MMT - Modern Monetary Theory - already in practice (for the big banks)

[Musburger1]

A definition of MMT from Wikipedia (Link). The idea is basically the government prints money without the need or backing of taxes (no debt) to achieve full employment, to pay for goods, services, or financial assets. Here's an example of how it is already in use and particularly benefits the big banking players.

Over the past decade, large financial companies have invested billions in America's shale industry. They hold bonds that these companies aren't going to be able to pay back. The bonds may be worth pennies on the dollar now in the open market. Junk bonds. The federal reserve will print money out of thin air, create a SPV (Special purpose vehicle, otherwise known as Blackstone), which will purchase the bonds at par, thus bailing out the bond holders that would have had to eat large losses. So MMT is being used to bail out the bond holder (the large banks and hedge funds). The oil companies will not be bailed out however, they will still go bankrupt. But instead of the banks now owning and taking control of the assets, the Federal Reserve (its proxy, Blackstone) would take ownership. This is selective MMT for the financial system in action.

 

[iatrogenic]

So MMT is being used to bail out the bond holder (the large banks and hedge funds).

Interesting. Which bond issues are being bailed out by the Feds, and how much money is involved?

 

[AC]

Iatronic, this is why Gold and Bit Coin investing will grow in importance once our currency is debased and we start seeing inflation. Already happening, infancy stage. Mus is right about this. Been going on a long time!

 

[Musburger1]

Interesting. Which bond issues are being bailed out by the Feds, and how much money is involved?

Fed to Buy Junk Bonds, Lend to States in Fresh Virus Support

The Fed for the First Time Can Buy Junk Bonds. That Should Help ‘Fallen Angels.’

 

[iatrogenic]

I agree there will be eventually be inflation, although the price of oil is quite the opposite of inflation currently. I just don't see gold or electronic signals replacing fiat. Both of those are/may be inflation hedges, but they are assets, not currency.

 

[Musburger1]

I agree there will be eventually be inflation, although the price of oil is quite the opposite of inflation currently. I just don't see gold or electronic signals replacing fiat. Both of those are/may be inflation hedges, but they are assets, not currency.

Currency is faith based. The dollar is currency until its not.

 

[iatrogenic]

Fed to Buy Junk Bonds, Lend to States in Fresh Virus Support

The Fed for the First Time Can Buy Junk Bonds. That Should Help ‘Fallen Angels.’

It could happen, but they are trying to support the companies their lock down policy is killing, and they should do so.

 

[iatrogenic]

Currency is faith based. The dollar is currency until its not.

That is true for all currency, fiat or commodity.

 

[Musburger1]

It could happen, but they are trying to support the companies their lock down policy is killing, and they should do so.

True in general, but in my example with the oil companies and the bond holders, it makes the bond holders whole, but the oil companies now must pay the fed. This may change nothing to their situation.

But whether or not you think the purchase of corporate debt is necessary, the fact is price discovery is becoming, or is already, meaningless. The idea of free market capitalism, punishing failure and bad bets and so forth is over. Even if the economy bounces back and inflation doesn’t accelerate, everyone knows the “market” is now centrally managed and backstopped.

 

[iatrogenic]

Only to an extent, and government intervening in the first place caused much of the problem. Go research bankruptcies in the U.S. and get back with me.

 

[Musburger1]

Only to an extent, and government intervening in the first place caused much of the problem. Go research bankruptcies in the U.S. and get back with me.

The government intervention will only increase. Congress leans toward creeping intervention, the largest banks have in essence merged with the government, and last but not least, Trump is a big-time interventionist. And Iatro, you yourself defend intervention (as a one-time necessity I suppose). But if someone is genuinely opposed to government intervention, giant deficits, etc., it ain't going to happen via elections, that's for sure.

 

[iatrogenic]

 

[Chop]

The way things are going, I think we might end up something like the state-backed 'capitalism' of S. Korea or Japan complete with an 'industrial policy' that picks what the government believes are the most important industries and companies and backs them up. I suppose it helps some with stability, but a government picking winners usually doesn't work out so well. Also, IMHO, it tends towards a big/huge company bias and leads to enormous bloated conglomerates at the expense of smaller, nimbler, more innovative companies. Also, always remember--with funding comes control.

As a counter-point, Samsung, Hyundai, and LG do make some very good products, as does Honda, Toyota, Kawasaki, etc.

 

[Chop]

There's a big split in the philosophical mindset regarding the purpose of private industry.

View 1: private companies exist (solely) for the benefit of their shareholders. This was heavily promoted by the U. of Chicago crowd and has dominated the thinking in business schools, and many economics departments, for decades.

View 2: private companies exist for the benefit of their stakeholders, which include their employees, the communities they operate in, and society as a whole, in addition to their shareholders.

Under view 1, bailouts are a transfer of public funds for the benefit of equity owners, who are often better off than the population at large. Most people don't like this, especially those who don't own stock.

Under view 2, bailouts are a transfer of public funds for the benefit of many employees, communities, etc. This has some level of public support, although there are many detractors and it still amounts to transferring $ to a select group of people. (Why should some low $ earner in a non-bailout company be taxed to support higher $ earners at the favored bailout companies).

 

[Austin_Bill]

A definition of MMT from Wikipedia (Link). The idea is basically the government prints money without the need or backing of taxes (no debt) to achieve full employment, to pay for goods, services, or financial assets. Here's an example of how it is already in use and particularly benefits the big banking players.

I call it Monopoly banker theory. Ever play Monopoly with a guy who insists on being the banker and he ends up stealing a few extra $500 every few rounds. Basically he funds himself with the bank money as much as he wants. That is basically what our government has been doing for decades. I thought that by 2025 most of our government programs would be dead, but now I realize they aren't going anywhere we just keep printing more money but we don't even do that since it's all digits in a computer.

If this is the case, then why collect taxes at all? Taxes are a waste of time, the government controls the money they make the rules and Taxes be damned they are worthless. It's not just the US, every country is playing this game.

 

[Austin_Bill]

I perfer this little diddy.

 

[Mr. Deez]

I perfer this little diddy.

I like how the guy who played the obnoxious dad ended up playing The Maestro on Seinfeld.

 

[Monahorns]

I think the companies exist for the benefit of customers. That means if a company isn't serving them well, they go away. MMT and bailouts don't allow that to happen.

Companies obviously have to make decisions based on how it affects profitability, employees, the land and air around them.

But you don't let banks keep companies open just to help employees. It ultimately hurts everyone.

 

[iatrogenic]

Categorical decisions like you mention are problematic. The facts of the situation should govern the decision.

 

[Monahorns]

My categorical comment is to let the market decide which means case by case, individual by individual. It is the epitome of distributed decisions where every person is involved in the outcome.

 

[Musburger1]

McConnell Says He Favors Allowing States to Declare Bankruptcy

Boy, this is going to be a battle. McConnell and the Republicans vs Pelosi and further deficit spending for state bailouts. Wonder which side Trump falls on?

His statements set up a conflict with House Speaker Nancy Pelosi, who said on Bloomberg Television Wednesday a “major package” of aid for state and local government will be in the next stimulus legislation considered by Congress.​

 

[Mr. Deez]

Trump does not give two squirts of piss about the deficit or debt. He will side with Pelosi. He won't shout that out loudly, but the state and local governments will get some kind of bailout. McConnell will back down.

 

[Musburger1]

Trump does not give two squirts of piss about the deficit or debt. He will side with Pelosi. He won't shout that out loudly, but the state and local governments will get some kind of bailout. McConnell will back down.

Yep. I'm quite certain that's the way it will go down.

 

[Monahorns]

Deez. Trump doesn't care about the deficit, but he does hate Pelosi and he is spiteful. I could see him oppose just to spite Pelosi.

 

[Mr. Deez]

Deez. Trump doesn't care about the deficit, but he does hate Pelosi and he is spiteful. I could see him oppose just to spite Pelosi.

He doesn't oppose her when it comes to spending money.

 

[Austin_Bill]

He doesn't oppose her when it comes to spending money.

He has a new currency, the 20 Trillion dollar bill, it will have his face on it. All our problems are solved. No more deficit we are good.

Our founding fathers are probably looking down on us and saying, damn, we should have just stuck with the king.