Episode 266 – Les Milei with Daniel Conceição

Macro N Cheese – Episode 266
Les Milei with Daniel Conceição
March 2, 2024

[00:00:00] Daniel Conceição [Intro/Music]: Milei has enacted the most aggressive, the most destructive gutting of public spending that we’ve ever seen. So he just closed off a whole bunch of public offices, slashed public spending, especially those he deemed unnecessary, like public education.

Whenever your demand for dollars is greater than the supply of dollars coming in, the price of dollars will increase. And for most Latin American countries, for Argentina and for Brazil, that’s the biggest driver of inflation.

[00:01:35] Geoff Ginter [Intro/Music]: Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.

[00:01:43] Steven Grumbine: All right. This is Steve with Macro N Cheese. I’m extremely dismayed and yet excited to have my friend Daniel come back on the show. Daniel Conceicao studied at UMKC under professors, Wray and Kelton. And he’s also a professor of macroeconomics and public finance at the Federal University of Rio de Janeiro.

He also works with the Modern Money Network in Brazil, and has been working to advance Modern Monetary Theory wherever he can, especially within Brazil. Today’s conversation is piggy-backing off of a prior conversation, only it’s just getting worse and worse with Milei down in Argentina. Javier Milei is off the tracks, just absolutely out of his mind.

I want to read something to you because there’s people in this country, the United States, who just lifted up literal crackpot Robert Kennedy, Jr. RFK Jr. When I say batshit crazy, I don’t think I’m stepping too far out of line there. I think this guy is just a lunatic. But he is also an economic illiterate and an economic terrorist.

He’s on Twitter and I’m going to read something to you, just so our audience knows where this is coming from. If you ever thought of supporting RFK Jr., and you have an ounce of economic literacy in your brain, what I’m about to read to you is going to not only shock you, but it’ll disgust you as well.

This is a tweet on February 25th at 5:30 Eastern Time. It’s been viewed 6.6 million times. It has been liked 87,000 times. RFK Jr said “after just nine weeks of Javier Milei in power, the government of Argentina has its first budget surplus in over 12 years. In US terms, Milei turned a $1.2 trillion annual deficit into a $400 billion surplus. It’s possible here too. Unlike my predecessors, I’ll actually drain the swamp, fire the bureaucrats who’ve racked up $34 trillion of debt.” And we’ll get into all that stuff. The comments are decidedly worse and worse. One of them, the gentleman says “we need to pursue the same policy in the US. Javier Milei to introduce a bill to Congress, to punish with jail time, any central bank official that ‘prints money’ to finance deficits…” from Breitbart news.

The next one says, “you advocate for more tax on American companies for climate related issues and more tax dollars sent to foreign nations, that doesn’t go with what you’re saying here. You’re not a libertarian, he is, big difference.” And guess what? That comment received 1.6 6 thousand likes. Then the next one goes, “you can thank Trump. Just like Milei told him last night, he was one of his inspirations.” The next one: “if Milei is in power for 10 years, he’ll probably make Argentina the greatest economic comeback in modern history.” So all these Libertarians are supporting this man, and that includes groups like Movement for a People’s Party, and all kinds of other people that claim to want all these things, but fundamentally instituting austerity at a level… I don’t know if it’s been seen before in modern history.

Daniel, this is insane. The idea of instituting austerity in America is already knocking on the door, but to look at the South to consider what Milei did, by receiving IMF loans and saying ‘structural adjustments, I got you beat, you can’t out austere me, I will cut even further than what you’re saying.’ I’m blown away.

What do you make of Milei? And what do you make of this RFK Jr. insanity?

[00:06:00] Daniel Conceição: Well, this is the epitome of our macroeconomic illiteracy that really still controls the debate. We have people who complain about what really is needed for private wealth to exist, as if it was a problem. The main thing is that they don’t really understand where financial wealth, that exists in the monetary economy, comes from. Which is basically public indebtedness. And the big thing is people don’t know what money is, that’s the basic misunderstanding. They think that money has to come from some productive activity. Because they think of money as a thing, not understanding that money is a public debt. So it can only exist, in order for us to acquire and to accumulate from public payments, and the state then has to make a payment, which necessarily becomes a piece of debt. Because money itself is a piece of debt, and then we can possibly accumulate wealth in a monetary economy. So what they’re advocating for, is the destruction of the possibility of anyone within a monetary economy to become wealthy, to acquire financial wealth, which is absolutely idiotic. And it will lead to the collapse of the Argentinian economy very quickly.

In fact, it’s very easy to explain the- supposedly- desirable results that they are celebrating, the budget surpluses. What happened was, Milei- as you said- has enacted the most aggressive, the most destructive gutting of public spending that we’ve ever seen. So he just came in, closed off a whole bunch of public offices, slashed public spending. Especially those types of spending he deemed unnecessary, which basically spending towards areas that he doesn’t like. Like public education, for instance. Anything that he seems to believe it’s progressive, it’s associated with enlightened thinking, that’s where he’s going to attack first. So all of that reduction in public spending comes at the same time as, he did not solve the root cause of his inflationary process in Argentina, which is the exchange rate dynamic that they have there.

Argentina is the clearest example of an economy whose prices are pushed by the exchange rate. And who faces a very hard situation trying to stabilize its exchange rate, because basically it has a huge demand for dollars- which it cannot get from anywhere- much greater than its capacity to generate dollars towards its economy. Especially after Milei has scared away a bunch of commercial partners- and other entities- who were willing to help Argentina deal with its foreign debt. Like China, for instance, had offered to help Argentina deal with its outstanding dollars in non-native debts; the BRICS Bank would be a source of help. But they opted to alienate themselves from those relevant political groups and instead have sought the support of the IMF.

And even the IMF is worried that Milei’s gutting of social programs might be too aggressive and lead to social unrest, that ultimately, will be bad for even the IMF, to keep pushing for structural adjustment. Because the IMF wants structural adjustments that are only aggressive enough, not to bring the country to a complete social collapse. So the IMF wants you to destroy your economy, but not so much, to the point of your country getting close to a revolution and complete social and political collapse. And they are worried that Milei might be pushing the economy of Argentina a little bit too far towards that process.

So even though the IMF has been calling for a little bit more spending- but let’s just make sure that we understand here, none of what he’s doing, besides being able to present market apologists with these supposedly “beautiful results of fiscal surpluses”- none of this will help to really target the problem of inflationary pressures in Argentina. Which come from the fact that they have to make huge dollar payments, so they need to get dollars, and they don’t get enough dollars from either exports or from being able to renew their borrowing from other sources, in order to make those payments.

So their demand for dollars is always greater than the supply of dollars, pushing the price of dollars up continually, without having any process that reduces that pressure coming. For instance, if their demand for dollars came from imports, eventually imports become too expensive and you eventually reduce your imports just because it’s not viable anymore.

But when you have to get dollars to pay for foreign debts, to make interest and principal payments, then that demand for dollars, you can’t substitute that with anything, because only dollars will be good to make those payments. And so, that’s the worst kind of dollar dependency that you can get. And the crazy thing is- and this is something that I learned when I first went to UMKC because I was confused about how to deal with public debts, and I grew up learning that public debts were a bad thing- I hadn’t learned about the difference between a national currency denominated debt and the foreign currency denominated debt. So I went to UMKC arguing that if the government got a little bit of time to spend a little bit more for a while- just a little bit- it would boost its capacity to generate surpluses, because it would increase taxes. And so I was asking for just a little bit of time for government to practice deficit spending before they tried to get a surplus. And then I came up with this idea that, okay, give me this time and the process of the tax multiplier will help us achieve surpluses. And this great French professor- who passed away recently- asked me, “well, but wait a minute Daniel, why do you need a primary surplus denominated in reais, if your problem has to do with dollar denominated debts?” And I had no answer. I couldn’t really say anything because that’s the truth. Why would you worry about getting reais saved up somewhere, if your problem is to make payments in dollars? It doesn’t help you at all.

The only thing that seems to be working right now for Milei, is the fact that, by cutting spending tremendously at first, and not addressing inflation as well as he should, and not doing anything, really, to reduce inflation. In fact, the only thing that he did was to increase inflation tremendously by devaluing the peso- once and for all- as soon as he came to office… that- by definition- increased all sorts of tax revenues without increasing public spending at all. What’s really going on, is his primary fiscal surplus has come from the fact that inflation has not eased up. In fact, it’s exploded since he came to office because of the devaluation.

And so taxes go with inflation, but spending does not. And this is why he’s been able to present his results. And the market spokespeople seem to be celebrating this, because they are- as you said- economic terrorists who celebrate the destruction of economies, without any concern.

[00:15:02] Grumbine: For me- after I watch this- I’m to the point now where I feel like, “wow, this record’s broken, isn’t it? It’s got a skip in it.” And it’s getting worse and worse. I, for the life of me, cannot find even a propped up, fake narrative

that makes what Milei is doing sound like “That’s the path! Let’s take out a loan from the International Monetary Fund that strips a country of everything…”

Oh, wait a minute. Hold on. I understand now. This is that libertarian paradise, of destroying the social fabric, the social safety net. And allowing only unfettered predatory anarcho capitalists to run rampant all over the society. And even that, I still struggle with coming up with enough of a bad Bitcoin meme to make this work.

What is the attraction to this?

[00:16:04] Conceição: Yeah.

It seems to me that the attraction is the false narrative. The attraction is to be able to claim he’s been able to achieve a fiscal surplus. And because most people view this as a good thing, in and of itself, without any critical thinking, then he’s been able to present this and most of the market friendly media has uncritically celebrated this result without realizing that this is a terrible result.

And it comes from a gimmick. Just the fact that taxes will always keep following inflation, because taxes are nominally determined. Whereas, if you freeze spending, you freeze spending. And so your spending will not increase, but your taxes will. Now the other thing is that, if he had been able to secure any sort of help from the IMF- or any other entity capable of delivering dollars with ease- that would be the only thing that makes some sense. Because what he needs to do right now, is to stop the climbing price of the dollar. And he has a stable and- at least for now- unavoidable demand for dollars, that he needs to meet, just to make payments on their outstanding foreign denominated debt. The best solution would be, to do away with this debt, but they’ve been held hostage by those predatory lenders. Remember those vulture lenders who purchased Argentine debt a while back and were able to secure, receiving the full value of their debts in American courts? Well, that’s still hanging over their heads. And so you either get help from someone with lots of dollars- who is able to help you repay that and restructure that debt- or you’ll deal with not relying on the dollar anymore. But then you would have to be already prepared to substitute most of your imports, with either domestic production, or finding some other commercial partner, which isn’t that easy.

So their dollar dependency is a huge problem, but he’s doing nothing that functionally addresses that.

[00:18:39] Grumbine: It can be more dependent on the dollar…

[00:18:41] Conceição: Yes. And his idea of dollarizing for good, would be the absolute worst thing, because it would make you fully- and completely- dependent on the dollar to do anything. Now, you wouldn’t have inflation, because the very thing that is driving price, would be the thing that you would then turn into your money standard within the country. But then, deflation would come at the expense of inflation of everything else. You’d basically be unable to buy anything, because you wouldn’t have the dollars to do anything- domestically- anymore. So that would be a terrible idea. But I don’t know because, just think of this… if they’re able to announce a public surplus as a good thing- without having to explain why it is good- maybe they could, just as well, announce the end of inflation- also- as a good thing. Even as the economy is going to the gutter and people are dying of hunger.

[00:19:51] Grumbine: Let me ask you this question, because I think most people don’t really, fully understand what’s going on in Argentina. When you say their ‘dollar denominated debt’, people just assume… ‘what happens if you lose faith in the dollar?’ What does Brazil or Argentina or any other country have to do with their ‘faith in the dollar’ when they’re in dollar denominated debt?

Help me understand where ‘faith in the dollar’ comes in, that has anything to do with Argentina. At the end of the day, Argentina is in debt in US dollars. How does that happen? And help people understand- because it is the most misunderstood thing

[00:20:39] Conceição: Yes it is.

[00:20:40] Grumbine: -the US doesn’t need people to have faith in the dollar at all, because at the end of the day, a gun and a tax will ensure you’ll accept that dollar.

[00:20:51] Conceição: Yeah, that’s the advantage. And this is something that is actually used by a lot of economists who- misguidedly as well- try to claim that the US- for some reason- is the only country that can apply MMT. As if MMT was something that got applied, as opposed to the description of how things work, and what you could do with it.

So the main thing is, that you can only purchase things with the currency that you create, that are sold for that currency. So any domestic economy can mobilize up to its full productive capacity by making payments in its own currency, because all of its economy is producing in exchange for its own currency.

So if you think of a closed off economy, it would be very easy to make that economy develop up to its potential. Because all you’d have to do is to increase payments, and as long as you live in a monetary economy, production would follow up to the economy’s potential. The problem, when you open the economy, is that sometimes you need to purchase things that are not available, in exchange for your currency. Then that’s when you have to import, and the need for imports is different for different countries. If you’re a country that is dependent on very basic stuff; for instance, let’s suppose that you had no drinkable water in your country and you had to import all of your water, then you would be very dependent on getting the currency that is able to be used, to make the payments for this very basic thing. Countries that import a lot of their food items. Countries that had to purchase a lot of their medicine during the pandemic- for instance. Many countries had to get dollars to buy the vaccines.

That’s something that you can only do if you have the currency that makes those payments, and most of those payments are done with dollars.

[00:23:04] Grumbine: Regular people in Argentina are not rifling through their wallet, finding US dollars. It’s the country importing them at the foreign exchange level. The foreign reserves paying foreign costs. Whereas the domestic economy, still runs on whatever the domestic currency is, correct?

[00:23:26] Conceição: Exactly.

[00:23:28] Grumbine: There’s no one that has ‘faith in the dollar’ or anything else like that. They don’t even know that it’s dollar denominated. They’re buying it in their local currency. It’s only because the country- in order to import- it has to be able to pay that… is that correct?

[00:23:42] Conceição: Well, it’s actually a little bit trickier, because when you are purchasing a lot of things that are sold for dollars, eventually you’ll start to look for them. And this is the thing, the faith in the dollar- basically, for those countries- is the faith in being able to purchase things that you need. If you’re buying food items and you have to pay an importer that is getting them from the US, eventually your economy needs to have the dollars, in order to make those payments. And so, that’s where the faith really comes from, for those countries.

In many of the Latin American countries- because we were primary exporting countries- so basically, we exported raw materials and we imported technologically sophisticated stuff- and pieces of machinery, technology- that we did not develop ourselves. And the longer you stay within the system- which is basically, I export my raw materials in order to import technologically sophisticated items- the harder it will be for you to break with that. Because it becomes harder and harder for you, to become able to produce those technologically, more sophisticated, goods and services. But this is something that many countries have done recently. China is a great example. A country that has been able to achieve that transition. From being able to export something very simple- in their case was whatever they could do with their labor supply, those pieces of crap that we used to buy at Walmart- and now they’re able to produce things that are at the technological frontier. But Brazil and Argentina never did that. And so now you truly are dependent on dollars to get those things. And now you have to think of exchange rate dynamics, which basically tell you how easy it is for you to get dollars, in order to deal with your import needs. And so, if you’re an exporting country, those exports should make you able to import. Now, that’s only if you try to use those dollars to make payments for imports. But this is something that is not automatic, because your exports are usually regular capitalists who are just doing their business. So they’re the exporting one. They’re selling abroad and they’re getting dollars.

Now, how would those dollars become available domestically, so that you could use them to make your imports? If those exporters came back to your country and said, “well, I need to make payments domestically, I need to pay wages and to buy imports, in order to keep exporting, and so I need to buy pesos [if you’re Argentine]. So, the Argentinian exporters of beef would come back to Argentina with their dollars, and would purchase pesos. And those dollars that were seeking pesos, would become available for other Argentinians, who are trying to buy those imports that Argentinians need.

So this is- basically- the dynamics of your foreign exchange. When you export, and your exports generate foreign currency that you can use to import, it’s because your exporters are using those dollars to buy domestic currency, in order to make their payments. But sometimes that doesn’t happen. Sometimes, as we’ve seen in the past, your exporters will just keep the dollars and use the dollars to buy other assets- dollar denominated- and then those dollars won’t become available domestically, because your exporters are being able to get very cheap loans, domestically, that are financially viable… because they make more money keeping their dollars, instead of internalizing.

So, those things also happen. It’s not automatic. But usually, you should see dollars coming from exports, helping you import. Now, most Latin American countries had periods, during which they couldn’t address their import needs, just with the dollars generated from export. So they decided, that in order to industrialize- and the Brazilian military government did that, and the Argentinian Junta did that- they sought easy sources of dollar financing abroad, so that they could complement their capacity to purchase technologies- pieces of machinery- to build up their domestic capacities. And for a while, that looked like a good idea because it was very easy to get dollars abroad. That’s during a time when a lot of those petrol dollars were looking for opportunities to make money outside of the US

But that got reversed very quickly with Volcker Shock, and once the dollars flew back to the US, then the Latin American countries got themselves in a very tricky situation, of having accumulated a whole bunch of dollar denominated debt, that they could now, not make the payments with their export revenue. So they had to look for other restructuring alternatives. That’s when they asked for help from the IMF. They went to meet with American bankers, all of them trying to raise money to keep getting the dollars needed, to deal with those payments. And in many instances, that was also to try to avoid the political cost of not being able to make dollar payments.

Because what happens when your demand for dollars overall- and for those countries the demand for dollars would be given by the need to make debt payments and your imports- whenever your demand for dollars is greater than the supply of dollars coming in, the price of dollars will increase. And for most Latin American countries- for Argentina and for Brazil for sure- that’s the biggest driver of inflation. So usually, our biggest inflationary shocks, come from an exchange rate shock, that then can trigger an inertial process of repricing, by those who become affected by the initial shock. So if your exchange rate shock is too large, you might get caught up in an inertial inflation process. And that’s the worst kind of inflation, because that usually deteriorates your political support very fast.

So, governments that face self-reinforcing inflationary processes, usually fall very quickly, because the political support for those governments deteriorates very fast… and it’s easy to understand why. Most people, especially when the inflationary shock comes from abroad- from the exchange rate- most people don’t enjoy that inflationary process, as an increase in their income.

So, most of the people are facing deteriorating purchasing powers, get pissed, and revolt and vote for the other candidate. Actually, this is what explains- very well- Milei’s popularity. He was able to capitalize on the previous government’s inability to avoid the deterioration of purchasing powers, due to exchange rate driven inflation in Argentina.

[00:32:10] Intermission: You are listening to Macro N Cheese, a podcast brought to you by Real Progressives, a non profit 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 TikTok, Twitter, Twitch, Rokfin, and Instagram.

[00:33:13] Grumbine: How does Mosler’s law apply here? Mosler’s law- for those of you who are not familiar- is: There is no financial crisis so deep, that a sufficiently large fiscal adjustment cannot deal with it… if we had a more competent person running things.

What does that say to us about Argentina?

[00:33:33] Conceição: No. And that’s where I think we need to recognize that Mosler’s law is not fully applicable, if your main problem is the rising price, of something that you cannot create. That happens when your main source of instability, comes from an appreciating price that refers to something that you need, but you cannot get from anywhere. Which is the case when it’s a foreign currency. So, you should be able to resolve any crisis by spending more towards the thing that you can apply.

So let’s say, if your financial crisis is due to falling stock prices… well, let’s just use our money creating powers to drive up that price- and this could be applied even to the problem of unemployment- because then, what’s your problem, what’s your crisis? It’s the falling price of labor, falling wages. How do you solve it? Well, I prop up the price by purchasing more labor. Now, what you cannot solve, is when you have a problem of true scarcity. So, let’s suppose that your problem comes from the fact that you have a drought, and nothing you can do can increase the production of food items. Well then, really, you can’t solve that by spending more money, because your problem is your inability to secure more food items.

And if you can’t do it, you can’t do it. That’s similar to the situation, when your problem comes from the inability to secure that currency that you need, to purchase foreign items. Now, the best solution for you, would be to be able to substitute your imports, with something you can produce domestically, but that takes time.

So until you’re able to substitute those things, you really have no alternative. You have to get that currency, and you can only get it from the issuer. Now, Mosler’s law would be applicable, if you increase that to the entire system of intervening entities. Because then, who could solve Argentina’s crisis?

Someone with lots of dollars or the issuer of the dollar. The Fed could step up and say, ‘Hey, Milei, do you want me to solve your crisis? I’ll do it in a minute.’ Because they need dollars, and the Fed can always supply them with infinite dollars to solve their crisis, to stop this inflationary pressure that’s coming from the exchange rate. Even China could have helped Argentina in that sense, because they have way more dollars than needed to deal with Argentina’s debts.

[00:36:37] Grumbine: Yeah.

[00:36:38] Conceição: For China, Argentina’s debt is the price of pittance.

[00:36:42] Grumbine: They could have wiped it right out.

[00:36:44] Conceição: So yes, they could have. But that would require for Milei to accept help from his enemies. But they could have used the BRICS bank, for instance, if they were willing to work with other entities. So, in that sense, yes, the issuer of a currency can always resolve a crisis that has been caused by insufficient currency in any market. And in this sense, the problem is the insufficiency of dollars within Argentina’s exchange rate market.

[00:37:20] Grumbine: That brings me to the next point. MMT tells us that a country cannot go broke on debt denominated in its own currency. And so, this brings up the whole point of, when you are not the currency issuer, you have big constraints- like states in the United States. So do countries when it comes to foreign debt, you can purchase anything available, that’s for sale in your currency.

So they’re purchasing things that are not available domestically, that must be imported. And once they do that, they’re now in a foreign exchange swap, where the domestic currency pushes out the foreign reserves to the other country, and vice versa. And in this case, they just don’t have enough of them. So, Mosler’s Law still holds up- as always. And so does the concept of MMT, which says: a country can always afford, it can always buy, what is available for sale in its own currency. The reason why they’re in this problem

[00:38:21] Conceição: Yes

[00:38:22] Grumbine: is because they don’t have value-added production of the things they need domestically, and they had to get them internationally. And now they’re on the hook for foreign denominated debt.

[00:38:35] Conceição: And maybe we’ve found a new version of the law, which is: if you’re not the issuer- because if we truly had a global system of institutions that are truly committed to economic prosperity all around the world that spirit of cooperation could be used to resolve issues that are outside of your own sovereign capabilities- because there is an issuer that could solve problems of countries that have accumulated foreign denominated debt. And it could- currently it isn’t- but it could be in their interest to stabilize global economies, in order to achieve social and economic prosperity globally, instead of being predatory towards those countries.

For instance, state governments- as you said- have no sovereign money creating capacity, but their federal governments have. So, if you have a local problem- a state localized problem that is resolvable by creating more money- we should look for the issuer. We should look for the federal entity that can resolve that problem and ask for help, and say “well, you should be committed to resolving this issue because it’s part of your federation”… at least within a national economy.

State crises should be resolved by the federal government. And that’s also true for the European Union. There’s no reason why the European Union should have allowed the crisis with their member countries- like Greece and Portugal- they should have never allowed those things to get to the point that they got, because it was very easy to solve that from. That European central bank could have easily purchased those national debts, in order to keep their prices from falling, and to protect them from being speculated against. But they chose not to intervene, until things got very bad.

And so, the issuer of a currency can always resolve a problem that has been caused by insufficient currency. And that’s actually true for most problems within monetary economies.

That’s something that I think we should stress.

[00:41:19] Grumbine: That’s a great point. So, let me ask you, given I’ve never been to South America- but I can only imagine what it’s like if I overlay what I think is happening down there on the streets, with what I see happening here in the US with the Trump phenomenon- what is it like down there? I would say 99. 999% of people are beyond economically illiterate.

This stuff is completely foreign to them at every level, but they hear somebody doing this stuff with confidence. Help me understand what that looks like?

I know what the cult of Trump and the cult of libertarianism in America looks like… what does it look like down there?

[00:42:05] Conceição: Well, I can only try to imagine. I haven’t been to Argentina to experience their drive towards this lunacy. From what I hear from friends, it’s been very similar to what we’ve experienced here in Brazil, with Bolsonaro. And in fact, it’s part of the same global phenomenon. I tend to believe that this embracing of these cartoonish villains- these monsters, these lunatics, that are advocating for the destruction of their social and economic fabrics- the appeal of those people reflects- in many ways- the failures of more civilized alternatives.

And we have to look in the mirror- as progressives- and recognize that we haven’t done enough when we had the chance.

[00:43:05] Grumbine: In my experience- and I have come full circle, my path has been well documented- but in the United States, I’m looking at Joe Biden, and he is funding the genocide in Gaza.

[00:43:16] Conceição: Yes.

[00:43:16] Grumbine: The man is a neoliberal conservative who suckled up to Dixiecrats. He has been on the wrong side of austerity every step along the way.

So, I reject Joe Biden as a member of the progressive community. Now, this is what they’re trying to redefine progressivism as, but Joe Biden, is in no way progressive.

[00:43:37] Conceição: Oh, you’re absolutely right. Just as Clinton was never a progressive. Just as Obama was a joke of an alternative. In fact, in the US I would be hard pressed to make my claim of we having ever had a chance of enacting truly progressive policies, perhaps since FDR. Because the stranglehold of Wall Street on both parties is so complete.

And not just Wall Street, but the whole capitalist, neoliberal-based establishment is fully complete. You can’t really claim that democratic governments have done anything other than, perhaps, not fully embrace evil openly. Oh, that was different from what the Republicans have done with Trump. And in fact, right now- as you said- they’re just not openly admitting that they’ve embraced evil, but they have. Because of their support of the genocide.

[00:44:50] Grumbine: It’s very scary to me, and I’ll tell you why. The fear I have- and I want you to walk me through this because I don’t have a dog in this fight, I don’t do electoral politics, I just am tired of the air getting sucked out of the room with it- the quote unquote “Democrats” are supposed to be the good guys… They’re not.

There’s no evidence of it whatsoever. It’s a lot of hot air. But to me, genocide with a smile, versus genocide with a little mustache, is still genocide. And the problem is, if these are the good guys and we’re not allowed to criticize them because “what do you want, Trump?”… then they just have carte blanche to do whatever evil they want.

[00:45:31] Conceição: And this is what they did to us. And this is the power of neoliberalism, which has attached itself to two versions of evil. One that is openly racist and homophobic, and one that says it’s not racist, but supports genocide. These are the two alternatives that we have. One that is openly saying that it will grab women by the ‘know whats’, and the other that says, “oh no, that’s a terrible thing to say”, but will have an ice cream man call for supporting the absolute most atrocious genocide of an innocent people. And this is what we have right now. This is actually something that made me, at least, admire Lula a little bit more.

[00:46:24] Grumbine: I believe- in talking with Jason Hickel and dealing with Fahdel Kaboob recently and others- that in order to make an impact with this stuff- whether it be in Argentina, whether it be in Gaza, whether it be in the US- the whole world is melting down with this disgraceful financialization of society and the austerity movement that is sweeping the land, and with that in mind, I don’t see an electoral path there.

We’ve got a climate crisis. I think about the timeline for these big events. I really believe at some point, people have got to stop looking to the electoral process and start realizing that their power has to be exerted as a countervailing force, whether it be in an election season or during a legislative season in between. We have got to stay vigilant and on point, but instead we get sucked into these ebbs and flows of electoralism… and nothing changes.

We’re constantly distracted. We’re fatigued by current events. People are unimaginative, uninspired, unwilling, and you see protest after protest in the U S, and Biden’s still like, ‘yeah, I’m going to keep funding it.’ And it’s the same thing with Milei. I don’t see a difference between Milei and Biden.

I don’t see a difference between Trump and Biden at this point. I’m sure that there’s some bedside manner moment there, I don’t see it. I see the world is falling down. You see the economics of it. We understand the mechanism. We understand the structure. They don’t understand it. You can err on one side, where they obviously just don’t know, so let’s teach them. Well, good. Maybe 30 years, 40 years, a few of them will understand. It took this long to get John Yarmuth to understand, and he’s no longer in Congress.

[00:48:16] Conceição: That’s such a shame.

[00:48:17] Grumbine: So my thoughts are, how do you make these changes? I don’t see an electoral path forward. I think there’s a third option and that is outside of it, to build nonstop power and pressure to force these things.

And I believe that’s the path forward, because show me an electoral path… I don’t see it.

[00:48:37] Conceição: And what we’ve learned with Bolsonaro and Milei, is that you can’t really keep people’s support by having minor social programs, and trying to be a little bit more civilized than the ultra liberal that are trying to gain power against you. Because if people get frustrated with your lack of commitment with producing change, they might very well embrace the horrible alternative, which is what we saw in Brazil with Bolsonaro. And of course you have a mix of drivers. You have religion at this point, that has driven people towards this insane desire of seeing a theocracy in Brazil. But the trigger was economic.

The Workers Party lost control of the country when Dilma embraced austerity at the worst possible time. No, it was only after people started experiencing falling incomes and unemployment that they said, “Well, if I’m not even getting that, maybe the right wingers are right, maybe it’s those communists and their corruption that has caused my life to go to hell, I don’t know, I don’t understand any of this… I just see that my life is no longer good, and my pastor is telling me that it’s because of these satanists and communists, so I’m going to give it a try, I’m going to see if this God-fearing monster, who is promising me to moralize the Brazilian economy and politics, maybe he’s the solution.”

And that’s what happened in Argentina as well. The government wasn’t able, really, to address their economic crunches. People were facing hardships under the Kishnerian governments. And at that point, they said, “well, let’s give it a try with this lunatic, I don’t know, I don’t understand what they’re saying anyways… I might as well give it a shot.” Not understanding what the potential consequences are. But the problem is, once you go full lunatic, it’s hard to bring it back. “It’s the economy, stupid”… up to a point. “It’s the economy, stupid”, until you lose control of your social fabric and you become Nazi Germany. “It was the economy, stupid” until Hitler came to power.

Then it was no longer “the economy, stupid.” It was the brainwashing that he was able to enact, and maybe we’re seeing something similar. It used to be “the economy, stupid”, people will vote for whoever delivers the best economic results. People don’t like being poor and facing hardships, but once they go full Milei- or maybe full Trump and full Bolsonaro, maybe because something else- it’s the economy and it’s the religion and it’s the hate of the immigrants, and all of that. And I don’t know where we go from there. Now, the key thing… you’re correct, we can’t possibly give up our weapons, which is the capacity to deliver economic prosperity to people. Lula should have understood that by now.

He’s the only one that’s left that could do something. And this is what makes me so pissed. He was willing to be so courageous against the Zionists and to denounce the Gaza genocide, even as people were accusing him of supporting Hamas and terrorists. I have always denounced violence by Hamas. What I’m doing now, is saying it is unacceptable for a state to deliberately and unapologetically kill innocent people, just because they belong to a different religion. Which is what Israel is doing.

Even if they claim that they’re fighting Hamas, they’re absolutely not concerned with avoiding deaths of Palestinians, which is unacceptable, morally unacceptable. We should all understand that it’s not about supporting anyone, it’s supporting life. It’s supporting innocent people’s lives. They’re still able to use the human shield argument. It’s so revolting.

And this is something that we still have to address. They say, “well, they’re using human shields.” Your responsibility is not to kill a human shield. A human shield is a hostage. Who the hell accepts killing hostages, in any action? Imagine if my mom is being held a hostage and you say “well, the robber was using her as a human shield, I killed her, Sorry.”

No, that’s unacceptable. It should always be unacceptable. Who the hell uses that language, “human shields”, and gets away with it? We’re so deranged at this point.

[00:53:46] Grumbine: You said something earlier that I think was important, and I want to just bring us back to that, because I think that the fertilizer that creates Trumpers and libertarians and other nihilists, comes from bad economics and economic conditions. And so, when people jump to fight the culture war and they ignore the economic conditions that created it to begin with, I think that is why we do this podcast.

And the advocacy that we do is because this is ground zero. The only way that bacteria grows on the Petri dish, is under bad economic conditions. And you can look back to the rise of Hitler- that’s cliche at this point, but it’s real, it’s valid. And the history we forget, we repeat.

In this particular case, all around the world, neoliberalism- that we’ve all voted for, apparently we’ve all found a way to justify and make excuses for- has been the fertilizer, the conditions that occurred, to create a huge swell of libertarian thinkers… and acceptability of that maniacal belief system. And Milei is just the latest of the purveyors of this insanity.

What do you think about that idea, that these guys don’t have a leg to stand on in good times? They only find a leg to stand on when the world’s turned into hell. And liberals, technocrats, bourgeois society across the world, doesn’t feel the pain that main street feels. And a Milei comes back, a Bolsonaro comes back, a Trump comes back. And then we’re force-fed what a great economy it is, but in reality, aggregates hide the suffering, because wealth inequality has grown so incredibly, that the people at top- the investor class- is so wealthy. It hides the real suffering below the surface and the private debt that people have taken on- the unsustainable private debt- to pay for healthcare and necessities, things that are not frivolous in any way.

And I imagine that makes for the right conditions for a Milei. I think that we need to look at the cause, and fight the cause, instead of just focusing on the end product. Cause the end product is a result of something, somebody else did. And people refuse to acknowledge that nobody wants Trump. Nobody wants Milei. Nobody wants Bolsonaro.

Until you allow a neoliberal into the White House- or into another office- to destroy the world with disgraceful privatization schemes and Wall Street deference… your thoughts.

[00:56:46] Conceição: No, you’re absolutely right. And I think this is actually what we should be focusing on. Is to advise- any government, that is associated with the progressive movement, the Lulas of the world, and even if there’s any Democrat, like if Bernie, for instance, was running- but to advise those people, that they can’t half-ass their policies and just do enough, to appease the markets and the people at the same time. Because those interests are never in line, you can’t possibly do the type of sabotaging of public investment, that the financial markets ask you to do, and still deliver economic prosperity for the people; you have to choose. And so, this is what Lula hasn’t done yet.

Now, this is why I was saying he’s been willing to go against the Zionists, to denounce the genocide, to compare it to the Holocaust, which was bold. Perhaps he should have remembered other genocides. But still, there is a similarity there, in terms of the dehumanization of the Jews in Germany, and now of the Palestinians in Israel.

But Lula has been willing to do that, and yet he’s still embraced the austerity recipe that his advisors have come up with. And the reason for that, seems to be that he doesn’t think that he’s strong enough to go against some sort of reaction, from the financial markets, from the Brazilian capitalists. But my point here is that there’s no alternative.

You have to try, even if he’s correct and even if the financial markets will mobilize and be able to get him out of office, the alternative would be very similar. They would still work against him and eventually they would get rid of it. The only possibility for us to have sustainable prosperity, is to embrace the most powerful tool that we have to promote prosperity, within the monetary economy, which is the power to create the money that we use. So what does that mean? Well, that means to embrace public investment like never before. That’s what FDR did. As soon as the American economy collapsed, let’s embrace public spending. Now, let’s accept here that- really- he embraced it, just for a while, until ’37 when he didn’t have the courage to embrace functional finance openly. And so he accepted to try to enact on austerity shock, and ultimately what so bears out of its crisis was the World War 2 spending. But nonetheless, you had those moments. The pandemic. The pandemic was a moment where most governments had to accept that they couldn’t do anything other than spend, in order to take their economies out of this law and to beat the pandemic as a crisis.

And so, this is the only alternative I would say that Lula has, is to embrace public spending and to bring the Brazilian economy up to its full potential. And that would be the only way to really rid us from the strengths of those ultra liberal fascists that are still looming around. Milei is what could happen again to Brazil, if we don’t do what we should. If Lula doesn’t get wise.

[01:00:49] Grumbine: So Daniel, I want to thank you so much. As you can tell, I’m a little spicy today because I am so frustrated. I cannot tell you how brutal it was to see that many likes on RFK Jr’s Austerity Lovers post and that infuriated me. Because I’m scared. I know what austerity does. I know austerity is one of the most brutal, blunt force tools used against the working class and the poor.

This pod was great for me. I really appreciate you taking the time to come on with me.

[01:01:25] Conceição: Oh, it’s wonderful.

[01:01:26] Grumbine: I have one final question for you.

[01:01:29] Conceição: Yeah, sure.

[01:01:30] Grumbine: Give us the exclamation point. Take us out. What is important to get from this, in your mind, walking away from this pod?

[01:01:39] Conceição: Well, I think we need to keep attacking those lies. What Milei has done, is to present a horrible result. Which is his fiscal surplus, that should be understood as a terrible thing for the country. It means the impoverishment of a country, whose people’s purchasing power is being devastated by inflation, at the same time as the country is becoming poor, because of his action.

No one should celebrate what he’s saying is good. We should look at it and be appalled and say, ‘what you’re doing is taking even more wealth from the economy, at a moment when it’s lacking already.’ But because people have learned that fiscal surpluses are always a good thing, they are able to see it for what it is.

And so they’ve been celebrating this terrible thing, this terrible result. And deliberate and dishonest people will point to this as if it’s a good thing. It isn’t. And it won’t be long before people see how terrible, what Milei is doing, is for the Argentinian people.

[01:03:02] Grumbine: Thank you so much, Daniel. I really appreciate it. Do me a favor, tell everybody where we can find more of your work.

[01:03:10] Conceição: We’re still doing stuff on the Institute for Functional Finance and Development in Brazil. It’s ifdbrasil. org. I have stepped down a little bit. I’m no longer president. Fabiano D’Alto is now our president, but we’re trying to get more stuff online for people to follow. We’re still trying to find the austerians here in Brazil, trying to debate them.

It’s not easy. We’ve seen a shift back to normality since the pandemic. For whatever reason, they’ve been able to control the debate without giving us much space to challenge them, but it’s our life mission.

[01:03:58] Grumbine: All right, Daniel, thank you so much, my friend. My name is Steve Grumbine. I’m the host of Macro N Cheese. My guest, Daniel Conceição. With Macro N Cheese, Real Progressives is a nonprofit. Please consider becoming a donor through our website, realprogressives.org under donate. Also feel free to come to Patreon and become a monthly subscriber there.

We’re on Substack, we’re on YouTube. Check us out. With that, Daniel, thank you once again for joining me. Macro N Cheese. We are out of here

[01:04:37] 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.