Episode 47 – 1000 Castaways: An MMT Journey with Clint Ballinger

Macro N Cheese – Episode 47 
1000 Castaways: An MMT Journey with Clint Ballinger 
December 21, 2019 

 

Clint Ballinger [intro/music] (00:03): 

Well, my basic idea is I think there should be a intro or a primer type reader that either a high school level or first-year econ 101 student, or maybe a businessman in the airport could find and read in an hour or two. It has no references to neoclassical economics at all. I would like to see all of economics or at least for a four year degree follow in the horizontal/vertical systems would be the division not micro/macro. 

Geoff Ginter [intro/music] (00:41): 

Now let’s see if we could avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine. 

Steve Grumbine (01:34): 

All right. And this is Steve with Macro N Cheese. Today we’re going to have a gentlemen from down under who is actually from the States. He’s actually been a bit of a world traveler. His name is Clint Ballinger. Clint is an interesting character. Clint doesn’t come by things the normal straightforward way.  

Clint has done the around about. And I’m going to let him get into some deep discussions about that in short, but Clint Ballinger began his interest in economic development in the very, very long run while at the University of Texas at Austin. While there he worked with the world’s oldest accounting tokens, Mesopotamian 8,000 to 3,500 BC under Denise Schmandt-Besserat and researched the development of both state and credit money with a special interest in the debt deflation work of Irving Fisher.  

For his MA in political science at the University of North Carolina at Chapel Hill, he focused on modern uneven economic development and went on to specialize in the interpretation of global econometric data for his PhD in geography at Cambridge University. So with that, welcome to the show, Clint. Thank you very much for joining us, sir. 

Clint Ballinger (02:55): 

Thank you, Steve. [inaudible] talk to you finally. 

Steve Grumbine (02:59): 

Absolutely. So you talked to me a little bit before we got on the air. You kind of let me know you’ve been all over the world and this has been a glorious journey for you. Take us through this maze of travel. 

Clint Ballinger (03:13): 

Oh yeah. I can probably tie that into how I got into MMT as well. So basically I was always interested in aspects of the economy ever since the nineties . . . I . . . all the headlines, if you remember way back, you know, the debt, the national debt and so on was gonna destroy us all. And I always thought that, you know, something didn’t seem right there.  

So I started reading and I obviously didn’t get lucky and run into MMT. So I found myself reading eventually Irving Fisher and kind of that point of view and definitely very interesting and helpful. And eventually my interest in economics, I got into economic geography and went back to university and I got my PhD and I finished right into 2008, which put me obviously finishing right into the great recession.  

And especially in geography departments in the United States, a lot of them are state funded and the money just wasn’t there for jobs and it’s a pretty bad situation. And after a year or so of just, you know, banging my head against the wall with jobs, I just decided if my interest is developing economics, then development economics would just go live in some developing countries.  

I’d lived abroad before, but I went then and spent a year in the ex-Soviet country and Republic of Georgia. And then after that a year in China, and then after that a year in Latin America and Costa Rica. And there was during that time period that I started actually kind of got back into, although my main interest at the time with development economics, I ran across Steve Keen’s stuff that was coming out about that time.  

And that kind of drew me back in, cause he’s also from the kind of horizontal banking side of the whole perspective that kind of tied in with Irving Fisher, you might say. Got real interested in Keen, kind of drew me back into the academics of it all because I kind of just gotten out of that. And then while reading Keen, I was in Georgia, actually, Boca, Georgia, reading that.  

And then right across one of John T Harvey’s articles in Forbes, I think his Social Security article. And while I was reading that, it really realized that, wait a minute, this doesn’t exactly have to do with the horizontal side. So I realized I was missing something and that led me into kind of eventually to MMT and understanding the vertical component.  

And basically I see MMT, and I think I have the Warren Mosler’s quote on my, kind of blurb to my book that it pretty much understanding the vertical and horizontal component of the macroeconomies, pretty much everything. So that partly is where my travels were. And along the way, how I got back into this whole economic thing and MMT and yeah, and now with Fadhel Kaboub’s stuff bringing .  

. . it’s interesting because I’m traditionally involved with development economics, but became interested in MMT through a different channel now that I’m real interested in putting those two things back together. 

Steve Grumbine (06:11): 

Very, very good. You know, MMT has been a huge part of my life and I’m not an economist and I didn’t study economics per se in grad school. I was just an MBA, but I was exposed to this. And the exposure that I received was enough to basically lock down and reinforce all the tropes and the incorrect beliefs that the economics profession has hoisted on the world.  

And it took many, many moons to unplug and deprogram and rewire the machine that is my brain. And it has been a fascinating journey in itself. I mean, you have just had an epic journey. One of the things that I found fascinating in your journey is that, you know, it’s one thing to deal with the culture.  

It’s another thing to go without the language skills and so forth. It’s another thing to completely understand how to do commerce abroad and just understand how to keep yourself safe from making bad decisions because things are done differently, but you seem to thrive and survive in these environments, which leads me to believe that you probably are a quick learn and you’re able to take knowledge and apply it.  

And I think that’s kind of what drew me to wanting to interview your here is your book. You’re an author and you wrote this book, “1000 Castaways.” And the key that jumps right out is how your professors should have explained the principles of macroeconomics but didn’t. And as early in the book as that comes, it’s a real good smack in the face to remind you that everything you learned was pretty much bunk.  

Tell us about the thinking behind your book and what this book is all about “1000 Castaways.” 

Clint Ballinger (08:07): 

Sure. So there’s kind of an interesting story on that. When I was still doing my master’s degree, you were mentioning how mainstream kind of education, just the mainstream macro doesn’t make any sense. I’ve been interested in these themes ever since the nineties, when there was always in the newspaper things about the debt crisis and so on all through the nineties.  

And I thought something just didn’t make sense for that, but it’s obviously we’ll be running across somebody that knows what they’re talking about, like Mosler or Wray or Mitchell or whatever. It’s really hard for the average person to put their finger on that. It’s kind of a shame. I was really close to getting involved in that aspect of economics doing my MA in political science.  

I was already researching uneven development. I’m a big fan of Jane Jacobs, which I might come back to that, had an influence on several things. And she was writing about currencies. Actually, I pointed out before she actually predicted the Euro would fall in eighties. I believe it was in her books.  

I’m writing about how currencies function and through her actually, I ended up reading Charles Goodhart and I was reading about, it was about 2000. I was reading one of his latest articles in the late nineties about what he usually uses the term ‘chartist money’ instead of chartalism. And I’ve come through the Robert Mundell study and optimal currency area theory, which I was looking at from the point of view of not just the money area, but it’s fundamentally spatial – if you talk about the area aspect of it.  

What areas are you talking about? Nation-states, the world regions, the Eurozone, what? And so that was kind of drawing me into that. And I then I started reading Goodhart and I ended up applying to the New School for Social Research and was accepted and was almost going there. And it would have been there probably in about 2001 and maybe overlapping some of the other people that were foundational to MMT at that time.  

I think some of them were at the New School. I ended up going to Cambridge instead and taking a whole different direction; but it’s just weird how close I was to that. But anyways, basically I think we’ve read, you know, Wray, Mosler, Mitchell and Fullwiler, and we’ve seen that they were teaching us something that the mainstream gets wrong, you know, and has for decades.  

And I think that’s what I mentioned, what I just did about doing my master’s degree. When you study political science or economic geography and all this, you look to the textbooks of economics to try to make sense of what you’re writing about and apply it to the political science aspect of it or whatever.  

And what’s so frustrating is you look and you realize it doesn’t make sense. And it’s sad. So many people are wasting their time by looking into the mainstream and, you know, trying and apply it to political science or economic geography. And so luckily I did finally start looking into it and learn kind of actually how the system actually works.  

Like I said, first through Keen and then through Mosler, Wray and Mitchell. And so that has been something that I’ve really became interested in. And then I realized there’s plenty of people out there, they’ve got the macro right now and they’ve even obviously got their textbook now. And hopefully things are changing, but ultimately, without the voters understanding these same things, they’re always going to vote for representatives who don’t do the right thing as far as spending and tax policy and so on and so forth.  

So just like I mentioned that a Warren Mosler quote, as you can see, I’ve actually done the book exactly following that. So basically, well, my basic ideas, I think there should be a kind of a intro or a primer type reader that either a high school level or first-year Econ 101 student or maybe a businessman in the airport could find and read in an hour or two.  

It has no references to neoclassical economics at all, and almost no references at all. I like the references to the MMT authors mainly out of respect to, you know, I don’t want to just act like these are my ideas. So I take the Mosler quote with vertical and horizontal money. I could’ve gone either way.  

I think I started with horizontal. There were some trade offs in starting with one or the other, and I have the bank credit money system developed. And then in the second chapter, I introduced a vertical or government public, co-organizing public projects, money. And then chapter three, I run through the trade offs of how we’d want to run those two systems and then four and five go back to them but in the real world.  

And the main kind of point several things about this, I wanted to kind of reclaim what the barter story. It doesn’t have to lead into classical economics. I want it to reclaim the kind of Austrian and people on island view, common sense. You know, it doesn’t have to lead to some of the things it does.  

If you look at 10 people on an island, the way you would basically surely you would have something like a job guarantee, no one would be sitting around idle. I have that in the book and the problem with 10 person on an island type story, – I also was looking at Krugman’s, it’s actually not Krugman – and it was before him, but the babysitting co-op story.  

Those kinds of stories is when you deal with small groups, you’re missing the most important thing, which is how would 10 people on an island you can, it’s kind of obvious how you’d want to divide and share and chores and tasks and goods and whatnot. It’s the scaling up that is hard. That’s why I made it a thousand people is because you start needing the types of organizational institutions that we need in the real world for societies of millions of people.  

So with “1000 Castaways,” when you go from 10 to a thousand, that’s when you can kind of simulate the need for credit money and capital developing projects with the banking system. And then in chapter two, you can see the need with a larger number of people for the emergence of a system to organize public works as well.  

And that’s one of the things I’ve never really heard it quite said this way. When you have a large number of people who want public projects, you can have a command society where you tell everyone what to do. And what’s kind of funny about conservatives sometimes being against public spending is actually our public spending, or a vertical system, is a market solution to the problem of organizing public goods, rather than saying, Hey, you know, Joe, you got to go work for NASA or Joe, you got to go to the military, whatever, or you need to, you know, help build this bridge or whatever.  

We float the tax credit and tax system, which creates the tax credit token, which becomes money like in the system and the basis. And then the government can spend those in. You buy and let the market decide how to supply these things like a bridge or whatever. So it’s a market solution to public goods.  

And then of course, as we know, historically banks eventually use that tax credit token as their basis as well. But one of the things I try to emphasize in the book, it’s not about the emergence of bank credit money that’s interesting, or is it the emergence of the vertical tax credit that’s interesting; it’s the systems themselves and what they do and what they’re for.  

One is for the private system for developing private projects, the other is for developing public projects. And they’re almost totally separate except for sharing the unit of count, which is the tax credit. 

Steve Grumbine (15:06): 

So take us through the book, kind of step us through the book itself. How should we be framing the Modern Monetary Theory discussion? How should we be framing macroeconomics so that regular people understand? 

Clint Ballinger (15:24): 

So obviously this has been a big aspect of Bill Mitchell’s work talking about this. Overall I just wanted to approach it one, obviously without any technical jargon or, and I try to avoid any confusing terminology. And I really don’t talk at all about previous neoclassical stuff. It’s confusing. And I really wanted to boil it down to looking at the reason why we have the two money systems that we do.  

In other words, what is it that vertical money does? Why does it serve a purpose and what is it that horizontal money does? Why does that system exist? So rather than just focusing on the very interesting fact that these systems emerged, which is kind of usually where everyone else stops, I point out that they have fundamentally different purposes.  

They still exist almost as separate entities, even though they’re linked by the unit of count. And once you understand that, and then some of the trade offs I talk about in chapter three, if the public just understood those two things, they would understand better how we use a vertical money system to organize public projects that either increase our well being directly, like for a job guarantee or amplify private projects, like a bridge would amplify a farmer’s market, for example.  

And also there’s a lot of confusion because some people that are pro public money, for example, don’t fully understand the purpose of the private credit money system, which is to fund capital projects – in other words, projects that increase our productivity. So the first system is really good at supplying consumer goods, supplying variety, restaurants, and so on and so forth.  

Whereas the public system has a different purpose. So I’m just trying to really, really distill those things down to their essence and get those to be understood by the general public. 

Steve Grumbine (17:15): 

Tell us what vertical and what horizontal money is. 

Clint Ballinger (17:19): 

Sure. Traditionally, sometimes this has been called endogenous money. Although certain reasons I don’t like to use that term, basically vertical money is public money and horizontal money is bank credit money. I think I mentioned earlier, something about that I was influenced a lot by Jane Jacobs and she has this great saying where she says, “Why be vague when we can be specific?”  

So one of the problems you’ll see, and I know we’ve all seen this in debates about these topics. It’s a lot of the problem is both talking past each other with different terminology and different understandings of debt and money and credit and so on and so forth. So if I’m talking about vertical money, I try to only assess exactly what I’m talking about, which are the tax credit token, which can either be reserves in the system or cash or the cash is less important.  

And then try to get the public to understand how that’s a public monopoly. And then everything that MMT said follows from the fact that the public monopoly and then understand that bank credit or horizontal money is just promises to pay in those so that the public kind of hear discussion about money being debt and all that, but they don’t fully understand necessarily that what banks are are just entities that promise to pay on your behalf.  

And they make payments between themselves and with the government with actual tax credit tokens or reserves. And the purpose of their promises to pay is system one, our horizontal system that increases our productivity, funding capital projects. So basically that’s a difference between the two. As a matter of fact, I really think that this way of organizing makes more sense than the common macro/micro distinction we make.  

I would like to see all of economics for at least for a four year degree follow in the horizontal and vertical systems would be the division, not micro/ macro. And then on macro, we have all kinds of classes for more advanced students going into welfare economics, going into taxing, spending, fiscal policy in general, on the one side, that would be the vertical side – what I call system two in the book.  

And then you would have another series of classes dealing with what I call system one in the book or the horizontal side, which would be about how to properly regulate financial markets, financial stability. You can even get into the micro of banking and loans and how they affect businesses and individuals.  

So that would be the micro aspect; but I see this way of dividing into vertical and horizontal money is a viable way to organize an entire economics course for four years. 

Steve Grumbine (19:53): 

Tell me for the listeners that are just maybe coming into the Macro N Cheese world and maybe have never heard some of these terms, explain endogenous and exogenous money creation. 

Clint Ballinger (20:07): 

Well, as I mentioned, I don’t really like to use those terms. There’s a little bit of a ambiguity in the term endogenous in a way you can look at even vertical money as being endogenous. Peter Cooper [inaudible] economist writes about that. To me they’re kind of older terms. So traditionally endogenous has been viewed as similar to what I’m calling horizontal or system one, and exogenous would be vertical or outside money from central bank.  

Terms inside and outside money are also used, but because there’s some confusion or discussion or disagreement around the term endogenous and exactly what that means, I just don’t use it. So for me, I’m going to talk about what some people would call endogenous, I’m calling horizontal bank credit money — promises to pay tax credits from a country and what some people have called exogenous, I’m only calling, I’m going to always say tax credit tokens are reserves – are actual government money, public money.  

Now those are the two terms I think are a little more precise and it’s better to use. But just so to be clear, it sort of corresponds to vertical and horizontal money. Just, I think there’s too much confusion in some of the older writing on those terms. 

Steve Grumbine (21:17): 

I love it. Right. So take us to the next level of this one desert island where castaways explain the machinations of the formation of the society on this island. Talk us through your book. 

Clint Ballinger (21:34): 

Sure. So I think I mentioned earlier that part of what I was trying to do is show that the basic insights from that kind of 10 person island would hold in a sense that you would want, like I said, if you’re 10 of you on an island and Joe gets a hurt leg, he’s still going to probably do something to help out just because he wants to.  

When you get a bigger society, you keep those basic kind of ideas there. People in society of 300 million people that want to work because we create the public [inaudible] and there’s no more reason not to have those people employed in our larger society than Joe on a 10 person island. Now that being said, what I wanted to show is the emergent properties of credit money and state money.  

So as you go from 10 to a thousand, I’m trying to simulate the way that you go from 10 to 300 million people. So I show that the credit money system developed out of the need for trust of smaller groups of people to do private projects, how use developed; and the biggest development is when it became transferable or negotiable.  

And this is a process that took thousands and thousands of years. That’s one of the things a lot of people don’t understand is how slowly these process, very, very, very slow tons of setbacks happen in different ways, all over the world at different times. Eventually though sometime around 1500, you see kind of modern banking arising, especially in Northern Italy.  

And you see the transferability of credit IOUs that becomes our modern banking system, which has the effect that I talk about on the island of allowing private projects on the island. I have a guy, John, who’s a fisherman. He doesn’t have the time or materials on his own because he’s just trying to get by to create a larger net.  

So by having these transferable IOUs, he’s eventually able to basically, it’s a capital increasing project where he is able to get a bigger net made, which increases the well being for the whole island, because they can catch far more fish this way. So that’s in chapter one, which is basically the bank credit money system and why it matters.  

Chapter two then I have, like I said, it was not clear whether I would even do vertical money first, or second, obviously some people would like to do state money first. So some form of state money, you could view it as extremely old, 5,000 years old when you have tribute systems in Mesopotamia. I have a person on the island talking about these older systems and then they decide to develop a similar system, but rather than using tribute to do things like the military or something like that, they understand that they can use it to transfer real goods for real public projects, so it would increase their wellbeing either directly like education or taking care of each other, healthcare or healthcare for the elderly and indirectly amplifying public projects.  

For example, if you build a road there on the island, they’re able to drag out more trees and rocks and therefore they all have better housing because of this public project increased their private capacity to build housing. So they basically impose a tax on themselves and then that creates a tax credit.  

And that creates that market solution to public goods. Which again, I’m always surprised that conservatives, when your people are talking to conservatives or libertarians, they don’t discuss more. The fact that our public money is actually a market solution by using tokens, whether they’re in [inaudible] society.  

And then of course as happened in the real world over hundreds of years, the tax credit eventually replaced any measure of a commodity in the private system. Obviously the majority of modern countries went off the gold standard in the early thirties, but incredibly not totally off the gold standard till 1971, as we know.  

So one of the things also I try to point out in the book is we’re talking about a thousand year development, extremely slow with a million, you know, setbacks that didn’t finish until 1971. So we actually only have two generations of economists or something like that that are even beginning to understand the meaning and significance of how we can run our public and modern banking system. 

Steve Grumbine (25:40): 

And it’s interesting, Warren Mosler will oftentimes refer to act of taxation as creating buyers and sellers of goods, which directly speaks to what you just said. You know, we went into a semantic debate for a long time about the low hanging fruit term tried to use, which is taxes don’t fund spending.  

But we regular people when we say the word fund, we’re talking about finance, pay for, whatever. In some circles, the word fund means a very different thing. And so this semantic debate went back and forth. And so what you’re doing here, by the way you’re describing this is kind of in my opinion, a great way of getting rid of all the semantic games, just getting straight to the point. I really liked the way you lead that out. 

Clint Ballinger (26:32): 

So yeah, like I said, the great quote by Jane Jacobs, basically the key to all of this of economics is the real resources and the kind of fascinating thing, I think about MMT and better writing on the economy that we have now is the way, unlike neoclassical economics, we’ve understood that real resources are what matter, but the systems we have organized in society, whether it’s the credit money system or the public money system are crucial to how resources are used and distributed, and employment and so on and so forth.  

So I think when you have neoclassical economics, it doesn’t make sense and you get into semantic games because there’s nothing else there anyway. When you talk about real resources and the real way the financial system affects those, then it’s pretty easy to use clear language that the average person can understand — saying that if you understand something really you can understand if you’re a child, kind of like true with MMT. 

Intermission (27:47): 

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, and Instagram. 

Steve Grumbine (28:35): 

That’s a great point. I mean, it really does come down to real resources and your island is a great example because your island is a confined system where you can really see cause and effect. I think people get wrapped around the axel because there has been so much misinformation in the world, I mean, things like hyperinflation, all these terms that people are really ill-equipped to defend themselves from being pulled into; but yet they’re pervasive and they create these worlds that are not really valid.  

They don’t really represent reality in any way, shape or form, but the narrative becomes the rule and these rules become the way we structure society, whether it be right or wrong. And I think that when you understand that economics is actually really, it comes down to the efficient distribution of real resources and productivity in not necessarily in a capitalist sense, just in terms of shifting units of labor and effort and stuff like that, to ensuring that we have a means of understanding how to move that stuff around in a way that’s equitable.  

Can you talk a little bit about some of the motivation you had for what you see as a just outcome for these types of things like on this island, these castaways, what does a just society end up looking like in this environment? 

Clint Ballinger (30:17): 

All right. So that brings up the chapter three. I talk about balancing the two systems. So in chapter one, I talked about how the credit money system increases our kind of material well being. And then chapter two, I talk about how public goods amplify private production, and they also just serve the purpose of directly providing goods that wouldn’t be provided.  

So, one thing I look at is first of balance, I get kind of a story of how we might look at how to balance the systems. So for example, to me, it’s kind of a natural measure of their private system. The private system developed as credit as we know, which means the private sector is taking out loans from banks for capital increasing projects, ideally.  

And as we know in the current system, that quite a lot has been written about as the FIRE sector, the finance insurance and real estate sector with all their lawyers and so on and so forth. This system has become bloated with bad loans and don’t give loans and it’s much bigger than it should be, which means real resources through a bloated private system, claims and real resources get produced that shouldn’t be basically.  

So we want to control that system by keeping basically just the healthy amount of loans being made, they’re being repaid and they’re actually funding useful projects. And then you want to add to that whatever public projects you obviously want, like bridges and education and healthcare, that amplify private productivity, and that brings to full employment.  

And then as I talk about you can’t really get to full employment just by spending, a traditional Keynesian kind of idea, despite what some people think of as that, because you reach bottlenecks and so on in the economy. So at some point you’re going to still have some unemployed and you want to target those people directly.  

And then I go into all the many, many reasons we want to help unemployed directly the social problems that employment causes, you know, just the loss of project that we could be doing, like parks and elderly care and so on, that might make sense for job guarantee. And some of the other reasons we’d want a job guarantee.  

The other thing I mentioned is, well, you have a kind of traditional view of public goods with the concepts of what are the traditional concepts they always talk about whether non-excludability and those traditional concepts. But I use an article by someone named Sue Kara from 2014. She has a great little section where she talks about the reasons we want public goods, or basically, let me see real quick in the book on page 49: “the goods that the market will produce because there is not an effective market with things like clean air and infrastructure and public sanitation, benefit goods that are just so beneficial to society, that it’s obvious that regardless of the resources we want to do them things like a bottle of water, public libraries, education, 911 call services.  

And then one thing that I think I don’t hear enough in the debate is network theory. So number three, all of them — utilities, basically anything that’s a network – networks are natural monopoly and you can’t privatize them or break them up. It doesn’t make sense. Now the only solution really is to, for the public to run them themselves.  

So that there’s rail, transport systems, communications networks, and all our utilities, that includes, I would say, our most of our legal system, an bank regulation. And so just networks in general. 

Steve Grumbine (33:41): 

All right. So take us through where are we today, like in your view, where are we in terms of the regular rank and file coming to understand the basics of how economics works? I mean, you look at the results of UK election and there’s so much going on there. It’s almost impossible to peg it to just economics, but clearly across the world.  

And even in the United States, people are still desperately held back from the idea that somehow or another a currency issuing government can’t afford to take care of its people. I think your book shows us that this isn’t true, but talk to me about where you see today. Where do you see the US, and in general, because we see this economic phenomenon, or I should say, you know, the incorrectness scattered throughout the world, the US doesn’t have a monopoly on, you know, ignorance on the subject.  

Where do you see us right now in terms of a great awakening? Or do you see that – is that far fetched? 

Clint Ballinger (34:53): 

So, as I was talking about before, one of the things I’m trying to emphasize in the book is the extent to which banking and public finance and just the general organizational systems we use are thousands of years old. It’s taken so many millennia for us to get to where we are now. And it’s incredibly recent that we’ve even fully gone off the gold standard in 1971.  

That’s just amazing. And then we have kind of what I call in the book, the dark ages from we were kind of getting there in the thirties and forties. Economics was starting to answer some of the big organizational questions of society. And then it just went off the rails for the last sixty years, just absolute nonsense for decades.  

And this small group of people, what I call the academic renegades of macroeconomics have brought some of these ideas, a logical discussion of these ideas back, and you see people like AOC and now Kelton helping us on really getting the message out there and just explaining the basic systems that we’ve developed and how they matter and the key purpose of what I’m trying to do with this book and what I think, you know, you’re trying to do with Real Progressives and so on is we’ve got the academics right basically.  

It’s a matter of getting the message out to the voter. And the reason for that is just so they can vote representatives who understand how public spending works and how do you regulate the finance sector. As I say, in the end of the book, those are the two primary drags on our wellbeing is that our representatives don’t know how to use public spending correctly.  

They have no idea, and they don’t know how to regulate the finance and private sector banking sector correctly. So that leads to all kinds of corruption. Those are the two big problems. And the fact we’re actually discussing them in logical terms now is half the battle. 

Steve Grumbine (36:39): 

You know, my experience has been more at ‘hand to hand,’ mano a mano type level. I’m not a theoretician. I have an understanding of the macro system and I have an understanding of how I’d like to see society structured. And I try desperately to make the macro fit my worldview, but I want to be able to understand, and I think the MMT to take Bill Mitchell at his word, it creates a lens by which we can evaluate decisions within the economy.  

Oftentimes we hear MMT boiled down to it’s just a framework for understanding a modern money economy and how money flows within a system. I also hear it talked about, but it’s just currency analysis. Well, I think it’s much more than that. But in your take, if you could describe Modern Monetary Theory to someone in a short order, what would you say? How would your elevator pitch . . . 

Clint Ballinger (37:43): 

That’s exactly what this book is. I’m trying to just set it out in the most basic terms that we have a private credit money system that organizes the private parts of the economy to increase productivity, to increase our material well being. And we have the vertical or public money part of the system that has nothing to do with communism or socialism or anything like that.  

It’s our group decision to transfer some resources to common usage that amplify public production or directly provide goods that we all want, like, you know, schools, NASA, national parks and so on. That’s really it. The thousand castaways, I said I went from 10 to a thousand to show how the emergent properties are needed for larger society, just 10 people.  

And then I, in chapters four and five, show how why in the real world and why they’re limited in the real world. And if I can get people to understand the limitations in chapter four, chapter five, then that’s it. I think they would know how to vote or someone who understands how to increase all of our prosperity. 

Steve Grumbine (38:53): 

You talk about regulation and I know that various political candidates with the best talk about this. I know that the MMT economists speak about this, and I know Warren’s written several things about reforming the banking system in terms of regulating and basically making banking boring again. I’ve spoken with Bill Black who talks about the best way to rob a bank is to own one.  

And he talks about corruption and basically leans back to the lack of regulation or the regulators regulating the regulators, which ultimately means there’s no one guarding the hen house. What do you see as the primary regulatory framework for a just banking system in this case. I know Warren’s papers out there, but just, you know, in your own words, what do you think? 

Clint Ballinger (39:48): 

So, as you know, I did a chapter one and two are the island’s development of kind of a perfect, I wanted a simple, perfect system for bank credit money in chapter one and public money in chapter two. So then chapters four and five are the real world versions of those. So basically in a way it’s simple macro-provincial regulations, been a lot in the news lately.  

And just, you know, the two things that make our economy bad are the doing public money wrong, which I’ll talk about in a minute. And then by chapter four, is that basically, you know, 2008, the crisis in 1929, for that matter, we let the whole Steve Keen debt deflation thing. We let the FIRE sector get too big.  

That’s also a Minsky of course, stability leads to instability. So to stop the wild swings and growth of the private credit money system, we just need better banking regulation. And one thing I don’t like is, especially with the Minsky’s “stability leads to instability,” people act almost like because it happened in 29, in 2008, that it always happens.  

There’s no way to stop it, it’s a natural thing. I don’t think so. I think now that we understand banking has been around pretty boringly similar for several hundred years now. To be honest, there isn’t any need for innovation. Financial innovation is always just a code word for somebody scamming or skimming money out of the system.  

So we just need the simple regulations that keep the systems small. And if the system’s small, it will be healthy. It will do what it’s supposed to do and nothing more. And so the plain vanilla banking rules we need — the number one rule, I think I got this from Mosler is just quit. We give the licenses for all banking and we can revoke them any time.  

So there’s the same true as private banking already, public insensitive. It’s what the public allows them to do. Tell them what they’re allowed to do, not what they’re not allowed to do. So say you have a license to do this, and if you want to do anything else, you have to ask us to do something different.  

Basically, I usually say no because there’s no purpose when they do anything different. All we want them to do is fund productive enterprises and run our payment system. And they don’t even necessarily have to do the second one of those. The other things that we can do, Mosler’s proposals for the banking system, which don’t get near enough credit or the attention as they should, but there are several that are just so easily implemented and obvious: one, make banks hold what’s been made.  

This will obviously force them to only make good loans, hopefully, and second, make them run on a single balance sheet. So that makes them transparent for regulatory agencies. There’s no reason to set up subsidiaries and all this other stuff. Just keep them on a simple balance sheet. You can see what’s going on.  

There’s nothing gained by them doing anything else. And the other really obvious one is don’t let them accept financial assets as collateral. That obviously is gaining a basically a Ponzi scheme. You know, all the different derivatives and all this again, it’s what they call financial innovation. It’s not innovative.  

It doesn’t help the real economy. There’s no purpose for it. So if we enact plain vanilla banking back to the 1950s, we can fund huge public projects. We can, banks can fund huge private projects. We can look at what we’re funding, which is what we should really do in the way that like Mazzucato and Wray do.  

We’ve got the basics down and start looking at the productivity side of the economy. You know, why are the Scandinavian countries build ships and the United States, we can’t do that. What is it about banking we need to tweak to make all the different societies maximize our real resources, but we just got to get back to plain vanilla banking and keep it simple.  

That’s really what it comes down to. And that’s the, what I say at the end of chapter four, that’s the biggest drag on real world economies that reduced our wellbeing below potential, except for one. And then I say, we can’t to that now, but 

Steve Grumbine (43:45): 

Let’s go right there and let’s go into chapter five now. So take us to that next place. 

Clint Ballinger (43:51): 

So chapter five, as I said, chapter one is the perfect horizontal chapter. Two’s kind of the perfect public, chapter three is how we would balance those two things in the job guarantee. Then chapter five is just chapter five is the addendum to the chapter five, which I add on there, is partly about the lies our system, not the way the perfect, you know, system could be.  

It has to do basically with thousands. Like I always emphasize the thousands of years our system has developed. And then up until let’s say 15 hundreds, when modern states, kind of proto-states begin to emerge. When they first emerged, they actually did need to borrow foreign currencies or, you know, some preexisting currency that allow fledgling states to kind of get off the ground.  

So what did they do? They floated promissory notes to do that. And that became considered the norm. Now, what we haven’t fully understood until really recently is that once they became effective, bureaucratic well organized States, they obviously could tax and they could shift resources to the public good that way.  

And when they tax, it automatically creates a tax credit. There’s two ways that can happen. You can either get the tax credit first and the private banking system developed based on that. Or you can have preexisting currencies that produce state taxes and on once they tax it on that tax credit takes on a life of its own and becomes the currency of just that country.  

Once that has happened, you don’t need the promissory notes anymore. They serve no purpose. A currency issuer that issues a promissory note or bond might just as well directly spend that money. There’s no difference. But the existence of the system, if you look at the amount of economists and macroeconomic writing and so on involved with monetary policy, it’s a massive waste because none of it works.  

Also, you have things like the Pete Peterson Foundation . . . as long as there are bonds and you can convince the public that we are in debt. As long as we have the bond system, and you can call it that, and if it is public enough. There is within MMT people like Mosler and Kelton, all of them, they understand the system so well from the nineties, they’ve understood that yes, there’s bonds, but ultimately the accounting shakes out the same.  

Whether you get rid of bonds or not. And they’re completely correct about that. Where I’ve kind of disagreed in some of my writing and you can see it. I think it’s worth the fight now to try to get rid of bonds and streamline the system, because I think that as long as we have bonds, even though MMT is correct, that ultimately the accounting means that they don’t matter.  

The public sees them, is never going to understand the system well enough to vote for representatives who will in turn, spend the way we would like. So basically I talk about the way that the public, because they think that we’re restricted financially based on our token system, they think there’s something called a public debt.  

The politicians and vested interests can stop the public from overall realizing that they can afford a job guarantee, afford Medicare for all. That it always comes down to a measure of real resources. So it’s kind of an exploration and explanation of the way that the public system has never actually financially constrained.  

It’s always real resources. So it’s kind of a paradox with MMT that to explain the way that we can use real resources, you have to study the financial system, kind of the opposite of neoclassical economics, which ignores the financial system and pretends it doesn’t matter and ends up getting the real resource aspect completely wrong. 

Steve Grumbine (47:18): 

Interesting. I know that you’ve written for Positive Money and some other publications out there, your own blog, I’m watching convergence here. You know, Positive Money has been slowly but surely coming the MMT way and so forth, but that hasn’t always been the case. In fact, there’s been quite a war if you will, between the Positive Money world and the MMT community.  

Can you talk a little bit about your experience within the positive money environment and how your writing was received? 

Clint Ballinger (47:55): 

Yeah. So as I mentioned, kind of in the nineties, you know, with all the talk about the national debt and all, I got into, I felt like something didn’t make sense there. And I eventually got into kind of the writings of Irvin Fisher and that whole, you know. He wrote a book called “The 100% Money” (The 100% Economy), I believe it’s called.  

And later on, kind of as an aside, Steve Keen was looking at as well problems with the horizontal and debt credit part of the economy. And of course, Positive Money is very interested in that as well. And I just felt like if you don’t know MMT relative to a lot of stuff out there referring to the neoclassical economics, the’re actually relatively better.  

They get vertical money in a way, or they get horizontal, endogenous money in a way they understand the aspect of kind of debt deflation and problems like that. Their basic solution though, is to get rid of horizontal money completely and just have only a government token. Eventually I moved away from that.  

I learned about MMT. I understood what I’ve written about now is quite different. But for a while, I did write a few blog posts some years ago, basically just saying that positive money people are relatively better than the mainstream. They at least kind of understand. And if you actually look at it, if you look at enacting say Mosler’s proposals somewhere at one of my old blog posts that I mentioned, I can’t remember if it was in the Wilson or quoting Mitchell or something like that.  

But thinking that if you enacted Mosler’s proposals that could shrink the horizontal or credit money system by up to like 90%, a big reduction in the horizontal money sector and Positive Money when they were proposing vertical money, they were obviously critique that, Hey, what about the, you know, good that the credit money system does for raising capital producing projects and so on.  

And they, at some point realized that a few years ago and wrote a pamphlet where they actually said, okay, we should allow some credit creation by some kind of government entity. Well, if you look there, you have Positive Money moving towards a system of vertical money was well-regulated horizontal sector.  

And with Mosler’s proposals, you have a public system with a well-regulated horizontal sector. So I merely was trying to kind of point out that actually there’s not that big of ground between them. And at that point before MMT had quite gotten all the attention it has gotten the last year, I thought having that Positive Money was especially big in the UK.  

You know, of course, MMT has a big US kind of base, an Australian based with Bill Mitchell and Steven Hail, but it seemed like in some ways that UK didn’t have quite as much. So I thought, Hey, if we can get Positive Money is big in the UK relatively well-organized. I thought a few years ago that that would be great to not just now towards unity and see how that goes.  

But anyways, I still think, although they come from completely different kinds of banking, currency, school arguments, traditionally, and so on and so forth, then at the end of the day, there’s actually some kind of common ground there and they’re well-organized and have publications and all that. So try and get them on board. 

Steve Grumbine (50:50): 

Very good. We’ve talked with Pastor Delman Coates who runs a group here in the States called Our Money. And they originally started as a Positive Money group. And they talk with the MMT community, began to understand that it was not just a concept of money, but the old legal framework that allows for a state to have that ability to arbiter debts and have the legal claims that the unit of account has.  

And I think that the marriage of understanding some of the really, really salient points that Positive Money does bring out about runaway credit. And, you know, we look at you point out Steve Keen’s debt deflation. I think Michael Hudson speaks about that as well as plenty of other MMTers, even thoughts on that, that really is kind of their sweet spot.  

What would you say is the key insight there? I mean, this debt deflation thing keeps coming up in a lot of ways, and it seems like an area that you really have an affinity for. 

Clint Ballinger (51:57): 

Sure. So debt deflation is what we’ve really had of course, in 2008 and 1929. And as I mentioned, I was really interested in the nineties about aspects and then use, you know, about the national debt and all that got into Irving Fisher and sort of from that side, and that kind of naturally leads to the kind of work that Steve Keen does.  

And so Steve Keen’s what drew me back, like I said, when I was in Georgia, kind of reading about all this again, and then I ran across the vertical side and got the whole integration, but debt deflation is basically the chapter four in my book when you don’t have proper regulation. And so the credit system it’s too big.  

And I think one of the things, I don’t know if I mentioned it in the book or not, but one of the things sometimes you’ll hear is that, Oh, don’t worry about the credit money side, because it always nets to zero, funds great deposits. And so as you pay back your loans, the balance sheet shrinks and back to zero, so it’s not ever really problematic.  

But one of the things I’ve heard said quite close, I think it should be is that it’s obvious that if the private credit money system is plus $1 and, you know, minus $1 on the balance sheet, that’s totally different than if it’s plus 20 quadrillion dollars on one side and 20 quadrillion is on the other either way, it nets to zero, but there’s a proper size.  

So what I’m talking about healthy size in chapter four, one that doesn’t allow real resource claims based on bad finance by the FIRE sector is when the size is such that loans are being repaid successfully by private borrowers so there’s not a big burden on private sector from more credit than they need or want.  

And then also that keeps the system small and stable, the banking system. If all the loans are good, then there’s isn’t kind of a tendency towards debt deflation. And I don’t believe that it’s an inevitable cycle that stability leads to instability. We know, you know, 1929 macroeconomics was still new.  

2008 we hadn’t had good economics for 70 years and now we understand it. We know the regulations we need. It’s just a matter of doing it. If we don’t do it, then we deserve what we get. 

Steve Grumbine (54:20): 

So Clint, look, I really appreciate you being with us here. This has been a fantastic journey here, and I’d love to be able to have you come back on. One of the things I guess I’d like to close out with. How can people follow you? How can they get your book? Let people know how to reach you. 

Clint Ballinger (54:38): 

Sure. So “1000 Castaways” is on Amazon and Barnes & Noble, the hardback, and a paperback and a Kindle and a Kobo ebook version. So any one of those, you can just type it in. It pops up pretty easy. Yeah. So anyone can reach me. I’m Clint Ballinger on Twitter. Feel free to message me about anything.  

Our email, CJ ballinger@gmail.com. But yeah, the book’s pretty easy to find. Also I blog at Clint Ballinger wordpress.com. So out some other stuff that I haven’t put in book form yet. I have not read a post the other day about it was weird. I happened to write a post about Reinhart and Rogoff’s kind of bad fear-mongering debt stuff.  

And about a week later, they came out with an article, or Rogoff did, and then Bill Mitchell wrote an article in light of that. So that was kind of timely anyways, that kind of stuff is online as well. So stuff’s related to my book, but not in the book. And yeah, so I hope to be around other than to be on here more. I know it’s amazing how quick an hour it goes and you have even covered half of what you wanted to talk about. 

Steve Grumbine (55:39): 

Yeah, and we will definitely do a part two and we can actually do this whenever you like, man. We can talk about this off air, but I just want to say how grateful I am that we were able to link up. And I look forward to talking with you again very, very soon. 

Clint Ballinger (55:56): 

Wonderful. I do as well. Hope to talk again. 

Ending Credits (56:05): 

Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts and promotional artwork by Mindy Donham. Macro N Cheese is publicly funded by our Real Progressive Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.