The Daily Show: Ears Edition - TDS Time Machine | Money Talk - Conversations with Economists

Episode Date: July 14, 2025

With Trump Tariffs back on the menu, it's time to consult the experts. Get into the weeds with these conversations with expert economists. Jon Stewart sits down with Oren Cass, chief economist at American Compass, who describes a conservative shift from faith in markets, using tariffs as incentives to pursue profit that supports society, how livable wages are the key to a strong economy, and the U.S.’s ideal economic and security alliance that includes balanced trade, owning defense burdens, and keeping China out. Stephanie Kelton, bestselling author of “The Deficit Myth” and professor of economics and public policy, talks to Jordan Klepper and Ronny Chieng about changing our understanding of government spending through MMT, or Modern Money Theory. European Central Bank President Christine Lagarde talks to Jon about the global economy, inflation, and Artificial Intelligence. They discuss how factors like the pandemic and Putin’s invasion of Ukraine led to high inflation rates, what stable inflation should look like, and how people feel the effects of inflation more dramatically because price increases far outpace wage increases. Learn more about your ad choices. Visit podcastchoices.com/adchoices

There's regular cold. And then there's the mountains are blue cold. Mountain cold refreshment. Core's light. The chill choice. Celebrate responsibly. Must be legal drinking age. This episode is brought to you by Adidas.

When the frustration grows and the doubts start to creep in, we all need someone who has our back to tell us we'll be okay, to remind us of our ability to believe because their belief in us transfers to self-belief and reminds us of all that we're capable of we all need someone to make us believe hashtag you got this you're listening to comedy central He is the chief economist at American Compass. It's an economic policy think tank. He writes the newsletter Understanding America. He's the author of the forthcoming book, The New Conservatives. Please welcome to the program, Oren Cass.

Sir. I got more for you. Tell them around. Thank you for joining us. Thank you for having me. I wanted to have you on. I wanted to tell you, I really do enjoy your writing. I follow the, I don't know what they're called now, Substack Blog. Substack. Substack. And I read your books.

I always find them, I don't necessarily maybe agree with all of them, but I do like them. I like them. I like them. I like them. I like them. I like Substack Block. Substack. Substack. And I read your books, I always find them, I don't necessarily maybe agree with all of it, but I always find it really interesting, in really good faith.

This is this idea of the new right on the economy. Can you explain what's the deviation from previous orthodoxy and sort of what that entails? Sure, I think the best way to understand it is that, you know, we went through a period of 30 or 40 years where conservatives just had way too much faith in markets. Just trust that you get out of the way and you're going to get great outcomes.

And markets can give you great outcomes, but they don't guarantee great outcomes. And so conservatives have been seeing it, especially over the last decade, a lot of the things we care about, things everybody cares about, do jobs pay enough to support a family? Right.

Are we too dependent on China for everything? Can we make computer chips in this country? Markets were perfectly happy to give us really bad answers on those questions. And so conservatives are starting to say, well, wait a minute, we actually have to care about this and we have to be prepared to do something about it. Now, when you say this at the meeting

with the other conservative economists, do they go, leave us? Like, it really seems like that is fundamental heresy on, you know, I've listened for years. The reason we can't do sort of social engineering or social policy or redistribution of wealth is the government's not in the business of picking winners and losers.

That is now often, the new right is saying actually we do. Yeah, I think that's right. The new right is saying actually there are some things we really want to see win. And that's what politics is. What would politics be if you just pretended you sort of didn't care about anything?

You'd sort of have a lot of the very uninspiring Republican politics of the last few decades, I would say. Now, you started, though, you worked with Mitt Romney, who is considered the avatar of that. Was he open to this idea? Where did it start to find traction for you that a more activist government, this sort of idea of economic policy

as kind of social engineering, when did it start to gain traction? I mean, for me, it actually started working with then Governor Romney. Like you said, he was conventional in a lot of ways. One of the issues I was responsible for with him was trade policy. And we brought him the very typical, here's what Republicans say about trade briefing. And he said, well, that's fine, but what are we going to do about China?

And to your point about all the other conservative economists in the room, they were, what are you talking about? We don't do anything about China. If China wants to send us cheap stuff, we say thank you very much. In the meeting What does it sound like when the monocles fall out? Does it does it clink The the gasp the gasps are can be disturbing yes, there's to your point

there's a lot of of disturbing. Yes, there's to your point. There's a lot of of religious fervor, frankly, on what I would call the old right about some of these ideas. And when someone says something very common sense, like, well, wait a minute, maybe, you know, an authoritarian communist government that's trying to hollow out American manufacturing, like, maybe that's not really free market. Right. I was saying, I was like, wow, that's, that's a really important market. Right. But I would say, I was like, wow, that's

that's a really important point. And I was the one assigned to go off and try to figure it out. And what I discovered was that on the right of center, really going back to the mid 1980s, there had just been no thinking about this. There had been an incredible. Protecting that manufacturing base or our industrial center. And then I think in COVID, you saw everyone kind of paused and went, oh, we don't have

supply lines to make paper masks. Like we don't have anything. Was that where you saw it really get a foothold? I think on the right of center, it was the China problem was active even before COVID. Because I think one thing, and it's important to say, this is a fairly recent conservative phenomenon. If you go back in the history of conservatism,

even if you look at Ronald Reagan himself, Reagan was a trade protectionist. He basically started a trade war with Japan because he did care about these things. This was in the days of Japanese car makers were making cars that were cheaper. People were preferring them. They were dominating the market in America. And Reagan negotiated an outright quota that Japan,

not even a tariff, Japan will not increase the number of cars it sends into America. And that's why we now have the American auto industry in the South. the number of cars it sends into America. And that's why we now have the American auto industry in the South. Honda and Toyota make American cars, essentially, because somebody like Reagan was willing to recognize trade is good if it's fair and balanced,

but we're not going to be doing that. I'm going to have to mix things about whether or not, like, that five years later, it actually gave too much leverage to these Japanese countries, and they got to drive very hard bargains for American labor in the South. For instance, they didn't build them in Michigan. They didn't build them where union labor was.

They built them, they undercut union labor in some respects. They did choose to go to states with non-union labor. Right. The way that the unions were behaving at the time was one of the reasons that U.S. automakers were falling behind. That level of inflexibility was a real challenge, and that's also something that you saw Reagan really take on and confront. So I don't think there are a lot of people in the American South today who would say,

boo, we wish the automakers would come. It was an enormous gain, and the investments have led to much higher productivity over time. So I think that's that's the story of what we want to see more of and bringing that back and giving the country a resilience that that losing that

base actually cost us. And this brings us to liberation day which is April 2nd April 2nd April 2nd. Mark it down. Liberation day. The Trump tariffs, we don't know what they are, but we know they'll work and that we will live on Mars in what, eight weeks? I don't know what's going to happen. Do you know what's going to happen on liberation day? I don't know what's going to happen and I think that there has rightly been know, rightly been at this point

a lot of criticism that the way that the Trump administration has been rolling a lot of this out is just leaving too many questions. That if you want to do this right, you need certainty and predictability, clear communication. All core values of the Trump administration. Fair, fair point. One of the interesting things about the Trump administration. Fair, fair point.

One of the interesting things about the Trump administration is that the team he has around him this time on the economic side, so Secretary of State Rubio, Secretary of the Treasury Scott Besson, his chief economic advisor, the US trade representative, he's really surrounded himself I think with a quite strong team that thinks consistently about this. And so, you know, that's something that... So, does he ever, like, ask them? That is a fair question, and that's what I think everybody's waiting to see, is can we sort of get this moving in the right direction? Because it is important to say that the direction is important here.

Right. That, you know, really for 25 years, going back to when we let China into the WTO, we have pursued this model that says more free trade always, regardless of what happens to American workers, regardless of what happens to American industry, we just want the cheap stuff. And that has been really damaging. You know, in some respects though we regard, I think we're putting a certain motive on China when in fact like these were corporations seeking the lowest water of wages and what they could pay people and certainly labor can't travel the way

that capital does. So you know I guess the idea is we levy these tariffs and then these corporations that had been seeking this will all go, oh, okay, it's not worth our while anymore and they'll reinvest in the States. Is that kind of the broad theory of it? Yes, the idea is that corporations are going to respond to incentives and you can go all the way back to Adam Smith and the wealth of nations and the idea of capitalism. You want people pursuing profit to do that in a way that is also good for the society.

Where I think a lot of economists, and this is left and right of Senator, got it wrong was to think that's just always the case. As long as they're pursuing profit, it's going to be good. And it's only going to be good. And it's only going to be good if it's within certain constraints, if the things that are most profitable actually are things that are good for the country. And the government decides sort of what those constraints are.

So they put guardrails around them. I guess the question I have is tariffs feel somewhat, I don't want to say whimsical in the sense of, oh, he, you know, dances downstairs in a tutu and says 25% on whiskey. Like, but they are executive actions. And if you're a business making a, I assume their plans are five year, 10 year, 20 year,

if they could just be repealed by the next guy and it's not legislation, is that really an effective incentive for bringing back all that manufacturing? I think that's a very fair concern and ideally it would be done through legislation. I think one of the things that's very encouraging is to see that we are increasingly now

seeing a new bipartisan consensus that we do wanna change. I'm sorry, I don't know that phrase. Was that? It started when President Joe Biden essentially kept all of Trump's trade actions. Everything that Trump did on China, Biden kept and then even extended some.

But wouldn't like the CHIPS Act, right? Wouldn't that be another way of incentivizing without setting up barriers that might be more unpredictable or might be flimsier depending on the whim of an executive. Why don't they embrace that in the same way? Doesn't that add to getting the outcome you want, incentivizing, bringing those jobs back? Why is that unpopular on the right? Well, it's only unpopular with some on the right. And I think it goes to where we started, which

is this historical concern with the idea of sort of picking winners and losers at all. And a lot of concern that what's going to happen if government actually gets involved in giving particular benefits to particular companies. That being said, the CHIPS Act was bipartisan. I think there were maybe 17 senators. You know, JD Vance has been a supporter of the Chips Act.

Right. And so, you know, I think, again, that's a step in the right direction. Would you rather see it through that kind of industrial policy or through... Or is it a real balancing of all those various levers? I think you have to do both, because if you only do the Chips Act kind of thing, Chips Act is great if you've got one thing that's really important. Almost everyone agrees, you know. Well, there's steel and, you know.

So, this becomes a question now, right? Do we really want Congress now going through and saying, oh, well, now we need one for steel. Well, do we need one for aluminum? Maybe. Well, do we need one for cars? Do we need one for airplanes? You know, that's both cumbersome and something

that's very difficult to do well politically. Whereas one of what I think actually the benefits of tariffs is that they are quite blunt. The tariff is sort of, if done well, a much broader policy that sort of shifts the baseline. And so I think you need that if you want to shift the basic decision making that businesses are gonna make generally.

And if there's particular things you really care about, that's when you also want to come in and give them support. Well, then did it surprise you as we talk about China as being sort of this ascendant economic power? And by the way, it's not just the manufacturing base of America that has been hurt by that. All the countries near China can't compete. All around there, Indonesia, Malaysia, they're struggling with a very similar thing. But then why go after Canada? Do you know what I mean?

It all seems so weirdly vindictive. And then we're going to take over Greenland. Like, it does feel a little less like rebalancing economic inequities. And we've decided on a new world order where big does what it wants and nation states, we go back to a little bit of that colonialist model or imperialist or whatever it was. Is that the concern, I guess? It's a fair concern. I think there's some truth to it that's not all bad when you talk about this new world order idea,

which is that the United States has been sort of championing this liberal world order, where we have essentially taken it upon ourselves to frankly absorb a lot of costs from other people. Right? So in the trade world, it's not just China, it's also Germany and Japan and Korea. We are absorbing their production. They get the jobs. But don't you think we're buying influence? I would say, so his, the Trump view is they're abusing us and using us. I think the view I have is America wants to tell them what to do.

And so by leveraging our military might, we have sway. But do we? What do we, what have we successfully told Japan or Germany to do? I mean in general? Yeah. In the last 30 years. Stop a year later, Hosen, I think they've cut down on it. No, no, no, no, this is a serious point. I appreciate the joke, but there's a reason you couldn't answer the question. And this is... Well, I don't know what we'd want them to do because I feel like... If we don't want them to do anything, then what are we maintaining the leverage for? Because well, the leverage is on when we want to go into Iraq.

I guess what I'm saying is what we want them to do is- Well, that was great. Listen, I'm not saying it was right, but you have a guy like JD Vance goes to Greenland and shits on Denmark. Denmark lost as many people per capita in those wars as we did. They talk about Denmark's not defending Greenland enough

and we'll do it, but aren't we doing it already? Like, they're in NATO. So I guess my point is, like, that stable world order hasn't mistreated the United States. I guess I don't see us as victims of a con game that Europe has been running on us. And, like, the idea that we want Germany to be able to fend off Russia on their own

places us in very tenuous position, does it not? Why? I have a book at home about Germany and their position as a global military power where we didn't have sway and they did what they wanted. I mean it didn't work out. Frankly I don't put a lot of cream in it. sway right and they did what they wanted I mean it didn't work out frankly I don't put a lot of previous I don't know 20% of the Oscar winning movies the fun applause line that like oh the Germans

will just become Nazis again like that's a weird racist critique of Germans I don't see any reason to believe that. Let's be honest, it is. Let's look at the actual German state. On what basis are you saying this is like something about Germany that we can't abide? I think it's that there is an element within their society that they've deemed. This is not me saying Germans will do that.

This is Germany. This is, I didn't say they'll become that. The leaders of Germany are fearful. I don't think they are. I think leaders of Germany really enjoy spending virtually nothing on their military while the United States spends roughly 4% of GDP on ours as we have been doing for decades with other countries and NATO. You think they're like freeloading on our military. There's no question they're freeloading on our military. You can say you you think they're like free loading on our military? There's no question they're free loading on our military.

You can say you like that they're free loading on our military, but I don't think there's any dispute that that's what they're doing. I guess I don't understand the idea that they're free loading and we want each nation-state to build up their military to the point, because to me that makes it more likely, if you build something like that it's more likely, if you build something like that, it's more likely you'll use it. Now that seems to be backed by general history. When people rearm, they tend to do it and use it.

But I think the idea that Europe needs to like, I guess what I'm saying is, this is a fine adjustment that's being made with a sledgehammer if that makes sense I think that's a very fair point. I think where we started on Yes, my five-year-old gets one point at pink. Yes. See I'll take that look the the new world order point that we started with, I think, is very important here.

Because what the Trump administration, and I think this is certainly Trump's view, JD Vance has spoken about this, Marco Rubio has spoken about this, their view is that this world order we try to establish in which the US does take on these burdens, and in your view, we benefit from taking on those burdens. I think it's a mixed bag. I would not say it's purely benefit.

I think what we do spend on defense is kind of insane and to have 850 military bases to project power across the world. I wholeheartedly agree with that. I think unleashing those forces through vindictiveness and, like, blaming them for victimizing us is not the methodology. Like, everything else, like Doge.

I always hate that straw man, like, we go, I don't like the way this is going. Oh, you're not for efficiency. Like, that same thing. Oh, you just want Germany to keep freeloading. That's not what I'm saying. And I think it's a misreading of that point and not being fair to the nuance of it.

I understand that there can be adjustments in that and that free trade can be rebalanced and all those other things, but they're breaking something that did serve us, maybe not phenomenally, but okay. And we had a really strong hand in building it. And now we're pretending like they did it to us. And that feels unfair.

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Oh! Oh! Oh! Oh! When I come on your studio show, I realize that's difficult to handle. It's not so fair. I didn't, yeah. You know what I mean.

I saw you prep them and everything. Yeah. But talk about that a little bit. Yeah. So first of all, I think you're absolutely right that the US did construct this system. And I think if that doesn't mean that the US should not learn lessons, that doesn't mean that conditions don't change.

But I do think it absolutely creates an obligation for us to be thoughtful in how we proceed. And I think it's a fair critique if we're not being thoughtful in how we proceed. That felt like a very different answer than Germany and Japan freeload on us. That's also true. All right.

It's so true. All right. What do you think is going to happen? Do you worry about the instability of not easing this transition? But is this a, and look, I've read the whole Mar-a-Lago Accord, and I don't know if that's a conspiracy, is the idea that there's some master plan, if we create this chaos, we cause all this thing,

to draw people to Mar-a-Lago where they renegotiate our nation's debt. Is that something that you think is plausible? Or is that what this is all about? Is that why they're not doing it in a way that seems more thoughtful? So let me say two things about it. The first is I think a lot of the critiques

of how it's being done are very fair. And I think it's important to distinguish that from the discussion of the principles. Because I think the principles are important and we should want to have the right set of principles and not throw them out if just because they're not being pursued in the way we might like. When it comes to something like the Mar-a-Lago Accord, I think what you see people talking

about and trying to move toward is to say, if we think this sort of liberal world order system, first of all, even if it was serving the U.S. well at one point, it's not serving as well anymore. Second of all, to some extent may just be going away anyway. China is now rising as a peer competitor. The US cannot be a unipolar hegemon like it was when the Cold War ended. So if we accept that things are going to change,

we should have a perspective on what we want to follow. And something that I've been writing about a lot is trying to interpret and decipher what that might look like. Because again, it's a very clear critique. They have not been as clear about it as we should want them to be. What I think we should want and what, like I said,

folks in the administration like a Marco Rubio or a Scott Besant, who I think do write and speak thoughtfully about it, have pointed toward is the idea that we absolutely want a strong economic and security alliance. It's not going to be the whole world because China is going to have its own sphere as well. But what we want to have within our sphere is a few things that in the past the U.S. didn't necessarily ask for. We're going to want balanced trade, where in the past we were happy to let the manufacturing

go elsewhere. We're going to want others to essentially own their own defense burdens. That doesn't mean we're not partnering and working together, but that everybody takes primary responsibility for their own defense. No NATO, no like alliance like that. No, no, you can absolutely have an alliance like that,

but the alliance is premised on, if you are Germany, you are on the front lines of what the concerns in Europe are. If you are Japan, you are on the front lines of what the concerns in Europe are. If you are Japan, you are on the front lines of the concerns with China. It's not a matter of everyone simply turning and asking the U.S. what the U.S. is going to do. And then the third element is keeping China out and recognizing that China, to your point,

China's just been doing China, doing what's best for China, but that that is not consistent with what the US and a US-led alliance would want. And so if you want to get from where we are today to that kind of system, you are asking things of allies that they haven't been asked before. And so the question is, how do you make that a credible ask? Because I think it's fair.

I don't think that those are unreasonable things to ask. But you are going to have to be willing to back that up and say, the old version is gone. Let's talk about what the new version could look like. Right. Do you think they prematurely blew up the old version? Or you just really felt like it just wasn't functioning in that way anymore?

I think the old version has I think the old version has been gone for a while at this point that that in the economic sphere the the idea of that sort of era of cheap goods the era of cheap goods the era of the U.S. being able to simply sort of exert its military will on the world the era of the U.S economy is being so much stronger than others that we could afford to absorb everybody else's production. You know, over the last 10 to 20 years, the US, the typical working family, has not been well served by that deal, I don't think.

No question. And this is where, so it sometimes gets, listen, people have differing viewpoints and it can get confusing and trying to, but here's where I think there can be great agreement. Working people making living wages. And I think that would be very surprising for someone on the center-right to sort of agree

with maybe the more progressive wing of the Democrats, but that is absolutely a value that we have lost. And do you think that's something that the right will follow you along with? Because it's something I think the left has been screaming about for a very long time. I think we're moving in that direction. You know, I think it is a process of transition when a party reorients, you know, the term realignment gets used a lot. We're increasingly seeing working people coming into the Republican Party.

We're seeing Republican leaders, folks like Marco Rubio, JD Vance, increasingly, I think, speak credibly and seriously to some of their concerns. We're seeing more openness to the labor movement. You have the Teamsters president partnering with someone like Senator Josh Hawley on legislation. And so I really do think that that is happening.

I think the politicians will always be the lagging indicator, right, the folks in their 70s and 80s. Right, the folks in their 70s and 80s. You're talking about the junior senators. Yeah. Mitch McConnell is unlikely to suddenly adopt all of this. But if you look at- Don't count him out. I'm going to go ahead and-

At 110, he's going to be ready. You have more faith than I do. When you look at younger Republicans, both folks coming into the Senate, so I mentioned Rubio and Vance, folks like Jim Banks from Indiana, Bernie Moreno from Ohio, all of them are more focused on these kinds of issues. And then when you look behind that at the sorts of people I work with, the policy wonks, researchers, writers,

journalists, lawyers, folks sort of 40 and under are overwhelmingly oriented in this way. And so I have a great deal of hope that as that moves to be the center of the party, you really are going to see a different Republican party that still loves markets and wants them to work, but has a much better understanding of their limitation, has much more concern for what is happening

to typical working family, and wants to figure out how to keep their conservative principles, but apply them somehow to use public policy and make things better. So socialism. Essential. No, I appreciate it.

One final question, and then I'll let you go, because I know we're busy. The final question is this. Are you concerned if they realign the trade? Look, corporations are, as you said, they're profit-seeking, and that's how they go. Are you afraid that the globalization movement, where they sought the lowest form of regulation

and workers' wages, will just be translated into this country? So, in other words, in the way that China might have undercut the United States, are you worried South Carolina and Texas undercut Wisconsin and Michigan, and that this revitalizing the manufacturing base will fall prey to the same dynamics that we saw it fall prey to globally.

Is that a concern? I'm not too concerned about that because that has always been a feature of American political economy. We've always had that sort of competition between the states. We can handle that disagreement. We can and I think that's the best way to think about more protection of the American market. There's been this idea for so long that free trade and free markets are sort of synonymous.

If you like free markets, you want more free trade. But free trade with China does not advance free markets. It takes everything authoritarian and communist in China and imports it. Now your companies have to compete with that. And then now you need more safety net programs to support those who lose their jobs. You need more chip sacks and industrial policy. You have to respond in all sorts of ways.

So many of the people that use those subsidies are actually working people. This isn't one of those lazy people sitting on the couch coasting on the government. I'm like, working people with one, sometimes two jobs that still have to subsidize it because they're just not paid enough. It's very, very difficult. on the government, I'm like, working people with one, sometimes two jobs that still have to subsidize it because they're just not paid enough.

And it's very, very difficult. But this is, listen, the book, the Ones in Future Worker, this is your old book. What's the new one called? It's called The New Conservatives. It's a summary of what we've been doing for the last five years at American Compass, developing the conservative economics of the new right.

And it will be out at the beginning of June. And when you go back to them and you tell them how was it, you'll say, like, Stewart was right about at least one. I'm gonna tell them, because I called John Stewart a racist, I'm not sure that was smart. It's all good. The New Contest is available on pre-order from Star Wars Newsletter,

Understanding America Sometimes. Only cash. Quick break, we'll be right back with this. That was great. That was great. I'll guess tonight's a professor of economics and public policy and the author of the bestselling book, The Deficit Myth.

She's featured in a new documentary, Finding the Money. MMT has always been a group of us that sacrificed a lot to make the professional decision to say things that are so different from what everyone else is saying. Knowing that you're going to be not just challenged but ridiculed along the way. You got to have some thick skin to get through it. But if you're convinced that the work that you're doing is important and that the ideas will hold up to scrutiny, then you just keep pushing forward.

Please welcome Stephanie Kelton. -♪ Whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa out, correct me if I'm wrong, to fundamentally change how people see money. Yeah. That's a big ask. And we got about seven minutes. I think a place to start is with MMT, right? MMT, if you can help us define what MMT is and I think what the narrative you're hoping to get across with MMT, what is the new economic narrative? It's no longer pull yourself up by your bootstraps.

What is MMT telling us? So, in economics, it's widely known as the dismal science, right, because it's... You've got to get better branding. Well, that's what MMT is trying to do, better branding, because, you know, in the dismal science, it's all about scarcity, and we can never have the things that we want because there's always this really intrusive

Problem, which is how are you gonna pay for it? Where is the money going to come from and the problem is that we treat money like just any other? Scarce good or service in the economy and what MMT is doing is saying hold on a second We're not on a gold standard anymore we have this thing called a fiat currency, and it does make people nervous because a fiat currency sort of opens up space, and it's kind of like, wait, is money real after all? And so MMT is an economic framework

that tries to have an honest conversation, that talks to people like grownups, not insulting people by telling them that you have to treat the government's budget like a household budget, and speaking down to people like grownups, not insulting people by telling them that you have to treat the government's budget like a household budget and speaking down to people. We want to be honest about the monetary system we have today, the capacities of the government to spend when you have a fiat currency and you're not tying your currency to gold and promising to convert into something that you could run out of like physical gold. So we're opening up a conversation

where there are still limits and you still have to make choices, but we can have an adult conversation about how the government can actually operate its budget when it doesn't face the same kinds of constraints that a household or a business faces. I mean, I guess by that, I think the big headline with this as well is the way we look at what the deficit means,

correct? Yeah. Like, I hear deficit, you hear it in the way we look at what the deficit means correct. Yeah, like I hear deficit you hear in the news you have a politician talking about a deficit equals bad and the major narrative of an empty monetary the modern monetary theory is deficit good correct. Every deficit is good for someone in purely financial terms and I'll tell you why because you're right we use this word and it sounds inherently like something's gone wrong if somebody is in deficit there's a problem right you don't want

to turn on the sporting game and find the the announcer saying that your team is gonna have to come back and overcome a seven run deficit if they're gonna win the game it's always a bad thing right but actually if you think about what the government deficit is, it's just the difference between two numbers. That's all it is. So what? Yeah?

What a relief. It's a relief. Oh. I guess we'll find that. Is everything fine? What? Does that mean everything's fine? It's fine in the sense that it's just a benign mathematical,

like it's the difference between two numbers. It's not even higher order math, right right it's just how many dollars the government spends into the economy each year versus how many they take back out mostly through taxation so simple math if they spend a hundred dollars into the economy and they only take $90 back out we label it a government deficit and somebody records it as a minus 10 on the government's ledger. What we forget to do is to recognize if they put 100 in and only take 90 out, somebody gets 10.

So the government's deficit is matched or mirrored by a financial surplus in some other part of the economy. Wait, hang on. So did you guys meet backstage or something? Because what the hell? What is MMT? What's MM is, what does MMT stand for? You hand it. So it's modern monetary theory and so again the currency we're not on a gold standard we're in the modern fiat age. Okay what's fiat? What's fiat? Well is it a good car that you get or what? What you're walking

around with if you've got some of this stuff in your wallet is a tax credit so those dollar bills that we're walking around with we think of that as money right and we can use it to transact we can use a buy and sell thing we can use it to make purchases of goods and services and money is good it's good to have okay generally and it's really good to have when you got to pay your taxes because this is what the government expects us to hand over at the end of the day. Okay, money is good. I'm with you so far. But let's do this. What about that government deficit that you just mentioned, right? And I said every government deficit is good for someone. Why? Because it's just a financial deposit into some other part of the economy. The question is good for whom and good for what?

The government can increase its deficit to do things like feed hungry kids, tackle the climate crisis, fix crumbling infrastructure. All of those things are ways to use a government deficit that might have desirable results for people and for the economy. So money is good. Deficit is good.

I'm with you so far. So what's the bad? What's the problem here? Well, a big part of the problem is the way that we've been taught to think about these things, to try to stamp out deficits, to reduce them, to view them as inherently dangerous. They're not inherently dangerous.

And as I just said, they can be used to help us accomplish important goals in the economy. Okay so okay so what's the next step why would we act let's say we believe in MMT or yeah MMT what what what's the next thing that I mean is belief enough do I just have to pray to MMT and then what what has to happen next or who else? What has to happen next is that the people that we elect to represent us have to go in there and take decisions using the incredible power that they have called the power of the purse.

That they've got to take decisions about whether to fund programs, whether to cut programs, not on the belief that they ought to be operating their budget like a household. But when these decisions come up about social security and Medicare, or continuing with the Inflation Reduction Act, and staying, you know, in the game on climate change, and going even beyond what that legislation did,

what I think gives me hope anyway, is that we've demonstrated what we're capable of, and that we can build on it, and not revert back to old ways of thinking about austerity and the need to reduce deficits because that's when you hammer your economy. That's when people have a lost decade. That's when all of a sudden, you know, the prosperity that is within reach starts to

slip through our fingers. So when the IRS comes for my taxes, I just got to tell them, like, yo, deficit is good. Don't worry about it. Don't worry about it. You know what you need to do? You need to take some THC or some DMT and let the MMT just wash over you. Let the paradigm shift come to you, Ronny Chieng.

Yeah, I think I'm in it right now. I think you're in it. Well, Finding the Money will be released in select theaters nationwide and on demand May 3rd. For more information, go to findingmoneyfilm.com. Stephanie Kelton, we're gonna take a quick break. We'll be right back. Thanks a lot. We'll be right back.

We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back.

We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back. No Frills delivers. Get groceries delivered to your door from No Frills with PC Express. Shop online and get $15 in PC optimum points on your first five orders. Shop now at nofrills.ca. ["No Frills"] My guests tonight, the president of the European Central Bank.

Please welcome back Christine Lagarde. Woo! Thank you so much for being here. We were just talking last time that I saw you, you were the French Minister of Finance. Great. And then you moved on IMF. And I came back. And you came back. And then now you are the head of the ECB, which is, for context, similar to like what the Fed would be, I assume, for the United States.

That's right. And you lowered interest rates as well. Yes. We started a little earlier in June. OK, I didn't know it was going to go there right away. I didn't know we were going to do this right away. We only did 25. He did 50.

You only did 25 pages? But then we did it again. So that's 50-50. Do you guys talk? Do you say, I'm about to do 25? And he's like, well, I'm going to do 50 two months later and make you look silly. You don't coordinate? No, we talk to each other, but we don't coordinate.

We don't. Now, is this the basis points? And we all now, there's a certain oracle nature to we wait to see what the central banks will do and they Always talk and kind of coded mysterious language, and then they say 25 basis points and we're like Yes What is that? But but is it now is that the signal inflation has been defeated It's not quite.

We are getting there. We are almost at target. Our target- What are you pointing at? Okay, my target- What's- My target is two, 2%. I want to get to 2%.

What is it now? It's 2.2. But I want to make sure that we are at two and that we stay at 2% because that's regarded as sort of stable inflation and we look at that in the medium term so we don't want to have one month at 2% and then another month at 2.6% we want it to be steady solid at 2 and we getting very close. Who was the two chooser? You know interestingly enough that was way back

and I think New Zealand was one of those that started it. And we're all following New Zealand now. That's what this is. New Zealand one day went, you know what would be a good number? Two. Now I think then all central bankers around the world thought well two percent because then that leaves a little wiggle room to negotiate wages increases. We're not exactly sure the statistics are perfect. So there is, you know, a room to maneuver on all accounts and two percent is something that, you know, goes reasonably unnoticed as long as wages progress as well. Right. Although when we say two percent we've faced kind of a pretty large inflationary spike so it seems like these higher prices have a certain stickiness that the

corporations have gotten accustomed to like well the supply chains are a little better and things have eased but we're not ten dollars for a taco and people still pay it so why not. But that's a big difference between the level of prices and the increase in prices. I see. So when you've had regular increases in prices, generally it doesn't move down. It stays at that level.

And that's when you talk about a level of prices. Now, why is that? So what caused the inflation in the first place? Do we have a handle on that? Yes. OK. Shall we take the last big inflation wave that we had? No. No, no, but no, okay. Yes. But as an example, okay, so what caused it? You had three components. One is you had the

worst pandemic ever since the 20s. Yes. The last 20s. That's right. Then you had- So a shutdown of- Shutdown of- Now that would seem to be deflationary because it would seem like demand would disappear. Well, some demand disappeared and some demand stayed, particularly when people continued to receive checks in the mail and had- The mistake was keeping people alive.

No. No, no, no, no, no. I get it now. No. I mistake was keeping people alive. No, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, at least in Europe, the worst war since the 40s. Still going on in Ukraine. Still going on in Ukraine. So energy, wheat. Energy, wheat, all sorts of commodity prices went down, especially given that dear Mr. Putin anticipated that and weighed on energy prices, so they weighed on energy supply, so that prices started going up even before the war started.

He had planned that all along. So energy prices were a big component in the inflation. So supply chain disruption. Yeah. Energy spike. Now, that's in Europe. We did not have that to the same extent, I would assume. You had some of it, but not, yeah.

OK, keep going. Because you have energy on site in the country. We don't have any energy sources. Oh, sure. You know why? Drill baby drill. Did you know that's our national anthem. That's what we we sing it before every ball game. So that's two. We got two. What's the third one. I would say three. The pandemic the war and the energy prices. So the three of them just pushed prices up in a big way and more so in Europe than in the U.S. We went up on average in the euro area. Prices went up to 10.6 percent. You never hit the double

digit. Right. I would imagine certain commodities would go up faster than others that they don't. It's not linear. I wouldn't imagine. No. But it has a dribbling effect. So if you have oil prices going up, up is going to have an impact on pretty much all of the products because you find energy everywhere. So give me a sense of oil prices go up how long does it take for

that to insinuate itself into the supply chain system and create that inflation that inflation it moves relatively fast so no matter of you know for months, it's into the various prices. Where there is a lag, which is much longer, it's on wages. Wages take more time to respond to that increase in prices. And it's, you know.

I don't know if you know this in America, wages have yet to respond. We're talking about from the 50s. Like, it's really, wages don't keep up. It brings up an interesting point. So're talking about from the 50s. Like it's really, wages don't keep up. It brings up an interesting point. Since the 80s, it feels like the economy flipped over to an investment economy. That's right. Rather than a labor economy.

Much more capital intensive. And the remuneration of capital was higher than the remuneration of labor. You're right. It's been a long time. It's not just in the last 10 years. No, it seems like the 80s were really that period of deregulation. And then it sped up there. But our tools that we use, whether it's the Fed or quantitative easing or those kinds of things, are still working at that supply side level.

In other words, like in 2008, we bailed out more on the corporate side. Rather than the people side. Well we we we secured the financial system to make sure that the positive for the customers around the world. Yes, we're not completely lost so that that was the key key proposal to make sure that the financial system doesn't collapse and then then you're right there was a tickling the last you know 6 years, five years since 2019,

when we started, we had COVID, we tried to keep the economy afloat. We tried to avoid that business goes down. The more demand side stimulus. Yeah. Yeah, yeah. And certainly in this country, yeah. And that's where maybe the rubber meets the road. It feels like, from what I've heard of economists-

Yeah, you want to dampen demand if you want to keep inflation down. Right. While at the same time you increase demand by putting some fiscal fuel in the system. But on the flip side, we kept people alive and in their homes. Like in 2008, when they decided on the quantitative easing and to give sort of that 0% interest window and people were able to come in and borrow money at the corporate level. Right, right.

At all levels, households as well. Household. But there was a horrible recession. A ton of people lost their homes. It was crushing. The lesson to me is stimulating on the demand side was a more efficient use of capital and also had the moral bonus of covering, like, human needs. Yes. Yes, yes, yes.

Yeah, rather than... So why does that seem now so controversial? It's not controversial in my books. Well, because you're human. But these guys I'm talking to, they give me a whole, like, that last trillion really screwed us for the next 10 years. And I'm like, what are you talking about? Well, everything has to be reasonable and sensible.

You don't want to overdo it to a point where you then have to sort of withdraw and sponge the liquidities that are out there. And that's the reason why at some stage you have to stop quantitative easing and you have to also stop the fiscal stimulus and support that you've given to the economy in hard times because times are getting better.

Do the central banks have mechanisms that can be more responsive on that demand side, as you said, rather than it having to filter through the system more on that supply side? The first tool that we use is interest rates. That's the most efficient one and it's the one that that has been traditionally used. You talked about... Certainly if you raise it will dampen the labor market. Yeah yeah and if you tighten, which is if you reduce the interest rates, if you cut, then it should stimulate the economy and it should encourage people having lower financing cost to go out, borrow, invest, and buy houses and things like that. Right.

That's what should happen. I wonder, is there any school of thought that thinks, boy, we've got this thing flipped on its head, and we would be such a more efficient and humane society if we stimulated more? Like, for example, I'm thinking about, and you tell me if this is the wrong way of thinking about it. Trump came in one point seven

trillion dollar tax cut. Most of it went to rich people cut the corporate tax rate from I think 35 percent to 21 percent. So that's a 14 percent. That's a huge amount of money deregulated a lot of industries. So I would think as a package

that's trillions and trillions and trillions of dollars. A lot of it went to stock buybacks. It doesn't trickle into wages and the labor market, but it does pop up our deficit making us less able to withstand, I don't know, a pandemic. Because we feel like then we can't put that- I'm a little bit scared when you talk about pandemic because I watched the interview that we did together in 2009. What did I say? Well, you said at the time,

because we discussed the stunning of the economy and I kind of said things are getting better. And then you closed the interview saying, unless we have a global pandemic. Laughter Applause Applause Applause Applause To the camera, I just want to address something very quickly.

Laughter When she says I said that, she is not suggesting all Jews gave us a global pandemic. Laughter What we're trying to do is demand. She says I said that, she is not suggesting all Jews gave us the money. What we're trying to do is to demand. And I only say that because there has been some confusion here in the United States. But exactly right. I'm wondering as a central banker, is there a way to look at the economy? Less on the supply side. How do we get labor to benefit more efficiently from

all that money? You have to you know those things. You have two components. Capital, labor. And you bring this together and you create value. The two have to be compensated. And for decades, capital has been better remunerated than labor. And the labor share in the value production has been reduced. Then it's a matter of give and take. So if the labor market is tight as it is now, it is for the labor to actually say, excuse me, I think that should be remunerated as well and probably better than it has for many, many years. Right.

So it's a question of... Is there a way to do it? Negotiations, discussions, and persistence. Right. Yep. Is there a better way? Because it seems like for corporate subsidies they don't have to fight so hard like it seems like labor has to really

fight for that seat at the table whereas the larger entities. Don't have the balance of lobbying forces is obviously skewed to one side right right in most countries you recommend poor people get better lobbyists. That would be. What about this? How about this? Is there anything in corporate, like when you talk about buybacks,

and it's all in stock, what if workers were automatically invested in that? I mean, some companies do that. I think the tech industry does a pretty good job of that. You know when you get hired there you're one way to deal with it. But it's a very small and not

very component to be a lot bigger. Right. Do you think when you forecast out what I worry about is labor is kind of been on the back foot and it seems like AI is going to further erode

labor's position is that something that you guys that is a big concern and I think that the discussions that are taking place now actually in New York concerning the governance of AI around the world and how it should be enhancing.

Workers position contribution to the economy, rather than replacing workers, is a vital discussion to be had. Who's having that? I think it's engineered by the United Nations and there is a group of thinkers and philosophers and experts in AI who are saying, watch out.

Because if there is no global governance on that, just as we have global governance on nuclear, not perfectly complied with, but at least generally respected. At least there is. We're all still here. Yeah. Yeah. Oh.

I'm worried about that. I happened to run into a couple of leading lights of the AI movement. And I said, globalization really hit American manufacturing, and we're still feeling it. And that's something that took decades to really play out. It also benefited the consumers. Don't forget that.

No question. When you do that, we did get much cheaper stretchy parents and everything. Yes, yes, yes. But that played out over years. And there are still areas where it's decimated and haven't been back. It seems like AI will do the same thing

to the more white-collar movement. But it's going to do it much quicker. And I said, are you guys concerned about that? And the guy goes, and he's one of them big hitters in that. And he goes, uh, no, we'll be good. And I was like, oh, we're all gonna die. Like, this is crazy. Will you adjust your pump? I don't we're all going to die. Like, this is crazy. Will you adjust?

I don't think we're going to die, but I think completely. Well, we will at some stage. No, no, no, I understand. And by the way, maybe for a lot of people. But we should really be concerned about AI, because where you are totally right is that it will affect all jobs. And those sort of white-colored jobs,

which were not affected, will be affected. And we have to be prepared. We have to improve our skill set. We have to be able to master that tool and not be the servant and the object of that tool. Because it is fast and it's transformative. Do you know what they told me? It's already smarter than us. Because what they do is it takes the 10,000

sort of years of human achievement and it swallows it in like six hours. I'll tell you something. Yeah. This morning, I wanted to check the price of butter because I thought you were going to ask me, where do you do you do you do your grocery shopping and did you notice that prices increase? What kind of an animal do you think I am? Christine Lagarde, how dare you, if I may say so. I know your butler does the shopping. So I check and I check with one of those terribly smart AI engine. I say, what was the price in 2019? What was the price in 2024? I get the answer and it's totally skewed.

I mean, it's cheaper now than it was in 2019. And my recollection is, uh-uh. So I tell this guy, this AI engine, I said, are you sure about your numbers? Can you check that? Comes back and says, well, terribly sorry, we made a mistake. Yes, you're right, it's the other way around.

So that tells me one thing. We have to're right, it's the other way around. So that tells me one thing. We have to be alert. We have to check the facts. We have to exercise judgment. And we cannot be made. Does it tell you that? Or does it tell you that AI is so far ahead of us

that the plan was, I'm going to give the head of the European Central Bank the wrong butter figures, absolutely plummeting her career. She's in charge of stability of Europe. Europe is then plunged into chaos. 500 years of black death. Oh, AI has got us by the... You must be behind that. I probably am.

The final question. So we're coming onto a period, people were talking about the soft landing. It's still been rough for consumers. Do you foresee within the next, you know, because I know these things take time, 12 months, 18 months, 24 months, a better stability building into this, obviously, God forbid, without some sort of terrible catastrophe? Yes, I should think so. Why do I say that? Because I think that the tools have improved.

The analytical models and tools that we use to anticipate and to try to measure are better. And because we've learned in the last few years more than we had in decades. And the stable 2% we're getting. And we know that uncertainty is going to be with us. And we have to factor that in and make sure that we have tools to anticipate uncertainty which is a big big

challenge sure we're anticipating uncertainty here in about 8 weeks. I feel yeah, I feel yeah. Thank you so much for joining it's always a pleasure to see. Explore more shows from the Daily Show Podcast universe by searching The Daily Show, wherever you get your podcasts. Watch The Daily Show weeknights at 11, 10 Central on Comedy Central and stream full episodes anytime on Paramount Plus. This has been a Comedy Central podcast.