The next great monetary experiment
“This MMT sounds like a recipe for immense inflation, even hyperinflation. You are spending all this money directly into the economy. It will drive consumer prices through the attic roof, you say. This is crackpot. A witch’s sabbath of inflation would surely result. Yes, but here the MMT crowd meets you head on… They agree with you. They agree MMT could cause a general inflation, possibly even a hyperinflation.”
USAGOLD note: Modern Monetary Theory (MMT) is neither modern nor a theory. John Law, the Scottish financier, tried a version of it exactly 300 years ago (1717-18) in France.* He did so with the blessing of the French monarchy and with a rationale very similar to MMT’s proponents today. In the end, Law’s theories (to his surprise if we are to believe the historical account) bankrupted the French people and the government, reduced the economy to ashes, and created such a distaste for paper scrip among the citizenry that it took 80 years for France to reintroduce paper money as a circulating medium.
“The shrewder speculators* became alarmed. They began to sell their shares of stock, and hoard in gold the enormous wealth they had acquired. This resulted in a demand on the government for metal in exchange for its paper, and soon the government had no metal to give. Then the crash came. Those who had the government paper could buy nothing with it. Those who held the Mississippi stock could scarce give it away. It was worthless. The government itself refused to accept its own paper for taxes. A few lucky speculators had made vast fortunes; but thousands of families, especially among the wealthier classes, were ruined.” – Edward S. Ellis and Charles F. Home, The Story of the Greatest Nations (1900)
* Please see this link for a summary of Law’s Mississippi Company land scheme.
Image by Internet Archive Book Images [No restrictions], via Wikimedia Commons/The Mississippi Bubble, Street of Speculators/The Story of the Greatest Nations/Edward S. Ellis and Charles F. Home (1900)
Repost from 2-4-2019