The Burden of Debt is not Sustainable, by Irwin Stelzer. Eventually, there will be either an official reset, a huge inflation, or a long steady inflation to whittle back the value of the debt. I’ll bet on the later, as politically easiest and most responsible.
A spectre is haunting the world. No, not communism, which can’t even find a home in Russia. The spectre is debt. The creditor class has nothing to lose but its Kapital, and the bourgeoisie nothing to lose except the value of all that it owns. As Vladimir Lenin once said, “the best way to destroy the capitalist system is to debauch the currency” — subject it to an unsustainable level of government debt, then increase the money supply such that the value of the currency drops sharply. Think Weimar Germany, Mugabe’s Zimbabwe, Maduro’s Venezuela, where carts replaced wallets and purses as shoppers’ means of transporting paper money.
The world GDP is about US$80 trillion
Brian Riedl, a senior fellow at the Manhattan Institute, estimates that this year the government will spend $35,148 per household and collect only $26,677 — nice for us, not so nice for our children and grandchildren. That $8,471 gap must be paid back somehow, some day.
All debt is repaid eventually, either by the borrower or the lender. Inflation means more of it is repaid by the lender.
So what do the gimme-dats and their leftist enablers do? Concoct the theory for the times. Rick Mills writes:
Democrats lining up for a shot at the title of 46th President are following an equally ruinous road with respect to the economy.
Modern Monetary Theory is a new way of approaching the US federal budget that is both unconventional and absurd. It posits that rather than obsessing about how large the debt has grown (over $22 trillion) and the ongoing annual deficits that fuel debt, we should focus on spending, specifically, how the government can target certain spending programs that will cause minimal inflation. Fiscal policy on steroids is, according to its proponents, to be the new engine of US growth and prosperity.
Government is therefore given a free pass on spending, because the only thing that we have to worry about with the national debt is inflation. Curb inflation and the debt can keep growing, with no consequences. This is because the US government can never run out of money. It just keeps printing money, because dollars are always in demand (with the dollar being the reserve currency, and commodities are traded in dollars).
One of MMT’s main proponents is Stephanie Kelton, an economics professor who advised Bernie Sanders’ 2016 presidential campaign. Among the statements she makes in a video explaining MMT, Kelton says “The US dollar is a simple public monopoly. In other words, the United States currency comes from the United States government.”
That means the federal government doesn’t need to “come up with the money” in order to be able to spend. It just prints money and spends it. …
Is MMT not the very definition of “debauching the currency” as Lenin predicted?
If you think MMT is only a theory that will never be put into practice, consider that the leading contender for the Democratic presidential nomination, Elizabeth Warren, has not exactly rejected the idea, as reported by Vox:
While emphasizing that “debt matters,” Sen. Elizabeth Warren (D-MA) recently noted, “we need to rethink our system in a way that is genuinely about investments that pay off over time.”
If Democrats win the presidency and Congress in 2020, look for four years of runaway spending, piling even higher deficits onto the national debt, and casting further doubt on the US dollar’s ability to handle its reserve status. Do bond-holders still believe the US is incapable of defaulting on its monstrous debt?
Modern Monetary Theory and the ideas of the Democratic Party’s far left fit like hand and glove. Pleas for universal medical coverage, free college tuition and a minimum $15 per hour wage can all be paid for by setting the money presses free.
Oddly enough, Pauline Hanson proposed MMT for Australia in about 2000. She was roundly ridiculed by all sides. But then they always criticize Pauline, no matter what she says.