Helicopter Money and MMT

Posted: March 26, 2020 in Economics, History, Idle Nonsense
Tags: , , , ,

Caveat: I’m not an economist, nor do I subscribe to most economic analyses. The dismal science is a weird sort of voodoo practiced by self-proclaimed priests and wizards. So more than usual, this blog post is me talking outta my ass.

As we enter a new phase of history where developments come barreling at us with seismic force, the past offers limited guidance what to expect or how to act or react. We are all being sorely tested in myriad ways. Considering how so much of modern civilization depends on money to keep things going, we’re also now testing the limits of fiat currency’s departure from reality before the whole stinkin’ mess collapses. The appearance of cryptocurrencies based on absolutely nothing (unless social consensus and/or obscurantism counts) was easy to ignore, though the opportunity cost is obvious. Public debt and unfunded obligations (e.g., ballooning repayment schedules, entitlements, pensions) have been less easy to ignore, though that proverbial can continues to be kicked down the road indefinitely. But now, this week, we’re greeted with news that the U.S. Congress is readying helicopter money to be showered on everyone to stave off the very collapse some of us consider inevitable. Can’t ignore that. How it will be distributed is unknown (by me, at least), but historical guidance suggests that the least needful will be getting most of it.

The rather precipitous disappearance and reappearance of money (or value) from the U.S. stock market, first in a matter of weeks and then in only days, invites not just disbelief but jaw-dropping incredulity. Unlike the previous crash/recovery when the malefactors and beneficiaries were mostly the same claque of Wall Street goons, this latest crash and preposterous flash recovery (for now) owes its origin to other causes, not that any of the old vulnerabilities were lessened. Most regular citizens a decade ago wanted bad actors — criminals, really — prosecuted and jailed. Didn’t happen, of course, and we have no such scapegoats this time around. Moreover, whatever the extraordinary measures might best be called (bail-outs, bail-ins, etc.), they signal a foundational test of the nature of money.

Modern monetary theory (MMT) would have us believe that sovereign countries like the U.S., especially because the U.S. dollar functions as the world’s reserve currency, can essentially print and spend as much of the stuff as needed. No blowback will result — certainly not the dread specter of hyperinflation. But how confident can anyone be in the theory when its relatively modest prior practice has been immoderated so egregiously? If hyperinflation does indeed follow, which I can’t prophesy, economic priests and wizards ought to be defrocked permanently. Good luck with that, I suppose; rational explanations fare poorly with a public fed a steady diet of false narratives, lies, cons, and swindles leavened with a heavy dose of aspiration and hope, if not outright greed.

A heavily used rhetorical device of mine is to remind folks that there is always a bigger umbrella over the narrow theme of any blog post, and this final paragraph is no different. That covering is the nonmonetary resources that the money economy motivates. Whether a loaf of bread costs 20¢ or $20, the bread is what really sustains us, not whatever make-believe currency we use to facilitate exchange. Sure, the money compels us (for now) to do the things that make the bread or extract the oil or assemble the disparate parts of the widget. But once money becomes worthless or goods become so prohibitively expensive our efforts no longer suffice to sustain us, what then? We have no alternatives or second chances on the horizon, do we? Thus, the anticipated infusion of helicopter money might well be the equivalent of an all-in bet in poker. That’s a pretty big bet with whole population hanging in the balance.

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