Warren Mosler on the Economy

Donated a book is that seven. Deadly innocent frauds of economic policy its author is Warren -- we're joined by warrant today on lunch money. Warren are you doing today. Good afternoon welcome to the show. -- tell us why the Federal Reserve and Ben Bernanke will not tell congress the truth about our national debt. I wish I -- -- the -- plead not the -- -- app where there are those on national TV yup. Report coming from Ford going up banks under two billion dollars they. Is that taxpayer money he said particularly now -- -- we just used the computer the market the numbers there counts. And Arabic quote on the back. Though and that's where all federal spending comes from know he he knows that there operations people have been told. Have been asked where the money comes from does a -- taxpayers keep -- China. If they know we just do their computer Marco people's accounts and they say oh you create out of it and make so yes and -- you know maybe he just can't connect the dots between that and we can run out of money. What would it should be. Which should Ben Bernanke -- what should Ben Bernanke be telling the senate be selling the president and be telling the congress. Should be telling them if you don't you're looking at deficit reduction fine but don't do it our -- -- not could run out of money. Interest rates are not gonna shoot up we're not going to be the next -- the treasury is not gonna app state. Anymore for. And -- treasury securities than the rates we set it got this a 100% under control. Between their -- reduction due for some other reason Stewart because you're afraid there's going to be some financial crisis so there -- Know Warren you were on record though as saying where we're not gonna be the next Greece but we're rapidly becoming the next Japan. Unfortunately. We're almost out there are there -- Said the true. To every victories are -- -- look we're not gonna make mistake Japan made it inept in years to our investigative. We're gonna cut rates faster we're gonna do quantitative easing sooner we're going to be more aggressive with the liquidity and ensure they work. Except they don't realize that was not the cost of the slope and in -- crisis -- -- on the lack of spending which comes at it in simple terms of the deficits too small. So if you're a Republican you'd be favored just cutting taxes to make the deficit larger group for a Democrat did you wanna have. Healthcare public spending to make that -- larger than maybe you compromise and a little bit about. Either way he's got to make the deficit orchard and both sides just they're struggling backwards on that issue so we were turning ourselves and to Japan. In your of the opinion that we should be cutting taxes dramatically you came up with the idea cutting payroll taxes is that correct. You know -- -- what I tried to do was -- with things would do immediately to restore the economy within ninety days that both sides would agree that you. And so the payroll tax it taxes the ones that. Presumably papers -- security and Medicare. The Democrats don't like them because are highly regressive punishing taxes and then they are the lowest income people the most of their fine. Most Smart getting rid of those. And surely Serb attacks and Republican commercial credit. And so -- And so that was I had consensus agreement and the people from the far left in the Tea Party and it. And I push -- back without trying to US senate press releases and discussions and trips to Washington. In the government finally lowered it by it but just like 2%. In the distant the where the other adjustable -- it golfing which is what we still need to do. So basically this 2% polity it sounds -- weren't from what I've read and really get that extended through the end of 2012. You know how how -- lately I've got listeners who were are tuning in right now on the saint OK if we eliminated payroll taxes. What impact would that have on my Social Security I have that question myself when I'm 52 years old. If you're not collect and any payroll tax where's my social security and come from when I retired fifteen years. Right exactly that question and of course that's what of the seven deadly -- and frauds and that those dollars come from the same place chairman Bernanke got the dollars from four. The bank or every other federal penny comes from a that is they just change in numbers Erica so Erica White Social Security check. My bank account changes from port thousands of 5000. All the government did was change one -- 25. Didn't get any dollars from anywhere to give to me there is no such thing. The guy in Washington is making the payments and treachery doesn't even have the phone number that you know the guys the IRS collecting the money is not operational connection. The guy collecting taxes is changing our non numbers down and our bank account you -- bending it changing their numbers up. You can't come fight in the today look at the different called with a surplus or deficit but. It didn't -- in -- if you kick a field goal in the it's it's because he'll call you up and you get three points on the scoreboard where we're at the stadium get the three point oh yes that question. Now the typical network. With the yet the fear I have -- in this is based on the way I was trained on economics is. We have 0% interest rates for an extended period timing have government deficits and government spending. It's follow typically is followed by high rates of inflation. As we have -- after World War II of your call 19464740. We had very high rates of inflation in those years. Okay so it. And if you look at Japan went 200% deficits are higher returns -- -- Euro interest rates for twenty years and more quantitative -- we can imagine it's still -- deflationary environment so short answer is yes. But -- the mile. It -- the way I like status for given size government because the government for various reasons -- Taxes at their respect so when the economy ice cold like it is today in taxes for the site government a way to I'd be reduced. Our big government -- and in politics but and then but if you've got out -- -- economy that's strong like we did in the late -- -- -- unemployment was in the threes. The government our tax structure drove us in surplus that was actually the right balance because. We were taking money out of the economy keep it from overheated but it soon as it wasn't overheating anymore we should have immediately reversed and gone back to deficit. Which we didn't do. So the actors yet -- deficit spending will cause inflation and not enough will cause deflection. And so count bodies in the unemployment line in coming whether it's enough about it. Yahoo! Mies -- at 24 million people who are unemployed or underemployed in this country right now. Yeah our labor force participation rate is. Multi year low back before back before -- -- and labor force that herbal. Now when you look at it at that job Ben Bernanke is doing Mitt Romney went on record last week and said that if he wins the presidency he's going to fire. Ben Bernanke will Barack Obama do the same thing is CNN -- just simply not renew Ben Bernanke -- terms up if Barack Obama wins the presidency. Probably not but you know unfortunately he's. They're doing this for the wrong reason they're missing the real criticism of the -- -- criticized -- for -- In -- public -- and that's -- -- said. Depends and so so easily because they're wrong in the criticism to the that but. The real criticisms of the that are very hard devastating and you know for example not keeping everybody informed that -- The US can't be the next great secure our money interest rates -- spike up or not dependent on China or anybody else for funding. Mean that's the biggest criticism and not criticizing the -- that so if they. Dismissed them and change that to get somebody else in the same problems that are addressing the fundamental misunderstandings. Why aren't they warned The Who and why don't. Although yeah I caught innocent fraud and give the benefit of the doubt -- don't understand it. Because you know they do understand they're doing it or it is subversion and -- worse but he he basically get the same place. What's their intentions if it's a version I mean if it's the if it's not innocent -- what is their end goal in this what's the. That are I don't know -- not a conspiracy -- -- personal bias it's innocent that they really don't understand it. Couldn't working against their own constituencies. It and it's -- you know the idea that I'm. Called MM Tina modern monetary it it it's it's spreading wildfires now because I'm and you economist magazine dissident and historians. It it doesn't -- that goes backwards once you understand. Government can't run out of money you don't two years later don't like yes. But what can understand -- Interest rates are controlled by the and not the market two years later he'll supply chain of art in there. So nobody ever backs up on -- -- it's moving out and we can only hope that understand -- doctor before it's too late -- too late for too many people. It sounds like there's neither party -- really is embracing. It is the end modern. Monetary theory -- That's correct and so both sides have proposals that would just make things worse the -- did they vote for a long term deficit reduction the president proposed four trillion. Deduction which makes things worse. And the it's been proposed -- seven trillion reductions will make it even worse. And so they just both going the wrong way they are both following the principles that got the Christian got all the people believing that they're doing the right thing so. But that's whereas they would champion from many lost decade like Japan or however long it takes for modern monetary Syria circus and -- these people are. So we can't expect our GDP to pick up any time soon Warren is are your talents. Now no we haven't not deficit spending at 88%. In the destroyed credit situation to muddle through here with. You -- 123%. GDP if Europe collapses. If you get a lot worse you know trying to collapse with the problems of course Europeans. Their story you know -- in the carpenter this piece to it as a matter how much are cut off it's still too short. -- that they keep cutting spending he can patent and where. -- heard that line before or and they. They keep raising taxes the economy gets worse they keep cutting spending it gets worse they say well we just got to do more but I'd be putting the -- -- what is it. Still to ensure the cook but it's. The price they -- leave the core weren't we have to let ego -- thank you very aren't there joining us appreciate your time. Ladies and gentlemen that was award most -- he's the author of the book the seven deadly innocent frauds of economic policy. The seven dead in the innocent frauds of economic policy -- those -- that's right here on Boston Sox nation -- XEW ArQule.