Modern Monetary Theory and How It Impacts Bitcoin Investments
Modern Monetary Theory has become a trendy topic of discussion lately as an alternative view. The “theory” has been discussed amongst politicians as a way to provide more jobs, to correct infrastructure, and to eliminate loans in education.
Basically, the MMT centers around the idea that countries should borrow within their own central banks and currencies, which inflation has given a little leeway to, according to Bloomberg.
In a subsequent article from Bloomberg, there have been varying opinions about how valid Modern Monetary Theory could potentially be, as Wall Street tries to figure out how to trade MMT. For that reason, the publication issued an article that helps to break down how to allocate, invest, and hedge in the event that MMT is implemented, assuming that it hasn’t already been.
The chief economist at global asset manager for Robeco, Léon Cornelissen, commented that there is an argument that could be brought to the table that the president should be considered “a practitioner of Modern Monetary Theory.” He bases that argument on his unfunded tax cuts and attempts to push low interest rate policies like MMT supporters would ultimately believe is the best choice.
Founder and CEO Jay Hatfield of InfraCap LLC believes that people need to get out while they can. If the government manages to expand with the idea that “deficit financing doesn’t matter,” it is most likely that there would be a weak dollar, combined with high rates for interest and a drastically slower pace in economic growth.
If that happened, Hatfield said that the best investments would be available outside of the United States. The stocks would most likely lose their attractiveness to investors because of their new interest rates. Stocks from international exchanges would see the most benefit, as Hatfield says.
Keith Wade, the chief economist and strategist for Schroders Plc, said the best investment product to look for would be hedges against inflation, which basically reduces the choices to gold, commodities, and property.
However, Wade commented that TIPS could do fairly well at this time, and that he would personally “probably switch any bonds to TIPS.” While the investors would better protect themselves from inflation, the return would not be very lucrative.
A research fellow with the American Institute for Economic Research, Peter C. Earle, pointed out that cryptocurrencies and precious metals would see more popularity with the implementation of MMT. These assets would basically act as inflationary hedges and cash surrogates. After all, Bitcoin was created as a response to the detrimental collapse of the economy over a decade ago.
Could it be time to be the saving grace once again? While more mainstream adoption would be necessary, Earle’s prediction that crypto could be the “cash surrogate” could put it in a position to gain the necessary traction.