MMT destroys international relations—dollar loses reserve status
Joe Ciolli 19, executive editor in the business division at Insider, overseeing the markets, investing, economy, and finance teams; and Vincent Deluard, macrostrategist at INTL FCStone, 03/17/19, “A Wall Street expert explains why the US is the 'worst place' for Alexandria Ocasio-Cortez's favorite economic theory — and breaks down the 'absolutely horrifying' impact it could have,” https://www.businessinsider.com/alexandria-ocasio-cortez-mmt-modern-monetary-theory-expert-opinion-on-drawbacks-2019-3 //SBM
At the core of Deluard's argument is the idea that domestic conditions in the US right now make MMT a bad fit — potentially creating a disastrous situation on a global basis. And that all stems from the US dollar's position as the world's foremost reserve currency.
According to Deluard, the massive amount the US government makes by issuing currency puts it in a unique position. It's allowed Americans the luxury of being able to import close to four times their annual income over the past 27 years without truly having to pay for it.
That all traces back to the perception that the US dollar will always be an anchor of value. If that idea vanishes, Deluard warns, the positive effects of MMT would be more than offset by decreased income as the dollar gradually loses its reserve status.
In fact, Deluard says the US's reserve-currency status has already taken a hit recently. The chart below shows that foreign holders have already sold $1 trillion in Treasurys over the past four years.
[Graph omitted]
"Unfortunately, MMT ideas became popular at the wrong place, and at the wrong time," Deluard said. "If the domestic conditions for MMT in the US are unfavorable, the international consequences of such a move would be absolutely horrifying."
So to summarize: Deluard thinks the "free money" the US collects from its role as a reserve-currency provider would be eroded by MMT. And that would ultimately hurt both the US and its international counterparts.
"The US is the worst place for a large scale MMT experiment," he said, adding that MMT's "failure to consider its international dimension is its greatest weakness."