MMT has given politicians the intellectual cover they need to embrace print and spend. That’s an offer that won’t sit on the table for long.
A flood of cash is about to be unleashed on the world. We’ve never seen anything like it.
Over the last couple of weeks, I’ve been helping you get across a seismic shift in the economic landscape (see here and here). This is going to be a total game-changer. It’s going to rewrite all the rules of finance.
And it’s going to make some people mind-bogglingly rich. (Maybe you?)
To recap, I’m talking about Modern Monetary Theory (MMT).
The most important implication is that governments can pretty much print and spend as much money as they want.
I’m over-simplifying that for sure, but that really is the take home message.
And for 100 years or so, no government has ever wanted to experiment with just printing and spending money because the traditional wisdom that that kind of behaviour led to hyper-inflation.
But since we launched QE experiment (the greatest money-printing experiment ever) after the GFC, it has become clear that money printing doesn’t necessarily lead to inflation. In fact, through QE, the global economy actually tilted even further towards deflation.
So that great economic-bogey man turns out to be just Mr Jenkins, the amusement park-owner, in a white sheet, and we’re all Scooby–Doo, just going “Wow! Who would have thought?”
But what happens now Scoobey-Doo has banished that evil ghost forever? What do we do now that we now that money printing doesn’t necessarily lead to inflation?
We print and print and print.
Of course we do. Now I’m not saying that’s going to be a great thing, but that is just how the politics are going to line up.
Think about it. Trump is already stacking the Federal Reserve and Treasury with people sympathetic to the view.
So what happens at the next election?
One party goes to the election with pretty much an unlimited war-chest. They argue that they can print money and spend it on things that will get the economy going, create jobs and get inflation up off the floor.
The other party doesn’t. They argue against printing money because… actually there aren’t many convincing arguments anymore – just an old dude in a sheet that no one is scared of.
What happens in that election?
It’s a bloodbath. The print and spend party wins hands down.
But the reality is that that won’t happen. The other party will see the writing on the wall, and become a print and spend party too.
And then it’s free cash for everyone.
And the reality is that people are ready to accept the idea that money isn’t fundamentally real – that it’s just some token to facilitate trade. Bitcoin has seeded that idea in the popular consciousness.
My sense is that people are willing to believe that governments can spend pretty much as much as they want.
MMT is giving them intellectual cover. The media is starting to pick up on the idea. And the promise of an unlimited warchest is something that no politician can resist for long.
MMT is coming. Great floods of cash are coming. The writing is on the wall.
But what does it mean for property? What does it mean for your investments.
More on that next week.