Modern Monetary Theory Explored

"There's nothing to prevent the federal government from creating as much money as it wants."
- Alan Greenspan

Household matters

Before I dig into MMT – this month’s topic – I would like to point your attention to the megatrend page on our website. As you can see, we have identified a total of six megatrends. One of those – about the debt supercycle – was until very recently called The End of the Debt Supercycle but, as you can see, the name has changed. It is now called Last Stages of the Debt Supercycle.

The logic behind this change is straightforward. Some of our clients have long argued (with some right) that “The End ...” is not a trend but rather the end. I honestly do not know precisely when this debt supercycle will collapse, but I do know (for all the reasons mentioned in prior Absolute Return Letters) that we are in the very last stages, hence the name change. Although our (well-meaning) clients have raised this issue for a while, my decision to write about MMT made me think of it again, and I should emphasise that it is indeed possible that an MMT framework in central banking, if introduced more widely, could extend this debt supercycle.

One of the classic signs that we are approaching the end of this debt supercycle is slowing productivity and GDP growth. I often come across those who argue that this will all be sorted out when the next wave of the digital revolution takes off. Inventions like AI in advanced robotics, IoT and other new digital technologies will see to that.

In a recent research paper which is only available to ARP+ subscribers (see here), I pointed out why you cannot necessarily make such an assumption. Also, we are about to publish a megatrend paper on climate change and, later this month, we plan to publish part V of our research paper on investing in natural resources in an increasingly digital world. That paper will summarise my earlier findings from parts I-IV and, most importantly, it will provide our thoughts on how an investment in natural resources should be structured going forward. All that will require a subscription to ARP+, though.