MMT is going mainstream. This changes everything.
Over a year before Covid hit, I was telling my readers about a seismic shift in economics.
And I still reckon over the next ten years, this will hands-down be the biggest issue for property investors going forward.
For better or worse this revolution has a name: Modern Monetary Theory, or MMT.
It’s possible that you’re starting to see this term come up more and more.
The ABC, in fact, have done a couple of pieces on it recently. Finance legend Alan Kohler has been giving it some air time, and then last week, they published this primer on it.
(I’d brag that I’m a year ahead of the ABC, but there’s not much pride in that.)
They do do a pretty good job of explaining the basics.
And remember that the basics are that debt and money printing are not necessarily bad.
They can be bad, but a lot depends on the context.
But in the right context, governments can print, borrow and spend, without disastrous consequences.
It’s a little more nuanced that that. Read the article or my original piece if you want a good primer.
But anyway, what’s interesting here is that the idea is slowly going mainstream.
The ABC did make a couple of mistakes, and these mistakes shine a light on just how much confusion is out there.
First, the piece opens up with a picture of money growing on a tree, with the caption: Theresa May famously said there is no “magic money tree”, but MMT theorists say she is wrong.
Yeah. No totally. That’s totally what MMT theorists are saying. There’s a magic money tree.
It comes from the seminal 1968 piece in the Harvard Economic Review, “There’s a magic money tree. A unicorn told me,” by R. Strudthrup.
That is not what they are saying. They fully admit that in the wrong circumstance, money-printing can be highly inflationary and very dangerous.
But we’ve been so conditioned around infantile arguments – All debt is bad. All money printing is bad, etc. that it’s really hard to see what a limiting mental framework it is.
And it’s incredibly frustrating to argue with.
It’s like someone says, “All apple are green!”
And you say, “I don’t think it’s true that all apples are green.”
And they say, “Hey guys, check this idiot out. He doesn’t believe in green apples.”
So that’s one thing holding this economic revolution back.
The second is the way the ABC talks about MMT “proponents”.
It’s a mistake to think about MMT in public policy terms. It’s not a political philosophy. It’s not a position about how to run the economy.
It seeks to be a description of what is. It simply attempts to describe what’s actually happening in the economy with more nuance and detail.
And in that sense, its wrong to talk about proponents the way you might have flat tax proponents.
Take myself for an example. Even though I think MMT does a great job of describing what’s happening, I don’t consider myself a “proponent, no more than I’m a ‘proponent’ of gravity.
And remember, we already been living in the MMT era for over ten years now. American has been running a massive money printing experiment since the GFC.
It’s already happening. The only question is about whether we, as governments but also as the public, do it consciously or not.
But mark my words, we’re not going back. We’ve had the money printing presses on full-bore, and I think people and governments will decide they like having money to throw around.
And that’s not to say there won’t be problems. There will.
Like asset-inflation. After the GFC-era money printing, the American stock market tripled in just over ten years.
Are we ok about that? It’s happening. Are we ok about it? Are we comfortable with the political ramifications?
Who knows. Most people don’t even know it’s happening.
And so my prediction is that the money printing machine will remain on, MMT or not, and the price of hard assets will boom.
Mark my words.
MMT will define the new roaring 20s.