Taibbi on Modern Monetary Theory

Matt Taibbi has a worthwhile essay on Modern Monetary Theory which he opens with a short video of the nation's chairman of the Council of Economic Advisers to the president making a fool of himself. The Theory appears to assert that Debt is really a form of liquid potential to do good.

If you have no time to read the essay, the less-than-2-minute video is definitely instructive about the level of joyful stupidity of our leadership.

Within the essay, Taibbi makes this profound statement:


Modern Monetary Theory was interesting back when it was dismissed as a fringe curiosity, but more like terrifying now that it's being taken seriously
MAY 18, 2024

I spent nearly ten years listening to people who in previous eras would have been wandering pantless in asylums insist the solution to all of earth’s problems could be graphed on a napkin. “Okay, if you put a thousand junk mortgages in a box, shake it up ten times, tap the lid and yell Abracazam!, 23% will be AAA-rated when you open the box again.” Banks sold this dream to pension funds, insurance companies, hedge funds, each other, and finally themselves. When it went kablooey Wall Street ran to the Fed and successfully demanded to be fully compensated for losses caused by its own defective products, arguing society had an obligation to bail out its delusions…

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Cassiodorus's picture

And that's precisely what they're doing.

Dollar hegemony 101: they print a lot of money, and the banks cover it because to avoid doing so means the value of their own dollars and dollar-denominated assets will shrink dramatically. So they cover it.

The reason why this system could fail is that the US is making a lot of enemies, now, and the made enemies are dumping their dollars because they recognize that every dollar they own is a cause for US blackmail. This means ever more print-covering.

I have no idea what will come next.

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