Not-So-Modern Monetary Theory

And it destroys the poor.  (SEE BELOW) Richard Duke

“The key idea of ​​MMT is that the government that controls the issuance of its currency cannot go bankrupt because it can always issue money to pay off its creditors. If so, then the government should not shy away from increasing the necessary expenditures. The government of a sovereign state can afford any expense — due to the currency monopoly, it cannot run out of money.

In a sense, the above description is true. The state actually has a monopoly on bank notes, so it cannot be insolvent like private individuals. That is why we hear about hyperinflation from time to time — the latest example is Venezuela, which not only exercised its monetary sovereignty, but did so on a grand scale.”


Debasement and Crony Capitalism; Nothing is New Under the Sun


Nehemiah: The king and his nobles (cronies) extracting from the people through debased silver


A general, but serious, reason to read this book— The Skyscraper Curse: And How Austrian Economics Predicted Every Major Economic Crisis of The Last Century — is to avoid being one of the millions who will be duped when the next crash (bust) occurs. Millions were and continue to be duped as to the reason for the boom leading up to 2007 and 2008 and why the bust occurred in 2008 relating to real estate.

Thornton begins with an important discussion of money creation and Richard Cantillon, writing: “… Richard Cantillon (1680s-1734?) [was] the first economic theorist and proto-Austrian economist …[he] showed how the interest rate and the money supply can create changes and distortions in the economy, a phenomenon now referred to as “Cantillon effects.”

Monetary inflation is affected by who gets the money and credit first and who gets it last. As fiat money is created by central banks, private banks are in a position to expand the amount of loans they make. The wealthy have established relationships with the banks, and they have the real estate and assets to provide collateral for the loans. Large, established companies and wealthy individuals are in favorable positions relative to small businesses and people with low or average incomes. The loans allow big companies and wealthy individuals to invest in capital goods during the boom phase of the business cycle. Central banks thereby create artificial inequality and poverty. This is the primary Cantillon effect of redistributing wealth.”

Thornton shows that the biggest winners come from the Federal Reserve and the bank system’s creation of newly created currency and credit are the U.S. Government, its large contractors, such as weapons manufacturers, big banks, and Wall Street. The losers are also revealed: the labor class consisting of private-sector workers, those on pensions or fixed incomes.

Review by Richard Duke on the Mises Institute website of the book: The Skyscraper Curse: And How Austrian Economists Predicted Every Major Economic Crisis of the Last Century by Dr. Mark Thornton


3 Kinds of Economic Ignorance