How to pay for "Green New Deal", adopt Modern Monetary Theory

NEW DEMOCRATS REJECT CAPITALISM, PLAN NEW ECONOMIC MAGIC

WE HAVE SEEN THIS IDEA BEFORE

New Yorkers are shocked that Amazon has decided to skip coming to New York. Amazon pulled out because of the outrage of the new Democrats that the state had promised them $3 billion of tax incentives to build there. Amazon was expected to spend $27 billion in taxes over the next ten years, and employ 25,000 workers. It seems that Amazon felt it was moving into an unfriendly neighborhood. 

Local New Democrats celebrated and were planning on how they could spend the $3 billion that would not be credited to Amazon. Forget about explaining to them that a credit is not cash to be spent. That would be too deep of a conversation.

Many have asked how the New Democrats plan to pay for all the new spending on healthcare, education, infrastructure and universal income.  They have the answer, "Modern Monetary theory".

In the 1930's the economic debate was between the Keynesian and the Austrian School of economics. The Austrians believed that money was to be an asset that was represented by currency and could be exchanged for goods and services. That governments should have a balanced budget and should not manipulate the economy by debasing the currency. This is of course a simplified explanation.

Keynesian's believed that money did not need to be backed by anything, fiat currency, and the economy could be controlled by raising and lowering interest rates. They in effect changed money from being an asset into being an instrument of government debt. They believed in running deficits to stimulate the economy and raising interest rates to suppress overheating.

Keynesian policy was adopted by Europe and the United States and our currency also became an instrument of government debt rather than an asset. Of course we see that the stimulation through deficits is never slowed by decreased spending. The theory has failed because there is no restraint on government deficits.

Now the New Democrats have embraced the Modern Monetary Theory, which believes that deficits and debt are not relevant nor to be considered. The plan is to control all aspects of the economy by government spending and taxes.

With this theory they can spend on social programs without restraint, debt, deficits and even interest as far as the government is concerned would be eliminated. They also believe that to restrain the economy from overheating, taxes, licenses, fees etc would be raised to restrain inflation and also to target the wealthy to achieve income equality and social justice. They also propose to adopt Asset Taxes, starting with the very wealthy, but as one could imagine it would soon apply to anyone with assets.

This theory is without simple common sense and attempts to defy the laws of simple economics and human nature. Implementing such a policy would destroy the economy in short order. Their policies would force people to shift assets from paper to hard currency and simply shut down much private economic activity.

Of course that is precisely their goal, no private economy, it would be a 100% Government controlled economy which would lead to an economy like Venezuela or Cuba.

originally published 2/21/19

It appears the Biden administration has embraced this theory, with their planned $6 trillion budget, $2 trillion infrastructure and social spending plan. The effect will be the dilution of the value of all paper assets valued in dollars. It will either happen in a slow steady manner or in a giant plunge. It is not a question of if, but when.