical physics, but when I learned a bit about economics, I was always interested in economics from a sort of dynamical systems analysis perspective.

It’s kind of interesting mathematics. Even the neoclassical stuff is interesting for a little while until you realize it’s a joke. But then when I heard about MMT, a lot of the pieces clicked into placed and it’s like, wow, this is really the struggle. This is where a lot of the grassroots groundwork struggle really… I don’t want it to sound pretentious, but emancipating the working class has gotta happen. Even if you’re not on board with MMT, if it’s gonna work, you’re gonna be using MMT, even if you don’t know it.

[00:04:40] Grumbine: Very well said.

[00:04:41] Smith: What I was getting to is this is really a lifelong journey on MMT and macroeconomics and social justice for me now because it’s just way more important than anything I can do in theoretical physics and I could always keep the physics as a hobby, but it’s just much more important to be engaging in the conversations that you are having.

I think. That’ll never end. I don’t think we’ll be done with this

[00:05:04] Grumbine: No.

[00:05:04] Smith: for the rest of our lives. We’ll just keep going.

[00:05:07] Grumbine: Yeah, we’re stuck, dude. That’s the problem. You wanna tell people, warn ’em in advance. Once I turn the light on for you, there’s no turning it off. It’s impossible to look away once you know the truth.

[00:05:20] Smith: Well, it’ll take some severe effort to shut down that conscience.

[00:05:26] Grumbine: So let me ask you. We’re engaged in a lot of discussions and you get to see the heavy hitters in the MMT community talking about some pretty heady stuff, but adjacent to that is a online left and a leftist politics that hasn’t really formed into a cohesive movement, but they have a lot of tropes that they zero in on. They’re just convinced of certain things that just ain’t so. We’ve always talked to people that are absolutely obsessed

[00:06:04] Smith: Hmm.

[00:06:05] Grumbine: with the concept of the petro dollar. And when talking with Warren Mosler, he said, the petro dollar’s merely a numeraire. And the only thing that matters is what currency people want to save in.

 And so that sounds good if you’re just talking to Warren Mosler. But the minute you try and tell one of these lefties who’s busy propping up a YouTube channel saying the end of the dollar and the petrodollar collapse and sound finance, hard money insanity. I understand the sensibilities.

I hate that the US is an empire and the way it wields its power, and I think the rest of the world hates the way the US behaves as well.

[00:06:52] Smith: Pretty much.

[00:06:53] Grumbine: And I think quicker we say that out loud, the quicker we can heal and make some changes. But when you tell them that the petrodollar is merely a numeraire, it only matters what they save in.

You’re presuming they have certain knowledge that would make that matter to them.

[00:07:08] Smith: Yeah,

[00:07:09] Grumbine: Can you tell me your understanding of the petro dollar system?

[00:07:14] Smith: I can. But will you let me add to that commentary first on the problems with the left a little bit,

[00:07:19] Grumbine: Yeah.

[00:07:20] Smith: just for context. Because, the online left and the left that are in the media, they face a really huge battle against big money from the likes of the Murdochs and even the center left, but let’s just call them centrist mass media, and they saturate a lot of online stuff too.

So the left, the traditional left, the old left, the new left, all the left. They’re really fighting an uphill battle. So I understand that they have to follow where the views are, click bait. There’s no good talking to just a little MMT insider crowd and cheerleading each other. We face the same constraints too.

We have to find views and we have to find a way to spread and propagate some of our knowledge as vital. And we will, because we know it’s vital. It’s not just click bait, but the mechanism to do it is somehow you gotta be a little bit sensationalist and a little bit clickbait. Or if you don’t wanna do that, you have to take a really slow, long-term road.

Really super long term, a little ratchet that’s clicking away endlessly forwards, advancing, but by tiny, tiny increments so that in your own lifetime you might not even know it. That’s what’s called a paradigm change in a big macro sense. Like a scientific discipline where you don’t have a conclusive experiment that just completely shocks everyone and converts everyone over.

Like you do with physics and quantum mechanics and general relativity, you have those moments. You don’t have that so much in economics. And so I understand the problems with the left and I understand to make a good joke, to make it funny, you have to tell a little bit of a lie. I think we can do a lot to make the petro dollar stuff and the imperialist stuff more accurate.

And so a much better joke on the establishment because it’s coming from a place that’s a little bit more accurate about how things actually work. And a lot of the left are really good in motive or meaning or the intent. And my impression is that sometimes I just think it doesn’t matter if I don’t get it quite right, because even if the petrodollar is not a thing, it’s a good thing to talk about because it conveys the right vague sentiment.

It’s just a sentiment. So having said that, the petrodollar, okay. I like to define things. So can we agree that the petrodollar is a currency, usually a state currency that is used to buy crude oil?

[00:09:50] Grumbine: Okay.

[00:09:51] Smith: Yeah, that’s what it is. Now, if there’s a monopoly supplier of oil, say the Saudis plus Russia, and they only accept US dollar currency, then your US dollar is the quote unquote petro dollar because it’s the only thing that you can use to buy oil.

Now it’s a petro dollar. Now, is that imperialism? No, it’s just the way the Saudis wanna operate. So the imperialism that’s associated with the petrodollar that all the people on the left want to rail against, quite rightly, is a more complicated story. It’s like how that agreement between the Saudis and the United States, or, I mean, I don’t know who made the agreements and all that and stuff like, I don’t follow the nitty gritty details of the global politics in that area, and I’ve never really had the urge to go and look back at the history of it, but I’m sure it’s, uh, motivated by a lot of NeoCon interests and interests of oligarchs.

And maybe also you could say a little bit of a misunderstanding, maybe not a little bit, huge bit misunderstanding of the currency of the United States. Because really the Saudis don’t need to be saving in US dollars. It’s just that they want to, and so they want everyone to give them US dollars to avoid whatever transactions, fees, or other things they have to mess around with to convert.

Well say if I get ahold of load of New Zealand dollar, pay them, it’s about the same as 75 cents US, so I’m gonna have to pay nominally a little bit of a higher price for my oil here. But if I give them my New Zealand dollars, They’re gonna say, I don’t want that. I wanna save in US dollars. So it’s a little bit of a pain for them.

So what do they do? Well, they find a dealer bank, swap mine for US dollars. It’s a little bit of a trade. They bid, they put in a bid, there’s an ask from somewhere else, and they do a swap of the currencies and there’s some little frictional cost associated with it. Is that imperialism? I don’t think so. So the whole idea is that it’s a false psychology that creates the imperialism, but what’s the false psychology there?

It’s that people think they need to get us dollars in order to buy their oil. Okay, so what is a little old country like well, not New Zealand, we’re a bit more sensible here, but say the Argentinians have everything really stuffed up. So let’s pick on them because they’re our deadly foes in rugby. So any chance to dunk on the Pumas I’ll take, right?

They beat the All Blacks for the first time in like forever last year. So they’re a bit of a threat to our rugby supremacy. So let’s pick on them. Let’s just suppose the Argentinians think like the Saudis and maybe the US power elites want them to think that they need to get US dollars to get their oil.

Suppose they’re not getting any from Brazil or Venezuela or whatever. So they go around trying to find US dollars and they realize it, quote unquote, run out of them. It’s what do they do? Oh, they have to go to the bank or the IMF or somewhere and borrow it because it’s critical for their industry. So even the government of Argentina, forget about their oil importers.

Maybe it’s the government that does it. They go out and borrow some US dollars, so they have to pay it back with a huge amount of interest. And that can get them into real trouble. If that keeps compounding, the interest on that debt keeps compounding, and then, all of a sudden you’ve got the IMF saying, well, we’re not gonna forgive that loan of US dollars.

We’re just gonna impose some austerity. Otherwise, yes, keep paying us back forever, or whatever the political pressure happens to be or we’ll come in and have the CIA coup you. Usually it’s not that severe, but it can get that bad, I guess. And so that’s the imperialism. It’s a false psychology because what else could the Argentinians do?

First of all, they could go off a fixed exchange rate or a peg so that they don’t have to care about the exchange rate. And they could run some domestic full employment. They showed they were capable of doing with Jefes de Hogar job guarantee there. Well, miniature job guarantee, pretty pathetic, but it sort of worked.

Do all sorts of other little things to fix up their domestic economy and take the peso and swap it for US dollars with a dealer bank. And that’s only gonna be a problem if the dealer banks don’t have the US dollars to swap or don’t want the peso. So that’s the residual. That’s the residual. If you can’t make a foreign exchange swap, then you’re in a lot of trouble because then how do you get the US dollars that the Saudi’s are demanding in return for the oil that you need?

Okay, so far?

[00:14:35] Grumbine: Yeah, absolutely. Keep going.

[00:14:37] Smith: Okay, so, but bear in mind you didn’t want me to apologize for any of my opinions here.

[00:14:42] Grumbine: That’s right. No apologies allowed. You’re not Canadian and the New Zealanders need to stop apologizing.

[00:14:50] Smith: But this is not solid fact that I’m saying because I’m talking about a lot of things that are slightly counterfactual.

[00:14:56] Grumbine: Sure.

[00:14:57] Smith: So if the Argentinians understood their MMT system, they could avoid all the hyperinflation that they get and so forth, which we could deal with later. It’s a slightly different topic.

That the inflation that they get from their viral borrowing of US dollars, or promises to pay in US dollars that they have. So, that’s a slightly different story, but it’s part of the story because it’s the false psychology. Okay, so the residual imperialism, that it could be the case that they can’t swap the peso for US dollars, but I’ve never seen that.

I’ve never seen that. I go and look at the worst currencies in the world. There’s a couple of sub-Saharan African countries I think, that have really pretty terrible, uh, exchange rates. You can see that that correlates with corruption. So Argentina is corrupt, but not that corrupt. And the other countries that have really bad currencies don’t have much to export, so they’re not able to pay for their imports in any sort of meaningful, real terms.

That’s real goods flow and the currency flows that’re of course opposite to the real goods. So you give away exports, you get currency, which you can then swap, and so on and so forth. So the Argentinians might be in a position where they’re even worse than these worst of all historical currencies, and no one wants to take a peso off them, but they can’t even bribe them to take a peso off them so that they can get us dollars to get oil.

That’s, like I said, it’s completely fictional. It’s never happened. I don’t think it ever will happen. The Argentinians make fairly decent meat products and other agricultural products. Not as good as superior New Zealand of course, but they can export stuff.

[00:16:43] Grumbine: Let me jump in real quick. Let me play the foil for this. So what about the confidence in the peso? Where does confidence come into this?

[00:16:55] Smith: Oh, it’s confidence that if you have peso, that it’s either gonna be accepted as a payment for whatever that’s for sale in peso. Don’t think that’s a problem. I think anyone will take the peso off you. The problem is the exchange rate for the peso might decline, and so your 100 peso today now only buys you the real goods tomorrow, or let’s say next year that today’s 10 pesos buy.

So, in effect, your 100 pesos in your hand, if you’re thinking about next year, it’s only 10 peso. As long as you have that in mind, then you can hedge your risk and that. But I guess the thing is, for a lot of ordinary people, they don’t understand too much about how the inflation dynamics works and the exchange rates get affected, and so they can be left holding pesos.

It’s not the hyper inflation is that bad, but it’s significant loss in the real wealth, they’ve still got 100 pesos, but next year it’s only worth 10 pesos from today. But who’s that? That’s really only gonna be big dealers who deal at pesos, but they already know this, so it’s not really a danger to them.

They don’t have confidence in the peso already, so they know the risks. It’s a problem, I guess, mostly for the poor people in Argentina, right? They’re the only ones you really have to worry about because if their wages don’t keep up, so if next year they don’t start earning 10,000 instead of 1000, Then that factor of 10 depreciation in the peso really hurts their real purchasing power.

But as long as their salary or wage is rising at the same rate, roughly as the inflation rate, then they also have no need to worry or lack confidence in the peso. So what they’re lacking confidence in is the price level. I’m not sure the price of goods valued in peso is gonna stay the same.

[00:18:54] Grumbine: When we talk about implementing something like a job guarantee, we say that it has a nominal price anchor to it. What is it that provides price anchors that would allow for that in these environments?

[00:19:07] Smith: In the environment of Argentina, you have to have no corruption, so you can’t have anyone giving away peso to cronies or for bribes or political favors or sweetheart deals or insane welfare payments to keep people out of poverty without giving them a job. You certainly want welfare payments, but in the form of a job guarantee is what I would call proper welfare.

Anyone who cannot work or should not work, the elderly, the young, sick, a decent society just supports them with welfare payments. But anyone else who can work should be working and it’s not a Protestant work ethic. I don’t mind if they don’t work very hard and just slack off a bit. They can contribute and so they can have a decent living wage, but for all of that to be not too hyperinflationary.

So if you think inflation is a problem psychologically or politically, which it is, people don’t like inflation, so they won’t vote you into office if you keep running high inflation. Although an Argentina, no government seems to be capable of avoiding the inflation because they’re all sort of equally got things misunderstood or backwards.

But, Suppose there was a political party that wasn’t prepared to really impose harsh austerity and to just bullheaded eliminate the inflation. But at the same time, they’re still corrupt. They’re still giving away money for free, essentially, and still borrowing US dollars that they don’t need to borrow, et cetera, et cetera.

Then you’ve got a bit of a problem. So it’s a big if. If you eliminate all the corruption, you eliminate all of the misunderstandings of the sovereign currency. They could always use their sovereign currency to fully employ anyone looking for work that’s not being hired by the private sector. Then you’ve got a feasibility of having a decent price anchor.

So in MMT we say that the state currency is a simple public monopoly, so the monopolist sets the price. The trouble is you have to always caveat that with, “even if they don’t know that they’re setting the price”. So if they don’t know they’re setting the price, you have to fill in all the gaps in Warren Mosler’s short, succinct statements.

You have to fill in all the gaps, filling in all the gaps. But they may not know it, so they may not realize it’s all the corruption, it’s all the free giveaways. It’s all the loaning of some other foreign currency that they cannot produce. All of those effects create price pressures cuz you’re just constantly having to pump in money to keep people able to eat and survive because you’re undermining your real production.

Your real output is not going up, and yet you’re giving away money for free. So that’s almost back to like a Milton Friedman kind of story. It’s almost monetarism. It’s like saying, yeah, if you run a super corrupt capitalist system and you have all these people just begging for money without producing any real output, Well then you’re kind of making it look a lot like a Uncle Milton’s sort of monetarist economy.

You’re making it that way by design, by ignorance, I guess you could say that sound about right?

[00:22:19] Grumbine: It sounds about right.

[00:22:20] Smith: My fictional Argentina. I’m prepared to kick them around a bit. They’re really good rugby players. It’s unfair. They’re good at football and rugby.

[00:22:32] Grumbine: Do you mean soccer?

[00:22:34] Smith: Okay.

[00:22:36] Grumbine: Because in the US we have football.

[00:22:39] Smith: Don’t tell any British hooligan that I’ll slap you.

[00:22:44] Grumbine: We’re such an exceptionalist people here that we even think that our football, because somebody kicks a field goal that makes it a football.

[00:22:52] Smith: Yeah. To the British soccer mom is someone who like socks you in the face with their handbag.

[00:23:00] Grumbine: Let’s look at the current shift with China on the rise. They’ve done what the US refused to do. They’ve built their infrastructure up. They focused on lifting up the people in their country. The standard of living has risen exponentially in China, and they’ve been relatively good global citizens in terms of building relationships and trying to build collaborative societies for whatever warts they may have.

Unfortunately, the pushback about this comes down to the collapse of the US dollar hegemony. Can you reflect upon what is going on with the dollar as the world reserve currency? This comes up so much. Japan doesn’t have a petro yen. And there’s a basket of reserve currencies. But the way Brian Romanchuck said in his Substack, reserves are for countries that need to have support for their currency that is pegged to a foreign currency, to a commodity of some variety.

[00:24:13] Smith: Exactly.

[00:24:14] Grumbine: Why are people obsessed with, there’s a lot of sympathy there because clearly they’re looking for an end to the US being able to just cut off an entire country from their savings.

[00:24:25] Smith: Yeah.

[00:24:26] Grumbine: We have watched the US abuse its role on the global stage. We have started wars over and over and destabilized regions, so I understand their desire to see US reach diminish with 800 military bases around the world.

But what is it about the world reserve currency that has these folks thinking somehow that’s gonna change the 800 military bases and it’s gonna suddenly stop the US military? Help me understand.

[00:24:59] Smith: Okay. The false psychology works in the favor of these imperialists. So if they’re clever enough, I’m not saying that they’re clever. Maybe they don’t understand MMT, nor does anyone else. So the imperialists maybe don’t understand MMT except the old, uh, freaking Donny Rumsfeld, Dick Cheney maybe understood it.

The imperialists, let’s say, don’t understand MMT. The neocons certainly don’t. At least not how they talk, but maybe they’re fooling everyone, so they’re like the Evil MMTers. But either case, the result is that looks like they don’t understand MMT, but then those suffering under imperialism also don’t understand MMT.

And so they’ve all got currency wrong. They all think about it as a finite resource like gold, where you’re still thinking in terms of fixed exchange rates. And so currency is precious. Even to the governments who are their own currency issuers, they still think of the currency as sort of precious.

Instead of being just score points in order to distribute economic output, they still think of it as something precious instead of a functional thing, as the thing that functions to drive demand for this otherwise worthless score points so that the government can then hire people for public service work or in the public sector.

And also creates a secondary market for goods for sale and the currency because now, you know, everyone needs this currency to pay their tax liabilities to the government. So the imperialists maybe don’t understand this, nor do those suffering under imperialism. And so you gotta understand in their psychology and their world, they have these mental models that they’re operating in that are false. But because they operate the mental models as if the mental models are true, they sort of are true.

Like you could play a game. Cricket. Oh, sorry. Do you guys know Cricket?

[00:26:52] Grumbine: Oh yes,

[00:26:53] Smith: What’s the one that you guys understand?

[00:26:55] Grumbine: baseball.

[00:26:56] Smith: Yeah. Baseball is similar to cricket. Well, it’s the analog, although it’s completely different, but either analogy works if you’ve got a baseball diamond and some baseball mits and a bat and whatever.

So you’ve got everything set up to play baseball, but then you start playing cricket because you think it’s the correct thing to do, is to play cricket. It’s gonna be a really crazy game. You have a system in place, an MMT system, but you determined to play the game as if it’s some other system where everything’s based on a gold standard or a fixed exchange rate or money is scarce for the issuer.

They just cannot issue too much money, otherwise it’s gonna create hyperinflation. Under that false psychology, I think a lot of what the leftists are saying, some of it can turn out to be valid because if you create an artificial demand for US dollars, and then those who have that by force imposed upon them that they need to get US dollars to pay you or to use your banking system, or whatever the pressure that you’re exerting on them as the NeoCon, then what are they gonna do?

Because they don’t understand they’re gonna borrow US dollars and have to pay interest.

[00:28:21] Intermission: You are listening to Macro N Cheese, a podcast brought to you by Real Progressives, a nonprofit organization dedicated to teaching the masses about MMT or Modern Monetary Theory. Please help our efforts and become a monthly donor at PayPal or Patreon. Like and follow our pages on Facebook and YouTube and follow us on Periscope, Twitter, Twitch, Rokfin, and Instagram.

[00:29:12] Grumbine: Is this not at some level, kind of like a de facto tax. When you consider what’s driving it, you’ve created an obligation.

[00:29:21] Smith: Exactly. It’s like effectively a tax on the rest of the world. We’re gonna take US dollars away from you or impose a reason for you to need them because you don’t understand your own monetary system. You end up figuring, oh god damn, I gotta get those US dollars somehow. And so you’re gonna sell your exports that you shouldn’t be selling because your own people need them, and you’re gonna have all sorts of crazy austerity.

Otherwise, the actual CIA might come in, or more mildly, the IMF might wag the finger at you and your government is gonna just meekly cave in and start imposing austerity in order to be able to afford to repay the IMF. Which never works as Michael Hudson will tell you, because austerity undermines your ability to repay the IMF because you have to put people outta work, lower wages, unemployment, lost output.

So it’s just, it all spiraled downwards and it’s just so sad. It’s just so sad that the left understand the imperialist angle of it, but don’t get the monetary story right, and so they can’t see that the solution is very obvious. Having said that, Lula and Xi and Modi and whoever’s in South Africa at the moment, the BRICS people, they don’t understand how to get out of it cleanly, but they obviously understand that they’ve gotta get off the reliance on having to borrow US dollars.

They’re coming up with this crazy BRICS currency system and all that, and that would work if there was a gold standard in place, Bretton Woods or some insanity like that, that would sort of, in a sense be necessary. So the BRICS system, the idea that they’re having a alternative quote unquote global reserve currency or something like that, it’s not necessary, but if you don’t understand it, it’s maybe a good idea.

It’s maybe a a good idea to do that as long as you’re gonna remain ignorant of MMT. So these countries can always establish payment systems where they just use their own currency trade with each other, same as usual. They don’t need the US dollar until there is a monopoly like the Saudis OPEC, who demand US dollars and they won’t accept anything else.

That’s when you need to get US dollars or if you wanna buy what the US is exporting. So contrary to a lot of stuff you hear in the lunatic side of the media, the US is still a strong industrial economy. Come on. It’s just you’re completely undermining your optimal economic output at a stable price by unemploying everyone.

And then you have massive skills losses as well. So it’s a terrible thing and it’ll take a long time to recover a full potential of USA, but it’s still a massively productive country. Although there’s a predatory financial sector that produces no really useful output. Still, you’ve got huge industrial capacity there.

And so people are still gonna want US products cause sometimes they’re still the best products or the cheapest or whatever. We don’t get everything from China and Taiwan, so it just means people are still gonna need US dollars for a lot of transactions and you just do a foreign exchange swap at a bank to do it.

And that’s what most people do in New Zealand. When we’re buying books from Amazon, New Zealand dollars go down in our bank accounts and then someone else’s bank account at Amazon and it goes up. It doesn’t go up in New Zealand dollars, it goes up in US dollars. So what the heck’s happening in between?

There’s some dealer bank operating the international payments layer. They’re just swapping US dollars for New Zealand dollars and there’s a transaction fee associated with that cuz they have to hedge their foreign exchange risk. The dealer banks, but they’re just market makers, so they’re not speculators.

[00:33:09] Grumbine: Does that have anything to do with confidence whatsoever? If you’re in New Zealand and you wanna buy a book from the US, there’s an FX swap. Does it have anything to do with your confidence in the US dollar or the US’s confidence in the New Zealand currency?

[00:33:25] Smith: Not at all, but that’s because I understand MMT. It may cause someone else some panic and dread.

[00:33:30] Grumbine: Yeah, that’s the point though. So these are the hills that you get stuck on? And this is when it starts getting ugly because as someone with leftist proclivities, which I’m very much aligned with, I feel like a man without a country, so to speak, because much of the MMT folks tend to be centrists and their political leanings are willing to to play in the centrist world.

And that’s not really where I want to be. And the place where I’d like to be unfortunately is filled with economic Illiteracy and very skeptical and untrusting of the state.

[00:34:12] Smith: Yeah.

[00:34:12] Grumbine: The state does a lot of lying. We’ve been lied into wars, the Iraq War, war with Afghanistan. We even had a president in Barack Obama who said, to raise the debt limit that’d be immoral.

What are we gonna do? Take out a credit card from the People’s Republic of China.

[00:34:31] Smith: Is he not just incredibly ignorant?

[00:34:33] Grumbine: Now, No, he is a neoliberal oligarch. He knows that he’s never borrowed or taken out a credit card. He absolutely knows.

[00:34:43] Smith: Right. They’ve gotta still have some though neoliberal /neoclassical/neokeynesian NAIRU story, non-accelerating inflation rate [of unemployment], because the pretense is that, oh, we’ve run outta money. Sorry guys. No more jobs. But I think behind that is, they have fear and panic about inflation and getting voted out of office because of that and the NAIRU.

So what I’m saying is he is ignorant. I think I’m right. He’s ignorant of MMT cuz he thinks the NAIRU, he thinks unemployment is what you need in order to discipline labor, in order to reduce wage demands to reduce prices or to keep prices stable and therefore avoid the inflation that old Larry Summers and the ghost of Milton will tell them is going to happen if you employ everyone.

And they dread getting voted out of office and all that. And the difference with Japan is that they have the same dread, I think. They just hate unemployment more, culturally. That’s one my reading of Bill Mitchell, by the way. I think Bill Mitchell’s got it right about Japan, obviously.

I mean, he speaks the language, knows them almost inside out as much as he can. If you’re an economist, and I think I hear him say that the Japanese culturally just hate unemployment. So there’s this massive tension there because they also think there is a NAIRU, so they still have unemployment. They just hate it more than anyone else.

And so they are constantly seeking to keep the interest rate low because they think that’ll inflate the economy and boost the economy, create higher GDP and jobs. And they got the interest rate backwards, but it’s kind of working in their favor a little bit because at least they’re not giving away the interest income to the rich.

They still have a high GINI coefficient. I think that’s not the best. Comes back to corruption too in New Zealand. One reason I’m pretty confident my earnings in New Zealand dollars are gonna still buy me the Amazon book next year, roughly at the same price because New Zealand is very low corruption.

We have the neoliberal infestation big time though, but we’re pretty low corruption.

[00:36:53] Grumbine: Take me to New Zealand. Get me out of this hell hole. Please bring me there. Please.

[00:36:57] Smith: I wish I could, man. I wish I could, but it’s like I say Neoliberals, we don’t have a job guarantee. So what are you gonna do? Be a tour guide?

[00:37:07] Grumbine: No, I’ll just be an activist there too. I’ll help you spread MMT to New Zealand.

[00:37:11] Smith: We should do that.

[00:37:13] Grumbine: That would be great.

[00:37:14] Smith: If you don’t get traction in the United States, if after all Stephanie Kelton’s and Randy’s and Mosler’s efforts don’t seem to be budging the needle at all, you should all come down here and try and install some dictator MMTer as our prime minister.

[00:37:32] Grumbine: So let’s talk about that light bulb moment that I think that all of us have when we finally understand that MMT describes that public monopoly that you described in the beginning. The lightning bolt moment where you can’t shut your eyes. How did that happen for you, Bijou?

[00:37:52] Smith: It was a little bit of long story. Like I said, I was in theoretical physics, but back in the 1980s, do you remember chaos theory became a really big thing?

[00:38:00] Grumbine: Oh yeah.

[00:38:01] Smith: New York Times, New Yorker type write-ups and all that sort of stuff. Most of nature is not how the scientists used to think about it or do in their labs.

Most of nature is very hard to control. So the meme or the one liner is like the flapping of a butterflies wings in Africa can change the weather in Europe, you can get a tornado in Europe or say Texas. Thanks to the beating of a butterflies wings somewhere down in Sri Lanka. So chaos theory is a big thing I was naturally really interested in, cause I’m a bit of a science geek.

Then super string theory came along. So I got into that more esoteric physics, but only as an aside, just kept being a constant distraction from my actual PhD, which dragged on cuz of that. But when I was looking at chaos theory, very soon after there was complexity theory, which is a very different field.

It’s not really chaos theory, but it’s related. It’s related. It’s complex systems of many multiple interacting simple parts, which may not be chaotic, but the entire system is very complex, though it kind of looks chaotic at a high level. And one of those prototypical systems is economic. And so there’s some people at an amazing institute called the Santa Fe Institute in New Mexico where they were doing this and it was really multi interdisciplinary.

It’s sort of my kind of thing. I like being a generalist and it was so cool. They were mixing literature, poetry, biology, physics, economics, all sorts of things. A lot of behavioral economics too. And then I sort of gave that away cuz the demands of life. And then life actually became very demanding for me.

Really hard for a generalist make their way in academia these days. And I don’t like the whole publish or perish thing. I’m a perfectionist, but I couldn’t publish anything. Yeah. I was just so slow. So anyway, I found myself lecturing statistics in I.T., but it was for a business school, not science or physics.

So I was scratching my head around how do I get something interesting that I’m actually interested in here? I’m not really interested in business. Well, I know that economics is related to business, even though economics is a bit strange, you know? So I remember the Santa Fe Institute and those people. I just went back to read about it.

I didn’t have a particular project in mind, but came across Steve Keen’s work and Warren Mosler’s book. I forget which one first, but what hit me with Mosler’s book Seven Deadly Innocent Frauds of Economics was that the forward was by Jamie Galbraith.

[00:40:41] Grumbine: Ah, yes.

[00:40:42] Smith: Here’s a funny story, so I’m thinking, oh, this guy’s a banker, this guy Mosler.

Sounds like a bit of an ordinary dude, probably a bit of a crank. Sounds like one of these cranks. I’ll, yeah, put it on my bookshelf, put it away to read some other time. But I couldn’t because Jamie Galbraith wrote the forward. And my father was a politician in New Zealand for a little bit, but also got to the CEO level ranks in public service and that, and my father was trained as an accountant, but was always into the sort of Keynesian economics of that.

And he had a big falling out with his Labour party colleagues because they went all neoliberal. And my father was more like our famous Prime Minister, David Lange. He was more concerned with social justice and the plight of the working class. And his favorite economist of all time, or one of his heroes was John Kenneth Galbraith.

 So whenever I listened to my dad talk about economics, he would always have the neoclassical story, cuz that’s all he knew. And I just couldn’t make heads or tails of it. It sounded a bit backwards to me. So I was, as a nine year old, a bit of a Moslerite. But plus science was just science and physics was a lot cooler, but my dad was always talked very fondly of these greats, Keynes and Galbraith.

It’s still in the time in the era you couldn’t sort of mention the word Marx, unfortunately. So I didn’t hear a lot of Marx, but I heard a lot of Galbraith and I read Galbraith books too, and I was pretty impressed. A great man, great gentleman, good person. Still had a bit of fixed exchange rate mentality, thinking like a post Keynesian, but still pretty good.

So that’s why I read Warren’s book. I knew that the son of Galbraith had to be a pretty good dude. I looked him up on Wikipedia or whatever. It was pretty good dude, Mosler, I read the first page. I could immediately tell, ah, he’s a seriously good dude. So that got me hooked. That’s the story.

[00:42:45] Grumbine: That’s pretty powerful.

[00:42:47] Smith: Yep.

[00:42:47] Grumbine: I’d love to have you back because you and I have great conversations offline.

[00:42:52] Smith: We gotta be back because we need to answer questions and follow ups and all sorts.

[00:42:57] Grumbine: Absolutely. We’re talking about doing a show if we can only find a way to make 17 hour difference in time zones. Yeah, work plus, that’s right.

[00:43:07] Smith: Yeah. Yeah.

[00:43:09] Grumbine: But the thing that’s most important to me though is that you and I have discovered that there’s an element here of tone that needs to be stepped up. And

[00:43:19] Smith: The unity.

[00:43:21] Grumbine: the idea of getting people to a place where they recognize the urgency of this information.

Not only for cataclysmic climate crisis that we can solve by understanding the way countries can spend money into existence, to do the necessary things that have to be done to protect the citizens from anthropogenic climate crisis, but also for things like healthcare that you take for granted. For me, I think of things in like baton passing.

You just do one step and you’re done. So for me, not everybody is the closer. Sometimes people are the ones that planted the seeds and others are the ones that water the seeds, and another is the one that gets the victory of bringing the person over the finish line. I don’t think people realize that some esoteric accounting identity is as vital to their existence as it needs to be.

So to me, I would rather piss them off, waking them up, get them to that point and recognize that maybe I’m not gonna be the closer. Maybe I’m the alarm clock that made this matter. And now we’ve got a new MMTer. We’re getting people to understand how this works to cross the bridge because we need huge numbers to make the kind of changes that are required.

Regardless of your political stripes, you still require oxygen, clean water, housing, food. You still require a lot of different things of which the currency issuing government within your native land should be able to do, provided you’ve earned your sovereignty of your energy, of your food production and whatever, value added manufacturing, et cetera.

So you and I have talked at length. There is a certain place where waking people up is very important. It’s not a one size fits all approach and it shouldn’t be. Everybody comes at life from a different perspective. So what are your thoughts?

[00:45:28] Smith: Well, firstly, if someone’s a little bit ignorant and you know they can take it, it’s not bad slapping them in the face a bit, it’s kind of what I do on Twitter. And then I get someone who’s like, oh, you are mean and nasty, and you poisoned the well. So I’m good. Thanks. Bye-bye. Then I realize I went too far. I want to engage people more than I want to slap them.

But if they’re being real stupid, I’m not opposed to giving a bit of a slap on Twitter. And all we are using is words, why are people so offended by harsh words. I don’t know. Although, to be fair, suppose we are all wrong. Suppose they’re right and I don’t know it and they use harsh words against me, is that gonna make me upset?

And yeah, it probably is. You know, it’s probably gonna get to me cause I’m a bit of a sensitive guy, so. I’m probably gonna feel a bit chagrined or a bit embarrassed that maybe they mentioned some economics word that I don’t know, and I have nothing to come back at them against. But no, I’m not completely stupid.

I do the research. I’m pretty sure MMT is correct. You just have to take the time to look at your country’s legal statutes. I think that’s where it starts. For me. Once I read Warren, obviously I was interested in MMT from different origins. Once I understood, oh, okay, it’s a public monopoly. Is this actually true in New Zealand law?

But of course it all makes total sense because it couldn’t be any other way. The New Zealand dollar, all our notes and that are stamped by the Reserve Bank in New Zealand. So it’s only a question of whether the Reserve Bank is part of our government, but we don’t have any crazy people here. So everyone knows the Reserve Bank is part of our government.

[00:47:09] Grumbine: We are so full of lunatic fringe on that one.

[00:47:12] Smith: There’s still some people here who say they should have independence, but of course the independence is granted by the Parliament. It’s a gift to the Central Bank people to go and do their own little bit of policy. But the wider issue here, I think is unity. I don’t wanna push people away with too many harsh words, so if I understand them, if I try to read their psychology, which I’m not good at, I’m a bit autistic, I often read people wrong.

It takes a lot of effort. I have to actually read what people are saying. I have to actually listen quite carefully to what people are saying to get a read of them. I can’t just get an instant feel and then I know they can take a slap, like for instance, John T. Harvey, if he starts spouting some nonsense, that sounds like fixed exchange rate talk, or Mark Blyth or Michael Hudson, whoever, even Steve Keen.

Okay. I probably shouldn’t slap them because I need their support too, but you know, but I can write my own software. Hey, it just takes me a lot longer to get things done if I don’t have help from the experts who can advise me.

[00:48:17] Grumbine: Sure.

[00:48:17] Smith: So I’ll definitely never slap Warren. He’s, he’s such a good advisor. Little bit of Chomsky like you have to play nice with Warren, cuz he’s so valuable. Anyway. So you don’t want to alienate people, and so you have to find a happy medium where you slap the right people, but the other people, even though, oh, it’s so infuriating, they’re not getting it, how am I gonna get through to them?

Sometimes they’re with, I think I’ll just say, have a bit of patience. Leave them alone for a while, come back to them because I tell you, what would it take to make MMT not true or wrong, as all the Twitterati keeps saying, MMT equals wrong. What would it take for that to actually be the case? It would be something like Mad Max.

Right? And even then, if the whole world disintegrated and decayed, people would still be using account records in their heads. If they didn’t have any paper to write on, it would still be, ah, yes, so and so owes me something. Okay, that thought is money. It’s a record of credits and debts. As long as the other person also remembers that they owe you, I guess you sort of have to have it two ways.

[00:49:28] Grumbine: Rohan says something really powerful in this space. Rohan always talks about money as a creature of law

[00:49:34] Smith: Yeah. Yeah.

[00:49:35] Grumbine: Without law in an anarchist world, I could see where money would be just a challenging record, like you said.

[00:49:46] Smith: it would be weird. It’d be weird money, but it would still be money because yes, it would still be in people’s heads. It’s just the price of things would be a really, really a bit fluid.

[00:49:57] Grumbine: Think about this, what you’re saying is really important because money isn’t a piece of paper.

[00:50:04] Smith: Those are the tokens.

[00:50:05] Grumbine: It is where do runs in a baseball game come from? And that’s the point with keystrokes and all the stuff about debiting or crediting an account, they come outta nowhere. It’s a scorekeeper. That’s the thing. It’s so much effort to make that cross the line for me.

[00:50:22] Smith: Once you get there, though, there’s still a lot of work to do because people still don’t understand the implications of that, and that’s why MMT is not just what Steve Keen [inaudible]. That’s why MMT is not just descriptive. Because once you understand that, there’s so many implications. So I mean it’s huge, you know?

So MMT is a very rich field, I always tease the post Keynesians. MMT is a super set of post Keynesian economics. It’s not a branch or anything. It absorbed post Keynesian economics. It went bigger. It’s not this little narrow descriptive only area with a little bit of theory about job guarantee because it has to be a theory because no one’s ever really tried the job guarantee.

So it’s all theory and that’s the end of the story. I like what Warren Mosler emailed to me said, well, MMT is, and this is like a definition, it’s the most succinct that I’ve ever found. MMT is recognition that the currency is a simple public monopoly and all the consequences thereof, it’s one of those Moslerisms where you have to fill in that or what are the consequences.

[00:51:26] Grumbine: This is what was causing Richard Murphy so much trouble.

[00:51:29] Smith: I Know. But when you fill in the consequences, we get all the work of Fadhel and Ndongo [Samba Sylla] and everyone else. Even Bill Mitchell’s partner who does the language framing stuff. Louisa. And who’s your friend over there that does a bit of a media analysis guy? Scott?

[00:51:48] Grumbine: Ferguson.

[00:51:49] Smith: Yeah. All those people. All that’s peripheral stuff.

Even the weirdo philosophers that think they’re bigger than the rest of us up in New York or all your big name insider MMTers. They, they’re all doing their own little things and it’s just saddened me if, if we all don’t realize that we’re all part of a community. And although you can have your own little capitalist little ideas over there on MMT Capitalist land or even MMT imperialist land, ugh, I hate to say it.

And over here in MMT centrist spaces and MMT leftist spaces, it’s all unified by an common understanding of the law and the currency system and that and all of the consequences thereof. And it’s so intimately tied to law. You can’t separate the legal system from the currency system. And so if you narrowly think of MMT as just describing just the currency, you’re forgetting about all of the consequences thereof.

So you do have narrow MMT. You do have narrow MMT as Bill and Randy and Warren defined it, and that’s really important to hold on to narrow MMT because it’s a unification point that unifies everyone. No one would disagree on that. But what people want to call quote unquote MMT has so much more, it’s not just no longer to do with money anymore to do with all sorts of other things.

But we should all try to work on being united because that’s where the strength comes in, and that’s where, go back to my father and his admiration of Galbraith and so on. Back then, I thought the Labour Party and the people on quote unquote left, which is a broad term to use, it describes too many things to really be clearly defined.

[00:53:30] Grumbine: Mm-hmm.

[00:53:30] Smith: But back then there was this idea that solidarity was a leftist thing. Being united was a leftist thing, unite with other workers, even though you really might hate their guts in private because they beat you at footy the other day or whatever, or they eat the wrong sort of food, you still unite with them.

That was the old idea. The neoliberalism sort just fractured everything up and destroyed all of that in a terrible way. And people that don’t realize you don’t have to live under the shadow of neoliberalism anymore. And there are ways to be united, and I think we’re on a long journey to work on unity.

Amongst the working class and a long journeys for everyone, so to definitely understand even narrow MMT. But once you understand narrow MMT, you’ve sort of got a lot of broad MMT that comes along with it just naturally from your own background.

[00:54:20] Grumbine: As a guy who focuses on physics, I consider we’ve got two moving points converging somewhere. One of them is climate crisis. And one of them is the public understanding MMT, and we don’t have an unlimited amount of time.

[00:54:37] Smith: Oh, you had to bring that up. Ruin my story of doing the long game. The climate crisis is not gonna wipe out humanity, I don’t think. That would be extraordinarily like a Boltzmann brain fluctuation level thing, but I agree. We want to avoid that. So there is urgency and it’s not just a long game for that reason.

It’s still a long game. Even if we have a climate crisis.

[00:55:02] Grumbine: Well, you could say it’s a long game, but the question will be, as the water acidifies, as sea levels rise, as coastal communities are wiped out as drought hits.

[00:55:16] Smith: People are gonna act like MMTers even if they don’t know it.

[00:55:20] Grumbine: That’s what I’m saying, because what is MMT? It really is less about the money. In fact, one of the things Scott Fullwiler once said to me was, MMT is the art of making money the least important thing

[00:55:31] Smith: Exactly, yes.

[00:55:33] Grumbine: about the real resources, right?

[00:55:35] Smith: Kind of. It’s a little bit of a sly thing to say there, but it is true. We understand the monetary system. Phew. Thank God that’s all sorted. The monetary system doesn’t go away. But now you concentrate on what was so much more better, which is real prosperity. Totally with you, man. Yeah,

[00:55:56] Grumbine: All right, buddy. Thank you so much for your time.

[00:55:59] Smith: very welcome.

[00:55:59] Grumbine: If you get a chance, check out Bijou online. Tell folks where we can find more of your work.

[00:56:06] Smith: I just occasionally spat a bit on Twitter and Mastodon and [inaudible]. I write two blogs, one called Topological 4G on Theory, or just T four G. It’s a GitHub or GitLab thing. I forget which. The other one is a macroeconomics blog called Ohanga Pai, O H A N G A space P A I, which is Te Reo Maori for good economics, or maybe it’s economics good.

I didn’t know, man. I might be really embarrassing myself. My friend Lee here says it’s okay. So I say it’s okay. I am Maori, by the way, but in the neoliberal old British colonials vestigial era, we never got taught that in school.

[00:56:54] Grumbine: All right. My name’s Steve Grumbine. This is the podcast, Macro N Cheese. My guest, Bijou Smith. Thank you so much. We are out of here.

[00:57:09] End Credits: Macro N Cheese is produced by Andy Kennedy. Descriptive Writing by Virginia Cotts and promotional artwork by Andy Kennedy. Macro N Cheese is publicly funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.