Is the monetary bubble economy sustainable? 

Will it be a soft reset (recession) or hard-reset (depression)?

CONCLUSION

Is the monetary bubble economy sustainable?

The monetary bubble economy seems unsustainable. With interest rates at zero and printing printing on, the economy has come to the end of the long term debt cycle. The Corona crisis has significantly worsened the situation. According to Ray Dalio, a depression is on the way or has actually already begun.

Will it be a hard reset (depression) or soft reset (recession)

The question is, will the soup really be eaten that hot? The IMF sounds serious: It wants "A New Bretton Woods Moment" and rearrange the global monetary system. Klaas Knot also sounds serious when he says; he wants to save the euro through European integration, money transfer and debt restructuring. 

It is clear that the world has entered a challenging MMT game. But will it be possible to avoid a hard reset? Will it be possible to get rid of the debt bubble through controlled inflation and debt restructuring? Creating inflation is difficult. The Nout Wellink's statement in 2016; that central banks behave like "Kamikaze" sounds extravagant but isnt totally crazy. You may wonder whether cutting interest rates to negative and the traditional QE, to create inflation, is sensible. The bubbles have grown further, the interest rate instrument has been used up and the traditional QE seems to be not working well in times of stagnation. There is only limited money flowing into the real economy, and that real economy is not really longing for all that extra debt.

Central banks are busy worldwide implementing Central Bank Digital Currency systems. This makes a currency change or fiscal stimulus; the direct injection of MMT helicopter money into the real economy immediately and quickly possible.

Since the Corona crisis, governments have actually been doing fiscal stimulus. Companies and individuals are supported through helicopter money. It is important that the economy does not become dependent on this, as with low interest rates, and that we actually slip from Modern Monetary Theory to the Mugabe Monetary Theory. 

To avert a hard reset, trust in the fiat currency and cooperation is crucial. At the moment, despite the ever-rattling printing press and the rising negative interest rates, confidence in the fiat currency is still high. This gives time to put things in order. In terms of cooperation, in Europe or in the world, we score less. In fact, there is quite a lot of resistance. This is worrisome. Changes are difficult. But under pressure, hopefully things will alter to the right direction.  

TIP

Ray Dalio says "cash is trash." The yield on government bonds is negative. There is huge asset inflation. Inflation on the Consumer Price Index (CPI) also appears to be on the rise. Huge stimulus programs are in the pipeline. Perhaps it would be wise to go to the Canary in the coal mine once in a while, both privately and professionally; gold, silver or crypto. MicroStrategy is the first listed company to have made Bitcoin the biggest stake in its Treasury reserve strategy.' It has purchased $450 million in Bitcoin to do so. Are there more to come?

Paper november 2020 - 9 pages

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Content

1. Monetary bubble economy
2. What is fiat money?
3. Solutions economic schools
4. Current situation: a challenging MMT game
5. Conclusion