Modern Monetary Theory (MMT) – semantic trickery for an ancient practice

Governments around the world (local, state and national) carry debt loads that can never be repaid. These numbers may combine into the $200 Trillion range – levels that cannot even be imagined, much less dealt with economically. (See IMF, McKinsey, and Bloomberg sources.) Per the IMF source, this translates into about $86,000 of debt for every person on the planet. (How many people are there around the globe who will never even make a cumulative $86,000 of income throughout their entire lifetimes, I wonder.) On top of these numbers, governments have made promises to the public for social and welfare spending (like Social Security and health care) that cannot be fulfilled. In the US alone, these unfunded liabilities promised to the public exceed $100T.

To worsen the picture, every year, the annual deficits grow, just adding to the public debt loads as money is borrowed (primarily through various forms of bond sales, e.g. US Treasuries) to keep the lights on, in a sense. There is no hope that even an annual budget could ever break even to pay current liabilities, despite the fact that tax confiscations from the public are ever-increasing and perpetually break previous collections records. Much less is there hope that any real progress could be made to paying down the principal on the many trillions of dollars of debt held by so many individual governments, like that of the US (to the tune of $22 trillion in national debt). City and state governments in the US have their own unsustainable debt paths, unpayable liabilities, bankrupt pension schemes, etc. Additionally, global private debt and derivatives are separate topics that add their own risk to economies.

To keep the shell games going, governments have to find ways to carry the debt year-over-year, convince the taxpayers to keep participating in the Ponzi scheme, and to create new money sources. Of course, the main form of government income is tax takings from the public. These never suffice. They cannot keep up with politicians’ appetites to grow programs, spending and wars – often as a payment to the public for their votes.

Another form of creating money is that of inflation – the hidden tax on the public. This is a very old practice by which governments dilute the money supply. Thousands of years ago, the Roman government did this by cutting corners into round coins, taking the gold and silver shaved corners to melt down into new, smaller coins that held the same face value, but obviously less real value. Thus the money and its value were diluted, and ultimately prices would rise in response. Today, governments do the same thing with the aid of their central banks (e.g. the Federal Reserve in the US). They sell government debt/bonds to the public and to other governments and use that borrowed income to fund current government liabilities. Thus, the money supply is expanded with that infusion into government coffers, the value of the currency is devalued, and ultimately prices increase on goods and services to balance that change. That is inflation. It isn’t natural. Ever-rising prices don’t just occur. It is the direct result of government theft of the value of taxpayers’ money and savings.

A recently published interview with Doug Casey, a contrarian investor and founder of Casey Research, highlighted some aspects of Modern Monetary Theory. He points out that governments are incapable of controlling currencies and points to the illustrative failures of Venezuela, Argentina and Zimbabwe. I would add the Weimar Republic to the list. Neither governments nor any individuals have the capability to understand the billions of moving persons, parts, decisions and interactions that influence economies and determine the values of goods and services. Manipulating values, especially those of currencies and interest rates, has far-reaching and typically unintended consequences. Casey says, “MMT is about radically increased government control. The argument shouldn’t be over whether MMT will ‘work’ or not. (Which he clearly points out multiple times throughout the interview that it does not.) The argument should be about whether it’s moral and proper for people in the government – whether elected or appointed – to print money to change the economy into something that suits them better.”

A few excerpts from Casey’s interview:

“Money represents the hours of your life that you spent earning it. That’s the basic principle here. It represents concentrated life – all the things you want to have and do for yourself, and provide for others in the future. When these people destroy the value of money, they’re destroying part of your life.”

Regarding the broad spectrum of politicians – “They’re all dangerous megalomaniacs. But the chimpanzees listen to them, choose teams, hang on to their every word, support them, and are easily incited to hoot and pant at each other. The American public is going to get exactly what it deserves.”

“They’re going to try every cockamamie idea they can to keep the ball rolling. Lots more controls of all types. More debt. More inflation. MMT is just going to be part of it.”

“I know I’ve been saying this for years. But the idea of America has gradually degraded since about the time of Teddy Roosevelt, and the original Progressives. Then faster with World War I, faster yet with the New Deal, faster yet with World War II, the Great Society, the Nixon devaluation, the Reagan deficits, the War on Drugs, the War on Terror. The only good news – and it’s super good news – is that science and technology have advanced as well. That’s maintained the general standard of living. Unfortunately, the State always gets first dibs on tech developments, and uses them against society. This long-term trend is now going hyperbolic.”

MMT is nothing new that hasn’t been perpetrated on the public countless times before. It’s a newer term for the ancient practice of governments fleecing the citizenry. A slick name aids the deception. As MMT and other forms of economic trickery are promoted by the political and ruling classes as solutions to the ills that they themselves caused, realize that it’s all been done before. And failed. Maybe consider trying something new… like free markets – unencumbered by so many controls, regulations, road blocks, manipulations, thefts, purchased privileges, subsidized failures, and corporo-gov collusions that benefit the few at the expense of the many. Those free markets, they’ve never been tried.