Before we dive into this “new” monetary model applied to capitalist economies, I would like to make a note and explain why I’m so against this way of conducting monetary policy and why I don’t think this is actually a new model, but simply the statement fiat-currencies are bound to explode.
A few years ago, it was understood by most economists that boom-burst cycles were associated with the quantity of money circulating in an economy. Inflation and growth go hand-in-hand so despite the quantity of money increasing, the economy isn’t necessarily growing.
Interestingly, it seems we forgot about this core concept somewhere along the way. If not, what’s happening with most, if not all, first-world economies? Why are governments allowing private institutions to keep minting more currency, if that is the reason it self-destructs?Achieving a sound-money economic cycle
If you’re wondering why the US hasn’t suffered a massive hyper-inflation, it’s because there’s plenty of US dollars stuck in foreign economies and financial assets (like bonds). Meaning, a great deal of the currency is not being traded on US soil.
Now, imagine what happens when foreign countries lose just some of their trust in the current system. What happens, then, to the world economy? Will it collapse into a new global fiat-currency? Will we go back to the gold standard? Or will we simply move into the easiest form of money it exists today: Bitcoin?
One thing is certain: the Modern Monetary Theory (MMT) is bound to accelerate our transition into a sound-money economic cycle.
Let’s look into what MMT is and how it works so you can form your own opinion on this theory.What’s MMT and how does it work?
In a nutshell, Modern Monetary Theory espouses three basic tenets:The government has a monopoly over the issuance of national currency Unlike households or companies, the government does not have a budget constraint. It can never run out of mon...