#88 Warren Mosler & Phil Armstrong: Weimar Republic Hyperinflation Through An MMT Lens (Part 1)
Patricia and Christian talk to MMT founder Warren Mosler and MMT scholar Dr Phil Armstrong about their recent paper: “Weimar Republic Hyperinflation through a Modern Monetary Theory Lens” (Part 1 of the interview).
Show Notes
Listen to Part 2 of this interview.
For an intro to MMT listen to these episodes.
Some of our other episodes with Warren Mosler which deal with inflation, interest rates and central bank policy:
- Listen to Episode 59: What Do Central Banks Do?
- Listen to Episode 80: MMT Holiday Special (part 1): https://www.patreon.com/posts/45281376
- Listen to Episode 81: MMT Holiday Special (part 2): https://www.patreon.com/posts/episode-81-mmt-2-45555840
- Listen to Episode 65 with Phil Armstrong on inflation (more on Paul Volcker’s policy decisions as Fed chair in the intro).
- Listen to Episode 55 with Dr Dirk Ehnts on MMT in the context of the Eurozone.
Our episodes with Sam Levey that touch on the forward pricing channel:
- Episode 43.
- Episode 76: https://www.patreon.com/posts/43697752
- Episode 77: https://www.patreon.com/posts/43886189
Other relevant sources:
- Read Weimar Republic Hyperinflation through a Modern Monetary Theory Lens by Phil Armstrong and Warren Mosler.
- Read A Discussion of Central Bank Operations and Interest Rate Policy by Warren Mosler and Phil Armstrong.
- Monopoly Money: The State as a Price Setter by Pavlina R. Tcherneva.
- Bill Mitchell – Zimbabwe for hyperventilators 101.
- Warren Mosler on Paul Volcker on YouTube (from min 13:25).
Get Tickets for “An Introduction To Modern Monetary Theory: Reconceptualising The Nature Of Banking” (presentation by Phil Armstrong) on 26th March 2021, organised by Women in Banking and Finance.
A list of other upcoming MMT events and courses.
Phil Armstrong’s book, Can Heterodox Economics Make a Difference?.
Transcript for Opening Monologue
At the beginning there, you heard MMT founder Warren Mosler, and scholar and author Dr Phil Armstrong – and in moment we’re going to be talking to them about their recent paper on the Weimar Republic hyperinflation.
If this is your first time hearing about MMT, you might want to listen to our first three episodes where me and Patricia talk through the basics, but if you want to dive in here, a good starting point is to ask: why does any fiat currency have any value to start with? And a relatively uncontroversial answer to that question is that the government is the only issuer of the thing that it demands for payment of taxes. That thing is called the British pound here in the UK, but this generalises to most, if not all, governments that issue their own fiat currency.
In modern money systems like these, the government imposes a tax in a token that it alone is allowed to create, which causes people to need to do things, sell their time, or their labour, or the things they make with that time and labour to get these tokens to pay the tax, and so a lot of the magic and mystery surrounding modern money can be broken down by thinking of the currency as a tax credit.
A five pound note, whatever it can buy in the private market, is a five pound tax credit – a promise to cancel out five pounds’ worth of your tax obligation to the state – the entity that issued the liability, and then the credits needed to settle that liability, in the first place.
One implication that follows from this is that the currency issuer, the government, can’t run out of its own money, and we’ve done many episodes on what that means for the politics of austerity, but this episode is designed to help you cope with that person who pops up from time-to-time to warn you that if the government understood it had an infinite capacity to spend, maybe to solve social problems, or god forbid, prevent human extinction, this will inevitably turn your nation into… [DRAMATIC MUSIC] The Weimar Republic!
Although it’s tempting to respond to this by saying: “Why thank you! I was just about to take control of the government and start attempting to pay a trillion pounds worth of gold, timber, coal and foreign currency to France, and invite them to send an army over to occupy all of our factories, but your tweet has shown me the error of my ways!” — while it’s valid to say that, for the legitimately curious, in this episode, we’re going to be talking about how the MMT theory of price level plays into this particular historical case.
The MMT view is that modern money derives its value from what the issuer of currency says you have to do to earn it, so as Warren explains in his MMT white paper, the price level is necessarily a function of prices paid by the government when it spends, or collateral demanded when it lends, and so when the government pays more for the same thing today than it did yesterday, it’s revising the value of its currency downward.
If that sounds a bit complicated, don’t worry, we’re going to unpack this a little bit more with Warren and Phil in a moment, and in the show notes I’ve linked to their paper and also to some of our other episodes and resources on the topic, and also I’ve linked to a list of (mostly online) events and courses where you can learn from leading MMT economists and – maybe just as importantly – connect with people on a similar journey.
And as ever, I’ve linked to where you can support this podcast financially via Patreon dot com slash MMT podcast. Support starts at a dollar a month which is 72 British pence at the time of recording, and no matter what level of support you give, you get early access to all our episodes, and patron-only episodes where you can ask me and Patricia MMT questions.
We are 100% listener supported, your financial support really helps keep the show going, and it keeps us going, and your support in other ways, whether it’s by recommending us to other people, or just by listening and spreading the word about this stuff really helps, too.
So thanks as ever for the time you put into understanding MMT – this is part one of a two-part conversation and part two will be out next week. Let’s dive in!
