FOG HORN

It’s Friday and time to kickoff the weekend. If you were in Indianapolis, for the 2019 NRA Annual Meeting and Exposition, I hope you had a great time. If you didn’t, you probably worked your derriere off all week but sat at home getting bombarded by what I will referrer to as the A.G. William Barr extravaganza. So, there’s a very good chance that you may need therapy.

Regular readers know that psychologists and others in the behavioral trades studied the subject so they could understand themselves. So, sitting down and paying $150+ an hour to a jackass that’s still figuring life out, so you can pour your heart out, is an utter and complete waste. Go out and get a hooker or organize a shoot the shit.

A shoot the shit is a social interaction in which participants don’t need to know anything about the subject being discussed, they can make unsupported comments, use uncensored profanity, insult anyone they wish and/or change the subject at will. They’re very effective between coworkers, buds and family members. The hooker will set you back a few bucks but shoot the shits are free. So, give it a try, but if you can’t get one going, please feel free to participate in ours.

I’m sure you’ve all heard of Congresswoman Alexandria Ocasio-Cortez, who sadly is not the sharpest tac in the box. This is the same Ocasio-Cortez that chased Amazon’s 25,000 jobs out of NYC, and a few month’s back she sounded the alarm announcing that the world would come to an end in 12 years. How’s that for leadership; not to mention the fact that 12 years in planetary time is equivalent to a pico second. She literally has no idea what she’s talking about and I can assure you she wouldn’t know a carbon molecule from a taco, but that’s okay.

In that 12 year window she wants to rebuild all U.S. buildings, terminate all fossil fuel usage, eliminate cow farts, get rid of fuel cars, ground airplanes etc. When I tell you that she’s clueless, rest assured this is a colossal understatement. If the Green New Deal is not enough for you, she’s also supporting MMT, which stands for “Modern Monetary Theory.” So, what the hell is that? To answer the question I need to cover the conventional concepts of fiscal and monetary policy.

Monetary policy addresses liquidity in the economy – meaning, is there an adequate supply of money in the economy to support economic growth. This is the function of the central banks around the world. Our central bank is the Federal Reserve. The Federal reserve looks at GDP, inflation, employment, consumption, the velocity of the dollar and other metrics on an ongoing basis. From that data, the Federal Reserve determines the appropriate interest rates and money supply. For example, if the Federal Reserve wants to increase the money supply they buy bonds adding to the money supply. If there is too much money, the Fed sells bonds pulling money out of the economy. Monetary policy requires some complex analytical models that are encapsulated in the science of econometrics.

Fiscal policy is taxation. Under conventional thought processes, taxation pays for government spending. If the government spends more than it takes in from taxes it runs a deficit and must borrow money from the global financial markets. It does this by selling bonds at a contract interest rate and specific term – 5 yrs., 10 years etc.

Although the central banks are independent from the government (i.e. politicians), successful economies strike a balance between fiscal and monetary policy. I’ll explain.

Let’s say that Congress decides to increase taxes. The increased payments to government reduce capital investment by businesses and reduces consumer disposable incomes. That has an impact on GDP. So the Federal Reserve may find it desirable to lower interest rates to spur the economy and prevent it from going into recession. Decreasing taxes, increases capital investment by business and spurs consumer spending so in order to curb demand-pull inflation the Fed may increase interest rates.

Just a quick blurb on deficits. Deficits, as I said earlier, occur when governments spend more than they take in from taxes. Deficits aggregate year over year into a national debt balance, and servicing that debt, which constitutes of paying interest and retiring maturing debt, hits the annual fiscal budget. The more debt you build up the more interest you have to pay and the less government has left over for all other government spending.

This is the 30,000 foot view of how our economy works.

Now, what is Modern Monetary Theory?

I’m still digesting the technical details but stated succinctly this is how it works. A government that prints its own currency is able to print whatever money it needs to buy whatever it needs. So, if Medicare for all costs $3 trillion, the government simply prints three trillion one dollar bills. MMT, looks for full employment and once it achieves full employment, which I assume is still considered to be a 4% unemployment rate, and consumption begins to increase, the government will increase taxes to reduce consumption reducing inflationary pressure.

How anyone sees this as a viable alternative to our existing model is beyond me. First thing that comes to mind is currency valuation, I guess if the EU bills the government for a $200 million dollar purchase government simply prints $200 million and sends it to them. I can’t imagine what foreign currency translations will look like! Who cares as long as they’re asking for dollars we’ll just print some.

In closing, here’s what you need to know about MMT. All money comes from government, It makes government the engine of the economy. This is the type of thing that Karl Marx would find palatable. So, is Congresswoman Ocasio-Cortez stupid or is she a communist?