MMT devalues the dollar and causes investors to dump their assets---ensures consequences in markets.

MMTers opine that governments should not be treated like households, which have to match revenues and expenses. MMTers maintain that governments control their own fiat currencies and therefore can pay their liabilities in their own currency, which they can print as they wish. Accordingly, governments do not need to budget as households or companies do, because they can meet all their obligations by simply printing money. And this, of course, is true. Problems, however, occur when government spending decisions lead printing presses to get out of control, as has happened in Weimar Germany, Argentina and many other Latin American countries, and the Zimbabwes of the world. So if the government simply instructs the central bank to print money whenever it needs it and in quantities beyond what the economy can absorb, one would expect inflation to rear its ugly head — often with catastrophic political and social consequences as in the Weimar Republic, which ushered in the Nazis.

The debasement of the currency also has ramifications on the foreign exchange market. If a country’s central bank prints too much money, it will lead to the devaluation of the currency on the foreign exchange markets. This, too, has many negative consequences, not the least of which is that if imports of goods and services cost more, prices will rise, causing inflation to accelerate. For the U.S., the devaluation of the U.S. dollar would have much more serious consequences. The U.S. dollar is the world’s major reserve currency, and U.S. Treasury obligations are held as reserves in central banks worldwide. A significant dollar devaluation would cause these banks, as well as other foreign institutions and corporations, to dump their U.S. Treasury holdings. The dollar dropped over 6% in 2020, and there is perhaps more to come. Currently, $7 trillion of U.S. government obligations are held by foreigners, and panic-selling to exchange these bonds for other currencies would cause enormous downward pressure on the dollar, debasing it even further. This would have potentially disastrous ramifications in the world’s capital markets.