Le Show; 2014-11-10

From deep inside your radio. Ladies and gentlemen, let us try. As you know, it's the motto of the United States Army Corps of Engineers. Well, somebody else is trying something. The state of Louisiana, the state government of Louisiana, which has moved heaven and at least part of earth to try to derail a lawsuit against 97 oil companies and petroleum services companies for their role in damaging the wetlands that protect South Louisiana from hurricane storm surge. That very same state of Louisiana government has this week sued the United States Army Corps of Engineers. Why? Because the state wants the Army Corps to pay the full $3 billion cost of restoring wetlands, sounds familiar. No, destroyed during the maintenance and operation of the Mr. Go outlet navigation channel built by the Army Corps. So if a arm of the federal government builds a channel that destroys wetlands

and doesn't take full responsibility for it, the state of Louisiana wants them to pay if oil companies do the same thing, not so much. The Mr. Go was a little used 72 mile shortcut from the Gulf of Mexico to the Intra Coastal Waterway in the industrial canal in New Orleans. You may have seen something about it in my film The Big Un Easy. It was completed in 1965, authorized to be 36 feet and 500 feet wide, and it eroded to more than 2,500 feet wide by the miracle of erosion. The channel allows saltwater to move inland, killing the remnants of a Cyrus and Tupelo forest. The state says Congress ordered the Corps to pay 100% of the cost of restoring wetlands eroded by the channel as part of the language ordering Mr. Go's closure in 2007. But the Corps says Congress intended really for Louisiana to pay 35%, 935 million of the cost, citing an older law that says this preempts Congress's later law.

This is not the kind of suit that seeks monetary damages, says the chairman of the state's coastal protection and restoration authority. But unless we can get this resolved, nothing will get done. But in fact, it is over the Corps's insistence that the state spends 975 million that the state insists the Corps spends. So, in a way, it is about money. In a very real way. Hello, welcome to the show. I love coffee, I love tea. I love the job, the job and it loves me. Coffee and tea and the job and me. A cup of cup of vanilla, a cup of cocoa, five, I love. I love, I love, I love, I love, I love, I love, I love, I love, I love, I love, I love I love. A cup of cup of cup of cup of cup of cup

Yeah, who'll slim me a slug from that wonderful month And I could've worked till I'm smug in a jump A slashed up onion and a raw one Raw one Wait, wait a percolator I love coffee, I love tea I love the jarba jarba and it loves me Coffee, tea, and the jarba and me A cup of cup of cup of cup of cup of cup of cup Boy, Boston Beans Boy, I said those witty witty beans Saturday Green I love coffee, I love tea I love the jarba jarba and it loves me Coffee, tea, and the jarba and me

A cup, a cup of cup of cup of cup And blow me a slug from that wonderful month And I could've worked till I'm smug in a jump A drop of nickel in my pot, Joe Take it slow, wait a wait a percolator I love coffee, I love tea I love the jarba jarba and it loves me Coffee, tea, and the jarba and me A cup, a cup of cup of cup of cup Boy From Santa Monica, the home of the homeless I'm Harry Scherer welcoming you to this edition of the program

called Lesho I guess this is a lawsuit heavy edition of the broadcast because in addition to the lawsuit filed in the state of Louisiana against the Army Corps I'm bringing your attention, I'm tugging your code about another lawsuit filed this week or actually one that had a judgment issued this week A federal judge has certified a week co that's a racketeer, influenced, and corrupt organization Class action lawsuit, accusing Donald Trump of misrepresenting Trump University to make tens of millions of dollars but delivering near their Donald Trump nor a university, it's like a horse mackerel You see, it's neither a horse nor a mackerel Lead plaintiff Art Cohen sued Donald Trump A year ago, claiming Trump devised an executed scheme to make tens of millions of dollars by misrepresenting that Trump University was an actual university taught by faculty professors at least partly selected by Trump himself Trump claimed that Trump University would teach some of his

real estate investing secrets to entice students Trump spent up to $6 million annually on a national advertising campaign Cohen says he attended a free seminar after he received a special invitation in the mail then paid Trump University $1500 to attend a three-day real estate retreat where he purchased a gold elite program for nearly $35,000 more Cohen claims Trump did not teach students did not contribute any meaningful way to the curriculum for the live events and did not handpick the instructors Trump this month lost another court battle against New York's Attorney General when a judge ruled that Trump was personally liable for running the university without a license which neither meant the New York Attorney General accused Trump of fraud claiming he cheated students out of $40 million A New York Supreme Court justice found that Trump and Michael Sachston, who served as the university's president, knew the university was being run without a license and determination of damages in that case is pending

and on Monday of this week a U.S. District Judge in San Diego ruled that Cohen's complaint can continue as a class action it's the first time you've heard the word class action and the same sentence with Donald Trump in a long time I would imagine the plaintiff has introduced evidence that the alleged misrepresentations of the university and of Donald Trump's participation were prominently featured in all marketing materials and that a playbook power point presentations and scripts encouraged if not required Trump University representatives to continue these representations said the judge. Trump unsuccessfully argued that individualized determinations will need to be met to determine whether they statute of limitations bars the claims of members of the class action he claimed that Cohen could have known as early as July 2009 the Trump University was not an actual university based on the facts that Cohen was not looking for a diploma the seminars were in a hotel and Cohen didn't make any inquiries into the accreditation status of the university probably what convinced him was the the alma mater

where these and Hudson's waters needs in their names warm embrace since the tower in which you mentor or be it never face to face through the dark foreboding winter inspired by your countenance fair we strive to pay your food to wish you to help you by some best to help with

no some you're guilty be out raised upon grief if you be but a card or cutout still inside you cops and fakes calm yet disciples be your motto through the times of and slug we remain your loyal consumers your universities of crowd ladies and gentlemen not about lawsuits now the

brits are coming up to their next in the spring of next year just as we pass by this mid term in our setup and strangely enough one of the big issues in their election this time around is the deficit yeah they're having a debate so-called about the level of the deficit and the national debt in Britain and the coalition parties the liberal democrats and the conservatives who disagree on a lot of other things are agreeing on the fact that well, you can't spend money on social programs like we used to in Britain they say because we got this and I believe the word has already been used in more than one political speech in public mountain of deficit that has to be reduced and the labor party

is not most and the most responsible because they created this deficit in the first place and you can't let them back in Britain is enjoying, if that's the word, anemic growth compared to its friends across the pond across the in Europe who are experiencing no growth at all even Germany has had backward move I think the last quarter their economy started reaffirming and failed closing this development should The Titi review of flame designing a new post-great recession period where anemic growth is the model for the future. The robust and rampant growth that we enjoyed previously may just have been a thing of the past.

Of course, in this country we're not hearing so much about the deficit anymore since it's going down. Strangely enough, even just given the anemic growth, growth enough has been sufficient apparently to drive the deficit down. With all this going on, I thought it might be interesting to revisit a conversation I had on this broadcast just about a couple of years ago right now with Dr. Stephanie Keltin, whose associate professor and chairman of the economics department of the University of Missouri in Kansas City and editor of the blog, New Economic Perspectives. Dr. Keltin, welcome to the program and I guess in the time since we've talked your somewhat radical view of economics and finances is getting a bit of a following. Interestingly, what we have is really a growing number of people who are subscribing to what we're doing, paying attention to what we're doing, inviting us to come and speak to their groups and they come from the finance industry. That's been kind of a surprise but I guess in some ways a lot of these folks have training and background in accounting and so a lot of what we do emphasizes sort of the other side of the ledger.

Every time someone talks about the government's deficit, you forget that when the government spends more than it collects from you that somebody else ends up with the difference and that's the other side of the ledger. So these finance and accounting types seem pretty intrigued by this. So let's start at the beginning. What's money? Money is a relationship that exists between two parties and it signifies a party who is the debtor and a party who's the creditor. So money is a balance sheet relationship where you've always got both sides of the balance sheet at work. You know, somebody's asset is somebody else's liability, somebody's IOU is somebody else's balance sheet asset. So money isn't this thing. We tend to think of money as a thing, something that you can pick up, something that exists in physical form and there's only so much of it or if there isn't so much, only so much of it, most people think there should be a limit. And really in the modern era, money is something that we create with key strokes. We use computers and you walk into a bank and you sit down with a loan officer and you say, I've got this plan for a small business I'd like to start or I'd like to expand my business or I want to buy a car or a computer or pay for school or whatever it is, the loan officer doesn't get up from the desk can say just just a second, let me go and find out if we have any money we're lending out today.

That doesn't happen, right? The loan officer doesn't look in the vault to find out if they can make the loan. They look at you and they look at your work history and how much you make, how long you've been there, what kind of debt you have. You know, they look at your balance sheet, not their balance sheet and if they think they can make money by extending credit to you, then they simply use the computer, they credit your bank account, you get money and they get this asset called a loan. Or in the last decade, they didn't even look at you. They didn't even look right. This changed when the United States and ultimately a lot of other countries went off the gold standard and money ceased to be a representation of something payable ultimately by the provision of certain, you could always go and demand certain precious metals for your piece of work. Right. Exactly. So before 1971, the monetary system that we had in the US looked very different from the one that we have today.

It was based on a system of fixed exchange rates. It was a global monetary system where you had 44 countries participating. This is something that was an outgrowth after the end of World War II. It was called the Bretton Woods system because it was designed and put into place conceived in a place called Bretton Woods, New Hampshire. And so 44 countries got together and decided to fix the value of their currency. So the Mexican peso would be convertible into so many US dollars and the French Frank into so many US dollars and the German mark into so many US dollars. And then through the dollar, those currencies would be convertible into gold. So a fixed price, you know, $35 an ounce. So you convert your douche marks into dollars and then your dollars into into gold. And when you have a system like that in place, of course you have to be careful about how much you allow your money supply to expand because you're promising to convert the dollar on demand into this very finite resource called gold. Well, after 1971, President Nixon took the US off of the Bretton Woods system. We don't have this old archaic gold standard convertibility currency system anymore. We have what sometimes referred to as just a pure fiat money system.

It's our money isn't backed by anything physical. It's not convertible on demand into any other country's currency or into any hard asset or anything like that. We quite literally can have an infinite supply of US dollars. Hey, there is no inherent limit to the amount of currency that can be created in the modern era. And this isn't, you know, a crazy idea that I dreamt up. This is something that Alan Greenspan has been really candid about. And he said it over and over again. You can find the videos, read the testimony. He says quite plainly that there is no limit to the government's capacity to create the currency. And that's why all of these debates that you hear about, all this hand ringing over the size of the national debt and what if we can't pay it back and the rating agencies and what if the US defaults on its debt. And all this in Greenspan comes out and he says this is ridiculous. The debt is denominated in the US dollar. The US dollar comes from the US government. We always have the ability to pay the debt always.

We hear the United States government, especially during the election campaign, being compared to two different entities to a household and to Greece. If I could dispel and disabuse people of these two myths, we would have an entirely different national conversation. So first, the household debt analogy, this is a really powerful one. And the finances that most people are familiar with, of course, are their own personal finances. And so I think it resonates with them when they hear people make the argument that the federal government faces the same kinds of constraints that you and I face, that we have to tighten our belts when times get tough and the federal government should do the same thing. And the person who really I think hammered this home, so a frost pro with his little chards and his feisty little attitude, telling the American people that we're on the verge of bankrupting this nation. And if he ran his business the way the government runs its operations, why he'd be broke and all this. So that's where that really, really comes from. And today, you know, it's the Peterson, Pete Peterson and his ill that are pushing this. So ask yourself, what is the difference? Why is it that a household has to live within its means?

Why is it that a household can only borrow so much before it runs into possibly a situation where a bill comes due and the household can't pay? Why is it that businesses sometimes go bankrupt? Why is it that state governments or Orange County? Why is it that some of these folks can actually go bankrupt? The fundamental difference between a household, a business, a state or a local government and the US federal government is that the US federal government is the issuer of the currency. And everybody else that I mentioned is merely the user of the currency. We all have to go out and get the dollar in order to spend the dollar. We either have to earn it, we have to borrow it, we make investments, we may have interest income, but we have to come up with the currency from some source. The US government in contrast is the source of the currency, right? The US dollar comes from the US government. Congress has given itself a monopoly over the issuance of the US dollar.

If you and I tried to do it, we go to jail. It's called counter-fitting, right? But the US government has the monopoly right to create the currency. And as the issuer of the currency, it can, as Alan Greenspan has said, as Ben Bernanke has said, it can never run out, it can never go broke, and it can never be forced to miss a payment. Greece, you asked about Greece. So this is a very interesting example, because what you have in Europe is this collection of countries that decided at various points in time, not everybody adopted the euro at the same time. But they all decided to give up their individual sovereign currencies. 11 of them did this in 1999, and then gradually six more countries joined. So today there are 17. But all of these countries used to have a currency that came from them. Right, and today they have this currency that they can't issue. And in order to spend, they have to go out and get the currency from somebody else. And so you look at Italy that today has a debt to GDP ratio.

That is almost exactly where it was 15 years ago. Only 15 years ago you didn't have a debt crisis, and today you do. What's the difference? How come they could always pay before same debt load? And the difference is because they had promised to pay Lira, and the Lira came from the Italian government, same for Greece. High debt was not something entirely new to Greece, but it was always sustainable before, because the debt was denominated in the Drakmen. And they could always come up with the currency when they needed to make a payment. Just incidentally, who does issue the euro? That would be the European Central Bank. They have the monopoly over the issue of the currency, and that's why time and time again, when we've seen governments get into trouble where they are. They are reaching the point where their debt levels are unsustainable, and there's the possibility that they actually might miss payments. The only place the currency can really come from, the only entity that can deal with the solvency crisis is the ECB.

So the ECB steps in, provides the funds, and this thing can go on, as long as the ECB is willing to do that, the euro can survive. But there's really no other alternative under a system like that, because these countries are borrowing in a currency that doesn't come from them. Financial markets realize that they're lending to currency users, and not currency issuers, which is exactly why the financial markets have so much power. It's why they're able to bully these countries in a way that they can't bully the US, they can't bully Japan, they can't bully the UK, look at Japan's debt to GDP. It's twice hours, it's 200 percent debt relative to the size of their economy, ours is about 100 percent debt to GDP. Where are Japan's interest rates? Right where ours are? Zero short term and about 1 percent long term. Why? Why is Japan's debt twice as big as ours, and their interest rates are at zero, UK same thing, US same thing, and in Europe, interest rates are all over the place, 6 percent, 6 and a half, 5, 7. It's because financial markets recognize that they're lending to currency users, that there's a real possibility of default, and in order to compensate them for the risk they're taking in lending to these currency users, they want a premium.

And so they're able to extract that higher interest rate by virtue of the fact that, you know, you might default. So you got to compensate that. Those are the so-called bond vigilantes that we keep hearing about. Let's get back to us. Does the United States have to either tax or borrow to get money to spend the federal government? No. It doesn't need to finance itself by raising taxes or collecting money through the sale of bonds, which is what we call borrowing. No, that is not the purpose of either of those operations. The currency comes from the government. So could the government write checks on its account at the federal reserve, and just allow the balance in that account, take an overdraft, right? So allow the balance in its account at the Fed to go negative, deeper, negative, deeper, negative, and the answer is yes, it could.

Currently, there are laws in place that prevent the federal government, that prevent the treasury from running its account at the Fed into the negative. But who came up with that rule? It's Congress, of course. So there is no financial constraint. The U.S. government is not revenue constrained in the way that private businesses or in the way that we're constrained. Well, if that's true, why are they taxing us? Well, taxes play an important and historically a very interesting role. You know, if you look at the history, one of the examples that we often use is we talk a little bit about the colonization of Africa by the British. You say, you know, the British sale over and they have a look around and they say, you all have some really terrific Greece. I'm paraphrasing. You're putting it mildly too. You all have some really great resources here. How's about we make a deal and you sell us some of this great stuff and we'd be happy to pay you for it. Here are some British pounds. And the Africans, you know, look at the currency and they say, well, it's lovely. But no thanks, Cheerio and Safe Trip Home. And the British said, well, no, actually we really, really want the resources. So here's what we're going to do.

We'll start imposing taxes could be a head tax, it could be a village tax, but we're going to impose a tax liability on you. The tax liability is payable only in the British currency and the penalty for not paying the taxes and then, you know, user imagination, the penalty was pretty stiff. So all of a sudden, these African people who had no interest in working to get the British currency suddenly became very willing to work and provide resources in order to get the currency. And the reason is that the currency had no value to them until the tax was imposed and the liability was imposed on them. In other words, until they were forced into debt. Can you create the demand for the currency? Historically, you can find this. You can find this in the literature. Historians are very good on this. Anthropologists are very good. New mismetists are very good. And economists are really terrible at this because they're lazy scholars by and large. And so yes, the literature, the work is out there. And historically, you can find this. And look, if you had asked the German people and they did ask the German people,

after poll, do you want the euro? Would you like to give up the Deutschmark? And the Germans said absolutely no. We are not signing on to this. We like the Deutschmark. We've been through a lot with our currency here. This thing is stable. We're keeping it. We don't want to take any risks. And the German government said, wait a minute, we're going to go ahead and introduce the euro from this point forward. All payments by government will be made in this new currency and all payments to government will be collected in this new currency. And it's that decision by the government about how it's going to make its payments and what it's going to accept in payment to itself that drives the currency, that ends up making that currency, the currency that circulates within the national borders. So they didn't have to confiscate lira and francs. They just were not payable as debts to the government. Exactly. And they quickly stop circulating as widely accepted. Okay. The other half of the question, why does the United States government borrow?

Well, it's a relic of an old monetary system and one that was designed to ensure that you didn't have too much of the currency created when you had a convertible currency. So currency was convertible into gold. So at this point, the answer with the new monetary system, the one we have today, the answer is that when the government sells bonds, it's a way for the government to hit and maintain positive interest rates. This gets a little bit complicated. But if you think about the government running deficits, that is spending more money than it collects from us in the form of taxes, what that does is it leaves the private sector. And in particular, the private banking system with a bunch of extra money that economists refer to as reserves. Let me slow down it for a show business person's understanding of this. This is the surplus in the private sector you were referring at the beginning to as the offset on the other side of the ledger sheet from the government deficit. That's right. So if the government buys a hundred billion dollar aircraft carrier, it's harder to do just a single purchase. But I'll try to do this.

And it collects only 90 billion in taxes. Well, the person who put the hundred billion into their checking account, that bank has a hundred billion dollars in what we call reserves. And now let's say the customer at that bank pays the 90 billion dollar tax liability. 90 comes out, but there's still an extra 10 billion in the banking system and in the private sector. And if you're not doing anything to get rid of those extra reserves, bank reserves circulate between banks. And so what happens is banks are required in the US to hold reserves. That is they keep checking accounts at one of the 12 Federal Reserve banks and they hold reserves against a fraction of what their customers keep on deposit with them. And what is a fractional reserve banking? For actual reserve banking. And sometimes banks have more reserves than they want to hold. And sometimes banks don't have as many as they're legally required to hold. And so you have this market out there called the Federal Funds Market. And the banks with too many can get together with the banks with too few and they make a loan.

And the price that you pay for those reserves is the Federal Funds Rate. And a lot of people will have heard that when they talk about the Federal Reserve changing interest rates or something. You hear about the Fed Funds Rate. Well, if the government is putting more in than it's taking out by spending more than it's collecting in taxes, then the banks are accumulating reserves. And if this is happening on a wide scale, right, all the banks are accumulating more reserves than everybody wants to be a lender and nobody wants to be a borrower. And so the price goes to zero. And so your overnight interest rate, the Federal Funds Rate, quickly falls to zero. Today it's a policy decision to keep it at zero. But that's not how things normally work. And normally the government wants the interest rate above zero. And so what they've done historically for decades now is they sell bonds. They say, well, the interest rate is zero because you all have all of these reserves and you're trying to get rid of them because they don't pay you any interest. Let's sell you some bonds. And then you hold US government bonds that pay you interest and I'll take those reserves from you. And so it allows the bond sale is a way for the government to maintain positive interest rates.

Is the short answer to a kind of complicated question? Well, it leads to the question of which we hear constantly talked about in the political context of who's buying US debt, US federal government debt. And we're depending on the Chinese and we're putting our grandchildren in hawk. Let's examine both halves of that one. Are the Chinese the main holders of US Treasury debt at this point in time? No, not by a long shot. No, they hold about a trillion dollars out of the total roughly 16 trillion. So no, it's not a trivial amount, but it's also not something we should be ringing our hands over the way we do today. China has US dollars because China has a strategy for domestic growth that relies heavily on China's desire to produce things and ship them to other people to enjoy.

So this is as long as this is part of their strategy and they want to grow their industries by making things and shipping them to foreigners, they're going to end up with the currency of foreign countries. And in the case of the US, when the Chinese send us more goods and services than we send them, they end up with US dollars, which is fine. We get the stuff and they get the credit to their bank account. Now what they do is they say, well, we have all these US dollars in our bank account, but they don't pay us any interest. So why don't we flip these out of our checking account into our savings account, which is basically what the US Treasury is to them. It's like having a savings account instead of a checking account. They get interest paid on the bottom. They get interest interest and because the US government is only promising to pay US dollars and because it's the issuer of the US dollar and it can never run out, it can always pay the interest, it can always pay back the principal. And when they do, we put the money back into China's checking account and then what does China do? Do they say, oh, good, we have lots of dollars. Now we can go buy more goods and services from the US.

No, they say, put it back in our savings account. We want the treasuries. So they just keep flipping it back and forth from checking into saving all the while. They're toiling away the day and in conditions. None of us would want to be working in producing things, cheap things, sending them to us to enjoy. And what do they get in return? They get more credits to their checking account that they flip into their savings account. And we act like they're winning and we're losing. And we send convoys of high level government officials over there to tell them to stop allowing us to abuse them this way. The other half of that, what's happening to our grandchildren? Who's doing what to our grandchildren? Well, we're not doing the many favors at the moment. That's for sure. Cut cutting education, laying off teachers, letting our infrastructure fall into disrepair to the tune of $2.2 trillion and a derating overall. I mean, we're not leaving them a whole lot to be proud of and energy and environment and any number of things. And for the moment and a retirement system, social security that cuts the programs that may not be there for them when they need them and so forth.

So we make all of these choices and the excuse is always, well, we'd love to do better, but we can't afford it because we don't understand our own monetary system. We think the dollar comes from China. Made right by it on the same assembly line as iPads. I left one question hanging from the previous question. Who does own most U.S. Treasury debt then, if not China? Oh, well, it's in, it's in, it's on the books of financial institutions, banks, pensions, corporations. I mean, these are good, safe. Mainly Americans. Mainly Americans. Sure. Sure. So if I were listening casually to you, I'm trying to pay more attention, but if I were a casual listener, I would say, is this just an ideological water carrier for the Democrats? Well, no, because they frustrate me more than anybody does.

Well, I mean, you know, who wants to strike the grand bargain? Who wants, who said go big? Who said four trillion? You know, this is most of this kind of talk is actually coming from the Democrats. It's not a free lunch look. There are lots of things that we don't do today to recover the economy to where we should recover it. And every single day, we're leaving around $10 billion on the table in lost output, lost income because of all of the unemployment. You know all the social problems that go alongside that housing market that we haven't addressed the problems there and so on and so forth. So there are real costs and there are lots of things that we forego every day because we don't do what we should be doing. But this is not what I've been saying shouldn't be interpreted to mean because you can create the currency in an infinite way that you should go out and spend to infinity. That's not it at all. What I'm saying is that when you have about 23 million Americans who want to work and they want full time work and they're unable to find it when you have things that need to be done, useful things that need to be done.

Like I mentioned the 2.2 trillion dollars in infrastructure investment that needs to be made. And you have folks who want to work and you have useful things that need to be done and you have the financial wherewithal to make that happen. It's not financially responsible. We hear a lot about fiscal responsibility. What could be more fiscally irresponsible than being the monopoly issue of the currency and keeping it so short that people can't get the currency when they want to work in exchange for the dollar so that they can buy things. And so you put people to work. You pay people to work. People go out and spend. Businesses have customers. Businesses hire. This is not really rocket science. I'm sort of dumbfounded. Every day I go through life at the complexity that apparently people can't figure out the simplicity of this. You run your economy at full employment. If there's unemployment, it's an indication that the deficit is too small. If you get inflation, it can be an indication that you're spending too much.

That is if the inflation is the result of, as they say, too much money chasing too few goods. But if your economy is starting to heat up and you begin to see inflationary pressures that are coming because there's too much demand and you don't have the capacity, the supply capacity, you can't produce enough goods and services, then you have to slow that demand down and you do that either by cutting spending or by raising taxes. Okay, you did mention the eyeword, which I'm sure some people have been screaming at their radios for some time now. So let's tackle it head on. If the government doesn't need to tax and it doesn't need to borrow in order to spend and it spends willy nilly, people will say hyperinflation, wheel barrels full of paper money just to buy a loaf of bread. The familiar images in our heads of the Weimar, which certainly still scares the Germans, if nobody else, inflation is a constraint. You've acknowledged that. How great a constraint is it? Well, it would be a significant constraint if we didn't have the excess capacity and the millions and millions of unemployed workers. So you expect price pressures when your markets get tight.

When you're running your factories very near their capacity, when the labor market gets so tight that you have basically a job opening for every job seeker, then you know you're really close to full employment. You know, you don't get hyperinflation by running your economy at full employment. Let's not forget that under the Clinton years, the so-called Clinton boom, we had full employment in this country. We had as close as what I'm comfortable referring to as full employment, where we actually had one job vacancy for every job seeker. And that was the first time in 35 years that we'd achieved those kinds of numbers. Our inflation rate was so low, nobody even talked about inflation. Our inflation was not even on the radar screen. We had high rates of growth of GDP. Our unemployment rate officially was 3.7%. We had high growth, low unemployment, and modest inflation. So we did this before and we did it in the not so distant past. All I'm saying is that the way we're running the economy right now, this is not fiscally responsible, this is dysfunctional finance. We're getting everything wrong.

We've got all kinds of room to run here. And we can safely crank up aggregate demand. We can safely cut taxes on those that we think will be most likely to go out and spend. And those that spending leads to the sales that then lead to job creation. And we can safely increase government spending on programs like infrastructure, education, and the kinds of things that we help that we believe generate real economic growth and prosperity and leave our children and grandchildren better off than they would be otherwise. Our colleague Warren Mosler, I believe, says that the decision to whether to cut taxes or to increase spending or the balance between those remains a political decision that this understanding of economics does not dictate one or the other or the particular formula for the combination. Is that correct? Sure, absolutely. I mean, I sometimes use the phrase cash registers don't discriminate. When you go to the grocery store, somebody might say to you paper or plastic, but nobody will ever say to you private or public.

And so whether the additional spending comes because we had a payroll tax holiday and millions of Americans have more take home pay and more money to either pay down debt or to go out and buy something new or whether it comes from direct government spending cash registers don't discriminate. So yes, it is very much a political decision. I want to double back to the question of the bond vigilates for a moment confidence in the market is is that code for bond vigilates looking for the next fish in the water that's that may be emitting blood. If the central bank establishes a low interest rate and then pledges to keep rates low as the Fed has done here that market participants are going to anticipate low interest rates across some period of time out in the term structure. And so you're going to have low interest rates. I mean, when you set the interest rate, you're going to have whatever interest rate you decide upon.

I'm getting the idea that what one of the things you folks are doing aside from trying to redirect our attention towards the actual way that the monetary system works in the post 1971 era is if this is not the purpose that seems to be the effect is to take the moralizing out of it. We've been taught by what we've been hearing in the so-called national debate that there's something immoral about having a high debt. There's something immoral about having these deficits. There's something that is against the way people should again from the household analogy obviously. But there's a morality factor here that I think moves Americans who don't even wouldn't know the federal reserve if they walked into the front door of it. Yeah, I, for whatever reason, I just started thinking about Murdoch and you know, it's obviously not God's will that the federal government be in deficit. There is a moralizing where it's a, it's a de facto sign that you're behaving imprudently. If there's a negative number on the ledger, we've done something wrong. We've gone wrong somewhere. And that what we're trying so hard to do is to get people to recognize that their deficit is our surplus, that their red ink is our black ink.

And it's a, it's a very hard thing to flip that switch and get people to spin the way that they view, you know, the government's deficit and the debt and so forth. And it's, it's a very powerful narrative, as you said, playing into the, into morals and fear and the fear of China and the fear of the rating agent. There's, there's both of those things are extremely difficult to get people to overcome both the moral aspect and the fear. What would happen if, if Ron Paul got his way and the United States went back on the gold standard? Well, we had eight depressions on the gold standard and zero off of the gold standard. It, it is a, it is a system that constrains you in a way. You have a flexible system today that provides you with policy space that you simply do not have when you're on a fixed exchange rate system, a gold standard system, when you're adopting a currency that you don't control like the euro, those types of monetary systems, the gold standard and the rest, they place constraints on you that limit your fiscal space.

And the reason it's important is because when you have an economic downturn and you inevitably will every single market economy on the planet has cycles. We have booms and we have busts. Everyone independent of the type of monetary system you have. So when that bust inevitably comes, you just won't be able to respond effectively, which is exactly why countries went off the gold standard every time they went to war. Every time there was a serious economic downturn, they all go off gold every time. In other words, it works until it doesn't work. You are the editor, I believe, of new economic perspectives, a web blog, yes. Yes. And one of the people who was written for that who writes for it fairly frequently has been a guest in this program, Bill Black.

So if any listeners who were intrigued by Bill Black or what's been talked about here today want more new economic perspectives.com, is that correct? That's that's Newton dot org dot org, new economics perspectives, new economic perspectives dot org would be the place to go. Dr. Stephanie Kelton, thank you so much for being with me today. It's been an honor and a pleasure. Thank you so much. Thank you. Thank you. Thank you.

Thank you. Thank you. Thank you.

Thank you. Thank you. Thank you.

Thank you. This is so sorry.

Soccer is governing party FIFA V5O FIFA, apologized after organizers of the 2018 World Cup in Russia displayed a map that showed Crimea as part of the host country. FIFA set a Russian agency higher to help with the introduction of the official emblem for the 2018 World Cup was to blame for the map. Set bladder head of FIFA rejected calls from US and EU politicians for the tournament to be removed from Russia as punishment for its role in the Ukrainian conflict. When some politicians say the World Cup in Russia should be boycott and I say on the contrary we should divide everybody. One cannot boycott football in general and it can't be boycott in Russia. You should talk to the Russian Olympic officials from 1980 to see if that's true. Date line, wherever, Walmart apologized for a Pashtun Papa Halloween costume, costume that appeared for sale on its website. The items description on Walmart.com red represent the Middle East and this men's Pashtun Papa costume this Halloween, whether you're making a serious political statement or staging a political parody, this authentic looking outfit is sure to fit the bill.

Shock your friends with this Islamic costume. Walmart suspended the vendor responsible for the costume. We have removed it from our site and are deeply sorry for any offense it may have caused. The costume violated Walmart's marketplace policy. US Secretary of State John Kerry phoned Israeli Prime Minister Benjamin Netanyahu and apologized to him in the name of the Obama administration for comments made by an anonymous US official who in talking to Jeffrey Goldberg of the Atlantic magazine called Netanyahu, quote, a chicken poop, unquote, that's not an exact quote. On Thursday, Kerry had publicly distanced himself from the comments stressing that neither he nor President Obama were behind the remarks which he said were disgraceful, unacceptable, and damaging. Goldberg added officials had previously called Netanyahu recalcitrant myopic reactionary obtuse blustering pompous and ass burgery, which led for US officials also to apologize to a foundation.

Dedicated to victims of autism spectrum. If you were one of the unlucky early adopters or as I call them beta testers who got your iPhone brick when you installed iOS 8.0.1, Apple Vice President of iPhone marketing Greg a Joess React is very sorry about it. It's being in a conference this week, Joess React officially apologized for the problems that iOS 8.0.1 caused and explained it wasn't the software itself. It was the way it was distributed that essentially rendered iPhone users unable to make phone calls with their devices. It's a phone, after all. It's the distribution. It's a distribution. Don't blame the software. It's the distribution. I blame the guys with the trucks. And from the OSS Society, as a society of people who were part of the Office of Special Services, the forerunner to the CIA, I would like to personally apologize for the OSS trailer that was shown at the dinner. The trailer was sent late Friday because I was managing many last-minute details of the event. I did not have time to review it before it was shown.

General Donovan is my hero, and I would never intentionally tarnish his memory. It's literally yours, Charles Pink, President of the OSS Society. I didn't see the trailer. I don't know how they tarnish the memory of General Wild Bill Donovan, the founder of the OSS. But, for the tarnishment, they are sorry. The apologies of the weak ladies and gentlemen on a copyrighted feature of this broadcast. Ladies and gentlemen, that's going to conclude this week's edition of the show of the program it turns next week at the same time over these same stations. If you'd like to see episode 2 of Nixon's The One featuring the incredibly tangled relationship between Richard Nixon and Henry Kissinger, just go to harryshira.com, right on the front page, click, watch Nixon's The One.

And that's exactly what you'll do. A typical show-shap photo of the San Diego Pittsburgh Chicago-Nex Island Hawaii desks for help with today's program, as thanks as always to Pam Hallstead and the Jenny Lawson, WWW, and New Orleans, with help for the broadcast as well. The email address for this program, and the playlist of the music heroirion heard here on, and cars eye-talk t-shirts all available at harryshira.com. And I'm yakking at you on Twitter at the harryshira. Little advance notice, Judith O'Neill and I will be doing our annual Christmas shows now called Christmas without tears, benefiting New Orleans musicians, clinic and local mental health charities. In New York, San Francisco, Chicago, and Los Angeles this year.

So check it out for information. It's always a good time for a good cause. The show comes to you from Century of Progress Productions and originates through the facilities of WWW and New Orleans flagship station of the Change Is Easy Radio Network. So long from Santa Monica.