"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises

Wednesday, February 2, 2011

Modern Monetary Theory: Bill Mitchell and Fiscal Sustainability

A few readers of this blog are well aware of Modern Monetary Theory (MMT), and I have noticed many others have come to this blog through their Google searches on MMT.  I have addressed my concerns on MMT, or rather to be more exact, how our current monetary system (for many, not all, countries) actually operates.

I share many of the social and political value preferences that MMT'ers hold.  And from what I am learning about Economist Bill Mitchell, I think there is a lot that I agree with in the political sphere.  My only concern are the faults of the Modern Monetary System and its fueling of the financialization (ponzification?) of many Western Economies.  This "ponzification," to me, represents one of the greatest thefts in world history.

But I don't want to get ahead of myself here.  I just wanted to post a link to Bill Mitchell's presentation on Fiscal Sustainability.  I will be writing several posts on this presentation - on where I agree, and where I disagree with Bill Mitchell, and MMT overall.  Don't get me wrong, on paper, it's a great system.  I just have many doubts on the theoretical possibility of a sovereign's moral stewardship of an electronic fiat monetary system.  Especially one that exists in a post industrial economy.  But I'll get to that in future posts.

Here is the link, for those that have a couple hours to kill to view the presentation.  There is also a transcript of the presentation for those that prefer to read at their speed instead of viewing the video:


On another note, a lot is transpiring in the Middle East, particularly Egypt.  As I have written before, this can be viewed in many ways.  But as it related to the current global monetary system, the repercussions can be dramatic.  The US Dollar and Oil are tied together.  The US Dollar derives much of its power through its use as the primary currency in global oil transactions.  If there is a transmission mechanism for the exportation of inflation - energy is the one - as energy affects the costs of everything.  And so, as goes the Middle East, so too goes the US Dollar.  But it can also get more out of control than that.  This can also affect Western Industrial Civilization.

I am going to hold off on writing on that topic for now.   I don't have much more to add than what I have written a few days ago, so I prefer to see how things unfold in the coming days.  Then we'll have a better view on where we're heading.

Make no mistake.  It is becoming a very dangerous world.  The world, despite cheap money fueled rising stock markets, is still extremely fragile.  Don't let the markets fool you.  We are approaching a chaotic period.  Just this week, Secretary of State Hillary Clinton called in most US Ambassadors for a meeting in Washington, DC.  This is unprecedented.

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