Temporal: Enterprise Solution for Distributed Data
·

Modern Monetary Theory justifies printing more money, Bitcoin is the counterargument

Modern Monetary Theory justifies printing more money, Bitcoin is the counterargument

Mario Draghi, the outgoing president of the European Central Bank, mentioned the institution is open to Modern Monetary Theory—a fiscal and monetary framework that argues governments can keep printing money so long as inflation is in check. This will only increase the demand for Bitcoin.

A brief breakdown of Modern Monetary Theory

Modern Monetary Theory proposes that governments with their own currency should disregard the accumulation of sovereign debt. The theory says that instead of worrying about fiscal deficits, governments should print as much money as needed to bolster their economy, as long as high rates of inflation are prevented. This, MMT explains, can be accomplished through cooperation between central banks and governments.

MMT has been subject to much backlash. A Bentley University economist called it “a bizarre, illogical, convoluted way of thinking macro.” But, it still seems to be gaining traction, with politicians like Democrat Alexandria Ocasio Cortez using it for justification for increasing social spending. It’s gaining so much traction, in fact, that Mario Draghi said in a press comment that the decision-making body of the ECB, the Governing Council, is open to MMT.

Even Ray Dalio—the co-head of the world’s largest hedge fund, Bridgewater Associates—has given some interpretations of MMT his stamp of approval. The billionaire investor wrote in a May that the current monetary policies of adjustable interest rates and quantitative easing are unproductive, necessitating the “fiscal and monetary policy coordination” described by MMT theorists.

Proving the need for Bitcoin

Worldwide, there aren’t any concrete plans to adopt MMT at the moment. However, with prominent supporters in Dalio and Draghi, governments may take it upon themselves to print an excessive amount of money. Some fiscal conservatives argue that the Federal Reserve is already adding excessive cash to the economy.

And this trend, according to countless analysts, will only be a boon for Bitcoin.

Peter C. Earle, a research fellow at the American Institute for Economic Research, said to Bloomberg that in an MMT-centric macroeconomy “precious metals and cryptocurrencies would swifty rise in popularity and therefore [its] price.” He suggested that when money printing is prevalent, precious metals and cryptocurrencies serve as “inflationary hedges”.

Earle’s analysis has been corroborated by an array of other economic researchers. Macro analyst Alex Krüger wrote on Twitter that “having elected politicians with control over both monetary and fiscal policy,” which is what MMT describes, is a “disaster waiting to happen.” While failing to describe the side-effects of MMT, Krüger remarked that “Bitcoin and gold should benefit from this long-term underlying theme”.

Bitcoin, specifically, is likely to become a tantalizing investment when sovereign debt becomes a number that governments can no longer disregard. Unlike the dollar or euro, Bitcoin has a fixed supply cap of 21 million coins and its inflation rate is set by a decentralized protocol—scarcity and the difficulty of production are two key characteristics of a “hard money.”

An economy in which government-issued money loses its purchasing power, or is at least is threatened to lose its purchasing power, will force investors to seek safe haven investments, assets that cannot be inflated away. Bitcoin, with an algorithmically-enforced issuance rate,  fits that bill.

As put best by Ari Paul in a tweet, the founder of the CIO of Blocktower Capital:

“Bitcoin is about ‘hard money,’ MMT says hardness doesn’t matter.”

With the Pandora’s box of MMT beginning to open, Bitcoin’s value proposition only becomes stronger.

Bitcoin | BTC

Updated: Nov 7 at 2:51 am PDT
$8,544.80
13.92%

Bitcoin, currently ranked #1 by market cap, is up 13.92% over the past 24 hours. BTC has a market cap of $153.91B with a 24 hour volume of $25.08B.

Chart by CryptoCompare

Bitcoin is up 13.92% over the past 24 hours.

Posted In: , Analysis, Price Watch, Regulation

The above advertisement is an affiliate link. CryptoSlate will earn a small commission if you sign up.

Like what you see? Subscribe to CryptoSlate

Get our daily newsletter containing the top blockchain stories and crypto analysis straight to your inbox.

Sign up to stay informed
Nick Chong
Author

Nick Chong

Journalist @ CryptoSlate

A decentralist at heart, Nick has shown interest in Bitcoin and cryptocurrencies since 2013. He has since joined this industry as a full-time content creator, focusing on written content and visuals. Aside from working with other leading trade publications, Nick is a part-time creative at HTC's Bitcoin division, EXODUS. He is based in Canada, where there is an apparent lack of industry events.

View author profile

Commitment to Transparency: The author of this article is invested and/or has an interest in one or more assets discussed in this post. CryptoSlate does not endorse any project or asset that may be mentioned or linked to in this article. Please take that into consideration when evaluating the content within this article.

Disclaimer: Our writers' opinions are solely their own and do not reflect the opinion of CryptoSlate. None of the information you read on CryptoSlate should be taken as investment advice, nor does CryptoSlate endorse any project that may be mentioned or linked to in this article. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own due diligence before taking any action related to content within this article. Finally, CryptoSlate takes no responsibility should you lose money trading cryptocurrencies.