MMT is currently a hotly discussed topic in financial circles and already has various monikers: Modern Money Theory; Magical Money Tree. We find the first too grandiose, too pompous and the second as more descriptive but simply shortsighted. We have our own moniker!
First, MMT is simply the idea that governments can print additional money (lots of it), then spend it to spur growth. In “normal” times such an idea would be recognized as a reckless, populist mistake. We are not in normal times, but rather we are all living in the shadow of monstrous world-wide debt mountain. And this mountain is holding us back from making progress. (Actually Japan has been doing this and the US is pretty much underway.)
Now – to lay the groundwork to explain the background dynamics – first think of a tsunami or an earthquake. These are outcomes because a mass of energy and then their release made them happen. A tsunami occurs perhaps because a side of an underground mountain slid off, or in the case of the earthquake one of two continental shelves shifted and released a mass of pressure energy to the surface. My apologies to the many, many victims of such disasters, the point here is simply to make the point that these phenomena start, release their new energy and … stop (mostly).
So, lets get to the point. This gargantuan mountain of debt is being widely recognized as the cause of blocking both present & future economic growth. The elephantine debt piles of governments is widely recognized as a danger to the actual functioning of governments themselves. We all need a solution.
And here comes our moniker to elucidate the evolution that will resolve this buildup of pressure: Make Money Trash!
When the printing of money comes at no or negligible cost to governments – or better, makes them money with negative interest rates on bonds – the responsible politicians will certainly do it. For MMT to be a substantive solution, they need to not only do it, but do it an a grandiose style. This will most certainly lead to inflation: the stated, but elusive goal of central banks. A little inflation, the fantasy number of 2% of the ECB or the Fed, will be reached – and passed like a regional train stopping shortly at the first of many, many stations. The end station will be a “hyper”station. This itinerary to the end station will have many calamities along the way where people will want to stop the train – and some will try. Won’t happen. But at the end station we will have surpassed the mountain of debt! Debt will be solved with cheap ‘trash’ money.
And just as the tsunami and the earthquake left behind many victims and much damage after their energy was spent, so will this force of a money avalanche after its force is spent. But society will survive. What this society looks like will be different from today, that is certain.