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But this too will inevitably fail.
Because MMT, like the debt-backed fiat system of today, is missing one critical piece.
Logical Fallacy of the Fiat Kind
The central claim of MMT is that a government can borrow whatever it wants because it only owes money to itself.
This is technically true.
I would even take it one step further and state that money doesn’t need to be backed by anything at all. It doesn’t need debt, gold, silver – anything – from which it derives value.
Let’s call this one-step-beyond-MMT monetary system the pure fiat solution.
In a pure fiat solution, a country would simply issue currency for delivery of specific services (say, being a soldier, providing medical services, supporting a legal system, etc.), skip the whole national debt part, and do its job without destroying the currency.
Indeed, the only difference between MMT and pure fiat is pretending debt is essential to the system versus admitting you don’t need it all.
Although, with MMT, bank’s still make easy money by keeping the whole charade debt-based.
In any case, the key to making any monetary system work is discipline.
For precious metals and Bitcoin, that discipline is inherent scarcity.
For the debt-backed fiat system that discipline is debt limits, whether imposed by congress, the markets, or an independent Federal Reserve.
For MMT and pure fiat, that discipline is congress.
But the core Fiat Logic Flaw – whether debt-backed, MMT, or pure – is assuming congress or central bankers can maintain that discipline.
Especially in the face of an existential threat brought on by abandoning discipline in the first place.
And that’s why the time is ripe for MMT.
The Path to Magic Money
The coming stagflation will inflict more economic pain than anything we’ve experienced in the U.S before. The voting subjects of the U.S. government will be desperate for any solution that seems easier than confronting reality.
This creates an opportunity for the political class to do the one thing it knows how to do; spin the Fake Prosperity wheel one more time.
Unfortunately, the only place left for that wheel to land is money for nothing.
We’ve had a minor form of money for nothing for decades through welfare payments.
Federal Pandemic Unemployment Compensation took it a step further.
The Child Tax Credit Payments that hit bank accounts directly each month during COVID, whether you were working or not, served as a trial run on how to extend payments directly from the U.S. Treasury Department to everyone.
The Federal Reserve’s recently launched FedNow service improves that reach, which I suspect is a launching pad for a Central Bank Digital Currency (CBDC).
And a CBDC is a perfect vehicle to implement the ultimate expression of money for nothing – productivity crushing Universal Basic Income (UBI) payments.
Toss in bank nationalization, which will make banks and bankers puppets of the political class, and the state will have everything it needs to exercise full discretion over every aspect of U.S. economic activity.
Think Free. Be Free. | | | | |
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