217. “Modern Monetary Theory” (MMT; Magic Money Tree) Effects?

Post Inauguration Day (1/20/21) Stimulus “Solution”? 

Both presidential candidates have promised lots – including big, pandemic, stimulus bills – “after the election”. What will be this free-lunch formula?

  1. The government issues another $3+ Trillion in government bonds.
  2. Smart investors won’t buy these bonds at near zero-percent interest. So, the Fed will print a similar amount of new dollars out of thin air to buy the bonds (through banks as intermediaries).
  3. This loan from our kids and grandkids will then be sent out to voters to spend and lobbyist clients (financial re-engineers) to bail them out of their zombie investments along with fees.

Questions:

  1. How long can you borrow what you think you will earn in the future to consume it now? (and have it again to spend later?)
  2. Will paying people not to work and allowing them to defer all monthly payments have any negative side effects?
  3. How many voters are not saving to pay for their deferred payments? Default rates? What problems do the un-payed parties now have? Who will bail them out?
  4. When Zombie companies are kept alive with junkier bond (re) financing at negligible interest rates, what effects does this have on their competitors and productivity in general?
  5. Will MMT programs cure the C19 bug and the damage of shutting down the global economy?
  6. If the Democrats sweep, what will their New Deal and higher taxes plan be? A positive for the economy?
  7. When central banks print to buy bonds to keep interest rates at a post-inflation, negative rate, who gets penalized and who gets subsidized?
  8. All currencies that ever existed don’t except for the current ones being debased by their respective central banks; how will this end?
  9. When will trading partners (or anyone with free cash) lose faith in a currency (like the dollar) that is being debased? Then, what alternative assets will become a store of value?
  10. Could competitive currency devaluation (a “lower dollar” myopically helps exports) coupled with trade wars cause supply chain problems and allocations?
  11. Will 11-13 revive the need for distributors’ to be ready with LIFO accounting skills and tactics?
  12. And, what other defenses against new taxes on all aspects of wealth?
  13. Meanwhile: the acceleration to digital distribution channels will continue.

Interesting Times? Your plans? Your company resiliency? Answers:

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