Randy: “We’re supposed to believe the central bank manages inflation by using interest rates?" 

Steve: “It’s ridiculous.” 

L. Randall Wray, one of the original MMT economists, recently wrote a paper with Yeva Nersisyan entitled, No, the Fed is NOT Independent – It is a Creature of Congress.  Steve invited Randy for a conversation about how the Federal Reserve is, and always has been, a "creature of Congress," and its supposed independence is a smokescreen that benefits the wealthy at the expense of the rest of us.

The Fed has a dual mandate of full employment and price stability, yet it consistently prioritizes the stability of Wall Street over the well-being of Main Street, bailing out banks while leaving workers to face the fallout of manufactured recessions. 

Randy describes how raising interest rates – the Fed’s so-called tool – works to suppress wages by slowing the economy and killing job growth. Federal Reserve transcripts explicitly state that they fear “wage inflation” but see “profit inflation” as desirable.

Randy wants Congress to take control of the central bank. (Some of us don’t see Congress as independent either.) But whatever our belief in the role of the state and who it serves, the episode contains valuable information on central bank operations, how interest rate hikes discipline labor, the truth about “fighting” inflation, and the difference between monetary and fiscal policy. We need to understand the mechanics of power if we’re going to build the future we deserve.

L. Randall Wray is a Professor of Economics at the Levy Economics Institute of Bard College, and Emeritus Professor at University of Missouri-Kansas City. He is one of the developers of Modern Money Theory and his newest book on the topic is Understanding Modern Money Theory: Money and Credit in Capitalist Economies (Elgar, 2025).

All right, folks, this is Steve with Macro and Cheese. Today's guest is none other than the original OG L. Randall Ray, as you'll see him in his writings.

That'd be Randy Ray, for those of you that get to know him and a prolific writer. He is a professor at Bard College at Levy.

He is also one of the original developers of the economic school of thought known as modern monetary theory. Randy has been on the show many times, and for those of you who don't know him, please go look up more of his work.

For those of you who heard my story, Randy's primer that he put in New Economic Perspectives, and his original book, which basically was the primer put into book form, was a core part of my learning mmt. It was way before the deficit myth, way before a lot of the stuff we get to see on the Internet that we've grown to know and love.

And so Randy's work has been very, very, very instrumental in really what a lot of the work we've put out there represents. So I appreciate him taking the time to be with us.

Today we're going to go over the Federal Reserve and we're going to talk about a policy paper or position paper that they put out at Levy Institute called no, the Fed is Not Independent. It is a Creature of Congress. You all have heard me talk about it. You've had multiple guests come on, such as Ron Gray.

We've had Christopher Shaw come on. We've had a number of people come on to discuss the Fed.

But it's really important today because as we're watching these no Kings rallies, for whatever they're worth, and we're watching the Trump administration rattle its sabers and talk about getting rid of Powell and so forth, the mere notion that the Fed is somehow or another truly an independent thing, that it's not part of the government, is ludicrous. And we will cover that today.

We'll also cover the primary purpose that the Fed was originally supposed to serve for the government and what it's been reduced to over the last 30 years or so. I'm well on the record for saying I believe a lot of this stuff is a manufacturing of consent.

These narrative forms that go out there are meant to keep us in a chaos mode, et cetera, and not really ever knowing what truth is. Kind of like a post truth society at this point meant to keep us all, you know, if there is no truth, then we can't ever know anything. Right.

And so we can't make decisions. But let's be honest, MMT is a real source of truth.

At least it's a mooring and anchoring that we can have in understanding the world around us as money is a primary mover of all things, quite frankly. And this is no different. So with that, I bring on my guest, Randy Ray. Welcome to the show, sir.

Oh, yes, good to be back.

Can you talk a little bit about what prompted you guys to write this policy position paper?

Well, actually, it was a statement by Senator Elizabeth Warren.

She is normally very good on financial markets, and she said that she completely disagreed with the appointment of Chair Powell, but now wants to protect him from President Trump. She wants to protect the Fed's independence.

And I was very shocked by this because the Fed is not independent, has never been independent, should never be independent of Congress. And what she should be doing instead is getting Congress to take back control over the Fed, take it away from Trump, take it away from Powell.

The Fed is a creature of Congress from the very beginning when it was founded, and she should take control.

You know, it's funny because you would think as a lot of these folks are lawyers that have been through a lot of legal review and have probably heard about this stuff in their schooling and their work, and yet they act like they're rubes, they're noobs. They have never heard of these things. It's almost oddly weird.

It's weird how off they are, how just absolutely ignorant of the very system they control or have access to, etc. It's appallingly shocking, isn't it?

Yes, it's shocking. Even if this was just a political angle, a way to get a ding against President Trump, which I'm all for doing.

But if it really is a misunderstanding of this, it is very difficult to understand that Congress does not understand that the Fed is a creature of Congress.

Now, the Fed has worked extremely hard over the past 30 years to become the wizard of odds, completely controlling the economy, getting people to believe that it's got all the right levers so that we don't really need fiscal policy, we don't really need regulation, that the Fed can do everything. The Fed can keep the economy on course.

There is no evidence to support the belief that the Fed is in control.

You know, when I look at all the happenings, if you will, the market crashes and the recurring bailouts, and realizing that only once have we seen even a slight bailout of the American people. And that was during COVID and it was very temporary.

Unfortunately, it doesn't seem like the Fed mandates, even in writing, even though they talk about full employment and price stability. And I know the Hubert Humphrey act, which we'll talk about here shortly, you know, is a legal end to that.

It doesn't seem like the Fed really, not just the Fed, but our government as a whole, but the Fed in particular. It doesn't seem like its primary purpose is to make the American public whole. It seems like it's there to protect American enterprise.

And whether it be shadow banks or whatever, it never really seems to work out for the little guy. How do we square up the Fed's mandate and the outcomes that it produces?

First, let me just remind everyone the COVID bailout actually was fiscal policy.

Yes, it was.

Both Biden and Trump spent trillions of dollars to help bail out the economy. And Yev and I wrote a piece laying out what the response should be. And we were focused on the fiscal policy.

And we believed, and still believe that Biden's relief package was very good, did a lot of good. We had our doubts about Trump's bailout package, but anyway, the bailout was not monetary policy.

Now, it's true that the Fed lowered interest rates, but interest rates had been low for a very long time. The Fed has engaged in some bailouts. Everyone remembers Silicon Valley Bank. Yes, the Fed did step in, but that did not help the economy.

It didn't help people. We can argue about whether it was a good idea to do that or not, but that is not what helped get us out of the deep Covid recession.

Now, the Fed's mandates have always been interpreted as a dual mandate, but really it's a triple mandate. It's always been reasonable growth, reasonably low inflation, and reasonably high employment.

So those are supposed to be the three things that the Fed focuses on. And this mandate was strengthened in the Humphrey Hawkins Act.

Jamie Galbraith actually played a big role in writing, and even he thinks now that it was probably misguided. And the reason it's misguided is if you look at that triple mandate, the Fed has no levers, no tools to achieve any of them.

In other words, even if we believed that all of these are good mandates, the Fed is not capable of pursuing any of them. All of these actually are better pursued by fiscal policy, not by monetary policy.

Back in those days of the Humphrey Hawkins act, the Fed and many economists still believed that the Fed could control the money supply. And Milton Friedman had convinced many economists and politicians that the key to controlling the economy is to control the money supply.

We now know, and the Fed actually began to discover this almost immediately after the Humphrey Hawkins act was passed. By the late 80s, the Fed gave up on money targets.

The Fed can't control the money supply and so they switch to interest rates, the Fed funds rate, the overnight interest rate. And the problem for pursuit of the mandates is the Fed funds rate is not a tool that can be used to hit any of the mandates. Just plain and simple.

And all of the evidence since the late 80s, it demonstrates that what I'm saying is absolutely correct. And even some people within the Fed have now written research reports and stated publicly that the Fed cannot do this.

And it is delusional for the Fed or for Congress or for the President to think that the Fed is able to do any of this.

There's conspiracies galore. The Fed is probably the most propaganda driven institution that the United States government has.

It's got more stories, more conspiracies, more insane, and some sane, some starting to feel more sane narratives behind the scenes as to its role and purpose.

Most of us on the MMT side, whether it be Warren basically saying the Fed could be reduced to a spreadsheet, or some of the other folks that have said basically that, you know what you just said, which is that overnight interest rate isn't really much of anything. I mean, there was a meme going around where there was a child's pretend car steering wheel and the kid was in the passenger seat playing.

They're saying this is the Fed and the reality driving it is fiscal policy. Fiscal policy belongs in the driver's seat, not the Fed. But we make a really big deal about this.

There's obviously something very negative that the Fed is capable of doing aside from just choosing to bail out rich people and leave the working class to suffer. What are some of the things that the Fed's misguided approach to things has done negatively to not only the economy, but really the broader society.

And fortunately the Fed actually Greenspan, had been caught lying to Congress. And Congress induced the Fed to start releasing transcripts of the FOMC meetings, which is where the decisions are made with a five year lag.

And so I read through the transcripts, which are almost word for word.

The only thing that they take out is if they start discussing a bank that's in big trouble, they take out the bank's name, but otherwise it's word for word. And they were worried that some jobs were being created. Literally that was the reason they liked the high unemployment.

And they were worried that if more jobs were being created and more people went back to work, then there could be inflation pressure. I think that indicates that you're right. The Fed acts against the interests of the working class. That I think is true.

If you just plot the unemployment rate over time and you plot the Fed's interest rate movements, it becomes very clear that as soon as the economy starts creating jobs, they raise interest rates. So it's very clear that is what they're doing now. Should the Fed be doing that? Of course not, because high employment is one of those mandates.

What else is the Fed supposed to do in addition to the mandates? The Fed was founded be a lender of last resort. The US was very unusual. We didn't have a lender of last resort.

What a lender of last resort is supposed to do is stop bank runs.

And the idea is that if people start running on a bank, obviously it does not have the cash on hand so that people can take cash out of their demand deposits. If everyone's coming in at once.

Finally, we would have a central bank that would act as lender of last resort. And the Fed does act as a lender of last resort. And that is a proper function of a central bank.

You say, well, they're saving the banks, this is true.

But if the banks are solvent but illiquid, which is when you're supposed to do lender of last resort interventions, you really don't want those banks to fail just because they're holding assets which are basically loans to households and firms that they can't sell immediately. So anyway, that function has been performed by all central banks.

And it's been known since around the middle of the 19th century that you need a central bank to do this. So that's a proper one. Messing around with interest rates is how the Fed is trying to achieve those other mandates.

And that is something that central banks were not set up to do.

You know, I want to touch on something. I'm just an activist, I'm not an economist before anybody accuses me of saying otherwise, but I do want to ask this question.

If the Fed's role is to manage interest rates or the overnight window, if you will, and the mandates are for shorthand, full employment and price stability. When you say that the Fed seemingly always raises interest rates when they start creating jobs, tells me a couple things, right?

So number one, the more jobs there are, the more opportunity it is for labor to withhold itself for a better wage that they can bargain. They're in a position to bargain. That's not the case when it's the other way around.

And interest rate hikes are, and I'll reduce this to a meme level, interest rates are cash to rich people, cash to people who already have money, cash to countries that. Whatever.

And so as labor is trying to achieve some sort of stability of its own, trying to gain some strength, some bargaining power, the Fed swoops in to sweep the legs of the labor movement and knock away its bargaining power while simultaneously giving the rich, presumably the people that own those businesses, more money through interest income channel. What's not to like if you're an oligarch or a rich person? And the Fed's approach to this, it seems like they're working hand in glove.

Now I'm summarizing, if unemployment is getting low enough that labor is able to demand higher wages, that will be inflationary because firms will pass the higher labor costs on in the form of prices. And the problem is that paying workers more doesn't increase their productivity. So it's just inflationary, okay?

On the other hand, if firms are just raising prices to increase their profits, that would be inflationary too. However, firms then have more profits that they will invest that will increase productivity.

So profits inflation is self limiting and in a way it's sort of desirable because it's going to increase productive capacity for the country. But wage inflation is undesirable because workers don't become more productive just because they have higher pay. And so think about that.

That's the way the Fed thinks and I would say that's the way many economists think too.

Now there actually is quite a bit of work that shows that if workers are paid more, actually they are more productive, they're happier, they work harder, they're more devoted to their jobs.

And there's a whole literature on this that's been created by what is called New Keynesians, like Janet Yellen, who was at the Fed and also at the Treasury. There's sort of a whole literature on this that emphasizes that actually raising wages is good for productivity.

It's interesting because like personal anecdote went to the hospital the other day, I had a weird reaction between a over the counter supplement and one of the other medications that I take and went to the ER and so forth. They kept finding nothing wrong because there was nothing wrong. I mean, I took a pill that didn't work well with another pill.

The answer is stop taking the pill. But each time they were like, you know, I'm a doctor and I don't see any of the symptoms. However, my, my job is to recommend that we admit you.

My job is to recommend that you stay, that my job is recommended, we do more tests and so forth.

And that sounds great and all that stuff, but I said to him, I said, what would be my estimated out of pocket if I say yes to any of the above, including with not even thinking about, you know, my insurance payment, it was ridiculous what it didn't cover and how many different hands had to be fed in this process. And to me, my ability to pay that and be safe. And like hypothetically my doctor said I should do this thing.

So technically, if you're just allowing yourself to follow a doctor's instructions, I should have done this thing. But I don't have the thousands and thousands of dollars that would have come from that simple stay just for diagnostics.

But if that was taken care of, I might have been willing to stick around. However, I race back because I don't have any paid time off. I'm a contractor, I'm a consult, and we don't get paid if we don't work.

So if you think about the circular nature of pay, benefits, whatever, and, you know, my health and my ability to do my job and on and on and on, like I went back to work without any sleep, still in the throes of what had happened, knowing full well it wasn't deadly, but still scary, that couldn't be good for productivity if you think about it like that.

And ultimately, if I would have had the peace of mind that it would have been covered and that I could have taken a day or two off from work just to get right, I would have come back to work healthier, better, ready to take on my role even more.

But instead, because of these kind of austerity driven narratives that are real life narratives that are real life situations we find ourselves in anecdotally, I mean, it's my story. I think that kind of proves the point right there in and of itself.

I'm a terrified guy, couldn't afford the bills, didn't do the thing that would ensure that I'm a. Okay. And simultaneously came to work without any sleep the night before.

I mean, it doesn't sound like a winning proposition if your goal is to maximize your resources and not having them live in precarity, am I correct?

Yeah, precarity is a big problem. You know, people have to string together two jobs, three jobs, and that's gonna hurt their productivity. Sure.

And just the worry of being able to support your family is not going to be good. Low pay is a problem. It reduces productivity. I don't think there's any doubt about that. So the Fed has this one tool.

It's the overnight interest rate target. And that's an interest rate that banks pay each other. Okay. For borrowing reserves. That's linked to interest rates for treasury bonds and bills.

And as you said, when the Fed raises its interest rate target, the interest rates on bonds, both private and government bonds, are going to go up. Who are those held by? Well, they're held by people who already have money. Wealthy people hold those things.

Your pension fund, if you have one, if you're lucky enough to have one, holds those things too. So sort of indirectly it can help working class People who someday hope to be retired and have a pension.

But for the most part you're going to be shifting income towards the top. When you raise interest rates, it's going to increase mortgage rates. If bond rates go up, mortgage rates are going to go up.

They're pretty closely linked to 10 year bonds. And that's going to make housing more unaffordable. It's going to make housing construction more expensive.

Because of course, while developer is building a housing development, they've got to pay wages, they've got to buy the materials, they're not going to see revenue for months, maybe a year. They've got to carry loans at higher interest rates. When the Fed is raising rates, so it's going to most likely reduce construction.

Contractors will wait until the interest rates go down in order to avoid the high costs of construction. The US built hardly any housing after the global financial collapse. So we already had a severe housing shortage before the Fed started raising rates.

And they only compound the problem by making housing more unaffordable and by reducing the incentive to construct more.

So there's many ways in which raising rates is going to hurt working class people while increasing the interest income to the already well off people. So there's that very negative distribution impact on the population. There also can be a link to the value of the US dollar.

All things equal, if our interest rate goes up relative to the rest of the world, the dollar will increase in value.

And that's going to have some negative impacts on production in the US Those costs relative to the cost of imports are going to be higher because imports become cheaper if the dollar is stronger. So there's another way that it can impact the working class.

And then finally, the most important impact, and I would say the main avenue through which the Fed affects the economy is by tanking financial markets by causing a financial crisis. This is what the Fed did.

When Chairman Volcker was brought in the high inflation period in the early 80s, he actually increased the target rate to 20%. Half of all the savings and loans failed in a tremendous financial crisis.

We've had several other financial crises, but then again we had the global financial crisis that was triggered by the Fed again raising interest rates. Today you don't cause bank runs for the most part. Silicon Valley was a bank run. But high rates cause insolvency of banks.

And that is what the Fed did in the global financial crisis.

If your financial sector tanks, the economy is also going to go down. Unemployment is going to skyrocket. You're going to have stagnation. And that stagnation is going to bring down inflation.

And so we did have a 20 year period of very low inflation where the inflation was running consistently below 2%, which central bankers have just decided on their own. 2% is the right number for inflation. There's no justification for this. Greenspan and Volcker have basically admitted this.

They just say, oh well, central bank has decided this is the right number. We could not get the inflation rate up to 2%.

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Europe could not get the inflation rate up to 2%. Japan has been suffering with near zero interest rates for 40 years.

Central banks, no matter what they tried to do, couldn't get the inflation rate up to 2%. And we're supposed to believe the central bank manages inflation by using interest rates?

It's ridiculous. I want to touch on your policy paper. We've kind of touched a little bit of this, but I think there's something very specific here.

It was like, can the Fed actually manage the economy, which we're determining quite clear. Clearly they cannot. They can do some very negative things, however.

But you know, during the pandemic, obviously we had saw what Isabella Weber dubbed sellers inflation, which is the profiteering. They found an opportunity to use a crisis to raise rates. And those rates never, ever come back down. They just stay kind of where they were.

But, but here we are now, we've got a new animal in town and that's Trump trying to play tariff fairy. And Trump has been willy nilly shooting favors out for lower tariffs. And you don't kiss the ring, you get higher tariffs.

And one of the things that has occurred over the last several months is this tariff on lumber and wood built products in particular with Canada.

And we're watching the tariffs on those really, really cause a tremendous impact on lumber in general, which is what we build houses with and a whole host of other things. What exactly is the Fed's role within the tariff space?

It seems like there is no greater economic issue going on right now than Trump's willy nilly kind of gangster style tariff flinging. And there's nobody in Congress is doing a damn thing about this. Let's be fair.

If they were ever a legitimate agency or organization or element of our government, they're doing nothing. They're just sit, sitting back and letting it happen. What exactly is the relationship between Trump's tariffs and the Fed?

And Quite frankly, this 2% target rate and how is the Fed managing that and is it effective and what will be done or what is being done about it?

I agree that the tariffs are going to add some inflation pressure and especially lumber. It'd be hard to think of a worse strategy than to raise the price of lumber when we have a severe housing shortage.

If you, you know, get down into the details of what is it that is causing our measure of inflation to be consistently around 3% instead of the 2% that the Fed wants. Housing is the biggest part of our inflation pressures. And the way to relieve that is fairly obvious.

Build more houses and raising the price of lumber is not going to do that. But also because of Fed thinking, the Fed is afraid to lower interest rates because Trump is causing inflation with tariffs.

And so we have this standoff between the President and the head of the Fed. If Trump would stop all the nonsense about the tariffs, the Fed maybe would lower interest rates as Trump wants him to do.

But as long as he keeps threatening these ridiculous tariff rates, the Fed is scared to lower him. And Powell was warning. He says, okay, we're lowering now, but don't think that we're going to lower again. It's not baked in.

The Fed is going to wait and see how much more damage is Trump going to do. So they're kind of a loggerhead now. I don't agree with either side.

The Fed should be lowering interest rates to compensate for the problems that Trump is creating. We want to reduce the cost of building houses. We want to reduce the mortgage rates to help the market for homes.

So keeping rates high is not the right response to tariffs.

You know, obviously you went on to talk about some of the things you agree with Elizabeth Warren about regarding Fed policy and so forth. I guess we can let you. I mean, I'll boil it down.

You agree that the President shouldn't be meddling, but you do believe Congress, which has created the Fed, this is important. This is kind of bringing a full circle. The Fed is a creature of Congress. Congress, however, doesn't show any.

In my lifetime, I have not seen Congress actually do anything with the Fed. I'm 56, and maybe I just wasn't aware of activities that they did to do this.

And this is why people go, the only thing federal about the Federal Reserve is the name. It's as federal as FedEx. You know, all the little tropes, but in reality it is a creature of Congress. And I want to take it a step further.

I have my fair share of disagreements with Warren Mosler outside of mmt, but within the MMT space, he will frequently say banks are public purpose entities already. They're already national. The issue is they've been deregulated, regulated.

And as a result of that, when we talk about reigning in the banks and we talk about all these various things, I mean, what we're really talking about is predatory lending practices and things like that.

They are still intended to be for the public purpose, but they really don't serve the public purpose, not in a way that I think the public would deem in their best interest. Can you talk momentarily about the.

The banking system, the relationship between the Fed and banks and their subordinate role to Congress in general and the charters that they're given from the federal government?

FDR sent his people in to decide which ones to reopen. So that's a long story, very interesting story. I won't go any more into that. But as a result, they said, well, hold up.

What was the Fed doing to help prevent this crisis? The Fed was only willing to lend to solvent banks that had a liquidity problem. And that was the way the Fed was set up.

And Congress said, well, oh, okay, that's not enough. What we need is for the Fed to also get involved in regulating the banks. Okay, so the second function was regulating the banks.

And then skip forward to World War II. We know that the federal government is going to spend far more than it's going to raise in tax revenue.

And I can tell you that everyone in the administration understood the government cannot run out of its own money. They understood that. Then they knew that finding the money was not the problem.

But they were going to issue a lot of government bonds and they wanted to make sure that the government didn't waste a lot of its spending on interest, which we already said goes to rich people. So they wanted to keep the interest rate low. So Congress told the Fed, you will keep the interest rate. The short term interest rate.

If I remember I was 3, 8 of 1%, way below 1%. You're going to keep it there. And the longer rate was longer. I think maybe it was 2%.

Now the treasury actually did not want to do it, but was forced to do it. They freed the Fed so that the Fed did not have to keep the interest rates at that range.

The third thing was the Fed is supposed to do what Congress once with regard to the interest rate, although Congress decided we're not going to do that anymore. Okay. So those are the things that the Fed is supposed to do. The problem is the Fed is not good at regulating.

The Fed has become a very free market oriented. Let the biggest banks do whatever they want to do. Don't worry, the market will discipline them.

We know how well that works with failure after failure and then the Fed doing something it is not supposed to do, which is bailing out an insolvent institution. That's what it did in the global financial crisis. That is actually illegal by US law, but the Fed did it and it does it over and over and over again.

It should not do that. And it is demonstrated it's not capable of regulation. So I actually would take that away from the Fed. It already is in the fdic.

But you need good people working in the FDIC in order to get them to do that. Okay. It's also a responsibility of the Office of the Comptroller of the Currency. Now both of these are actually under the Treasury.

So you need a good Treasury Secretary and you say, okay, you guys are going to regulate the banks. And then of course Elizabeth Warren got through a very good idea. Good legislation.

You also need to protect the consumers from the financial institutions. So we created the Consumer Protection Bureau. Those are a better way to regulate the financial institutions.

States also regulate banks, which also is another layer of regulation, which is a good idea. Congress can pass laws that regulate banks, tell them what they can do and what they cannot do. I think that's the right way to regulate.

So I would take that away from the Fed. I would take interest rate setting away from the Fed.

Just do what we did in World War II say hey, we're tired of you jacking around the interest rates, causing financial crises, sending money off to the already rich. We're going to mandate from now on the Fed funds rate will be some target set by Congress. I recommend 1 or 2%. A lot of MMT people say zero.

I'm okay with that too. Okay, let's just choose one. It's movements of the rate that cause the financial problems. So let's choose 1 0, 1 2%. Okay, any of those, fine.

And the Fed must hit those. And that's it. That's what I would use the Fed for as well as lender of last resort.

You must have a lender of last resort and they are only supposed to lend to solvent institutions. Then you have to have a good way to unwind the insolvent institutions. You don't prop them up, you shut them down. And we have laws that govern this.

But the Fed has been breaking the law. So that's the short of an answer as I can give.

Well, with the kind of like I don't even know what you want to call it banana republic type judiciary that we have now, the Supreme Court is laughably partisan. I have almost no faith in our judicial system whatsoever to net out any kind of fair equitable hearings.

I don't see deliberation, not in a meaningful way. I don't see anything that I was trained in school to believe happening in real life, like everything that I thought I knew.

When I watch it, it doesn't look like what I was told it was. It could have been error of understanding on my part, which certainly wouldn't be the first time.

But my lying eyes are struggling to see a functioning government that actually provides justice, provides oversight. This nefarious idea that it's we the people. I mean, you almost have to be asleep to believe it. It's got to be like a dream or a nightmare.

And reality is, is that I'm not seeing any pathway for regular people to have a say so here. I mean, obviously the more you dig into these things, you realize that the elites were always the ones that it was targeted for.

I mean, our Constitution protects private property right up front. I mean we're talk the ultimate in elite capture here, if you ever want to call it capture. I mean, it was set up for the elite.

It's always been for them. We were a slave nation. What, if anything, gives you hope that this will change? This is not even thinking politically, it's thinking structurally.

I mean, these institutions that we have are being defunded they're being destroyed, maybe in some cases for better, but it would be accidental if it was for better. It just seems like a complete unraveling of any kind of meaningful structure.

I don't know whether this is a transition or whether this is a ending or a beginning or where we are in a process, some sort of change. But what appears to be obvious anyway, to me is that none of this has anything to do with voters or public interest or public desire at all.

Where is this coming from? What is driving these things that we're seeing today?

I agree that the original setup of the United States was to protect the wealthy and to protect the slave owners from democracy. That is, it wasn't set up as a democracy. It was to protect the elite from democracy.

But over hundreds of years, we have remedied some of the problems with the original setup. And I agree we have some major setbacks taking many steps backward.

Pavlina Chernova and I have a paper on the visions of the presidential candidates since Carter and on the movement of the electorate, both those that vote and those that are registered to vote but do not vote, which is the majority. None of the above always wins presidential elections because they don't vote for either one.

And I think the problem is that the Democratic Party abandoned the working class. I mean, completely abandoned. It has paid no attention to it. Chuck Schumer said, yeah, don't worry about losing the working class.

We're going to get some of those suburban white women who have been leaning Republican. We're going to get some of those. Well, this was a complete disaster. And you mentioned Bernie.

You know, Bernie, I think, has been on the right path all along, but he was alone.

I think that now more and more Democrats and others recognize that the hope really is with focusing on the working class, getting those who have refused to hold their nose and vote for people that they cannot possibly support, bring those back. The belief always has been, well, the people who don't vote, they're not engaged. They're not following the politics.

They're probably uneducated, probably in a nice show. That's absolutely false. The ones who are sitting it out, they were probably the ones that are the best educated. Yes.

The most involved, the most active. They're just disgusted with the candidates that are being put forward. And so I'm a lot more optimistic, I think, than you. Yes, yes, you are.

That some people. I think we are seeing this in the mayor's race.

I can't remember the number of volunteers that he has, but it was tens of thousands of people that are willing to go knock on doors that can defeat all the money that's coming in from billionaires to support Cuomo. Okay? So I think that there's some hope in both Bernie and that guy.

That guy has shown that you can get people out, you can get people to support you who have not been supporting the Democratic candidates.

I follow the Mamdani stuff marginally, but he doesn't represent my area.

So, you know, I'm not going to larp, like, I have some sort of role in this, but the reality is that he's a mayor in a major city, no question about it.

And so it's naturally interesting and so forth, but we've seen various people come in, they come in to bring the ruckus, and five minutes later they'd call him Pelosi Mama Bear. And losing the people's faith in them instantaneous. The minute that they sell out, and that is selling out, that right there is a.

A tell to the people that are following very closely but unimpressed by the results. And I think to myself, what will it take? And now we can talk about an electoral side. I think that there needs to be another element here.

You saw a lot of MMT activists bring a lot of attention, some of it unwanted, perhaps, but nonetheless got MMT in a lot of ways on the map for a lot of people that would have never otherwise heard of it. I think that was done outside of a political party, that was done outside of the electoral system.

And I think that looking at folks like the Black Panthers and looking at the Rainbow Coalition and looking at Fred Hampton and others, I believe in order to make these kind of changes matter, it has to go beyond just this electoral process. And people scoff at that like somehow or another. That's irrational and crazy.

But even MLK, outside of the electoral process, who famously said the greatest threat to the Negro was basically the liberal, the white liberal, who values their own convenience and everything over justice. They prefer law and order over justice and have sold out every step along the way.

Kind of like a Bacon's rebellion, watching them sell out the working class if it was inconvenient for them. And if you remember the dnc, you.

You saw people walking outside the DNC being asked about Gaza and they threw their head back laughing, or they plugged their ears and kept walking. I think this is a bigger stain on the Democrats than perhaps people are willing to acknowledge.

There was a very elite, very, you know, the Hamptons kind of look to it, and I think it's going to take more than just political party kind of stuff. I think it's going to require an untainable, un corruptible kind of external influence to create some sort of dual power to force things to happen.

Because I don't see it happening naturally. I mean, I don't think people have enough time to sit there and hound these representatives to do what they say they're going to do.

And sometimes what they say they're going to do is so muddled that people have no idea what they actually said. And I don't know that they know what they said.

I guess as we're going through this, monetary policy and MMT have taken in many ways a step back because the corruption and the insanity are at such a high level that it's really hard to bring things about the Fed into a conversation or bring things in about interest rates or monetary policy or fiscal policy or even modern monetary theory. Because they're like, show me the candidates that are doing any of this stuff, Steve. Show me anybody that gives a crap about this stuff.

And be honest, Steve, you can't do it. Show me. And I struggle because they're not wrong. I can't do it. Help me see this. Do you see a dual approach?

I mean, you've been around a minute, you've seen some movements in your day. What are your thoughts about the approaches people have been taking? Strictly leaning into the kind of electoral process?

I hadn't really borne the fruit that they would like, but I don't know. What are your thoughts? I know you're an economist, by the way. I'm just asking.

I think that I'll agree that politics alone is not enough. Yes. I'm an economist. So what I think needs to be offered to them are economic policies that are going to improve their lives.

Yes.

There's no doubt that the current young generations are facing an economy that is much worse for them than the economy I faced 50 years ago when I was young. And we need to offer them something better.

I think we need to focus on the economics and less on the politics and maybe less on some of the things the Democratic Party have been associated with that are very important to some groups. But they. And that's fine, but they've been neglecting things that would benefit the vast majority of Americans.

So I think we need to get a list of those things that will appeal and make those at least part of the central platform of the whatever part. The Democratic Party for a long time has been the party that was offering progressive economics. It has not been doing that for quite a while.

I'm doubtful that the Republican Party is going to switch gears and become that party.

No, never.

It's extremely difficult to do the third party.

Oh, yes.

But you can do what Bernie does. You can do what AOC does.

Working on the fringes within a party, but really beyond helping to put together an economic package that would improve the lives of the vast majority of Americans is pretty much the only thing I can offer.

Understood.

I can't offer the politics. I don't really know how you can bring people back if actually both parties would stop repelling the huge block of potential voters and bring them in.

Whichever party can do that is going to be winning, and I hope it will be the party that is pushing progressive economic policy.

That's a fair way to go out there, sir. I appreciate your time here very much and look forward to seeing the stuff you and Pavlina put together.

That would be very interesting thought experiment, looking backwards. Tell us, do you have anything new coming up? I mean, last couple times you've had a book, you've had this or that or the other.

What's going on in Randy's world right now?

But this one will be advanced, going deeply into his contributions, beginning with his dissertation. So that's an academic thing.

But let me just say November 19th, the Levy Institute is holding presentations in Congress on rethinking the Fed's independence.

So exactly what we've been talking about, directly related to that, Jamie Galbraith will be there, Claudia Sahm, Pavlina me, William Bergman, I don't know, but I think he's representing the more conservative point of view. But I think he also agrees that the Fed independence thing is overstated. But anyway, we'll see. I don't know.

So we'll be in Congress presenting that, and we'll see whether that has any influence on thinking.

It's exciting to at least give it a shot. Right. If you don't give it a shot, you'll never know. So I appreciate the effort there and looking forward to seeing that.

Hopefully there's some sort of video of it or at least a transcript of it that we can kind of catch up on. That would be wonderful.

Watch the Levy website.

Okay, we'll do. We'll make sure we get that out there as well. All right. Randy, listen, it was wonderful to be with you.

It's been a while, so I really appreciate your time. As far as it goes. I'm going to take us out, folks. My name is Steve Grumbine.

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