If you want to sell high inflation to voters as a positive thing, you’re gonna need a damn compelling narrative.
It just so happens that such a narrative is being developed and distributed. A narrative that the millennials – who’re only just flexing their muscles at the ballot box – are particularly predisposed to. That is the focus of today’s letter.
But first, a quick recap. Yesterday, we looked at Modern Monetary Theory (MMT), which has recently boomed in popularity. It permits a radically new approach to government spending: for politicos seeking access to the public purse, MMT is a skeleton key to any boondoggle, granting nearly unlimited government funding for whatever pet project they wish to pursue. This has a cost of course: inflation.
But depending on how old you are, a lengthy period of high inflation could be seen as a good thing. A sustained period of high inflation would flip the generational wealth gap which has become a political bone of contention in recent years, causing a redistribution of wealth from the old to the young. This inflation could be pursued deliberately (though it’s unlikely that would be acknowledged publicly), though it’s more likely that it would occur as a consequence of grand government spending plans.
So what grand government spending plan could be used to bring this about? What narrative could be used to sell the idea that high inflation is good, or at least a minor side effect of fixing an urgent and pressing need?
Greater than World War II… Greater than the Apollo programme… A “mass mobilisation” like never before…
I’ve become very conscious while writing this series that many of you that read Capital & Conflict hail from older generations, while I am a millennial. Rest assured, I’m no fan of wealth redistribution or the government running a printing press – I’m a gold bug, for heaven’s sake. But good luck finding many others like me in my age bracket.
I recently discovered a key difference between older generations and mine: the three r’s were taught at school.
Older folks will recognise the three r’s to mean reading, ’riting, and ‘rithmetic. That this was what older folks view as “the three r’s” was completely alien to me until recently. I only learned about ‘em a couple months back. You see, I was taught a different three r’s at school. Mine all actually start with r: reduce, reuse, recycle.
All through my education, beginning very early on, were constant signposts to an impending problem of climate change and environmental deterioration. The most blatant of these occurred when I was in primary school, when we were taken out of class for a cinema outing to watch Al Gore’s Oscar-winning science fiction classic documentary An Inconvenient Truth. Bear in mind, this was a state school. If memory serves, I don’t even think my parents were asked to pay for the viewing.
The “school strikes for climate” and the strong millennial turnout at Extinction Rebellion rallies reveal that this “activation” of the youth has only continued. Whatever your beliefs on climate change, be you a “believer”, “sceptic” or “denier”, the issue is being increasingly brought towards the printing presses. And running the printing presses won’t matter for the millennials, as it’ll bring about “intergenerational fairness”.
The Green New Deal proposal of millennial Alexandria Ocasio Cortes, firebrand of the Democrats in the US, is but a forerunner of what is to come.
The plan, among many other things (including promising economic security to those “unwilling” to work)…
“Upgrading all existing buildings in the United States and building new buildings to achieve maximal energy efficiency, water efficiency, safety, affordability, comfort, and durability, including through electrification.”
“Overhauling transportation systems in the United States to eliminate pollution and greenhouse gas emissions from the transportation sector as much as is technologically feasible, including through investment in – (i) zero-emission vehicle infrastructure and manufacturing; (ii) clean, affordable, and accessible public transportation; and (iii) high-speed rail.”
“Spurring massive growth in clean manufacturing in the United States and removing pollution and greenhouse gas emissions from manufacturing and industry as much as is technologically feasible.”
… may cost tens of trillions of dollars. But that’s no matter. Because she’s a believer in MMT.
And she has the backing of economists like Stephanie Kelton, also an MMTer, who commands respect from Republicans as well. Here’s a recent piece by her in the Huffington Post, emphasis mine:
We need a mass mobilization of people and resources, something not unlike the U.S. involvement in World War II or the Apollo moon missions ― but even bigger. We must transform our energy system, transportation, housing, agriculture and more.
What we don’t (yet) have is the final, vital ingredient ― a critical mass of politicians prepared to unleash the enormous power of the public purse to save the planet. We need more political courage and less political consternation…
We can’t afford to let deficit politics stand in the way of an ambitious Green New Deal…
Once we understand that money is a legal and social tool, no longer beholden to the false scarcity of the gold standard, we can focus on what matters most: the best use of natural and human resources to meet current social needs and to sustainably increase our productive capacity to improve living standards for future generations.
Trash the currency, save the world. The state deciding what is “the best use of natural and human resources to meet current social needs” sounds an awful lot like communism, but don’t let that get in the way – we’ve a planet to save. “From each according to his ability, to each according to his needs”, you might say.
Print or die
… if we want the planet not to burn, we have to have a solution that meets the needs of the transformation implied by the science of climate change. We can disagree on how to do that. But either we care about the heat death of the planet, or we don’t. And what MMT shows us is the constraints there are not financial. The constraints there are our political will. They’re our capacity economically. And then the question is, do we want the planet to burn or not, or do we want to force people to stay unemployed or not? So I think there’s a range of prescriptions, but that the framework itself sets up a very different sort of chessboard than otherwise.
– Rohan Grey, MMTer and president of the Modern Monetary Network
Come on, buddy. If you want the planet not to burn, you better rustle up that “political will” to get the printing presses rolling. Don’t you wanna save the world from “heat death”?
Regardless of your beliefs on climate change (you may even believe such “solutions” are required), bear in mind the vast expansion of the state such plans to counter it imply – especially if you hear direct reference to MMT.
The stage is not only being set by politicos. Our own Mark Carney has been getting the printing presses all nice and warm in preparation for the grand struggle against climate change, as have 34 other central banks, as part of the “network for greening the financial system”, the NGFS. Their first report revealed they’re happy to “do their bit”.
Central banks may decide to employ part of their investments to pursue non-financial sustainability goals in order to generate positive (societal) impacts, in addition to traditional financial return goals. In this way, central banks can also actively support the development of the market for green and sustainable assets…
Notwithstanding that the focus of central banks incorporating ESG (Environmental, Social, and Governance) aspects into their portfolio management has been on own funds and pension liability portfolios, some voices have called for an extension of this approach to monetary policy. Among NGFS members, so far only one central bank, the People’s Bank of China, has a dedicated policy to promote green finance via monetary policy.
“So far”. Let’s see what happens after the next election, with more millennials joining the electorate by the day.
To close, I’ll leave you with an insight from John Butler, former investment banker and monetary historian, on MMT:
MMT is not ‘modern’. It has been around at least since John Law printed livres in a futile effort to restore solvency to deficit-financed late Bourbon France. The Jacobins would try the same tactic and fail just as miserably. Napoleon knew better: He paid his soldiers in silver.
Should MMT arrive, we’d do well to take Napoleon’s hint.
All the best,
Boaz Shoshan
Editor, Capital & Conflict
Category: Market updates