Bob Murphy Show Ep. 493 Three Deeper Dives Into Fiscal and Monetary Economics
Apr 3, 2026
L. Randall Wray, economist and MMT co-founder, appears via debate excerpts and offers MMT perspectives. Discussion covers when supply shocks should not prompt tightening. They examine how nominal rates can mislead about policy stance. The sectoral balances framework and claims about deficits, private saving, and interest flows are also explored.
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Why Nominal Rates Mislead During Inflation
- Nominal interest rates can mislead about monetary stance during inflationary booms.
- Mises and Friedman show high nominal rates amid hyperinflation can imply deeply negative real rates, so nominal level alone is unreliable.
Rate Hikes Only Tighten If Money Creation Falls
- Raising policy rates isn't mechanically contractionary because the transmission depends on how the central bank tightens money.
- If rate hikes come from reducing the money stock (selling assets), that is contractionary; otherwise effects differ.
Higher Government Rates Don't Automatically Inflate
- Higher yields on existing government debt boost income to creditors but that income must come from taxes, spending cuts, or money creation.
- Murphy stresses higher interest payments aren't inflationary unless financed by printing.