Ten years later, what have we learned? We've learned that one bad idea leads to the next worse one. Japanification gone global. Throughout this era, the only winning "bet" was predicting that our leaders would always take the easy way out. Due to a populace wholly incapable of accepting reality. What this era did more than anything is to create a ubiquitous belief in "free money". Currently manifesting itself in printing money to inflate stocks, and borrowed tax cuts. But soon to be manifest in buying just about anything. So it is now, one can gaze into the future and see where both sides of the political spectrum are leaning. Which is very consistent with my long-term prediction for hyperinflation. What month or year that happens is anyone's guess.
The most likely path is the blue line:
As we see above, the next phase of Ponzi collapse will be painful for risk asset holders. To put it mildly. Ponzi policy-makers will quickly use up their conventional tools since policy was never normalized in the past decade. They have only a couple of interest rate bullets left.
Then they will get back to experiments with "unconventional" policies beginning with balance sheet expansion to re-inflate stocks. Which will likely be shockingly politically unpopular this time around.
Which is where MMT comes into play, the new fantasy being thrown around: "Modern Monetary Theory". The conjoining of fiscal and monetary lunacy into a single headed monster. The initiation of which took place in the past decade.
Before we get into that, I will now present a continuum of what I see as the policy choice spectrum:
To the left (not politically of course) we have the Austrian libertarian fantasy model that exists nowhere in the world, and will never be politically feasible. It should be more likely called the "Austerian model" for those who want to see the neighbourhood kids dumpster diving their trash cans. The perfectly unattainable Austrian Utopia has served its purpose of leading the U.S. further and further to the right for decades toward the Promised Wasteland of de-regulated corruption and strip-mined social programs. Now culminating in a reality TV game show host bilking families out of their tax refunds.
To the right of the Hunger Games is the real-world ideal consisting of responsibly managed macroeconomic policies. The model that essentially existed in the U.S. for the better part of 200 years and hopefully where this all lands some years hence, when all of the dumb ideas have been exhausted.
To the right of the Hunger Games is the real-world ideal consisting of responsibly managed macroeconomic policies. The model that essentially existed in the U.S. for the better part of 200 years and hopefully where this all lands some years hence, when all of the dumb ideas have been exhausted.
Then there's the current Banana Republican model, which is well over the line into the ludicrous asinine. And then the nuclear option, MMT.
The real-world ideal is what existed in the United States prior to 1980:
The real-world ideal is what existed in the United States prior to 1980:
Which gets us to the end-game, MMT, the path of which has already been taken. In other words, both sides of the political aisle disagree on what the money should be spent on, but neither side disagrees that deficits no longer matter:
"MMT is growing in prominence precisely because of its relative lack of concern about the size of the deficit. In the years immediately after the Great Recession, which started in December 2007, this aspect of MMT stood in favorable contrast to the position of fiscal-policy centrists and many Republican politicians who called for significant reductions in the deficit at a time of very high unemployment."
Both parties claim to care about the deficit, but once in power they often act as if they care more about putting their preferred policies in place, whether these are tax cuts in the case of conservatives or new spending programs in the case of liberals. Further loosening political constraints on deficits is reckless, no matter which party is doing it."
The article then goes on down the rabbit hole of discussing ways of controlling the inevitable inflation under the MMT paradigm. I won't entertain that delusion. What this represents in a nutshell is short-term way of destroying past debts and tamping down riots. After that, it's wheel barrows full of money and imploded banks. What happens after that is any fool's guess.
Austrian-economists will be happy to know that currency inflation is a flat tax that dispenses with the IRS.
One day sane ideas will matter. But not today.
Today, the lying factory is cranking at 100%
Today, the lying factory is cranking at 100%
