Intellectuals are laying the groundwork for a tower of debt higher than any ever seen in world history.
The primary architect? Paul Krugman? Jerome Powell? Joseph Stiglitz?
It’s none other than Alexandria Ocasio-Cortez (AOC), the ambitious young representative of New York’s 14th district, who has the shovel in her hands.
She may be the youngest woman ever elected to Congress, but she wasn’t born yesterday. And she may not know any more about economics than Donald J. Trump. But she knows a winning trend when she sees one.
And circa 2019, debt is becoming more popular than internet hook-ups.
Our dear readers generally approve when we poke fun at liberals like Ms. Ocasio-Cortez. But they hate it when we talk smack about the president. Many see the contest in Washington as a fight between good and evil. And they know what side they’re on!
We predict, however, that AOC and DJT will soon be on the same side. Beyond good and evil. Just dumb.
Both are already “low-interest kind of people.” And when the going gets tough, both will come to love Modern Monetary Theory, MMT… and $2-trillion federal deficits.
Markets are running into trouble. The trends that were so felicitous for so long – falling interest rates and rising stock prices – have now stalled, or even reversed.
The private sector faces a recession. Wall Street sees a bear market coming. In Washington, tax receipts will fall… as costs continue to rise.
How to keep the jig up? The politicians – left, right, and center – will come to see: debt isn’t so bad!
What were those previous generations thinking, they will wonder? Scrimping and saving, balancing budgets, making trade-offs – and for what? The silly duffers didn’t know any better.
A government can issue debt to pay for whatever it likes. It can pay to fight a war, to lower taxes for a preferred group, to soften the sharp edges of a recession. The United States has, in fact, issued debt to pay for all of these things. American politicians say that public debt crowds out private investment, that it’s unsustainable and will turn the country into Argentina. Or Greece. Or now, Venezuela. But regardless of what they say, what American politicians do is vote for more debt.
Year in, year out… boom or bust… Democrat or Republican – they voted for more debt. Modern Monetary Theory is at least realistic about it.
What really counts is the total amount of resources the feds take. The more they squander, the less is left for real output and growth. And the practical advantage of debt over inflation (just printing money) is that it limits the take.
Borrowed money has a cost. The more the feds borrow, the higher interest rates go. Then, the economy slumps… tax revenues decline… and the feds are worse off than ever.
Then, of course, the feds finagle a fix, getting the central bank – the Fed – to buy up their debt, so interest rates don’t go up. This ends up being very close to a pure MMT or Chartalist system, where the feds are, in effect, printing the money to pay for their quack programs.
Fake money only works for as long as it mimics real money; that is, only so long as it respects the limits of real resources. After all, a car is not a car because the feds say it’s a car; it’s a car because it takes you where you want to go.
And as soon as the feds’ money stops taking you where you want to go – like Zim dollars in Zimbabwe in 2006 or bolívars in Venezuela today – MMT falls apart. The feds could “print” all they wanted; it wouldn’t buy them a ham sandwich.
Fortunately, the U.S. dollar still has some miles left on it. But with politicians like AOC and DJT at the wheel, it’s just a matter of time before the limits come off… and it ends up in a ditch.https://archive.fo/npUGyhttps://www.zerohedge.com/news/2019-02-05/dumb-and-dumber-trump-and-ocasio-cortez-will-join-forces-and-debase-dollar