Bank Regulators Embrace MMT

Bank regulators have embraced the Magic Money Tree Modern Monetary Theory and will reduce the reserve requirements of the biggest U.S. lenders by 1.5 percent.

I know that doesn’t seem like much, but that gets multiplied by 9-10x by the banks. Remember, banks lend money into existence, so this is just another form of money printing. (If you wanted to know why the U.S. 10-year yield has barely fallen despite World War III in the on-deck circle, now you know.)

Ostensibly, the reason for lowering the reserve requirements is so that the big banks can buy more U.S. Treasuries and add depth to the treasury market. But, plot twist, that’s not what’s going to happen!

No one in their right mind wants to own U.S. wealth confiscation certificates, and the banks don’t either. So they will use the lower reserve requirements… to buy back their own shares and pay dividends to shareholders!

Of course, this just makes the banks more fragile!

This is so on brand for Trump. He has the right idea, but the execution does the exact opposite of what is intended. #artofthedeal!

I predict this policy will be replaced with one that simply excludes U.S. Treasuries from reserve requirements, which would actually incentivize the banks to buy them.

Thank you for your attention to this matter.