QTR Fringe Finance: Modern Monetary Theory And Boiling Frogs

Financial markets are still reeling from the recent bout of inflation. That inflation resulted from a number of factors. But the largest and most important was the printing of trillions of dollars during the pandemic.

That event demonstrated the costs of just blindly printing money. While many see the danger of repeating that experiment, another group sees an opportunity. This poses a potential danger to your investments to watch out for.

The danger is known as Modern Monetary Theory (MMT). It works under the assumption that printing money as needed to pay for goods and services should be normal. And, in fact, it may even be better than simply borrowing money as we currently do.

MMT has picked up some interest in recent years. The idea of printing money sounds more attractive than borrowing it at interest, as many governments do. And in theory, governments could simply print money as needed rather than tax their populations.

However, we’ve seen from the MMT-like policies during the pandemic that the result is surging inflation.

If MMT ideas were to take hold, higher inflation would likely become far more normalized. Investors would have a more challenging time investing in the stock market. And defensive assets from inflation such as gold and bitcoin would likely see further massive gains.

To get a full sense of the dangers posed by MMT, click here.