Jan 30, 2022
Welcome to episode 106 of Activist #MMT. Today I talk with lawyer and independent economics researcher Jonathan Wilson, on the reality of the petrodollar or reserve currency, focusing especially on his unique and easy-to-understand "Cool Stuff" hypothesis. Jonathan's article on the topic can be found on pmpecon.com. Here's a direct link: The Cool Stuff Hypothesis Versus the Petrodollar
(A list of the "audio chapters" in this episode can be found at the bottom of this post. Here's a link to parts two and three.)
Links to snippets from this three-part episode with Jonathan Wilson:
The Cool Stuff hypothesis is a realistic look at how and why a country's currency is desired, spent, and saved – by people both in and out of that country. The playful phrase "Cool Stuff" was inspired by Stephanie Kelton and her 2020 book The Deficit Myth, which takes twenty-five years of MMT academic scholarship and boils it down for a popular, non-academic audience. Aside from the academic concepts, what most impressed me about the book is how Stephanie successfully and simultaneously teaches these concepts to those who know nothing, and also teaches me, who at the time had been studying the topic for two-and-a-half years, things I never knew. I compare this to how the best movies and kids' music can appeal to both adults and kids.
Now, regarding the Cool Stuff hypothesis. A gallon of 2% milk is not Cool. You can go into one of many stores and reliably and inexpensively find a decent gallon of milk. The stores that sell these Un-Cool products products are Un-Cool stores. They're a dime a dozen. On the other hand, some products are Cool. They're unique and more difficult to get, and you can only find them at a select number of stores, or maybe only one. These stores are, therefore, Cool. We go out of our way to shop there because we want their Cool Stuff.
It's no different on the international scale. Most countries sell Un-Cool stuff, and some sell very Cool Stuff that can't be obtained anywhere else. An example of Un-Cool Stuff is a customer-support call center or website and content creators. An example of Cool Stuff is the airplanes and airplane parts sold in the United States, such as by Lockheed Martin. A distant second are those sold by Airbus in France.
Of course, a store can be cool because it genuinely makes Cool Stuff. It can also be cool by killing off all its competitors so it's the only game left in town. An example is an international conglomerate entering a local market, charging below cost for as long as it takes to kill off every local competitor, and then using its monopoly power to price gouge. On the international level, as illuminated by the work of Fadhel Kaboub and others, a common example is a less-powerful country being deceived into a predatory loan by a more powerful country. This foreign-denominated debt puts the less-powerful nation into debt peonage, and a perpetual cycle of doing what's best to pay off that short-term debt at the cost of its citizens' daily, and long-term, survival. It also makes it impossible for that country to ever become Cool.
What's unique in the international context, however, is that the products from a country can only be purchased with that country's currency. This is because the companies therein must pay taxes in that currency, and also must pay their employees and suppliers in that same currency, because they too have that tax obligation. It means that anyone who wishes to buy a product from a country, whether a citizen of or not, must obtain that currency. Just like a national deficit is the only thing that can give citizens wealth, a trade deficit is the only thing that can give foreigners the money with which to buy their Cool Stuff – both now and in the future. The former by spending, the latter by saving.
This interview with Jonathan is in three parts. In part one, he describes how he discovered MMT starting with Sam Levey at the University of Southern California, where they were both in the marching band from 2009-2012. The first MMT book Jonathan purchased was Clint Ballinger's 1,000 Castaways (I interviewed Clint on his book in episodes 39 and 40). Jonathan then summarizes his Cool Stuff hypothesis. In part two he finishes that summary and then we connect the hypothesis to the ridiculous and hyperbolic theory of the petrodollar.
In part three we drastically change subjects. For the past nine months, Jonathan has assisted me in developing a full and free online course that's not directly or explicitly MMT, but is critical for those who want to better understand it. It's based on the work of Asad Zaman (who was my guest in episodes 56 and 57) and is titled Historical Context for Real-World Economics. The course is produced by Activist #MMT, and hosted by Bill Mitchell's MMTed and Esha Krishnaswamy's Historic-ly.
More on that in part three.
If you like what you hear, then I hope you might consider becoming a monthly patron of Activist #MMT. Patrons of Activist #MMT have exclusive access to several full-length episodes (including part two with Warren), right now. A full list is here, each with a brief highlight.">If you like what you hear, then I hope you might consider becoming a monthly patron of Activist #MMT. Patrons of Activist #MMT have exclusive access to several full-length episodes (including parts two and three with Jonathan), right now. A full list is here, each with a brief highlight.
Patrons also get the opportunity to ask my academic guests questions (like last week's episode with Warren), and they support the development of my large and growing collection of learn MMT resources – among other MMT things. To become a patron, you can start by going to patreon.com/activistmmt. Every little bit helps a little bit, and it all adds up to a lot. Thanks.
And now, let's get to part one of my conversation with Jonathan Wilson. Enjoy.