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Karl Marx’s Road to Hell is Paved with Fake Money

Karl Marx’s Road to Hell is Paved with Fake Money

“The way to Hell is paved with good intentions,” remarked Karl Marx in Das Kapital.

The devious fellow was bemoaning evil capitalists for having the gall to use their own money for the express purpose of making more money.

Marx, a rambling busybody, was habitually wrong.  The road to hell is paved with something much more than good intentions.  Grift, graft, larceny, corruption and fake money are what primarily composes the pavement.  Good intentions are merely dusted in to better the aesthetic.

If you want to understand what’s going on with exploding price inflation then you must understand this…

Right now in the United States we have a scam currency that’s controlled by central planners.  Specifically, we have what Marx envisioned in Plank No. 5 of his Communist Manifesto:

“No. 5.  Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.”

The Federal Reserve System, created by the Federal Reserve Act of Congress in 1913, is indeed a ‘national bank’ and it politically manipulates interest rates and holds a monopoly on legal counterfeiting in the United States.

Without the Fed’s policies of mass credit creation the U.S. government could have never run up a national debt over $28 trillion.  Without the Fed’s policies of extreme credit market intervention the U.S. trade deficit for March of $74.4 billion – a new record – would have never been possible.  Without the Fed’s printing press money the U.S. government could have never run annual budget deficits over $3 trillion.

The fact is centralized credit in the hands of a central bank always leads to money supply inflation.  Asset price inflation and consumer price inflation then follow in strange and unpredictable ways.

…click on the above link to read the rest of the article…

Do You Believe in Magic?


The people pretending to run the world’s financial affairs do. The more layers of abstract game-playing they add to the existing armatures of unreality they’ve already constructed, the more certain it becomes that they will blow up all the support systems of a sunsetting hyper-tech economy that now has no safe lane to continue running in.

Virtually all the big nations are doing this now in desperation because they don’t understand that the hyper-tech economy is hostage to the deteriorating economics of energy, basically fossil fuels, and oil especially. The macro mega-system can’t grow anymore. We’re now in the de-growth phase of a dynamic that pulsates through history, as everything in the universe pulsates. We attempted to compensate for de-growth with debt, borrowing from the future.

But debt only works in the youthful growth phases of economic pulsation, when the prospect of being paid back is statistically favorable. Now in the elder de-growth phase, the prospect of paying back debts, or even servicing the interest, is statistically dismal. The amount of racked-up debt worldwide has entered the realm of the laughable. So, the roughly twenty-year experiment in Central Bank credit magic, as a replacement for true capital formation, has come to its grievous end.

Hence, America under the pretend leadership of Joe Biden ventures into the final act of this melodrama, which will end badly and probably pretty quickly. They are about to call in the financial four horsemen of apocalypse: 1) Modern Monetary Theory (MMT), 2) a command economy, 3) Universal Basic Income (UBI, “helicopter” money for the people), and 4) the “Build Back Better” infrastructure scheme.

…click on the above link to read the rest of the article…

money, monetary theory, modern monetary theory, debt, money printing, james howard kunstler, clusterfuck nation, magic, degrowth, growth

MMT Has Lit the Fuse on This Inflation Powder Keg

An economic framework called Modern Monetary Theory (MMT) governs the financial world today, but fails to account for the consequences of its practices. In fact, MMT is leading us to an extremely dangerous financial situation that could blow up at any time.

What is MMT?

Before we get to that, it helps to know what MMT means. It is a theory that states:

monetarily sovereign countries like the U.S., U.K., Japan, and Canada, which spend, tax, and borrow in a fiat currency they fully control, are not constrained by revenues when it comes to federal government spending. These governments do not rely on taxes or borrowing for spending since they can print as much as they need and are the monopoly issuers of the currency. Since their budgets aren’t like a regular household’s, their policies should not be shaped by fears of rising national debt. [emphasis added]

Put more simply, the Federal Reserve can create as much new money as it wants to pay off old debts and fund new government spending. Meanwhile, most individuals don’t concern themselves with the rising national debt (like you most certainly would if your own personal debts were growing).

With such powerful “magic” at their fingertips, Modern Monetary Theorists don’t pay much attention to the fundamentals of the economy. After all, they’ve been taught that the fundamentals don’t matter.

For example, if you’re concerned about the Fed’s nasty habit of running up the national debt and inflating the money supply, MMT tells us not to worry:

With a public debt approaching $30 trillion and a money supply that has increased by 25% in the last two years, the worry seems justified. However, Modern Monetary Theory (MMT) says we have nothing to worry about.

…click on the above link to read the rest of the article…

birch gold group, modern monetary theory, mmt, money printing,

Penalizing Prudence

PENALIZING PRUDENCE

“Economy, prudence, and a simple life are the sure masters of need, and will often accomplish that which, their opposites, with a fortune at hand, will fail to do.” – Clara Barton

“Affairs are easier of entrance than of exit; and it is but common prudence to see our way out before we venture in.” – Aesop

One of my conceits, of which there are many, is the belief that because I have entered the third trimester of my life, I am now in possession of great volumes of wisdom and perspective. Thankfully Mrs. Cog is always nearby to efficiently and surgically remove any such thoughts of grandeur and omnipotence. That said, at some point during the flight of life, even birds of prey eventually turn their thoughts to the comfort of a nearby nest rather than their next fearless fight.

Even the most reckless among us begins elevating to greater importance the preservation of resources rather than mindless squandering, especially when we are closer to the end than the beginning. This is a good thing, by the way. It adds balance to the socioeconomic system, both personally and collectively, as well as countering the self-destructive tendencies of those obsessed with endless consumption.

There’s a reason we’re no longer referred to as ‘citizens’ in mainstream media or political speech, but rather the more personal-responsibility-evading ‘consumer’. If given even a minimum of thought, one quickly realizes this subtly propagandized term (consumer) is a significant, but not the only, component of the obvious agenda to infantilize the US (and global) population.

Like the one year old who eats, sleeps, plays, defecates, eats, sleeps, plays……with no personal responsibility other than to be self-indulgent and consume food and attention, we are being reduced (distilled down might be a better term) to our most base impulses. I suspect most people, if told this to their face, would not react well to my observation, assuming instead I was being critical of them personally.

…click on the above link to read the rest of the article…

Book Review: The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy

In January, the Congressional Budget Office (CBO) released its Budget and Economic outlook for 2020 to 2030. It is horrific reading. Federal budget deficits are projected to rise from $1.0 trillion this year to $1.3 trillion over the next 10 years.

Federal debt will rise to 98% of GDP by 2030, “its highest percentage since 1946,” the CBO says. “By 2050, debt would be 180% of GDP—far higher than it has ever been.” And that was before Covid-19 hit. Now those numbers will be much, much worse.

On top of this, politicians have been announcing grand schemes for further spending: $47 billion on free college tuition, $1 trillion for new infrastructure, $1.4 trillion to write off student loan debt, at least $7 trillion on the Green New Deal and $32 trillion on Medicare for All. By one estimate, these new proposals total an estimated $42.5 trillion over the next decade.

Adding these new spending proposals to the flood of red ink the CBO projects just from following the current path, the federal government is set to face a serious fiscal crisis in the not-too-distant future.

KEEP PRINTING

Or, perhaps not. There is an idea afoot in economics that, as Bernie Sanders’ former economic advisor Stephanie Kelton argues in her new book The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy, could revolutionize the field in the same way that Copernicus did to astronomy by showing that the earth orbited the sun.

Modern Monetary Theory (MMT) states that “in almost all instances federal deficits are good for the economy. They are necessary.” That being so, we don’t have to worry about this coming deluge of red ink, indeed:

…click on the above link to read the rest of the article…

Blain’s Morning Porridge – 21st August 2020 – John Law’s MMT revisited

 

Blain’s Morning Porridge – 21st August 2020 – John Law’s MMT revisited

“Earlier today apparently a woman rang the BBC and said she had heard that there was a hurricane on the way. Well if you are watching, don’t worry, there isn’t.”

It’s blowing a full hooley out there this morning, which is very bad news for my olive trees as the storm is shaking the ripening fruit off. Shame. It’s the first time our little olive grove has produced what looked likely to become full-sized olives. I was going to add them to Dirty Martinis. Meanwhile, mink farms are being wiped out by coronavirus which is proving 100% fatal to the well-dressed ferrets. Interesting, but what does it mean…?

It’s Friday, which means I am allowed to go off on something of a tangent – so let’s not worry about how long this tech rally continues, the rising tensions in Europe, Apple spending $17bln on stock buybacks, China vs US, or the US election.

What’s got me worried this morning is the headline in the FT: UK Public Debt tops £2 trillion for first time on Covid Spending Boom.

Should we worry or should we not? (Clue: the first one…)

Let me ask the question: how long can governments continue to spend their way out of the Coronavirus crisis? The bills for long-term furlough programmes and sectoral bailouts and support, increased social services as unemployment rises, and the urgent need for health spending are going to come due at some point. Is it going to be a problem, and if yes, how big?

Government debt is rocketing higher – but does it matter? Conventional thinking, based on Reinhart and Rogoff, is when debt/GDP exceeds 77% there will a significant slowdown in growth.

…click on the above link to read the rest of the article…

Powell: “Now Is Not The Time To Be Concerned About Debt”

Powell: “Now Is Not The Time To Be Concerned About Debt”

In what was perhaps the most illuminating soundbite from the Powell press conference, in response to a question about the sustainability of the US fiscal trajectory in general, and the soaring debt and deficit in particular – both of which the Fed is now directly monetizing thanks to MMT/Helicopter Money, the Fed Chairman was laconic: “this is not the time” to be concerned about debt.


Bitcoin@Bitcoin

Jerome Powell, Chair of the Federal Reserve: “The debt is growing faster than the economy. This is not the time to act upon those concerns”

Time for Plan ₿

Embedded video

Fair enough, in response we will be just as laconic and use the CBO’s latest long-term debt to GDP forecast to ask the Chairman just when will it be the time to be concerned about the Federal debt. For the benefit of the Fed Chair we have conveniently provided several possible answers.

Doug Casey on What the International Ruling Class Have Planned for You

Doug Casey on What the International Ruling Class Have Planned for You

International Ruling class

International Man: No matter the problem, the prescription of the Davos crowd is always more welfare, more warfare, more money printing, more taxes, and of course, more centralization of power into global institutions.

What’s your take?

Doug Casey: The people who attend Davos are all welfare statists. They’re not necessarily socialists, insofar as they don’t want to see government nationalize industries. Most understand how totally dysfunctional that is and that they don’t really benefit from it. Strict socialism, defined as State ownership of the means of production, is off the table. They prefer economic fascism, where a powerful State can funnel wealth to the corporations the elite own or control. They’re happy to throw some table scraps to the unwashed masses, of course. Modern Monetary Theory (MMT) is the best way to do that.

Again, they’re not socialists. They’re welfare statists. Completely opportunistic and absolutely unprincipled. Despicable people, actually. Few are entrepreneurial, independent thinkers or free-market oriented. Those types would be disruptive at Davos, and if they’re ever invited, it would be only once.

Other than celebrities, court intellectuals, and publicity-oriented multibillionaires, the attendees are almost all bureaucrats and politicians who thrive on stolen money. But it’s no longer easily visible briefcases full of cash. That’s quaint in today’s world. They steal indirectly, by making sure they benefit from state regulations, state favors, and the inflation of the currency.

Bribes are in the form of tax-deducible donations to charitable foundations and nongovernmental organizations (NGOs). That’s not only much safer, but the money is vastly bigger, and the way it’s rigged adds to their prestige. Both making and taking a bribe disguises the miscreants as philanthropists and do-gooders when they use an NGO as a funnel.

…click on the above link to read the rest of the article…

Will MMT Trigger the Collapse of “Money”?

Will MMT Trigger the Collapse of "Money"?

Will MMT Trigger the Collapse of “Money”?

If the supply of money in an economy is $1 billion, each unit of currency buys X (the purchasing power of each unit of currency).

If the money supply is doubled without any expansion in the consumers’ pool of goods and services, the purchasing power of each unit of currency falls in half. This reduction in the purchasing power of each unit of currency is called inflation.

Governments facing soaring demands and limited tax revenues are naturally tempted to meet these demands with “free” new currency, since the political and financial pain caused by skyrocketing taxes leads to governments being tossed from power.

This temptation explains the regular occurrence of hyperinflation and debt default, as the temptation to over-borrow and pile up interest payments leads to governments defaulting on their debt. In both cases — hyperinflation and debt default — there’s a currency/ governance/ financial crisis that upends the status quo.

This is one common objection to MMT: the freedom to issue new currency is difficult to limit, as there will always be more demands for government spending. Without some “governor” to limit the issuance of new currency to align with the expansion of goods and services, then governments tend to issue new currency far in excess of what the real economy is creating.

This generates inflation, which impoverishes everyone using the currency.

MMT advocates claim that since MMT generates goods and services, it won’t generate inflation. But rebuilding a bridge doesn’t actually create any new goods and services, or increase productivity: it generates wages and consumes materials and energy.

Since it doesn’t generate more consumable goods and services, the expansion of wages and demand for materials will drive prices higher.

 …click on the above link to read the rest of the article…

ECB Official: Can Use Portfolio To Combat Climate Change

ECB Official: Can Use Portfolio To Combat Climate Change  

Central banks have been making all kinds of ridiculous climate change statements in the last several quarters. Some monetary authorities have even said, they could also expand balance sheets to purchase climate-related financial investments. 

Sabine Lautenschläger, Member of the Executive Board and Governing Council of the European Central Bank (ECB), was quoted by Bloomberg on Wednesday in Düsseldorf, Germany, as saying the ECB is prepared to use its balance sheet to support the fight against climate change. 

Bloomberg quoted Lautenschläge as saying: 

• Sustainability criteria are already taken into account in our portfolios that are not held for monetary policy purposes: Lautenschlaeger

• The ECB needs to address all citizens, not just an expert audience – without ever becoming political

We’ve suggested in the past, that this is just a giant ruse to sneak through MMT and helicopter money under the virtue-signaling guise of fighting climate change. 

Central banks, who’ve spent a decade expanding balance sheets, have plowed trillions of dollars into financial assets across the world.

The flawed policy lifted financial asset prices but only benefited a few who held stock, bonds, real estate, etc… Everyone else, which is a majority of the global population are considered non-asset holders, didn’t participate in the decades-long orgy of cheap money, thus created a massive wealth gap that can no longer be ignored. 

As a result of the wealth gap, protectionism and nationalism are sweeping across the world. 

Political uncertainty across the world is at the highest levels ever. 

Millions of people are currently protesting from Asia, the Middle East, and South America, calling for change after a decade of flawed monetary policy by global central banks. 

 …click on the above link to read the rest of the article…

What the Hell is the ECB Doing?

What the Hell is the ECB Doing?

Danielle DiMartino poses an interesting question regarding the ECB. I have a set of answers.

What is the ECB Doing?

I started thinking about that question weeks ago.

I have a set of answers and even started writing this post before DiMartino brought it to the forefront.

There are only two answers. One of them is very unsettling.

  1. Ignorance
  2. On Purpose

Occam’s Razor

Occam’s razor is a principle from philosophy. Suppose there exists two explanations for an occurrence. In this case the one that requires the least amount of assumptions is usually correct. Another way of saying it is that the more assumptions you have to make, the more unlikely an explanation.

Occam’s Razor typically eliminates most conspiracy theories. It’s not that conspiracies don’t happen, but that simpler solutions are far more likely.

My corollary to the theory is very easy to understand: If stupidity is one of the possible answers, it is the most likely answer.

I am a normally a big fan of Occam’s Razor.

But this is so bizarre that I have my doubts.

Importantly, this may not be a conspiracy at all. Mario Draghi can easily be acting alone.

My Lead Question

How stupid can things get before one starts believing something else is in play?

I had already been thinking about that question when not only did ECB president Mario Draghi further push interest rates into negative territory but he also said it was a good idea for the ECB to think about MMT.

Shocking ECB Dissent

Dissent at the Fed happens all the time. It is rare at the ECB. The ECB builds a consensus and it is typically unanimous.

 …click on the above link to read the rest of the article…

Debasing the Baseless–Modern Monetary Theory

DEBASING THE BASELESS – MODERN MONETARY THEORY

  • Populist politicians are turning to Modern Monetary Theory
  • Fiscal stimulus has not led to significant inflation during the last decade
  • MMT is too radical to be adopted in full but the allure of fiscal expansion is great
  • Asset markets will benefit over the medium-term

A recent post from the Peterson Institute – Further Thinking on the Costs and Benefits of Deficits – follows on from the Presidential Lecture given by Olivier Blanchard at the annual gathering of the American Economic Association (AEA) Public Debt and Low Interest Rates. The article discusses a number of issues which are linked to Blanchard’s speech: –

  1. Is the political system so biased towards deficit increases that economists have a responsibility to overemphasize the cost of deficits?
  2. Do the changing economics of deficits mean that anything goes and we do not need to pay attention to fiscal constraints, as some have inferred from modern monetary theory (MMT)?
  3. You advocate doing no harm, but is that enough to stabilize the debt at a reasonable level?
  4. Isn’t action on the deficit urgent in order to reduce the risk of a fiscal crisis?
  5. Do you think anything about fiscal policy is urgent?

Their answers are 1. Sometimes, although they question whether it is the role of economists to lean against the political wind. 2. No, which is a relief to those of a more puritanical disposition towards debt. The authors’ argument, however, omits any discussion of the function of interest rates in an unfettered market, to act as a signal about the merit of an investment. When interest rates are manipulated, malinvestment flourishes. They propose: –

 …click on the above link to read the rest of the article…

Lacy Hunt Blasts MMT and Speaks of Hyperinflation If Implemented

Lacy Hunt Blasts MMT and Speaks of Hyperinflation If Implemented

In the Hoisington First Quarter Review, Lacy Hunt blasts MMT as “self-perpetuating” inflation.

Please consider the Hoisington Investment Quarterly Outlook for the first quarter of 2019.

MMT Leads to Hyperinflation

Under existing statutes, Fed liabilities, which they can create without limits, are not permitted to be used to pay U.S. government expenditures. As such, the Fed’s liabilities are not legal tender. They can only purchase a limited class of assets, such as U.S. Treasury and federal agency securities, from the banks, who in turn hold the proceeds from this sale in a reserve account at one of the Federal Reserve banks. There is currently, however, a real live proposal to make the Fed’s liabilities legal tender so that the Fed can directly fund the expenditures of the federal government – this is MMT – and it would require a change in law, i.e. a rewrite of the Federal Reserve Act.

This is not a theoretical exercise. Harvard Professor Kenneth Rogoff, writing in ProjectSyndicate.org (March 4, 2019), states “A number of leading U.S. progressives, who may well be in power after the 2020 elections, advocate using the Fed’s balance sheet as a cash cow to fund expansive new social programs, especially in view of current low inflation and interest rates.” How would MMT be implemented and what would be the economic implications? The process would be something like this: The Treasury would issue zero maturity and zero interest rate liabilities to the Fed, who in turn, would increase the Treasury’s balances at the Federal Reserve Banks. The Treasury, in turn, could spend these deposits directly to pay for programs, personnel, etc. Thus, the Fed, which is part of the government, would be funding its parent with a worthless IOU.

 …click on the above link to read the rest of the article…

David Rosenberg: Fed Will Embrace ‘Helicopter Money’ In The Next Few Years

David Rosenberg: Fed Will Embrace ‘Helicopter Money’ In The Next Few Years

Jerome Powell has denounced MMT has “just wrong”, but many Wall Street luminaries have surprisingly communicated an openness to the proposal. Most recently Ray Dalio proposed a marriage of monetary and fiscal policy that sounded suspiciously similar to MMT. Bill Gross, once a vocal critic of the Federal Reserve’s stimulus program, told Bloomberg shortly after he retired from managing outside money that higher taxes and the advent of MMT might be ‘necessary evils’  to combat the widening economic gap between the rich and the poor.

MMT has been perhaps the most widely discussed topic in the realm of economics since Alexandria Ocasio-Cortez proposed it as a possible mechanism for financing her ‘revolutionary’ Green New Deal. But this past week, President Trump’s exhortation that the Federal Reserve usher in QE4 by cutting interest rates stoked a frenzy of speculation that the world’s most powerful central bank might be closer to outright debt monetization – aka ‘helicopter money’ – than mainstream economists had realized. Of course, debt monetization is a central plank of the MMT program.

But just days before Trump made his now-infamous QE4 comment, Gluskin Sheff chief economist David Rosenberg offered a prediction during an interview with MacroVoice’s Erik Townsend that, in retrospect, seems surprisingly prescient. 

David Rosenberg

David Rosenberg

During a discussion about how the Fed ‘pause’ impacted Sheff’s monetary policy outlook, Rosenberg, a frequent guest on CNBC, declared that, instead of giving QE another try, the central bank would opt for something even more radical by embracing MMT. And not without good reason. Just because the Fed is ostensibly insulated from political considerations, doesn’t mean it’s not obligated to protect its credibility.

 …click on the above link to read the rest of the article…

MMT Is a Recipe for Revolution

MMT Is a Recipe for Revolution

Historian Stephen Mihm recently argued that based on his reading of the monetary system of colonial Massachusetts, modern monetary theory (MMT), which he cheekily referred to as PMT (Puritan monetary theory), “worked — up to a point.”

One can forgive him for misunderstanding America’s colonial monetary system, which was so much more complex than our current arrangements that scholars are still fighting over some basic details.

Clearly, though, America’s colonial monetary experience exposes the fallacy at the heart of MMT (which might be better called postmodern monetary theory): the best monetary policy for the government is not necessarily the best monetary policy for the economy. As Samuel Sewall noted in his diary, “I was at the making of the first Bills of Credit in the year 1690: they were not Made for want of Money, but for want of Money in the Treasury.”

While true that colonial governments controlled the money supply by directly issuing (or lendin)  and then retiring pieces of paper, their macroeconomic track record was abysmal, except when they carefully obeyed the market signals created by sterling exchange rates and the price of gold and silver in terms of paper money.

MMT in the colonial period often led to periods of ruinous inflation and, less well-understood, revolution-inducing deflation.

South Carolina and New England were the poster colonies for inflation, in part because they bore the brunt of colonial wars against their rival Spanish and French empires. Relative peace and following market signals eventually stabilized prices in South Carolina. 

In New England, however, Rhode Island for decades was able to act as a “money pump” that forced inflation on other New England colonies until they abandoned MMT entirely in the early 1750s.

 …click on the above link to read the rest of the article…

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