Saville: De Facto MMT

He’s one of the smart ones, without any of the promotional stink stuck to 90-something % of the financial media, large or small. Check out Steve Saville’s view on MMT, the Fed and inflation.

De Facto MMT

“Now, the Fed’s QE programs of 2008-2014 generated a lot less “price inflation” than many people feared. This was largely because the new money was injected into the financial markets (bonds and stocks) and only gradually trickled into the ‘real economy’. To some extent what happened over the past couple of months is similar, but with two significant differences.

One significant difference between the Fed’s recent actions and the QE of 2008-2014 is that for some of its new money and credit creation the Fed is bypassing the PDs. No regulatory change was needed for this to happen. Instead, as I explained in my earlier post, the Fed created Special Purpose Vehicles (SPVs) that do the actual monetising of assets and the lending of new money into existence. In effect, new money is now being created by the Fed and sent directly to various non-bank entities, including municipalities, private businesses and bondholders.

The second significant difference is the crux of the issue and why the US now has MMT in all but name.”

As to the first part I’ve highlighted, this is why the inflation likely to come of the Fed’s limitless ability to print and distribute ‘munny’ is going to be different than the stealth inflation of the 2009-2014 period, when the financialized economy funneled the inflation where it was supposed to go, the US financial asset markets. This is different, but the inflation problem will probably be more readily obvious because it will reside in full view, driving all kinds of costs upward in eventual response to the cheapening of money units.

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