Posted on | January 31, 2013 | 9 Comments
Essentially, there are four preconditions in Modern Monetary Theory:
- Money enters the economy through government spending, as the total amount of money is constrained not by gold but by the total output of the national economy;
- Government spending is speculative as it prints as much money as it needs to control production and, as a byproduct, employment, and spending beyond productive capacity leads to inflation;
- Taxes do not pay for expenditures but are instead a way to throttle private sector demand; and
- The government is the issuer of the currency, sovereign governments that issue their own currency are never insolvent, so debts essentially don’t matter.
I would submit we now meet those preconditions. With the Federal Reserve’s bond-buying program, beginning with Quantitative Easing “QE1? in November 2008, the US government is the de facto issuer of currency, as the Fed can, for the most part, purchase Treasury Bonds at will. The Federal Reserve is currently purchasing 61% of Bonds at auction, quickly approaching its 70% self-imposed limit, which was relaxed from 35% in 2010.
I would submit that the economic wreckage before you kinda shows that the capitalist/monetary theorist approaches are kinda like before/after chrystal meth pics.
Thus, until somebody articulates reform for the Federal Reserve, stand by for a steady stream of Hegelism. The private sector economy is the horse, the government is the cart. This Modern Monetary Theorist foolishness isn’t going to end well. But, hey, we’re celebrating the 100th anniversary of Woodrow Wilson’s inauguration, aren’t we?