Video Transcript: (use scroll bar as required)

OK. Today, my guest is Warren Mosler. Warren's been a Financial Professional, a designer and manufacturer of motor cars, a designer and manufacturer of boats. He's also an author. His book was described by his wife as the most important book ever published. And he's one of the co-founders of Modern Monetary Theory. And I asked Warren to outline what he felt was the most fundamental ideas of Modern Monetary Theory that differentiates it, but also is essential for those coming into it to grasp at the outset.

So welcome, Warren.

And I thank you for that introduction, Bill.

So for me, the most important thing that for people understand is sequence. What I brought to the academic world with the idea of sequence. And let me explain what I mean by sequence.

At that time, and even for most people today, they all think that are in the US congressman, for example, they all think that they have to get money to be able to spend.

And so they will think about getting money through taxes so that they can spend. What they can't tax, then they believe they have to borrow from the likes of China, in order to spend, and then they leave that to our children and our grandchildren. And that's - at the time, this was 1996 - on January 1996 - when we made the first post to the academic world.

That was what all the academic understood then. And what I was saying and what I introduced them to is the idea that they've got that sequence backwards and in fact that the money to pay taxes, money to buy bonds, comes from the government. It doesn't come from the private sector. The government doesn't get money from the private sector to be able to spend.

Instead, since the money to pay taxes comes from the public sector, from the government, the private sector is dependent on the government to get money to be able to pay taxes and to buy bonds, and they just have that backwards.

Now, once you understand that the government spends first and then the funds are there to pay taxes - government spends first, and then the funds are there to buy bonds. But then you understand that there is no issue of crowding anybody out or financing or where - how are you going to pay for and where is money come from or borrowing it from China - its spending the money first and then later after that money is spent and somehow got to China, to the Chinese - to China's bank account, they are coming back and using to buy government securities after the money has been spent.

So there's no imperative to collect tax or to borrow to get money to spend. So the important thing is to understand that sequence. If you understand that sequence, the rest follows. And I can go into a little more about the rest that follows?

Yeah please.

Yeah and so what you realise at that point or the next understanding is that what I just said, the money to pay taxes or dollars that can pay taxes comes from the government and it would be are the government's agents, which US includes all the Central Banks.

And that means we have a very simple case of monopoly. Government is the single supplier of the dollars to pay taxes, and so we now analyse the currency as a public monopoly, which is a very simple, straightforward analysis that tells us exactly what it is - depicting the government amounts for paying the taxes.

The dollar is a tax credit. The yen is a tax credit. The euro is a tax credit. You can go through all the textbooks and all have these rambling example understandings of what money is. It's a medium of exchange. It does this. It does that. If they don't know what it is, it's a tax credit.

So that idea was introduced to the academic world in about 1996. The other thing and the important thing that MMT is interested in is the understanding of where the price level comes from. Why do things cost what they cost?

Why is it there?

And once you understand the currency is in the governments, it could be more simple. The government has the dollars that we want. It tells us what we have to begin. It's defining the value of the money by the prices it pays when it stands. It's very simple. It's pitching and we're catching. We have to accept that prices. Otherwise, we can't pay taxes and we're going to lose our house or car, go to jail or whatever the penalties for non-payment of taxes. No other school of economics has an understanding for the source of the price level. They just call it historic.

I say just has been there. We can tell you maybe why it might change next year. We can't tell you where it came from, but it can't tell you why it might change either, because once you don't understand what it is and where it came from, they don't know why it might change and why it might change means why there might be inflation. Inflation is a continuous change in the price level. We understand that it's caused by government continuously paying higher prices for the same thing which defines its currency downward.

And I think that's a good introduction for the new online courses and I look forward to all of you signing up and getting the sequence right there in the understanding of the monetary system.

That's perfect. Thanks very much and all the best.

End of Transcript