Bitcoin and Modern Monetary Theory

Foreword: Regarding the development of the world economy, modern monetary theory regulates the economy through fiscal policy and monetary policy, in order to achieve a stable development without causing inflation or deflation. But there are also economic theories that although government debt and the loose monetary policy of the central bank can bring prosperity to the economy in the short or medium term, it will put the world economy in great danger in the long run. According to this theory, predictable monetary inflation mechanisms and no-licensing are important financial alternatives, also known as Bitcoin, which provide an option for people to escape in the event of failure of modern monetary theory. Where will the future go? Welcome everyone to browse and discuss.


There are two powerful economic theories today: modern monetary theory and bitcoin. Although the core of political dialogue is still about the basic and eternal debate of leftist economics and rightist economics.

Two emerging and extreme theories are beginning to reshape the existing economic dialogue. Modern monetary theory is a positive proposition, while cryptocurrency is an anti-proposition. However, bitcoin and modern monetary theory have pushed the original economic dialogue to another category, making it no longer confined to traditional liberal economics and conservatism economics.

Dissatisfaction with the political and economic status quo and increasing extreme emotions will all likely break or change our existing theoretical framework. In the current era of the times, these two topics, like all other topics, can easily lead to widespread speculation, distortion and confusion. Other political forces will also cause this topic to attract wider attention.

More complicated is that since modern monetary theory and supporters of Bitcoin are fighting each other for the right to speak, the tug-of-war between the two is becoming more and more tense.

In other words, the two are hostile to each other and have a sense of group. A famous modern monetary theory scholar has mentioned the most essential issues to us.

Students with mainstream cultural ideas form a group, and thus establish a sense of belonging and common goals, but also make them turn a blind eye to new or excellent ways of thinking or hostility.

Although the universal definition of modern monetary theory is that "a country cannot default on debt denominated in its own currency," some early proponents of modern monetary theory did not accept this fundamental principle. The problem is that many of the proposals of supporters of modern monetary theory are relatively reasonable when dealing with specific events, but modern monetary theory is difficult to clarify when considering the scope of consideration to the public level. Another author of modern monetary theory, Bill Mitchell, continues to speak. He believes that modern monetary theory is not a revolutionary new system, nor a threat to the current system; modern monetary theory is the current system:

In fact, modern monetary theory only describes the existing systems of most countries after 1971.

Modern monetary theory only summarizes the current state of the global economy: the existing fiat currency system. Mitchell also elaborated on the fundamental principle of universalism, that is, “the government will not limit spending because of the need to increase income.” In addition, he borrowed a cliché: “Currency has no intrinsic value.”

The popular definition of modern monetary theory has pushed this core to the extreme. For centuries, the ratio of debt to GDP has been steadily increasing. It is difficult for fiscal conservatives to stick to the debt ceiling. The Republicans and Democrats in the United States have spent a total of trillions of dollars, and spending has already exceeded the total income.

According to Mitchell's definition, modern monetary theory has laid the foundation for the global economy. However, due to the spread of modern media, the well-known and sensational part of modern monetary theory seems to indicate that the state needs to solve the more macroscopic problems by increasing debt.

To some extent, although the global economy has experienced two brief and severe collapses in this century, many areas have experienced two long periods of prosperity. The sharp increase in government spending, coupled with a loose central bank policy (interests hit a record low + a growing trillion dollar balance sheet), together form the economic landscape we know today.

In addition to modern monetary theory, classic Austrian economists believe that loose fiscal policy stimulus in the short term will eventually lead to unpredictable long-term risks:

One of the best economic charts of all time, quoted from: Bridgewater by Ray Dalio

Blue Fox Notes "Lu" Remarks: Focus on the most recent debt crisis in American history in the 1930s, when debt debt grew faster than income and debt pressure reached a high point. Interest rates as low as zero interest rates are not able to fight the Great Depression. In order to end the Great Depression, policy makers abandoned the gold standard and printed banknotes.

At the beginning of the last century, the government's unconstrained fiscal expenditures + loose central bank policy + printing of banknotes together led to a social disaster. If history repeats itself, credit will continue to expand, so the Great Recession of this century may be just a precursor.

In 2008, when the huge credit system in the global economy was on the verge of collapse, governments of all countries joined forces to reinvigorate the credit system by introducing a quantitative easing policy, namely “printing money”. In the medium and long term, although this unconventional monetary approach may avoid the Great Depression in the 21st century, in the long run, it will eventually weaken the viability of capitalism.

For those worried about such a future, the theoretical lifeboat of the financial crisis marks its creative choice, and it conveys such information:

"Times Weekly, January 3, 2009, the Prime Minister faced a second round of bank bailouts." (Blue Fox Note: This is the coinbase text of Nakamoto Satoshi embedded in the creation block in January 2009. Also for modern currency An implicit declaration of theory.)

The emergence of Bitcoin's founding block is the beginning of Bitcoin's attempt to replace central bank and government debt, and it creates money that is independent of most typical national economic monopoly mechanisms.

Unlike government debt spending or central banks using different policies to influence the circulation, acquisition, and distribution of global currencies, Bitcoin is programmed to restructure what we know:

Unlike the government's relatively casual impact or increased money supply (through spending, capital controls, or central banking), Bitcoin is also known as a distributed book (blockchain), and Bitcoin offers an alternative, based primarily on idea:

1. Predictable and programmed monetary inflation mechanisms;

2. The access network is not geographically restricted and does not require a license.

Looking back at history, government debt continued to expand, leading to inflation to some extent, and ultimately to social disasters. Although stable and predictable government debt growth may bring about a mid-term economic boom, once the real impact is created, the entire financial system will be in danger of collapse.

Inflation in the country, such as today's Venezuela and Germany before World War II, innocent people will be crushed by the economy. In theory, Bitcoin can be a universal economic escape cabin, allowing individuals to be protected from the impact of the local economic collapse. Anyone can use this alternative value store to protect their wealth through the Internet.

However, Bitcoin is vulnerable to extreme fluctuations and is still technically limited. Although Bitcoin is likely to be an alternative to the deteriorating global economy, it is also politically inadequate, which does make the public feel very uneasy.

Like modern monetary theory, the myth of bitcoin is also very easy to get out of control. There is also competition in the field of cryptocurrency, and many parties compete for control. However, predictable, unlicensed digital native currency is likely to become a bitcoin narrative. As a new generation of financial alternatives, Bitcoin's influence has gradually expanded. After hacking, fraud, bubble or token inflation, there may be other vicious incidents.

Logically speaking, modern monetary theory scholars, including all schools, regard bitcoin as a nemesis. Contrary to the idea that modern monetary theory moves toward financial monopoly, Bitcoin adopts a completely different philosophical approach to government debt, which allows individuals to escape from endless government debt, so Bitcoin weakens this monopoly mechanism to some extent. .

Other supporters of more rational modern monetary theory, such as Bill Mitchell, said Bitcoin is independent of the free market, and its emergence actually affirmed the status of modern monetary theory. He said:

“All imbalances in the foreign exchange market are resolved by exchange rate fluctuations. This means that domestic policy instruments – central banks and fiscal policies – are free to target domestic policy objectives because they know that exchange rates can resolve trade deficits and trade surpluses. Such as the currency imbalance caused."

Today's free-floating currency foreign exchange system provides verification and checks and balances for modern monetary theory. Bitcoin offers another extensional choice. If global government debt and the loose monetary policy of the central bank are long-term threats, then the entire world economy is in an incredible danger.

In this regard, governments and central banks in all countries will feel guilty. If the world economy is really threatened, then there is no safe haven in the fiat currency. Once the danger occurs, if any… we all know that Bitcoin can provide shelter in reality.

The future of the world economy was created by the evolution and differentiation of bitcoin and modern monetary theory.

In the days to come, modern monetary theory may be pushed to the extreme by global politics, when Bitcoin will bring a more extreme choice. Only time will tell us which theory will prevail, or how the two will combine.

Author: Mike Co, translated by the "Blue Fox notes," Community "Lu".

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