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April 17 2019

Need Money? Hey, Just Print It

by Charlotte Hays

I have not heard a single Democratic candidate say we can just print more money for thelavish  programs they propose.

But that seems they only way to raise the cash for Medicare for All, full employment, and vast infrastructure work.

And printing more cash may be what some 2020 hopefuls are thinking, though I haven't heard anybody quite put that into words yet.

But that is exactly what a new economic school of thought popular with progressives espouses.

You see the hot, newish, somewhat behind-the-scenes guru for the progressive movement, economist Stephanie Kelton, appears to advocate just that: When money is needed, the government can just print some more, silly.

Guy Sorman has a fascinating City Journal piece on Kelton,  a 2016 adviser to Bernie Sanders, and the Modern Monetary Theory--MMT--of which she is a prominent proponent. 

Kelton represents a break with traditional economic thinking, as Sorman expains:

As Kelton explains the new theory, governments can create money according to their needs because a state cannot go bankrupt.

Of course, some do go bankrupt, as Argentina did most recently. But for the sake of argument, let’s acknowledge that the United States is unlikely to go bankrupt: Why not print all the money it wants, so as to satisfy any public goal?

Of course, Kelton's theories are that new:

In fact, MMT is not just a theory, and not really new; it has been put into practice many times—with uniformly disastrous results. Around 1300, King Philip IV of France reduced the quantity of gold and silver in circulating currency, without changing its name or notional value. The difference in weight would supposedly replenish the treasury. Today, we would call this “devaluation.” As an unintended but predictable consequence, all prices for goods on the market rose to compensate for the degraded value of the new coins; the people knew that they were being cheated. This was inflation avant la lettre.

Philip’s failure did not prevent future governments from succumbing to the temptation to create money heedlessly. Germany’s Weimar Republic began churning out Papiermarks in order to buy hard currency to repay its reparations debt to France and Belgium; my father, who lived in Berlin then, told of how he needed a suitcase of banknotes to go shopping. Venezuelans face this same plight today. A decade ago, it was Zimbabweans, in a country where annual inflation reached 79 billion percent.

Sorman says that, while contemporary advocates of the MMT school of economics recognize that it can lead inflation, they underestimate the seriousness of inflation itself.

Venezuela, you might have noticed, is eating itself alive because of inflation.

MMT advocates have an answer to inflation, though: print more money.

They would give to Congress the authority to print money (now it belongs to the Federal Reserve), and theoretically--or perhaps, alas, not so theoretically--Congress could print any amount of money it deemed necessary.

Sorman writes:

MMT’s internal logic recognizes no limits on government spending, an approach that leads logically to a Soviet-style society. Why keep any private sector, when Congress can simultaneously appropriate money for any program and create the money to pay for it?

MMT advocates, Sorman says, describe themselves as neo-Keynesians. But they are far more radical. And can you imagine what would happen if Congress, not an independent institution, ran the money supply?

I urge you to read the entire article.

I'd never heard of MMT before, but the proposals for unbirdled spending espoused by 2020 Democrats fall into place once you do know aboutit.

All 2020 hopefuls should be asked whether this is the way they intend to raise money for their agendas of lavish spending (on which they do seem sorta vague, come to think of it).

 

 



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