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May 2, 2019 | How the Feds Will Cover Up Their Next Larceny

Is an American author of books and articles on economic and financial subjects. He is the founder and president of Agora Publishing, and author of the daily financial column, Diary of a Rogue Economist.

PORTLAW, IRELAND – Yes, Dear Reader… markets are unpredictable.

But you always know which way politicians will go; they will take the low road.


Big Hit

Which is why MMT is going to be a big hit in Washington – with both parties.

Recall that MMT (Modern Monetary Theory) states that governments can, and should, print and spend as much money as they want, assuming nothing bad happens.

Buffett, Icahn, and Powell may be bad-mouthing Modern Monetary Theory… but AOC and Bernie Sanders are already on board. And Donald J. Trump is buying his ticket.

First, the president is setting up the Fed to take the fall for the next stock sell-off. It “incessantly lifted rates,” he claims. Then, he will take the lead in solving the crisis by shifting to much bolder fiscal policies. More spending. Bigger deficits.

Earlier this week, Democrats announced that they had worked out a $2 trillion infrastructure program with the White House. That is just the beginning… Education programs. Student debt forgiveness. Rebuilding the military.

No boondoggle left behind!


It’s Inevitable

And yesterday, Ray Dalio, the world’s most successful hedge fund manager, saw it coming, too. Bloomberg:

Central banking as we know it is on the way out, and it’s “inevitable” that something like modern monetary theory will replace it, billionaire investor Ray Dalio said.

The doctrine, known as MMT, says that governments should manage their economies through spending and taxes – instead of relying on independent central banks to do it via interest rates. […]

Central banks might print money directly to finance government programs – bypassing the need to sell bonds. They could buy real estate “which would then ideally be used for socially beneficial ends.” They could also write off debts hanging over the economy, in a kind of “jubilee.” In downturns, they could deliver cash straight to the public, an idea widely known as “helicopter money.”

There are risks, Dalio acknowledged. Such policies would put “the power to create and allocate money, credit, and spending” in the hands of politicians.



Loopy Idea

People always come to believe what they must believe when they need to believe it.

And if you’re at the tail end of a credit-fueled bubble… with an overpriced stock market… a trillion-dollar federal deficit… and $72 trillion of debt (total U.S., public and private)… What are you going to do?

Admit that you’ve been a damned fool? Fess up that you’ve made a mess of the economy and that it would have been better just to leave it alone?

Cut spending and drain The Swamp?

Or, come up with some loopy idea that allows you to keep the jig going… and get even more of what you really want – other people’s wealth?

Ray Dalio calls it a risk… that the feds would have the “power to create and allocate money, credit, and spending.” But this shows a profound misunderstanding.

That’s not a risk; it’s a sure thing. And it’s precisely the reason that both Donald J. Trump and AOC will turn to MMT (even though the Republicans may not admit it). MMT gives them a way to squeeze more power and money out of the voters.

Government is always a way for the few to take advantage of the many. It is always based on win-lose deals, not win-win deals.

The feds create no wealth. And there’s no such thing as a free lunch or a stimulus program. So whatever the feds get or spend must be taken away from someone else. MMT provides a gauze of semi-coherent claptrap to cover up the larceny.

Creating and allocating money, credit, and spending is, of course, just another way of telling people what to do and keeping them in line, by cutting them off if they don’t do it.

It’s what the Soviet Union did. And Nazi Germany. And Mao’s China. It’s what all the 20th century’s “isms” – communism, Chavism, Peronism, national socialism, syndicalism, collectivism – did. It’s what all governments do – if they get the chance.

Money is time. Time is life. MMT is just the latest swindle to take it away.




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May 2nd, 2019

Posted In: Bill Bonner's Diary

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