dr seventy calvin is with us economist and chair of the part of economics at
the university of missouri and kansas city and editor in chief of bead new
economic perspectives blog new economic perspectives dot or dr kalam
welcome to our program
it's great to join him it is great to have you with us a watched enough video
clips of you that i feel like i know you
uh... it is by a personal could you give us a a snapshot your summary
of what modern monetary theory means
well
i guess the easiest way to say it is to say that it's in the way they're doing
economics that brings us into the twenty-first century on that
recognizes the simple fact that were not at all standard anymore and so much at
the way that we keep g economics to the end
i'm not just in the u_s_ but all around the world is based on these outmoded
ideas that are no longer relevant in the modern era
and so what
modern money theory does is really recognize that the system works very
differently today by virtue of the fact that the monetary system changed in a
really important way in nineteen seventy one and that is
uh... the year in which we broke from gold and so we have this monetary system
today that is based ana purity say fiat money uh... and it just doesn't work the
way it used to work under the old system but we act like we're still hamstrung
by the same sort of constraints that were present to the old system
narco arm and we are taking advantage of a whole range of policy options that
weekend adopted now that weren't really available to us before okay so under the
old system when we were before nixon close the door window in seventy one
were basically
constrained in the number of dollars that we could produced by the amount of
gold we had to set an accurate
statement is point one
yes more unless i mean you had to be very hysterical women running your
fiscal and monetary policy because
when we're pledging to do was to convert the currency
into gold which is of course eliminating finite resource
and so you need very careful about how many dollars you actually creating had
in circulation because it
you had too many people all at the same time deciding i wanna hold the dollar
and when it convert into gold even running to real problems in terms of
keeping that might exist dot how do you respond as somebody who says in nineteen
seventy one
uh... if you paid
fifteen or twenty thousand dollars for a house that house right now which sell
for two or three hundred thousand dollars impact in two thousand seven
primaries so for
four hundred thousand dollars uh... isn't that evidence that we should the
state in the gold standard i think that's basically the kind of ron paul
response
right so well i would say to them
you know we had eight depressions while we're on both standard and we had zero
since we've gone off the gold standard so
because there is one of these monetary systems that works until you need it
most and then it doesn't work which is why
every country in the world abandons cold
uh... when you have an economic crisis like the one that we had in in two
thousand seven if we had been on a gold standard then
we would have been forced out the gold standard i have certainly seen the value
of our currency clubs
uh... will now
no we sure happen but this is something that lots of people were uh... word
bringing the alarm bells about writing
when the fed began intervening in these unprecedented ways with quantitative
easing and so forth a lot of the gold bugs started running around and saying
this is the end of the world the dollars going to become worthless it's gonna
collapse we're gonna end up like by march ernie or zimbabwe the dollar will
be worker paper it's printed on and so forth and of course
matrimony spokesman really really wrong about things
although the price of gold is has gone from
you know say wild in the just fifteen years ago the selling for around two
hundred and thirty dollars an ounce and
sixteen hundred dollars an ounce now
on is that an indication of a change in the price of that particular commodity
or in the value of the dollar
well it's certainly an indication of it
change in the price of a commodity because that's the that's why the price
of gold is going out you've got a lot of people
we would have this belief you know that big currency is going to become
worthless and their fears and anxiety i drive them to purchase commodities like
gold and so it drives up the price of gold and we're seeing now and you know
these corrections in in terms of goldman as as market participants begin to
understand that the dollars actually not going to collapse
well then called the comes on unless appear so in that shot so as a fiat
currency our dollars no longer backed by gold it is backed by the wealth and
full faith and credit of the united states government eleven
church or in in the dollar definitely has about you i mean we all are willing
to working provide things in order to get the currency
as citizens uh... it is intrinsically worthless in the sense that uh...
deathbed currency itself the the bills and notes and so forth
don't have intrinsic value
but they have them nonetheless in the reason that we're all willing to work in
providing resources in order to get peace is essentially because the dollar
is a tax credit
so way young we can get into that night minister
but at that just to too
to put in a on the cost of the story
yet of the but oh my god some throughout the goals there really is falling apart
how do you read but that in in the face of
you know that
in nineteen seventy one
a good middle-class income was twelve thousand dollars a year in today that's
way below the poverty level in nineteen seventy one you can buy a decent house
for thirty thousand dollars specter very nice house and now that's you know for
five hundred thousand for the exact same house
that in nineteen seventy one gold was thirty some odd dollars now stout
sixteen hundred
pick your commodity gasoline in seventy one was thirty cents a gallon now it's
almost four dollars
um...
e are there commodities that have not gone up in value that would show that
what we're looking at is commodity inflation rather than dollar
depreciation
weirded out uation or is dollar devaluation just a natural thing that
would have happened with a without power going from a cold soon to a fiat
currency
the dollar has gone up in value went down in value over time against a range
of different currencies one week it's a one year it's down another month is back
up another week and stamp
so the dollar fluctuates against moral currencies and and a whole range of
uh... goods and services have become much cheaper quality has improved
a number of things that we could look at a site for just the price of gold
outlook and a lot of things have happened since nineteen seventy one that
have led to
declining standards of living is for americans
uh... you know since nineteen seventy three the real wages of the average
american yet at worker in this country
have been stagnant and more recently have been declining and so
you know you've got that the demise of unions and you've got the fact that
uh... corporate profits have been increasing productivity has gone opera
over time
and real wages have stagnated and so
americans have turned more and more to get to finance their standard of living
over time in
and they're just a whole range of things then
taken place the financial is asian of the economy and so forth that uh...
contribute to the declining worker standards of living over time
so through so we should be looking at standard of living rather than
what a dollar will buy i'm
i'm still doubt on you know i'm i'm on your side and still much during an
argument
y_a_ the dollar is not appreciating
well why if it is it has nothing to do with
gold standard depreciating in terms of black
depreciating against past and good so inflation is next
ordinarily modest right now if it can even hit it's very modest to two and a
half percent inflation target and so you know i i i don't see did devaluation of
the u_s_ dollar that so many people sort of wring their hands about i mean we
we've actually had
for now very long period time going all the way back to the to the clinton area
where we had rising productivity we had to claiming unemployment rates we have
one on the surface appear will really help the economy
unhappy inflation is extraordinarily modest even and then fifty a very
quickly to just just a few sites will be back after stephanie calvin
is with us in the commerce
and each of the department economics minister concerning kansas city editor
in chief applaud new economic perspectives
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