“An Explanation of Modern Monetary Theory”

A Tuesday Wall Street Journal Letters to the Editor writer offered one.

[I]nflation is the only reason to limit budget deficits. The national debt is never a valid reason in countries with their own currencies; they can always make payments as they come due and can never be forced to default.

In particular,

The debt can always be paid by creating money.

Here are a couple more thoughts on the matter.

Printing money is, in and of itself, inflationary if production doesn’t rise in a way that substantially keeps pace with the increase in dollars chasing those goods and services. Using printed money to pay a national debt doesn’t cut it. Otherwise, Treasury could simply declare our national debt paid off, deeming the dollars printed.

Alternatively, Treasury could execute that middle step; the money printed to pay the debt still must go somewhere after the debt instruments are retired, it won’t simply disappear into the æther—it’ll enter the economy and inflate prices.

And this claim:

Treasurys are completely marketable. If a wealthy bondholder wants to buy something, she will sell bonds.

To whom will this wealthy bondholder sell the bonds (I’ll elide questions about the per centage of outstanding bonds this “wealthy” class holds)? There must be a buyer. If the idea is that Government will use the money to buy its own debt, we’re back to the above. Failing that, it’d be interesting to see this wealthy person take one of his bonds to his grocery store to buy food. Or use one to pay his cab driver—and tip well or ask for change.

This isn’t a theoretical disagreement, either; we have the example of Zimbabwe, courtesy of another writer in his Letter:

Zimbabwe’s government, which printed so much currency that it became worthless and had to be abandoned in favor of US currency.

This writer is the proud owner of a Zimbabwe Z$100 Trillion (yes, with a “T”) note that he picked up for two bucks, US—and he says he overpaid.

“Credible Military Capabilities”

The European Union needs some, says Ursula von der Leyen, European Commission President.

In order to respond to crises, the EU needs “credible military capabilities,” the leader of the EU Commission Ursula von der Leyen said at the World Economic Forum in Davos on Wednesday.
The bloc has already “set up the building blocks of a European defense union,” the former German defense minister said in her speech.
“It is complementary to NATO and it is different,” she added. “There is a European way to foreign policy and foreign security policy where hard power is an important tool […] but it is never the only one.”

Well, NSS.

This is much of what President Donald Trump has been saying since he began campaigning for office in 2015. It’s part of his long push (which is beginning to have some success) for NATO’s European member nations to quit freeloading off our treasure and blood and actually honor their NATO commitments with more of their own money and blood.

It’s also a clear indication that those nations, whose prosperity appeared and grew under American protection, can—and have been able to for a long time—do more for NATO than they have been. After all, it will cost much more to develop an additional defense establishment with the building blocks of a European defense union that is complementary to NATO and…is different.”

Von der Leyen says the EU can afford both.