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Bloomberg reports a “new” monetary philosophy is gaining traction in America: Modern Money Theory.
Adherents believe the Treasury Department should print all the money it could ever desire.
That means no need for a central bank to create money… no need to borrow through bonds… and no need for gold or any other backing to the currency.
The government has tried this before…
During the U.S. Civil War, the federal government printed $400 million in unbacked paper notes to finance its war deficits. These dollars—with their distinctive green backs—soon suffered 75% inflation.
But in a world where the establishment believes negative interest rates and proposed “helicopter drops” of money onto the economy are “normal,” nothing should surprise us…
Bottom line: Fiat money—whether conjured at the Federal Reserve or printed at the Treasury—begets more fiat money. When governments have no natural constraints to reign in their largess, they will always print (and tax and spend) more…