Bankers Join Socialist in Supporting “Modern Monetary Theory”
|The gaggle of socialist candidates vying to win the Democratic nomination for
president all agree on one thing. They believe government should be doing a lot
more.
Just how to pay for all of those dreams is the question. Modern Monetary Theory
(MMT), we are told by the likes of Alexandria Ocasio Cortez, is the answer.
The New York Times describes MMT as a “package of eccentric ideas” including the
notion “deficits are too small, and that the U.S. can essentially print money to pay
off its debt.”
Yes, proponents of MMT, believe the U.S. should borrow more than it does currently,
which is roughly $1 trillion per year. Why worry? The U.S. can simply create the
trillions needed to pay off all of that debt.
Some may ask just who will be willing to lend to the U.S. when the primary means of
repayment will be firing up a digital printing press.
Anyone who passed Economics 101 should be able to see the fatal flaw in Modern
Monetary Theory. History is clear and there are some real-life catastrophes playing
out right now in places like Venezuela.
Hyperinflation and currency collapse is the inevitable result when governments begin
printing to escape all limitations.
The headline for the above-referenced article in the New York Times: “Modern
Monetary Theory Finds an Embrace in an Unexpected Place: Wall Street.” There is no
telling exactly why the Times considers Wall Street’s enthusiastic embrace of MMT as
“unexpected.”
The nation’s largest banks certainly got behind the “extraordinary measures” taken
by the Fed and the Treasury in response to the 2008 financial crisis. The bailouts,
Zero Interest Rate Policy, and Quantitative Easing were lavished upon Wall Street as
a gift -- a gift to investment bankers themselves.
The 2008 bailouts ensured bankers would not be accountable for the fraud and
mismanagement in their real estate lending.
Zero Interest Rate Policy (ZIRP) helped the banks rebuild their balance sheets as
they borrowed vast amounts of money from the Fed for free and used it to buy
Treasuries yielding 2-3%. And they took full advantage of QE by dumping huge
quantities of toxic mortgage backed securities on the Fed.
Bankers love inflation because they can make sure they are first in line as the
troughs fill with freshly printed cash. The last decade was MMT-lite, and they loved
it. It is no surprise whatsoever they are eager now to get the party started with full-
blown MMT.
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