Business & Investment

The Disaster of Modern Monetary Theory — MMT, China, and the Moon

Dear reader,

* Slow applause *


It’s the end of 2020.

Of course, that doesn’t mean that all of our problems are gone when the Gregorian calendar flicks towards the New Year.

However, I’m a little more ready.

2020 is one of the most exhilarating things I have witnessed on the market. A global stock market crash of nearly 35% within four weeks. A sharp rebound continues. Some companies have begun to create new highs. Some people haven’t regained what they lost.

The 48-hour gold futures market has shown its vulnerability. A few months later, the spot price of gold exceeded US $ 2,000 for the first time in history. Leave us at a new high of US $ 2,069.

What could happen next? Jim below talks about some of the things that will affect the US market in the coming years.

Australia may have more conflicts with China. I think our commodity sector is just starting to get hot.

But We need to take a break from this year before we can start predicting future events in detail.

The Fat Tail Media Office will close tomorrow. Like you, I am very excited to take a break and prepare to start a new year. However, keep an eye on your inbox as you will continue to send emails during breaks using some of your favorite articles of the year.

I and everyone at the Fattail Media Office wish you and your family a very Merry Christmas and a happy and safe New Year.

We look forward to seeing you in 2021.

Well, it ended up in the gym.


Shae Russell's signature

Shay Russell,
Editor, Daily Reckoning Australia

*** ***

For those unfamiliar with the term MMT, it stands for Modern Monetary Theory. This is the subject I covered extensively in both the 2019 books, aftermath, And in my new book New Great Depression..

“Theory” is not very theoretical because there is no evidence, and there is nothing “modern” because it has existed for more than 100 years. Still, it’s all the rage in Washington, DC these days. Investors need to be careful as they will affect the new Biden administration’s fiscal and monetary policy, whether or not they agree.

MMT has three basic beliefs

The first is the ability to integrate the Fed’s and Treasury operations. Legally, the two agencies are completely separate, but policies can be adjusted as needed. Appointing former Fed Chair Janet Yellen as the new Treasury Secretary underscores what the Biden administration is planning.

The second idea is that citizens need to accept dollars (whether they like it or not) because they need dollars to pay taxes. And if you don’t pay taxes, you’ll go to jail. In effect, the dollar is supported by the barrel (in other words, Mao Tse-tung).

The third idea is that there is no practical limit to the amount of debt the United States can issue. The US debt-to-GDP ratio today is around 130% (up from 106% last year). However, MMT cheerleaders point out a percentage of Japan above 250% as evidence that the United States can borrow more.

All these ideas are terribly flawed

Japan is a good test case because the Japanese buy their own debt (the US depends on foreign investors) and the Japanese economy has barely grown for 30 years (try it in the US). There is none.

The Federal Reserve and the Treasury can be operationally integrated, but when the market reveals that they are monetizing all new debt, trust is lost, interest rates rise, and the rat lecture collapses. I will. And when confidence is lost, citizens can turn to land, gold, silver, natural resources, and other hard assets as an alternative to the dollar.

MMT tax police have nothing to keep them busy, as you do not tax unrealized profits.

Disaster being created

Modern Monetary Theory is a catastrophe in the works (although it can take years to implement).this paper I will explain the reason.

If you invest in highly productive assets, you can borrow money. But if you just spend money on handouts to support a stagnant economy, you’re just digging deeper debt holes for yourself. Ultimately, it can be default, inflation, high interest rates, high taxes, or all of the above.

It’s not the rosy scenario that the MMT crowd makes you believe. Still, it may come soon.

Meanwhile, far away …

China has landed on the moon. How long does it take to plant a weapon?

Chinese spacecraft made a soft landing Moon December 1st. It was not the first Chinese spacecraft to reach the moon. The Chinese did it in Chang 1 in March 2009. But this was a soft landing, not a crash landing like the 2009 effort. And this is the first Chinese mission to the Moon, where rock and soil samples can be taken and returned to Earth.

The Chinese are just up to date to arrive on this type of mission. The Soviet Union made a lunar landing in 1959. Other countries that landed on the moon as either a lunar landing or a soft landing are Japan, India, Israel, and the European Space Agency. Of course, in the six Apollo programs from 1969 to 1972, only the United States sent manned missions to the moon and returned them safely.

Nevertheless, China’s mission is important not only to return soil samples, but also to promote China’s technical understanding of soft landing, ascender launches, space docking, and return to Earth.

China has the luxury of simply setting goals and achieving them. It is not hampered by budgetary or competing spending priorities, as it is in western democracies. In China, the social welfare and poverty program can wait another day if it is decided by the Communist Party Politburo. If China wants to go to the moon, it just goes.

What is a Chinese long game?

Over the next few years, we can expect softer landings, more manned missions, docking exercises, and finally Chinese missions to the Moon. It’s just a matter of time. The question is, what is a long game in China?

Given its actions in the South China Sea, the Taiwan Strait, and the Himalayan border with India, it is reasonable to expect that China’s lunar goals are not limited to pure scientific research. It will have some geopolitical (or I should say Luna political) end in mind.

China can fully foresee its military mission to the Moon, including permanent settlements and radiation weapons designed to destroy the Earth-based and satellite-based defense systems of the United States and its allies. This is another reason to argue that US technology will not be made available to Chinese laboratories and companies working with Chinese military and Communist leaders.

China may reach that goal in the long run, but there is no reason for the United States to support it in the process. The best way to delay the future Chinese military presence on the Moon is to stop technology transfer to China today.

all the best,

Jim Rickers signature

Jim Rickers,
Strategist, Daily Reckoning Australia

PS: Australia’s Massive COVID Depression — Learn which investments to accumulate and which to avoid to give you the best chance of maintaining wealth during a recession. Click here for more information.

The Disaster of Modern Monetary Theory — MMT, China, and the Moon The Disaster of Modern Monetary Theory — MMT, China, and the Moon

Back to top button