Macro N Cheese

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What do government deficits have to do with the money in our pockets? Returning guest Jim Byrne, of the MMT101.ORG podcast, joins Steve to demystify one of Modern Monetary Theory’s most important tools: sectoral balances. They unpack the accounting identity that let a handful of economists see the 2008 financial crash coming years before Wall Street or the Fed had a clue. Using simple, everyday analogies, Jim walks through why government deficits and surpluses are mirror images of what's happening in your own bank account — and why the conventional wisdom about government "living within its means" gets the whole picture backwards.
Along the way, Steve and Jim dig into the real history: how nearly every attempt to pay down the national debt has been followed by a depression or recession, how a toxic mix of government surpluses, ballooning private debt, and banking deregulation set the stage for 2008, and how the subprime mortgage scheme was less an accident than a business model.
The discussion turns to Jim’s native Scotland and the fiscal framework proposed for a future independent country. The Scottish Government plans initially to continue using the British pound, making Scotland a currency user rather than issuer, while also proposing fiscal rules aligned with the EU’s Stability and Growth Pact as it pursues EU membership. The EU framework retains reference values of a government deficit below 3 percent of GDP and public debt below 60 percent. Jim uses sectoral balances to show how imposing such limits, particularly in a country running an external deficit, would squeeze the domestic private sector, increasing household indebtedness and putting pressure on employment and public services.
Accounting identities can tell us how much money is flowing between sectors, but that’s not the whole picture. Steve and Jim add the missing dimension of class and distribution. Sectoral balances give us the map; stratification and class analysis tell us where the money actually lands. Together, they provide a powerful way to cut through familiar myths about government debt and expose the political choices hidden behind supposedly neutral economic policy.
Jim Byrne hosts the MMT101.ORG podcast, where he focuses on explaining Modern Monetary Theory, heterodox economics, and how public monetary systems really operate.
Follow his work and the MMT101.ORG podcast at mmt101.substack.com
@MMT101dotORG on X

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This week we’re having a long-overdue reunion with John T. Harvey, known to our listeners as the Cowboy Economist because of his plainspoken, accessible way of explaining complex ideas. John talks with Steve about his latest book, US Business Cycles 1954–2020. The conversation challenges mainstream economic theory that treats markets as naturally self-correcting, when in fact unemployment, inequality, oligarchy, and recurring crises are outcomes generated by the system itself.
The discussion brings MMT’s insights about money and real resources into direct contact with the question of class power. If the federal government can finance full employment, and a Job Guarantee could give workers a genuine alternative to precarious private employment, why don’t we do it? John and Steve agree on the central contradiction: the obstacles are not primarily economic or technical. They lie in the distribution of power and in institutions structured around the interests of capital. The challenge, then, is not simply figuring out what is economically possible, but understanding what prevents us from doing it.

John T. Harvey is the Hal Wright Professor of Economics in the Department of Economics at Texas Christian University. He is a well-known heterodox scholar who has published extensively, including two books: Currencies, Crises and Capital Flows (2009) and Contending Perspectives in Economics (2020 2nd edition). His most recent book is US Business Cycles 1954–2020, published by Cambridge University Press (December 2025). He has earned numerous awards for teaching and research and his work focuses on exchange rates and business cycles.

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They say the greatest trick the devil ever pulled was convincing the world he doesn’t exist. Capitalism pulled off something even trickier: convincing us it’s just the way things work.
Historian Andrew Hartman joins Steve to examine how American public education became a battleground in the struggle over class, ideology, and political consciousness. Drawing on his book Education and the Cold War: The Battle for the American School, Andrew traces how the radical possibilities of the 1930s, including militant teacher organizing and encouraging students to question capitalist individualism, were systematically narrowed by the Red Scare. Schools increasingly shifted toward preparing students to adapt to the existing order.
Steve and Andrew explore the crucial role of liberal anti-communism, the Cold War equating of capitalism with democracy and freedom, and an educational culture that treats capitalism as ordinary reality while Marxism and socialism must continually justify their existence. The result is a powerful look at cultural hegemony: how the boundaries of what Americans consider reasonable, possible, or even thinkable were constructed, and why so much of that Cold War ideological architecture remains with us today.
Andrew Hartman is a distinguished professor of history at Illinois State University and the author of several books, including Education and the Cold War: The Battle for the American School; A War for the Soul of America: A History of the Culture Wars; and Karl Marx in America, out in 2025 with the University of Chicago Press.
His website: Andrew Hartman
Facebook: https://www.facebook.com/andrewghartman
Twitter/X: @HartmanAndrew
IG: https://www.instagram.com/professorandrewhartman/
BlueSky: @andrewhartman.bsky.social
LinkedIn: https://www.linkedin.com/in/andrew-hartman-45045610/

Erald Kolasi returns to the podcast to remind us that AI doesn’t simply exist weightlessly in the ephemeral cloud. Drawing on his research into its global energy and emissions impact, Erald traces AI’s vast material infrastructure, from mining, semiconductors, water, energy, and logistics to data centers and power generation. His life-cycle analysis reveals a monster-sized ecological footprint, in contrast to conventional estimates that focus narrowly on electricity consumed at data centers.
But this goes deeper than technology. Steve and Erald examine AI through the dynamics of capital accumulation, monopoly power, financial speculation, imperialism, and the intimate relationship between corporations and the capitalist state. Its explosive growth reflects decisions about who controls society’s resources and what they are used for. The conversation closes by imagining a radically different trajectory: publicly controlled technology directed toward reducing necessary labor and meeting human needs rather than enriching private capital and accelerating ecological destruction. What kind of political economic system would this require?
AI is the subject, but capitalism is the story.
Erald Kolasi is a writer and researcher focusing on the nexus between energy, technology, economics, complex systems, and ecological dynamics. His book, The Physics of Capitalism, came out from Monthly Review Press in February 2025. He received his PhD in Physics from George Mason University in 2016. You can find out more about Erald and his work at his website, eraldkolasi.com.
Subscribe to his Substack: https://substack.com/@technodynamics

**Join us on Tuesday to discuss this episode in our online gathering, Macro 'n Chill. August 25, 8pm ET / 5pm PT. Register here: https://us06web.zoom.us/meeting/register/NGxWl6qMTaKXPhR51uHkwA

If public power repeatedly stands behind private finance when it fails, shouldn't that same power be directed toward employment, productive capacity, and human need? So why isn't it?

Economist Eric Tymoigne returns to the podcast to examine the rapid growth of private credit and private equity through Hyman Minsky’s theory of money manager capitalism. Eric argues that the expansion of payment-in-kind interest, securitization, layered leverage, and dependence on rising asset prices are signs that Ponzi finance is becoming increasingly embedded in private markets, making the financial system more fragile. He warns that efforts to “democratize” these markets by opening them to ordinary savers will broaden the pool of investors available to absorb risks and losses (which should really be borne by the wealthy.)

The conversation then moves from financial instability to political economy. Through an MMT lens, Eric explains the enormous potential capacity of a currency-issuing government to contain financial crises, sustain incomes, and direct investment toward public purposes. Again we must ask why it doesn't happen. This raises the deeper question of whose purposes the state serves. Steve and Eric discuss public investment, community banking, the federal job guarantee, the influence of wealth on political decision-making, and the limits of electoral democracy in a capitalist system.

Eric Tymoigne is an Associate Professor of Economics at Lewis & Clark College, Portland, Oregon; and Research Associate at the Levy Economics Institute of Bard College. His areas of teaching and research include macroeconomics, money and banking, and monetary economics.
Find him on Twitter @tymoignee