By Erin Haswell
Erin’s video is first among several developed by students in Eric Tymgoine’s modern money course.
We thought so. Stay tuned: we’re realizing more of these over the next few days.
But (why is there always a “but”?) Do you know why commercials used to be 1 minute long, and they’re now only 30 seconds? Not because advertisers can’t afford it, there are more total minutes of commercials now than before, and the same spot runs multiple times on a single show. It’s because most people won’t pay attention for a full minute at a time anymore.
This clip is almost 14-1/2 minutes long, which is why it will never “go viral”.
I understand the need to lay the foundation, especially in an academic environment, but a shorter piece needs to assume some knowledge and more directly attack the conclusion – the interesting part. Maybe that can be done more easily with different topics.
Very difficult stuff to convey.
This is probably the best attempt I’ve seen.
Well done and keep up the good work.
It was good. Probably about 2-5 minutes too long. I would try (no mean task) to get the videos under 10 minutes.
And thank you for remembering that you are talking to a global audience not just a US audience.
For the record, I did watch the whole thing. It was well done. Still not sure it is the right style to send to newcomers, but definitely a step forward.
I had a few thoughts for some shorter/punchier items.
1. US Centric. Based on the recent articles related to Ben Franklins writing. Focusing on inflation/money creation and taxes. 4 Characters: Newbie asking questions, Ben Franklin, Ron Paul, Marriner Eccles, maybe in the form of a tribunal – 3 experts sitting above, lowly peasant coming for answers. Q1: Why does the govt keep reducing the value of my money by printing? A(RP) – yeah that right, now only 5% since ME controlled the fed… A(ME) Yes RP, but a senator in 19xx made $xx, what do you make today….. A(BF) as I wrote in my 18xx letters, that is why we use taxes as a control knob on demand. it must be so when money creation is involved.
2. Kind of global. Foreign debt.Two characters something along the lines of
C1:”I’m really worried about how much we owe China” (I think almost everybody ‘owes’ China).
C2: Well, where did China get all those dollars they are lending us.
C1: We bought their stuff
C2: What if we hadn’t bought their stuff with dollars
C1: but we did, and anyway, other people buy their stuff and they can trade to get our dollars
C2: OK, so how did we get those dollars to spend or trade with China
C1: I work and my boss pays me dollars
C2: so your boss creates dollars
…few more lines on this…
C2: And if China has all these dollars and we don’t borrow from them, what do they do with them
… leading to interest payments as an unnecessary gift.
I’m not in economics so I’m sure I messed up in small ways above. But, these 2 concepts. (1) taxes as a thermostat (2) dollars (NFA) ultimately come from the government, were two big foundations for me that encouraged me to explore further. The sectoral balances are huge also, but a little harder to pear down to 2:30.
Just had another thought on simplified sectoral. Characters in a room:
2. Domestic Govt
3. Dom Firm
4. Dom Bank
5. Dom Person
Start with a stack of NFA’s. Create a simple dialog as we hand them around to each other. Have 3, 4 and 5 stand in a circle. Total em up. Maybe even add a period 2 where more NFA’s are added.
Sorry to be a backseat driver. You are all doing very fine work. The effort is appreciated.
Just so that everyone understands, this video was created by two undergraduate students as part of a course assignment (they chose to do this creative project rather than a standard research paper). It was never meant to be the kind of thing that could “go viral”. That would require a highly simplified argument that would not have garnered these students the high marks they undoubtedly earned with this. They had to show their prof. (Eric Tymoigne) that they had a deep understanding of the nature of sectoral balances.
We’ve got some really clever people out there (you know who you are!). So here’s a challenge — come up with a script for a video that COULD go viral, and the NEP team will gladly help to animate it. We’ll even post the best ones and Tweet the heck out of them as well.
What is money? Are deficits always bad? What causes inflation? Why isn’t QE working? Will the US End up Like Greece? These are just a handful of ideas. Give it your best shot!
YEAH! I’ll write a script for the deficit owl. The animation is 100% up to you, though.
BTW, I give those students an A+. I didn’t mean to imply that they did not achieve their objective. Maybe it’s just coincidence, but this post appeared shortly after I suggested on the MMP blog that a viral, entertaining Youtube would help the cause.
Actually only one student made this video. Same with the other ones coming up.
Preaching to the choir my friend! I’ve been agitating for something like the Story of Stuff for years. It takes big bucks to do a really professional video like that. They make it easy now, with free animation software. So the quality isn’t as good, but with the right script … you really can go viral. I hope others will take the challenge as well.
Many thanks to you for stepping up!
You may want to change some of the dialogue, too. No copyright. But here’s one sh0rt one:
Scene: The woods. Zoom in to see Young Owl and Deficit Owl sitting on a branch high in the trees.
YO: Oh, wise Deficit Owl, why is it that the people hate the deficit?
DO: The people have been taught by their Chief Economist, the Deficit Hawk, that deficits are bad.
YO: Are they really bad?
DO: Well, it depends. If all the people were working, and all their output was already spoken for, and the government would try to spend more money then all it would accomplish is to raise the price of whatever they wanted to buy. There would be no more output, because no more output is possible.
YO: Are all the people working now?
DO: No. Many of them are not working at all, and many more of them are working part-time when they would like to work full-time.
YO: So what would the deficit do now, when so many of the people are not working?
DO: It would raise Aggregate Demand – how much stuff the people and the government want to buy, and the producers of those things would hire more people to make them.
YO: Is that why the people hate the deficit? They don’t want more people to be hired?
DO: No, the people want more people to be hired. It is the Deficit Hawk who prevents the deficit from rising.
YO: We have a deficit now. Why are the people not all working?
DO: The deficit is too small. Some of the people are working because of the deficit, but not all that could be.
YO: How can we know what is the right size deficit?
DO: When very few of the people are unemployed, the deficit is the right size.
YO: Yes, but how can we know in advance what deficit will make very few of the people unemployed?
DO: We cannot know for sure in advance. Probably the best we can do is adjust the deficit every few months until unemployment is where we want it to be, and then hold steady until something else changes.
YO: What else will change?
DO: The economy is always changing. The people sometimes want to save more of their incomes, and sometimes less. The governments of other countries also want to save some of our money. These leakages of money from the economy must be made up somehow, or else the producers will lay people off, and unemployment will rise. If the leakages become smaller, then prices will rise and we should make the deficit smaller.
YO: Does the Deficit Hawk adjust the deficit every few months?
DO: No, the Deficit Hawk decides many months in advance what he wants the deficit to be. The real deficit is almost never what he says he wants it to be.
YO: Why can he not make it what he wants it to be?
DO: Because the deficit is mostly exogenous.
YO: Ex … what?
DO: The economy has many automatic stabilizers in it. When sales and incomes increase, taxes increase. Taxes remove money from the economy, and that slows it down. When sales and incomes decrease, and people are unemployed, the government gives some of them some money, which makes the economy slow down a little bit less. So, when the Deficit Hawk reduces spending or raises taxes to try to reduce the deficit, the economy slows down, spending goes up, and taxes might not go up at all.
YO: Has the Deficit Hawk ever eliminated the deficit?
DO: Yes, from 1997-2001 the government budget was in surplus.
YO: What happened then?
DO: The recession of 2000-2002. Since 1837, the National Debt – that’s the sum of all annual budget surpluses and deficits – has been growing almost every year. A few times that it did not grow, we had depressions, until the Great Depression in the 1930’s. After that, we have had recessions whenever the deficit gets small or the budget goes into surplus.
YO: It seems we should have deficits all the time, then.
DO: Probably. More so now that we have a Trade Deficit – people in other countries are selling us more stuff than they buy from us, and their governments are hoarding our dollars, so that their currencies do not rise too much. And, normally, the people want to save some money, too. When both the foreign sector and the domestic sector want to have a surplus, then the government sector must have a deficit. Remember the sectoral balances?
YO: Yes. It is good for the domestic sector to have a surplus, right?
DO: Yes. That means the people are getting richer.
YO: And is it good for the foreign sector to have a surplus?
DO: Yes. It means they are sending us nice products, and we are sending them dollars that our government can create for free.
YO: So, if the foreign sector wants a surplus, and the domestic sector wants a surplus, how can we also not have a government deficit? The deficits and surpluses of the three sectors MUST sum to zero. It is an accounting identity.
DO: (faces audience and smiles)
I was on a roll. Here’s another:
YO: Oh, wise Deficit Owl, since the National Debt in the US is rising so fast, is the US going to be like Greece?
DO: No, young one. More likely we would become like Japan.
YO: Why is that?
DO: Greece is not monetarily sovereign. They use the Euro currency, which is controlled by the European Central Bank. Greece cannot create Euros, just like Illinois cannot create dollars.
Japan and the US are monetarily sovereign. Japan creates Japanese Yen, and they are the only ones that can create Japanese Yen. Likewise, the US creates US Dollars, and they are the only ones who can create US Dollars.
YO: Does Greece have more debt than Japan?
DO: No. Japan has lots more debt than Greece.
YO: So, are the interest rates in Japan higher than in Greece?
DO: No, the interest rate on Japanese government debt is near zero percent, like in the US. The interest rate on Greek government debt varies a lot, but is much higher.
YO: Is that why Japan can afford the interest on their debt, and Greece cannot?
DO: No. Japan can afford any amount of interest on their debt, because they are monetarily sovereign. Japan (and the US) can create as many Yen (or Dollars) as necessary to pay interest on their debts, and furthermore they can control the interest rate on their debts.
YO: Why can’t Greece do that?
DO: Greece is like Illinois, or you and me. They cannot create money to pay the interest on their debt. If you borrow more money that you can afford, nobody else will lend you money anymore, except at a very high interest rate, because it is likely that you will default on that debt. Our interest rate is determined by the markets.
YO: Why is the interest rate on Japanese or US government debt not determined in the markets?
DO: Because the Central Banks in Japan and the US control their own interest rates. They can buy as much of their own country’s debt as necessary to maintain their interest rate target. They can simply create the money to do so, using keystrokes on their computers. They are monetarily sovereign.
YO: So, Greece is in trouble because they are not monetarily sovereign?
DO: That is correct.
YO: Why is Japan in trouble?
DO: Japan is acting like they are not monetarily sovereign. They choose not to create enough Japanese Yen to maintain production and prices in their economy, so they have deflation and recession. They are afraid that if they create more money, they will cause inflation and high interest rates. They do not realize that they control the interest rate, no matter what.
YO: Why will the US be like Japan?
DO: Because the same fears exist here. The Deficit Hawk does not realize that we are monetarily sovereign, and can create as much money as we need to in order to maintain output and interest rates.
YO: So, the Deficit Hawk believes we are the same as Greece?
YO: And because he believes that, he will make us like Japan?
Hey, Trixie are you out there? Funny works well, and that gal is funny!
Yep, yep, I’m here. Fashionably late as usual. I am terrible at scripted comedy not to mention educating people, but this sounds like a fun challenge. Since I have zero ability to self-edit, I can’t guarantee it won’t end up with an ‘X’ rating or the Secret Service at my door. Perhaps I will engage someone like Dan K. or Tom H. — people with actual communication skills — for editing purposes. Time is always limited (as well as my attention span), but stay tuned.
Btw, fantastic video Erin!!!
Are you sure you didn’t write the script for this one?
Yes, exactly like that. Geerussell, I officially declare you as my editor.
The voices are extremely irritating. Whoever popularized this inane robo-talk trend needs to be liquidated asap.
Great work Erin!
@Golfer1John, fantastic scripts. Pretty much word for word what I have been saying for months now. I would like to take another crack writing one of these scripts as well!
Thank you. You’re not the only one saying it. I surely didn’t make this up, it’s what I’ve learned from Wray and Mosler and others. The key is to make it available and attractive to a general audience (assuming a very limited attention span and no book-learning in economics, just life experience). I’m hoping this sort of format can do that.
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