MB Fund Podcast: Is 2020 Government Stimulus essentially MMT?

With the heavy amounts of Government stimulus being provided worldwide this year in response to Coronavirus’ economic impacts, we wanted to get the perspective of Adelaide University’s Dr. Steven Hail as to if this stimulus was essentially MMT in all but name
Our Agenda includes:
• Quick background to MMT
• MMT and Inflation expectations
• Which country is closest to considering MMT? Has any economy adopted a form of modern monetary theory and been OK?
• How much does the Phillips curve factor into MMT thinking
• Thoughts around government responsibility and MMT, given a lot of the arguments against MMT centre around whether governments can be trusted.
• Investment implications

See the presentation slides: https://nucleuswealth.com/wp-content/uploads/2020/11/is-2020-government-stimulus-essentially-mmt.pdf

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Tim Fuller is Head of Advice at the MacroBusiness Fund, which is powered by Nucleus Wealth.

The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. Tim Fuller is an authorised representative of Nucleus Wealth Management, a Corporate Authorised Representative of Nucleus Advice Pty Ltd – AFSL 515796.

Tim Fuller


  1. Tim FullerMEMBER

    Our viewer question of the week: which country do you think will be first to successfully implement MMT and perhaps a Universal Basic Income?

    • Sigh … its never been a process of implementing MMT because its a description of the system for decades, caveat – administrations operate it differently, but the potential is still there. Case in point – the platinum coin concept is pure MMT, where as currently the system is ad hoc with hangovers from previous monetary systems – see floating gold, fixed gold, end of convertibility, et al.

      • One learns something every day! “The Platinum Koala is the most famous series of Australian platinum coins. On 18 June 1987, the Australian Government approved the minting of platinum coins, and accepted them as legal tender.”

        • Legal basis

          The issuance of paper currency is subject to various accounting and quantity restrictions that platinum coinage is not. According to the United States Mint, coinage is accounted for as follows:[3]

          Since Fiscal Year (FY) 1996, the Mint has operated under the United States Mint Public Enterprise Fund (PEF). As authorized by Public Law 104-52 (codified at 31 U.S.C. § 5136), the PEF eliminates the need for appropriations. Proceeds from the sales of circulating coins to the Federal Reserve Banks (FRB), bullion coins to authorized purchasers, and numismatic items to the public and other customers are paid into the PEF and provide the funding for Mint operations. All circulating, bullion and numismatic operating expenses and capital investments incurred for the Mint’s operations and programs are paid out of the PEF. By law, all funds in the PEF are available without fiscal year limitation. Revenues determined to be in excess of the amount required by the PEF are transferred to the United States Treasury General Fund as off-budget and on-budget receipts. Off-budget receipts consist of seigniorage, the difference between the receipts from the Federal Reserve System from the sale of circulating coins at face value and the full costs of minting and distributing circulating coins. Seigniorage is deposited periodically to the General Fund where it reduces the government’s need to borrow.

          The concept of striking a trillion-dollar coin that would generate one trillion dollars in seigniorage, which would be off-budget, or numismatic profit, which would be on-budget, and be transferred to the Treasury, is based on the authority granted by Section 31 U.S.C. § 5112 of the United States Code for the Treasury Department to “mint and issue platinum bullion coins” in any denominations the Secretary of the Treasury may choose. Thus, if the Treasury were to mint one-trillion dollar coins, it could deposit such coins at the Federal Reserve’s Treasury account instead of issuing new debt.[4][5][6][7]

          31 U.S.C. 5112(k) as originally enacted by Public Law 104-208 in 1996:

          The Secretary may mint and issue bullion and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.

          In 2000, the word “bullion” was replaced with “platinum bullion coins”.[8]

          Platinum bullion coins can, by this statute, be minted in any denomination, whereas coins in any other specified metal are restricted to amounts of $50, $25, $10, $5 and $1.[9] This is the origin of the concept of minting a very high denomination coin, since the platinum clause provides the only loophole.

          Philip N. Diehl, former director of the United States Mint and with Republican Congressman Michael Castle co-author of the platinum coin law, has said the procedure would be permitted by the statute.[5] However, Castle says he never intended such a use. The platinum coinage provision was eventually passed by a Republican Congress over the objections of a Democratic Treasury in 1996.[8][10][11]

          Laurence Tribe, a constitutional law professor at Harvard Law School, said the legal basis of the trillion-dollar coin is sound and that the coin could not be challenged in court as no one would have standing to do so.[12] Professor Jonathan H. Adler of the Case Western Reserve University School of Law has said that he believes the legality of the trillion-dollar coin to be dubious.[13] – snip

          Its a legal construct subject to congressional outcomes same as all other budgetary views E.g. largely whatever dominate ideology holds at the time.

    • No idea. As skippy suggests (I think) hasn’t Dr Hail just made the point that MMT is more a description of what already happens rather than an entirely new theory?

      In any event, an informative podcast with much food for thought.

      To the extent I understand it, my concern is less with the concept and more with what the muppets in charge will do with it.

      • Yes that has always been the proposition – for some decades – as far as architecture goes, albeit administration varies E.g. Monetarism and now Quasi Monetarism = same assembly line under different management with different goals.

        BTW on the coin issue the wiki page would suffice.

        Funny aside … some think Yellen coming in means loose policy … chortle … shes in the group pushing debt reduction – repair … go figure in a room of knee jerks by the usual suspects …

      • Jumping jack flash

        In my opinion the interest rate manipulation starting around 2000 with Greenspan was the beginning of “MMT”.
        Up until that point interest rates were sacred, and with good reason. Everything since then has been a rude, mostly failed experiement in economic theory which i dub the New Economy. Its basis is debt growing at the correct rate to enable more debt to be created than last time, which is supposed to be able to be completely controlled by setting the cash rate, at least, in theory. It hasnt worked properly for over 10 years, much to their ďisappoinment and befuddlement.

        • I highly suggest your read the MMT literature, it predates Greenspan back to the onset of WWII with the end of taxation = revenue.

          But its not hard to search NEP for more attributed and fleshed out information rather than speculation.

    • Jumping jack flash

      Houses only going one way with 2% mortgage rates and 30 billion dollars of fresh super money (or a significant portion of that) leveraged at 95% LVR.

      Barely a token effort by the banks to ensure it isnt used for deposits. After 6 months it doesn’t matter anyway.