Saturday, March 9, 2019

Brian Chappatta - How to Trade MMT Is Wall Street’s Great Unknown

The biggest names in finance all have an opinion on the polarizing theory, but not a plan.

This article has some real concerns about MMT causing inflation, but it says traders should get ready for it because it could be coming.

The article seems to be saying is that the general public - and students - should stay lumbered with enormous debt to keep inflation down.

But the new fiscal spending should help grow the economy to soak up the extra money so there won't be too much, or any, inflation.

The economist, Philip Soos, recently tweeted-

I'm vaguely amused at those who criticise #MMT yet they almost always peddle pseudo-scientific falsehoods as their financial models are blatantly wrong: the financial intermediation and fractional reserve theories, among others. #MMT is a correct theory of the financial system.

From Bloomberg

Muir sees MMT as a way to shift gains from Wall Street to Main Street. “Monetary stimulus with fiscal austerity doesn’t do anything except make the rich richer,” he wrote. “MMT is novel, ambitious, and a little bit scary. I get it. But let me let you in on a little bit of a secret – young people aren’t afraid of trying something new. They know the system isn’t working and are desperately looking for an alternative.”

Then again, MMT might not even be all that novel. Just look at Japan, which has a debt-to-GDP ratio of about 225 percent and a central bank that’s hasn’t just controlled interest rates, but also bought a record 6.5 trillion yen of exchange-traded funds in 2018. And yet no one seems concerned, judging by Japanese bond yields and inflation expectations.
The goal of MMT isn’t to become Japan, though. The way Muir sees things, inflation will take hold because fiscal spending would be injected straight into the real economy (think free college or a federal job guarantee), rather than quantitative easing’s more indirect route (buying bonds to suppress interest rates, which encourages companies to borrow cheaply, which then maybe gets them to boost wages or headcount). In the post-crisis era, he argues, households have been overwhelmed by debt, which has suppressed economic growth. If that pressure dissipated, the economy could run hot – and so could inflation.
More here:



Konrad said...

More government spending means more money sucked up by the banks, which are out of control.

It also means more money sucked up by the weapons makers. On Monday (11 March) Trump will release his proposed federal budget for FY 2020.

It has already been reviewed by insiders, and it contains massive increases for the Pentagon, plus massive cuts in programs that help average people.

AXEC / E.K-H said...

Links on Brian Chappatta’ ‘How to Trade MMT Is Wall Street’s Great Unknown’

MMTers push the agenda of Wall Street/the Oligarchy and NOT of WeThePeople.

Very busy these days: Wall Street’s agents

MMT and the promotion of Wall Street socialism

MMT = proto-scientific junk + deception of the 99-percenters

How MMT enlightens Washington

MMT, Warren Mosler, and the little helpers from Wall Street and Academia

MMT: The fusion of Wall Street and Academia

Egmont Kakarot-Handtke