Can we briefly discuss the core flaw in MMT? Under MMT you merge the central bank with the treasury - effectively removing independence of the reserve bank and putting it all under control of politicians. The great irony is the spike in BTC is because it’s truly independent...

“Under MMT deficits don’t matter if you can borrow in your own currency” - ok so let’s look at Argentina or Africa - if govt borrows directly from the central bank, international partners stop accepting your currency. On a globalised world it means consumers can’t buy things...

MMT’s core assumption is that people want your particular currency. They don’t - money is that which cancels debt. People use currency to settle invoices because it has the power to cancel debt. If you can’t use it to cancel your debts, you will get hyper-inflation.

In Congo the USD is used rather than the Franc - why? Because people can cancel their debts (ie pay invoices) with USD while the Franc can only pay their taxes. If the USA adopts MMT, these contracts will shift to a non-MMT currency, probably starting with RMB or EUD.

I promise you: you don’t care about national currency - you care about the freedom it gives you to acquire goods and services. You don’t care about acquiring money, you care about acquiring buying power. Currency is not buying power - it’s the way we transfer buying power.

MMT is ultimately wishful thinking - the core problem facing the world today is that compound interest has made the Uber wealthy capital sinks. And because we’re optimising production of stuff we use every day we have relatively cheap commodities and huge asset price inflation.

In 1971, Australia’s first McDonalds opened. A Big Mac sold for 49 Australian cents, and the median house price was $21,200 or 43,265 Big Macs. Average adult full time earnings was $7600 - 15,510 Big Macs...

Average ordinary full time earnings in Australia is today $89,128. A big Mac costs $7.45. That’s 11,963 Big Macs - the buying power of 40 hours of labor per week have dropped about 23% in 50 years. The median house price is now $1,143,012 - which is 153,425 Big Macs....

The hard asset has increased in value by 355% and the value of your labor has dropped about 23%. Lots more money was created -

AUD M3 (money supply) in 1971 according to the Fed
1971: 16,125,000,000.00000
2019: 2,139,066,666,666.66970

That’s 133x the money...

Our population in 1971 was 12.94 million people - today it’s nearly 26 million people. We have increased the money supply 65x on a constant population basis. Is your life 65x better? Nope - your buying power has gone down 23% and asset prices have gone up 355%

“But James - MMT says governments can borrow endlessly if they borrow in their own currency” - in 1971 the Federal Australian Government owed a touch over 10%, denominated in AUD. At the end of last financial year it owed 36% of GDP - a 360% increase...

1971 is interesting in Australia’s financial history for a reason other than Maccas coming to Oz. It’s was the beginning of the last global negative interest rate cycle (in real terms - once you remove inflation)

History doesn’t repeat, but it does rhyme and I don’t like the poem - 1971 is also when the gold standard was abandoned... we’ve had a massive increase in money supply, in wealth inequality, in hard asset prices, in debt to gdp and the buying power of an hour of labor is down 23%

TLDR - MMT is a scam - we can’t manipulate our currency into long-term prosperity.

And the reason for this - a government can *only* borrow in its own currency for as long as outsiders trust that currency will have buying power when currency is used to cancel the debt.

And people in an economy can *only* buy imports (or buy foreign currency to buy imports) as long as their local currency has value (buying power/the ability to cancel debt) relatively to the currency where they want to import the thing from.

So, once again MMT (at the term is commonly used) = scam.

Another problem for MMT - in 1977 the US Treasury had to issue bonds in Swiss Francs. No one was prepared to accept USD denominated debt. MMT won’t work.