A government can’t simply print however much money they want to be able to buy whatever it is that they want.
The Deficit Myth was recently released and in the book the author argues that because the government issues its own currency, it doesn’t have to operate like a traditional household. According to the author, all we need to do is print $239 trillion and the US will be funded for the next 75 years.
Stephanie Kelton is a proponent of what’s known as modern monetary theory, which is essentially the belief that the government can print its way out of its problems at any time.
One argument for this theory is that it’s okay to inflate the money supply as long as the economy inflates at the same rate. The trick is in what proponents of the theory are proposing they use the newly printed money for.
The Green New Deal has an estimated price tag of $93 trillion, but if that money were printed today would it actually productively grow the economy? The government can’t replace the productivity that takes place in a free market economy.
The government can’t guarantee that a job that it creates is going to benefit the economy in the same way that a private enterprise, when they create a job, can grow the economy. Governments tend not to be able to allocate resources efficiently in the same way a private enterprise can.
Elon Musk just sent two astronauts into space in the first commercial space flight, and he did it far more efficiently and quicker than his government counterparts.
Some of the biggest criticisms of modern monetary theory come from the left hand side of the aisle. Paul Krugman has warned the US will see hyperinflation if they adopt the theory.
Inflation is a type of tax, but it’s more insidious than a tax increase because at least with a tax increase your representatives have to vote on it. Inflation is like a hidden tax that devalues your money in the same way as tax increases but without any legislation.
If the government printed money to pay off the national debt, we know that inflation would rise and that would decrease the value of US bonds, resulting in a sovereign debt crisis. This eventually leads to a spiral of rising interest rates and crowding all other expenses out of the budget. Printing money ultimately creates more problems than it solves.
There are three programs that are primarily driving our national debt; Social Security, MediCare, and Medicaid, and those programs are tied to inflation.
The US can’t print its way out of its problems, the only option is to raise more revenue via higher taxes.
Modern monetary theory is dangerous to the US economy and population and will eventually result in major problems for everyone involved. In the end, we need to become more fiscally sane and fundamentally respect the financial laws of the universe.
We know that we shouldn’t spend more than we bring in, so we have to be wary of approaches that fly in the face of common sense.