A System Decaying
Economists today called “experts” advise the federal government council to issue currency based on MMT (Modern Monetary Theory). These teachings are the policies that come to pass when funding government spending. These are the same teachings taught in colleges and universities.
Modern Monetary Theory:
There is no financial constraint on government spending as long as a country is a sovereign issuer of currency and does not tie the value of its currency to another currency . . . Being a sovereign issuer of currency endows the government to borrow money from the country’s central bank.
The FED is the central bank for the United States. Essentially the central banks of the United States can credit the US government bank for an unlimited amount of money with no interest rate or repayment of government bonds purchased by the FED.
The US Government goes to these lengths in MMT either for economic desires or social goals. A practical way of increasing government funds without raising additional taxes or competing with other governments with good-looking government interest bonds.
There are issues regarding MMT. First, governments get a temporary gratification, like opium, in receiving billions for their spending. In essence, it brings the Cantillon effect; the closes to the printing machine reap the rewards. Politicians do insider trading. How come a politician's wealth increased 10X while in office, even during the Covid Crisis? When their salaries do not match.
insert photo
Another issue is the implementation of inflation or even hyper-inflation. These tendencies are seen from printing money in an economy as stock markets reach all-time highs. Pricing of gas meat goes up by the day. You get the Boom and the bust. Then comes along another housing crisis.
Separating the Money from State
This is Ben Bernanke from the Fed after the financial crisis. He was speaking in front of Congress.
The FED’s balance sheet was spoken in front of Congress on being less than $1 Trillion. After the financial crisis, the FED increased the balance sheet by nearly $4 Trillion more. Now the FED’S balance sheet sits at roughly $8.5 Trillion.
Just understand. Central Banks and the FED are heavily invested in the Markets; they will not let it crash.
If anyone noticed when the Covid Crisis impacted the Market, the Market started tanking. They paused trading for 10 minutes allowing the FED time to insert liquidity in the market by the billions. That is why the Stock Market reached an all-time high of 70 times in 2021.
As the Government State and FED have become close in hand. Essentially the FED is propping up the economy and market today. The S&P 500 and FED assets are correlated because of the amount they buy. The FED is the one saving the economy from collapsing. It has more than $8 Trillion on its balance sheet.
You do not let the system clean itself and regress to natural economy numbers. Debt piles up for citizens, companies, and governments.
Not just debt piling in the US but debt also from other countries that depend on the dollar. Small countries that take out loans from central banks in dollars, like the IMF (International Monetary Fund), provide for their citizens and create growth. Do realize, though, the monthly payments must be made in dollars while their own country is dealing with their fiat currency of Peso, Bolivian, Lira, etc. These fiat currencies are ultimately devaluing themselves against the dollar because the government in their own country has to print their money to make the payments, like taking out a credit card to pay off another credit card while accumulating interest.
For Example:
This has occurred in Argentina on Feb. 9, 2022. In light of Argentina adopting Bitcoin through the app Strike, sending across borderless payments or remittances at near-zero cost.
The country has suffered a $1 = $105.67 Argentine Pesos. It is a privilege to live in the United States, where the dollar is the global monetary reserve, but the value of the dollar is taken away from its citizens through inflation.
Inflation is taxation without legislation - Milton Friedman