Monetary-Policy

We use an easy-to-understand analogy to explain the relationship between digital currency “mining” and “accounting,” as well as why Bitcoin and Ethereum have different supply caps.

• The U.S. stock market’s sustained bull run is largely driven by the “watering” of the dollar, rather than America’s inherent “hard power.”
• The modern monetary system has gradually become an important theoretical cornerstone for many economies worldwide since the 2008 financial crisis, emphasizing the subjective initiative of large governments in intervening in markets and utilizing government fiscal deficits as a primary tool to achieve full employment while stabilizing inflation.
• The term “large government” is most commonly associated with Keynesianism, which highlights the government’s role in “smoothing peaks and troughs” during economic cycles – for example, suppressing overheating and stimulating contraction. It places great emphasis on the multiplier effect of government spending, i.e., how much an increase in monetary stimulus can amplify consumer multipliers; a 1-unit increase in government expenditure stimulates an equivalent increase in corporate and individual income, leading to business expansion and job creation, and ultimately mitigating economic downturns. Furthermore, it adopts a relatively conservative approach to fiscal deficit limits and sustainability. The multiplier effect will drive market recovery, thereby increasing government revenue, especially during periods of overheating, where government debt potential and interest rate levels can be accumulated as stimulus funds for the next cycle.
• The modern monetary system is more like an extreme extension of Keynesianism, but with differences; its biggest characteristic is the limitation on government debt, which means the central bank should not have independent autonomy, primarily focused on inflation and full employment. With limited resources and productivity, inflation refers to the government continuously increasing purchasing power through unlimited fiscal deficits as technological progress improves production efficiency, until it reaches the ideal level of full employment and production bottlenecks; continuing to increase monetary supply will lead to inflation, at which point it chooses to set a limit on fiscal deficits, as long as there are idle production resources, increased debt will not trigger inflation.

After the Financial Crisis

Of course, reality is not an ideal world, and execution in each stage involves human participation. Keynesianism is also selectively applied, leading to more economic stimulus during downturns and less overheating suppression. Economic imbalances generate achievements, while overheating also does, making it extremely difficult to suppress them. The numerous economic problems brought about, even a new financial crisis, are not inferior to the economic shocks caused by traditional overcapacity. The 2008 global financial crisis was actually a market self-reinforcement resulting from extreme Keynesianism, leading to the proliferation of speculative structural financial investment products such as real estate and financial investment products derived from real estate as their underlying assets. Even before the crisis erupted, there was a lack of risk awareness at academic, political, and market levels, treating debt-fueled prosperity as achievements, and more people benefited from it, such as the enormous financial system: losses are yours, dividends are ours, it’s bankruptcy – we made a fortune, money cannot be spat out. Ultimately, this led to massive investment by participants, bearing the profits of previous stages.