Hi my friend,
This is indeed a very interesting topic and I believe that people who believe in MMT simply never went through a period without relative money stability.
It is funny that this theory comes from people living mainly in developed countries. This theories only works as long as there are no foreign depts...
MMT doesn't produce inflation, it produces bubbles that pop
Of course it is possible to always create more money supply by printing it directly through the central banks or through dept creation by normal commercial banks. The more money available in a system the more you devaluate it. This means that for an even amount of goods the amount of money available increases which should lean to a devaluation of the money.
MMT believes that a country can always print new money but it is simply blind. The more money that is printed, the more we assist to a bad allocation of assets. Meaning the money will always go where the ROI is highest. It will go into share markets or real estate or bonds, accordingly...
This means that we don't see a continuous depreciation of the money, it fills a bubble and the depreciation will only occur when this buble pops.
MMT and foreign dept = potential for major crises
Imagine a country that prints and prints more of its currency to pay back its depts. Of course it can print always more but currencies are interlocked between each other. You are a foreigner and you see that the money supply of this country is growing and growing. You expect inflation and you will sell assets of this country. This means that there will be a sale pressure on this currency and a loss of price compared to other currencies. This means that if this country has depts in foreign currencies then this dept will increase in value drastically. It will be impossible to print always more currency because the more that is printed, the less it will be worth and the foreign dept will increase. Just some examples of that: Venezuela, Argentina, Turkey...
A currency that is printed according to MMT will be worth nothing in the long run
So I would keep my hands away from any currency that is created according to MMT. I would advise to invest in BTC that has a very limited supply or in Swiss Francs, probably the most stable Fiat currency and a governement behind it that by law is compelled to keep dept under control.
Best regards,
Achim
Our current banking system, in which money is created out of thin air each time a loan is granted, is essentially printing money. I guess the difference between fractional reserve lending and MMT is that with fractional reserve only the banks really benefit. With MMT more of us may benefit.
Interesting point. But remember, "more of us may benefit" owing to money that is printed out of thin air. Those benefits might feel good, but they're all based on nothing more than thin air.
In other words, MMT can have certain short-term benefits, but at what cost. MMT and QE and money-printing are by their very nature unsustainable.
Regardless of any benefits, I'm expecting the worst.
Trouble is that fractional reserve lending does the same thing--creates money out of thin air. The difference is that a loan is supposed to be based on some value-add that will allow the borrower to repay the principle and interest. It is worth watching Money as Debt on YouTube for how this works as well as reading the critiques and director's responses
Exactly. I find it strange when those who rely on / support fractional reserve banking turn around and excoriate those who promote MMT.
Thanks for the link to "Money as Debt." I'll give it a look soon.
Dear @majes.tytyty
In long run I would also expect the worst.
Yep. Hang on tight!!
Thank you for dropping by @toddrjohnson and sharing your thoughts.
ps. did you give up on posting on steemit ?
Yours, Piotr
Thank you for your amazing comment @achim03
Very informative. And you shocked me when you mentioned that MMT doesnt produce inflation. I always thought that increased supply (over demand) will lower value of FIAT currency. And as such - it would create inflation.
If money would end up in property market, then it will increase cost of rent. And that will impact prices of everything. Wouldn't it be ... inflation?
You nailed it! Again big thx for your feedback.
Cheers, Piotr
In a way we are already living in a world of MMT with QE and as a result I always wondered why there was not more inflation. I believe it is because the inflation is kind of hidden within bubbles but when these bubbles explode we will have the same results as if we would have with an increased inflation. I saw this in Turkey. A simple tweet from D. Trump about taxing steel was enough to produce a devaluation of the currency of 20% within a couple of days.
Instead of coming little by little the inflation manifests in bursts and is therefore much more dangerous and imprevisible.
Best regards,
Achim