Alexandria Ocasio-Cortez’s media-adored “Green New Deal” is estimated to cost $90 trillion, even after her office excised from it her push to attack the scourge of airplanes and cow flatulence.
And how will she fund it?
By putting makeup on a very old and destructive pig.
Ms. Ocasio-Cortez wants to employ “Modern Monetary Theory”, which isn’t modern at all, and is so utterly disconnected from reality that it will always remain theoretical even as its practice destroys savings and causes malinvestment and inflation.
First, the theory.
It’s nothing more than warmed-over Keynesianism, or the idea of “full employment” from the “multiplying factor” of government spending, or via a government-granted banking monopoly printing tons of money, and handing it to the politicians to spend it on pork projects.
The desperate move is a reaction to the fact that government (aka the state, aka, the “sovereign” in olden days) can’t tax enough to pay for all of their vaunted plans to curry favor.
As a result, they have only two other options. They can issue bonds, or they can print money. For this reason, most politicians claim the “power” to control the currency and forbid you from using anything other than their government-run cash. They also tend to charter “private” banks that are granted a government monopoly on printing the cash. This allows the politicians to float bonds that the monopoly bank can buy with money the bank creates out of thin air.
It’s bad mojo, and it’s based on what economists call “fiat currency”, or money that’s mandated onto citizens by government fiat. It’s the exact opposite of currency many would choose -- money that would be connected to a hard-to-inflate precious metal so that users and recipients could count on it retaining its value.
The outcome of government control of money creation or government-granted monopoly power over money is always the same: it inflates the money supply, destroys the buying power of the cash in circulation, bids up prices, inspires reckless malinvestments due to low interest rates, causes artificial booms and the resultant busts as citizens realize prices are far higher than real value, and eats away at savings.
But Ocasio-Cortez loves the idea, and so do some “trusted” pop media pundits. As Bob Adelmann covers very well for The New American, Stephanie Kelton, a professor of “public policy and economics” at Stony Brook University, pushed the basic idea of the “Green New Deal” in November, last year, writing:
We have the outline of a plan. We need a mass mobilization of people and resources, something not unlike the U.S. involvement in World War II or the Apollo moon missions — but even bigger. We must transform our energy system, transportation, housing, agriculture and more…
Any wonder why Ocasio-Cortez insultingly referred to battling “Climate Change” as “our World War Two”?
Oh, and Kelton adds more dangerous assumptions to her fantasy:
As a monopoly supplier of U.S. currency with full financial sovereignty, the federal government is not like a household or even a business. When Congress authorizes spending, it sets off a sequence of actions. Federal agencies, such as the Department of Defense or Department of Energy, enter into contracts and begin spending. As the checks go out, the government’s bank ― the Federal Reserve ― clears the payments by crediting the seller’s bank account with digital dollars. In other words, Congress can pass any budget it chooses, and our government already pays for everything by creating new money.
Which is all very, very bad Prof. Kelton…
She even claims that this “…is how ‘we’ paid for the first New Deal”, when, as economists from Murray Rothbard, to Robert Higgs, to Tom Woods, to Lawrence Reed, to Bob Murphy, and many more have observed, the New Deal prolonged the Great Depression, it syphoned cash away from productive ventures, created a vast pork-crony system, and it was never really paid for, since the government kept borrowing on the backs of future generations, and still does.
Yet the central-bank-created inflation of the money supply to fund massive government spending continues, and The Wall Street Journal recently joined the herd, seemingly oblivious to the facts.
MMT (Modern Monetary Theory) argues that fiscal policy makers aren’t constrained by their ability to find investors to buy bonds that finance deficits — because the U.S. government can… print its own currency to finance deficits.
This level of sophistry is remarkable.
And this kind of “money-pumping-for-government-spending” is not modern. It has been tried over and over in world history, always with the same results. In fact, in the 18th Century, a banking monopoly was given to politician Robert Morris by the American Continental Congress, allowing him to buy war bonds with the inflated paper money the Congress labeled the “Continental”. Guess what, friends...? The loan certificates, like the Continental, became worthless. As Tom diLorenzo notes in his book, “How Capitalism Saved America”, by the end of 1779, the loan certificates – which were less than three years old in most cases -- had depreciated to twenty-four times less than their original stated value.
Adelmann quotes spot-on economics professor Joseph Salerno for a great summation of so-called “Modern Monetary Theory”:
Not only is [MMT] a recipe for massive inflation but it will also cause chronic depression…
And he is absolutely right.
Many pop media pundits are applauding this rehash of a provably poison dish when, in fact, these same media figures are so uninformed, they don’t even know the meaning of the word “inflation”.
They mention price increases as “inflation”, and they claim that MMT will not cause inflation.
But inflation is not the rise in prices. Inflation is the inflation of the money supply that inevitably, and always, leads to price increases.
And MMT is a recipe for just that.
Haven’t the politicians done enough to destroy the buying power of our earnings?