AOC likes MMT and everybody is LOL! Translation: Alexandria Ocasio-Cortez has come out supporting Modern Monetary Theory (MMT) as a way to pay for her socialist dreams and everyone on both sides of the political spectrum thinks it’s hilarious.
In a recent interview she stated that MMT "absolutely" (needed to be) "a larger part of our conversation." And that my friends is what $54,000 per year gets you in education at a liberal New England college.
So what is Modern Monetary Theory? It’s actually quite a simple concept, and one that in various forms has been around since the 1930’s. The basic idea is that governments that control their own currency can just print however much they need to pay for everything they want. Essentially, the government borrows the money it needs by selling more treasury bonds and just writes checks.
This isn’t a modern theory — John Maynard Keynes thought of it in 1936 — but even Keynes was more a proponent of changing interest rates and taxes than of burying the government in debt.
However, now rebranded as "Modern Monetary Theory" (MMT), it has the hearts and minds of Democratic Socialists who are beginning to realize there is no amount of tax they can extort that will pay for all of their free goodies. Even Ocasio-Cortez’s 70 percent income tax heist added to Elizabeth Warren’s 2 percent net worth confiscation would only cover about a fifth of the annual cost of just universal healthcare for all.
The new funding plan? MMT!
Actually, it sounds pretty good at first. Just figure out how much we need for ice cream and cookies and photocopy up the money without any consequences. But it turns out there are consequences — big consequences.
Even liberal Nobel Prize winning economists like Paul Krugman think MMT is a joke. In a recent New York Times editorial he said that MMT, “feels like playing Calvinball, with the rules constantly changing” and “it seems just obviously indefensible.”
Sell some bonds, print some money, and buy cool stuff. But here’s where the wheels come off of that go-cart.
Continuously selling more and more bonds to monetize the printing presses will cause bond buyers to pay lower and lower prices. It is the law of demand — the more quantity you want to sell the lower the price has to be. And, as everyone knows, when bond prices drop interest rates rise, choking off consumer and business borrowing.
Soon nobody could afford to finance a new house, or buy a new piece of machinery for their business.
But the MMT disciples have answers for this. All of their (the government’s) spending on giveaway goodies will replace the lost consumer and business spending in the economy. In their dream it actually grows the GDP by replacing private marketplace spending with government jobs and purchases. And speaking of jobs, if MMT got you laid off from building houses or making machinery, the government will just print more money and pay you not to work — not kidding, it’s part of the plan.
And the economic destruction from MMT doesn’t stop there. All of this extra money floating around without increased productivity will drive inflation through the roof. Forget about soaring interest rates because even if you don’t have to borrow, prices will be too high to afford anything anyway.
But, again, the delusion of MMT has an answer — raise taxes!
That’s right. The idea is that if unemployment is low (it is), and productivity is slowing (it is), then raise taxes to fight inflation by sucking excess money out of the economy. This is a play right out of Keynes’ 1930’s game plan. Only Keynes would have first advised to just stop printing money and then there would be no need to siphon excess cash with tax increases.
Free healthcare, free college, wages for not working… why not throw some cupcakes in the mix too! No, flooding the market with currency until the private economy collapses is truly the worst in a string of bad Democratic Socialist ideas. If MMT were to become the economic policy of the land, believe me, we’d all “feel the Bern!”
Kevin Cochrane teaches economics and business at Colorado Mesa University in Grand Junction and is a visiting professor of economics at the University of International Relations in Beijing, China. He is a regular contributor to several national publications including the Washington Times, Washington Examiner, and American Thinker. He previously was the economic correspondent for both CBS and NBC TV affiliates in Southern California. For 27 years he formerly was a senior banking executive with a major NYSE listed bank holding company and the CEO of a national multi-bank operating company. To read more of his reports — Click Here Now.
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