Dalio: Something Like MMT Is Coming

“The central banks as we know them are at the EXIT corridor, and the ENTER gate is the modern monetary theory.” shares billionaire and hedge fund manager Ray Dalio.

The doctrine known as MMT says governments should manage their economies through taxes and costs instead of relying on interest from independent central banks. The IMF has to dispel the fears of budget deficit and sovereign debt to countries like USA whose currency can not depreciate and allow itself to spend more than the allowable, while at the same time suppressing inflation (as is currently the case).

MMT debates that have been forgotten in the past have become quite fashionable in recent months, and the idea has been criticized by a number of financial world luminaries, such as Warren Buffet and Fed Chairman Jerome Powell, but according to Dalio, politicians have little choice but to accept .

“The challenge will be to achieve economic well-being for people when monetary policy does not work.” Zero interest rates and redemption of bonds in the process known to us, such as QE, have almost exhausted the stimulus of the economy. third-generation monetary policy “MP-3”, which will include “fiscal and monetary coordination” in line with the broader standards of MMT. ” says Dalio.

Dalio provides an exemplary example of how MMT would look like:

Centralized banks will print money directly on programs of the finance ministries, for example, to buy real estate and buildings for social purposes, thus jumping over bonds. Perhaps we can see government debt forgiveness in the form of a “jubilee”, and during recessions there will be direct intervention of cash known as “helicopter money.”

The risks Dalio finds lies in the fact that politicians will hold in their hands “the power to distribute money, costs and credits.

“It is difficult to imagine how such a system will be built and worked, but at the same time we have inevitably headed for that.”