Monday , October 14 2019
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We’re All MMT’ers Now

Summary:
Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it. But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world. Why Trump swallowed a budget deal that bleeds red ink [Politico] “The president asked Mnuchin to negotiate a deal. And Mnuchin went to Pelosi saying, ‘How much is it going to cost me to get a debt limit increase past the election?’’’ one former senior administration official said sarcastically. “He doesn’t care about the cost. Wall Street is happy. The defense folks

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Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


We’re All MMT’ers Now

Why Trump swallowed a budget deal that bleeds red ink [Politico]

“The president asked Mnuchin to negotiate a deal. And Mnuchin went to Pelosi saying, ‘How much is it going to cost me to get a debt limit increase past the election?’’’ one former senior administration official said sarcastically. “He doesn’t care about the cost. Wall Street is happy. The defense folks are happy. That’s good enough.”

“He didn’t do anything. The pay-fors, offsets are a joke. It’s an accounting trick,” said one GOP senator. “It was sad. And he’s gleeful that the president loves him best for the moment.”

Back in 1971, Richard Nixon famously said “We’re all Keynesians now“, referring to his embrace of stimulative Federal government spending to juice his electoral campaign in 1972.

The only difference between Nixon and Trump in this regard is that at least Nixon made a half-hearted attempt at pretending that he cared about deficits. Ditto Reagan. Ditto Bush 41 and Bush 43. It’s my catchphrase about the oligarchic excess of the Trump regime:

They’re. Not. Even. Pretending. Anymore.

That’s why I found this Politico headline so funny … that somehow it was difficult for Trump “to swallow” a budget agreement that runs $1.4 trillion deficits for as far as the eye can see.

We’re All MMT’ers Now

LOL.

This is exactly the budget that Trump wanted. Please, please don’t throw me in that briar patch!

You know, we spend a lot of time here at Epsilon Theory with Natural Language Processing (NLP) engines that allow us to visualize the narratives that wash over us like water. I would like to show you a visualization of the US budgetary debate narrative. I would like to show you a picture of the fiscal policy narrative and its connection to the investment narratives that swim in the financial markets ocean. There’s just one problem.

That narrative connection does not exist.

I mean … are there occasional articles printed in the national media about the federal budget and the national debt and all that “stuff”? Sure.

But there is essentially zero narrative or linguistic connection between those articles and anything written about financial markets. Our words about markets and investing do not connect to our words about budgets and spending. At all.

I’ve never seen a less cohesive, less attentive narrative structure.

And I’ve seen a lot of narrative structures.

Why is this important?

Because THIS is what complacency looks like.

What breaks that complacency?

If Trump is reelected in 2020, I think he pushes forward a $2 TRILLION bond issuance that is fully or partially monetized by the Fed. They’ll be called Infrastructure Bonds.

If a Democrat is elected in 2020, I think she or he pushes forward a $2 TRILLION bond issuance that is fully or partially monetized by the Fed. They’ll be called Green Bonds.

It’s the same damn thing. Because … once again, with feeling … They’re. Not. Even. Pretending. Anymore.

Does the market go up or down on this? Yes.

We’re all MMT’ers now.

You ready for that? I bet you’re not.


About Ben Hunt
Ben Hunt
He is the chief investment strategist at Salient, a $14 billion asset manager based in Houston and San Francisco, and the author of Epsilon Theory, a newsletter and website that examines markets through the lenses of game theory and history. Over 100,000 professional investors and allocators read Epsilon Theory for its fresh perspective into market dynamics.

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