Using COVID-19 as a cover story

One aspect of the coronavirus is how it’s being used for economic upheavals that weren’t previously acceptable. The view from a Hong Kong analyst:

From March 2020 MMT is now a reality:

“Under cover of the ‘coronacrisis’, we are now witnessing the introduction of Modern Monetary Theory (MMT), which isn’t modern and isn’t a theory.

The dollars that the government will inject into the Fed’s Special Purpose Vehicles (SPVs) were previously created out of nothing when the Fed monetised Treasury securities. So, the Fed creates money out of nothing. This money then goes to the government. The government then deposits some of this money into the Fed’s new SPVs, and based on this injection of ‘capital’ the Fed creates a lot more money out of nothing.

No longer will governments feel constrained by their abilities to tax the population and borrow from bond investors. From now on they will act like they have unrestricted access to a bottomless pool of money.”

The Coming Great Inflation from October 2019 showed that current developments were already in the works:

“The difference between money and every other economic good is that money is on one side of almost every economic transaction. Consequently, there is no single number that can accurately represent the price (purchasing power) of money, meaning that even the most honest and rigorous attempt to calculate the ‘general price level’ will fail. This doesn’t imply that changes in the supply of money have no effect on money purchasing power, but it does imply that the effects of changes in the money supply can’t be explained or understood via a simple equation.

The economic effects of a money-supply increase driven by commercial banks making loans to their customers will be very different from the economic effects of a money-supply increase driven by central banks monetising assets. ‘Main Street’ is the first receiver of the new money in the former case and ‘Wall Street’ is the first receiver of the new money in the latter case. This alone goes a long way towards explaining why the QE programs of Q4-2008 onward had a much greater effect on financial asset prices than on the prices that get added together to form the Consumer Price Index.

Due to the combination of the false belief that large increases in the supply of money have only a minor effect on the purchasing power of money and the equally false belief that the economy would benefit from a bit more ‘price inflation’, it’s a good bet that central banks and governments will devise ways to inject a lot more money into the economy in reaction to future economic weakness.”

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