By Sean Kelly
Looking ahead to the new line-up in Washington, a Bloomberg News opinion piece last week (1/11) asked, “Will Powell and Yellen Test MMT in the U.S.?”
MMT is the acronym for Modern Monetary Theory. It doesn’t remain to be tested by the combination of Federal Reserve chairman Jerome Powell and Treasury secretary Janet Yellen. The U.S. has already started down the MMT road to financial perdition. And there is nothing we can do about it now. Except protect ourselves with precious metals.
We have written about MMT before, describing it this way in November: “The school of thought that animates much of Washington today is Modern Monetary Theory. It is not modern at all; it is an old notion. The central idea is that as long as the government has a printing press, it can print all the money it wants. It does not even need to use taxing authority. The theory holds that the government can just print away.”
Insisting as it does, that anything the government wishes to do, it can do by simply printing money, means in its advanced form that the Treasury would simply issue new dollars to pay for any spending initiative. It cuts out the middleman of the Federal Reserve in the money-creation flim-flam. In other words, it merges the Fed and the Treasury into one entity operating seamlessly.
But that is only a formality for people interested in organization charts.
If the Fed directly funds federal debt, Modern Monetary Theory is up and running.
Not long ago, MMT was only the enthusiasm of people way off in the weeds of monetary policy, people like Alexandria Ocasio-Cortez and Elizabeth Warren. But when COVID hit last year, the Fed rolled $3 trillion off the digital printing press quick as a wink, funding Washington’s spending.
It was with that, we wrote, that “MMT became US policy.”
When President-elect Biden named Yellen to run the Treasury Department, he was looking for a Secretary who would enable the unprecedented spending his team planned. It prompted this comment from the New York Sun: “What better way to achieve that merger than to appoint the former Fed head as the new Treasury head… Multi-trillion dollar deficit spending plans will emerge soon from the new Congress. Treasury will spend the money. The Fed will buy the Treasury debt with newly printed money. The US will go broke. And a clueless Janet Yellen will supervise the entire operation.”
Now it is out in the open.
Just days ago, Bryon Wien and Joe Zidle, Vice Chairman and Chief Investment Strategist respectively, of Blackstone Group, the nation’s largest private equity firm with $584 billion of assets under management, predicted that the Fed and Treasury “would openly embrace Modern Monetary Theory” this year.
When the government taxes people to pay for its spending, inflation does not necessarily result. Someone created real wealth which the government took from them to pay for something else. Wealth is being exchanged for wealth. The taxpayer has less; the government or its beneficiaries have more. It does not corrupt the monetary system.
But when the government prints the money or pays with a check backed by nothing, nothing is being exchanged for something, for real wealth. It doesn’t matter if the theory is called “modern,” monetary nothing for something is an ancient currency sleight of hand that creates inflation.
We invite you to watch as the policy unfolds over the ensuing months.
We will provide running commentary along the way. But first make sure that you have secured your wealth and retirement with real money, with gold and silver. Do it now, because we expect things to start moving fast.
Modern Monetary Theory has arrived. For the dollar, it is “prognosis negative.”