L. Randall Wray
speaker
31 appearances
1 recordings
1 series
first heard May 2025
last heard May 2025
L. Randall Wray’s voice in public audio — every appearance, attributed to the second.
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We cannot run out of money. Impossible. Money is a keystroke credit. to an account. It is a keystroke. You cannot run out of keystrokes. A bank can't run out of money. The Treasury cannot run out of money. All this today on Something You Should Know.
That's the big question that I've been trying to answer constantly. in writing for the past 30 years. You know, what is money? So most people will say, oh, well, you know, it's coins, it's paper money, and it's something I use to go buy stuff, okay? And so that's sort of a functional approach. What do I use when I go buy stuff? Increasingly, you don't use coins or paper money
You flash or you tap a piece of plastic on a reader, and that's how you buy stuff. So I think that we need to get away from this notion that money is something we can get our hands on. If you go back in time, actually, most market activity as far back as we go, took place on the basis of credit and debit. And really that, I think, is how we should look at money.
Money is a credit in your hands and it's somebody's debt. And so I think of money as being a debt denominated, that is, measured, kept track of, in terms of a money of account. In the United States, that is the dollar.
Yeah, if you've ever seen the safe door open, you look in there, They couldn't possibly have the money in there. They may have hundreds of millions of dollars of deposits of their customers, and they certainly do not keep that money in the safe. So where is it? Well, it's neither here nor there. It's electronic entries on a computer hard drive. That's what it is.
It's a record of what the bank owes you. That's what your checking account deposit is. It's just a record of what the bank owes you. And when you make a payment to someone, your bank will debit your account. and credit the account of whoever is receiving your payment. So it's just a series of credits and debits. It's all accounting.
Well, so I can say a lot about the government's money, but first, you can create money. You can take a piece of paper and write, I owe you $5. You have just created money. Money is the record of a debt. You have just put yourself in debt. I owe you $5. Now, can you find someone to accept it? If so, you really have created money. And probably your mom would take it.
Maybe some of your good friends would take it. So the problem is, for you, the acceptability of your IOU is pretty narrow. When a bank writes IOU $5, that's going to be accepted almost everywhere, in part because We've got the government standing behind it in several different ways. Your checking account is the bank's IOU. The bank creates this, we could say, out of thin air.
It is just a keystroke credit to your deposit account. They can create money.
Yeah, there are three misunderstandings in that statement. First, we cannot run out of money, period. Impossible. Money is a keystroke credit to an account. It's just a credit. It is a keystroke. You cannot run out of keystrokes. As long as there is one person left at the Fed with one finger, they can keystroke some more credits. Okay? So that is just simply false. It's propaganda, really.
Trying to scare people. We cannot run out of money. A bank can't run out of money. And the central bank can't run out of money. The treasury cannot run out of money. They can always make all payments as they come due. Now, Can the government or the private sector spend too much and cause inflation, which will reduce the value of the money? Yes, that can happen. Okay.
If we create too much money and spend too much so that we're trying to buy more goods and services than our economy can produce or that we could import, then prices can be pushed up. You can get inflation. So that could be a danger. When we look, say, 10 years into the future, 20 years into the future, we are an aging society. That means we will have relatively more old people
on Social Security compared to young people who are workers or children of workers who will become workers. So the question will be 10, 20, 30 years out in the future, will we be able to produce enough real goods and services to take care of all the retirees, plus the people of working age, plus the children.
Now on all reasonable projections of what we think the nation's productive capacity will be, I can assure you that the estimates are we will be able to do that. We're going to be productive enough to take care of All the young, all the old, and everybody in between. And since we can't run out of money, we'll be able to afford it.
There is this great fear that if the US government runs a deficit this year, deficits add to debt. So over the course of this year, if the government spent 500 billion more than it received in taxes, that will add 500 billion to the national debt, which is somewhere north of $30 trillion right now. We would add 500 billion more. And some people say, well, this can't go on forever.
You can't have the outstanding debt grow year after year. Well, if you look at the past 200 and something years since the founding of the nation, the debt has grown steadily. It has grown faster than GDP, which is our measure of national output. The debt ratio has grown over that period at a rate of 2% per year. It's gone on for over 200 years.
The notion that something that has been going on for 200 years can't go on a while longer just boggles the mind. We will be able to grow the debt. Now, households and firms at some point need to repay their debts. They have finite lifetimes and hopefully, by the time you die, you're going to pay off your debt. The US government doesn't have a finite lifetime.
It has been around for over 200 years and maybe it'll be around 200 more years. It doesn't actually ever repay the debt. The debt grows year after year. All that happens is that when a bond matures, so if you have a 10-year bond, at the end of 10 years, it will mature and the holder can present it to the government and say, I want cash. Government will say, fine, we'll give you the cash.
And then the government will just issue another 10-year bond and sell it to someone else. That's what happens. The debt doesn't get repaid. It gets rolled into new debt. This has been going on for 200 years.
The the debt government's debt. Is our asset. OK, if the government issues $100 bond, That will be held in the non-government sector by banks, by household savers, by pension funds, and by private firms that want to hold the safest asset in the world, which is U.S. Treasury bonds. That is the safest asset you can possibly put in your portfolio.
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