The MMT Podcast with Patricia Pino & Christian Reilly

#206 The Fauxbel Prize: Top Lies In Economics 2026 with Dr Phil Armstrong (part 1)

Feb 19, 2026

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Episode notes

Patricia and Christian talk to economist and author Dr Phil Armstrong about the least useful pieces of economic commentary from the last 12 months.

In this episode:

"Sure, the government *can* create money… (but it shouldn't)"
"It's okay for the government to 'borrow'… if it's investing"
"The national debt is a time bomb!"
"Government 'borrowing' is okay… when interest rates are low"

More to follow in part 2

Full conversation here: https://www.patreon.com/posts/150931987?pr=true

Please help sustain this podcast!

Patrons get early access to all episodes and patron-only episodes: https://www.patreon.com/MMTpodcast

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JOIN PATRICIA AND MMT CO-FOUNDER PROFESSOR BILL MITCHELL AT THE LAUNCH OF A NEW DEDICATED MODERN MONETARY THEORY THINK TANK - MMTUK POLICY RESEARCH GROUP!

7pm on Wednesday 25 February at Friends Meeting House, London Click here to register as an attendee: https://actionnetwork.org/events/mmtuk-launch-event/

MMTUK will be publishing its Job Guarantee policy on 25th February - read a short intro here: https://mmtuk.org/job-guarantee

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Relevant to this episode:

Join Patricia and Phil (and many more) at Scotland's Festival of Economics (Edinburgh and online) 19th - 21st March 2026: https://www.scoteconfest.org/#learnmore
Join the new MMT UK discord server to connect with others looking to promote MMT and ecological economics in the UK!: https://discord.gg/S3UbxFe4FR
"The self-financing state: An institutional analysis of government expenditure, revenue collection and debt issuance operations in the United Kingdom" (Berkeley et al, 2022): https://www.ucl.ac.uk/bartlett/sites/bartlett/files/the_self-financing_state_an_institutional_analysis_of_government_expenditure_revenue_collection_and_debt_issuance_operations_in_the_united_kingdom.pdf
For more on the (Liz) Trussageddon, listen to Episode 147 - Dirk Ehnts: Do Markets Control Our Politics?: https://www.patreon.com/posts/episode-147-dirk-72906421
"How to Fight Back Against the False Idea that the Government is at the Mercy of Financial Markets" by Sheridan Kates: https://thealternative.org.uk/dailyalternative/2025/3/10/scotonomics-monetary-autonomy
"There is no need to issue public debt" by Bill Mitchell: https://billmitchell.org/blog/?p=31715
Episode 148 - Pavlina Tcherneva: Why The Job Guarantee Is Core To Modern Monetary Theory: https://www.patreon.com/posts/episode-148-why-73211346
Quick read: Pavlina Tcherneva's Job Guarantee FAQ page: https://pavlina-tcherneva.net/job-guarantee-faq/
Episode 30 - Steven Hail: Understanding Government Bonds (Part 1) :https://www.patreon.com/posts/29621245
Episode 31 - Steven Hail: Understanding Government Bonds (Part 2): https://www.patreon.com/posts/29829500
"Federal Debt and Modern Money" by Steven Hail & David Joy: https://www.global-isp.org/wp-content/uploads/PN-121.pdf
"Is exchange rate depreciation inflationary?" by Bill Mitchell: https://billmitchell.org/blog/?p=32922

Podcast Description

In this compelling first part of their annual Fauxbel Prize discussion, Patricia Pino and Christian Reilly are joined by economist Dr Phil Armstrong to dissect the most deceptive economic talking points of 2026. What emerges is a masterclass in identifying the subtle linguistic tricks that maintain public misunderstanding about how government finance actually works.

The conversation begins with Christian's astute observation about the phrase 'the government *can* create money' - a seemingly innocent statement that actually perpetuates dangerous misconceptions. As the panel explores, there's a world of difference between saying the government 'can' create money versus acknowledging that it 'does' create money with every pound it spends. This distinction matters because it allows economists and pundits to maintain outdated frameworks whilst appearing to acknowledge MMT insights.

Dr Armstrong brings his characteristic clarity to explaining the consolidated view of government and central bank operations, illustrating why all government spending necessarily involves money creation. Using vivid analogies - from goldfish that must swim in water to the government's unique relationship with the Bank of England - he demonstrates why currency-issuing governments are fundamentally different from currency users like households or businesses.

The discussion then tackles the politically damaging notion that governments should only 'borrow to invest'. Patricia explains why this framing misunderstands the true function of deficits whilst inadvertently supporting neoliberal arguments for privatisation. The panel reveals how this seemingly progressive talking point actually reinforces the household analogy and hands ammunition to fiscal conservatives.

In his analysis of the 'public debt time bomb' narrative, Phil turns conventional wisdom on its head by pointing out that if foreign debt holdings were truly a source of power, then Britain - as the second-largest holder of US Treasury securities - would presumably have a decisive degree of control over America's economic destiny.

Throughout, the conversation illuminates core MMT principles: the operational reality of government spending, the true nature of government bonds as private sector savings, and why exchange rate concerns, whilst legitimate, shouldn't drive us back to defunct fiscal rules. The panel's analysis reveals how even well-intentioned progressive economists can inadvertently perpetuate harmful misconceptions about monetary sovereignty.

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Key Topics with Timestamps

[02:15] Introduction to the Fauxbel Prize concept[05:30] "Government can create money" vs "does create money"[12:45] The consolidated view of government and central bank[18:20] Why all government spending is money creation[25:10] "Borrowing to invest" - the progressive own goal[35:45] Historical context: Keynes and bifurcating budgets[42:30] The "Tap" system vs bond auctions[48:15] "Public debt = time bomb" narrative analysis[55:40] Exchange rate concerns and industrial policy

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Guest Bio

Dr Phil Armstrong - Economist and author of "Can Heterodox Economics Make a Difference?". Researcher with expertise in monetary operations and MMT analysis.

Key Takeaways

Language matters: The difference between "can" and "does" in describing government money creation shapes public understanding
All government spending creates new money: Currency-issuing governments cannot spend previously collected money - every expenditure creates new money
The "government borrowing to Invest" narrative is counterproductive: This framing reinforces household analogies and supports privatisation arguments
A government "debt" clock is a national SAVINGS clock: Government debt represents private sector savings, not a burden
Exchange rate policy needs strategy: Arbitrary fiscal rules won't address structural economic vulnerabilities

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All our episodes in chronological order: https://www.patreon.com/posts/43111643

All our patron-only episodes: https://www.patreon.com/posts/57542767

Scotland's Festival of Economics (Edinburgh and online)

19th - 21st March 2026: https://www.scoteconfest.org/#learnmore

JOIN PATRICIA'S MMT ACTIVIST NETWORK (MMT UK): https://actionnetwork.org/forms/activist-registration-form

Join the MMT UK Discord server to connect with others looking to promote MMT and ecological economics in the UK!: https://discord.gg/S3UbxFe4FR

MMT: THE MOVIE!

"Finding The Money", a documentary by Maren Poitras featuring Stephanie Kelton is now available worldwide to rent or buy: https://findingthemoney.vhx.tv/products/finding-the-money
Updates on worldwide screenings of "Finding The Money" can be found here: https://findingmoneyfilm.com/where-to-watch/
To arrange a screening of "Finding The Money", apply here: https://findingmoneyfilm.com/host-a-screening/

STUDY THE ECONOMICS OF SUSTAINABILITY!

Details of Modern Money Lab's online graduate, postgraduate and standalone courses in economics are here: https://modernmoneylab.org.au/

For an intro to MMT:

Our first three episodes: https://www.patreon.com/posts/41742417
Episode 126 - Dirk Ehnts: How Banks Create Money: https://www.patreon.com/posts/62603318

Quick MMT reads:

Warren's Mosler's MMT white paper: http://moslereconomics.com/mmt-white-paper/
Steven Hail's quick MMT explainer: https://theconversation.com/explainer-what-is-modern-monetary-theory-72095
Quick explanation of government debt and deficit: "Some Numbers Are Big. Let Me Help You Get Over It": https://christreilly.com/2020/02/17/some-numbers-are-big-let-me-help-you-get-over-it/

For a short, non-technical, free ebook explaining MMT, download Warren Mosler's "7 Deadly Innocent Frauds Of Economic Policy" here: http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

Episodes on monetary operations:

Episode 20 - Warren Mosler: The MMT Money Story (part 1): https://www.patreon.com/posts/28004824
Episode 126 - Dirk Ehnts: How Banks Create Money: https://www.patreon.com/posts/62603318
Episode 13 - Steven Hail: Everything You Always Wanted To Know About Banking, But Were Afraid To Ask: https://www.patreon.com/posts/41790887
Episode 43 - Sam Levey: Understanding Endogenous Money: https://www.patreon.com/posts/35073683
Episode 84 - Andrew Berkeley, Richard Tye & Neil Wilson: An Accounting Model Of The UK Exchequer (Part 1): https://www.patreon.com/posts/46352183
Episode 86 - Andrew Berkeley, Richard Tye & Neil Wilson: An Accounting Model Of The UK Exchequer (Part 2): https://www.patreon.com/posts/46865929

For more on Quantitative Easing:

Episode 59 - Warren Mosler: What Do Central Banks Do?: https://www.patreon.com/posts/39070023
Episode 143 - Paul Sheard: What Is Quantitative Easing?: https://www.patreon.com/posts/71589989?pr=true

Episodes on inflation:

Episode 7: Steven Hail: Inflation, Price Shocks and Other Misunderstandings: https://www.patreon.com/posts/41780508
Episode 65 - Phil Armstrong: Understanding Inflation: https://www.patreon.com/posts/40672678
Episode 104 - John T Harvey: Inflation, Stagflation & Healing The Nation: https://www.patreon.com/posts/52207835
Episode 123 - Warren Mosler: Understanding The Price Level And Inflation: https://www.patreon.com/posts/59856379
Episode 128 - L. Randall Wray & Yeva Nersisyan: What's Causing Accelerating Inflation? Pandemic Or Policy Response?: https://www.patreon.com/posts/63776558

Our Job Guarantee episodes:

Episode 4 - Fadhel Kaboub: What is the Job Guarantee?: https://www.patreon.com/posts/41742701
Episode 47 - Pavlina Tcherneva: Building Resilience - The Case For A Job Guarantee: https://www.patreon.com/posts/36034543
Episode 148 - Pavlina Tcherneva: Why The Job Guarantee Is Core To Modern Monetary Theory: https://www.patreon.com/posts/episode-148-why-73211346
Quick read: Pavlina Tcherneva's Job Guarantee FAQ page: https://pavlina-tcherneva.net/job-guarantee-faq/

More on government bonds (and "vigilantes"):

Episode 30 - Steven Hail: Understanding Government Bonds (Part 1):https://www.patreon.com/posts/29621245
Episode 31 - Steven Hail: Understanding Government Bonds (Part 2): https://www.patreon.com/posts/29829500
Episode 143 - Paul Sheard: What Is Quantitative Easing?: https://www.patreon.com/posts/71589989?pr=true
Episode 147 - Dirk Ehnts: Do Markets Control Our Politics?: https://www.patreon.com/posts/episode-147-dirk-72906421
Episode 144 - Warren Mosler: The Natural Rate Of Interest Is Zero: https://www.patreon.com/posts/71966513
Episode 145 - John T Harvey: What Determines Currency Prices?: https://www.patreon.com/posts/72283811?pr=true