No debt fictional world

Imagination precedes invention - sure there have been accidental discoveries, but even in such cases, ultimately, someone was pursuing their imagination, albeit for some other objective.
To venture a guess, science fiction perhaps has played a major role in improving the quality of life of mankind, more than any other genre of fiction- the submarine, the cell phone, the tablet, credit cards, video calling, bionic limbs, electric cars all the way down to space travel; and perhaps even the World Wide Web, were first imagined by someone simply trying to sell a book.
On a lighter note, romantic fiction can hardly be expected to conceive ground breaking scientific discoveries - but then again you never know.
Curiously, however one subject, deeply devoted to a fictional world, which has absolutely failed to alleviate the miseries of mankind in the real world, is economics. Most all its theories can never be proved in the real world, and its champions usually struggle to explain phenomenon, after disaster has stuck, and even then generally fail miserably - the discipline has yet to build a consensus on the causes of the Great Depression.
The supply-demand curve is a lie - the price for gasoline, the most traded commodity, is set not by supply nor by demand, but by the futures market and speculators; which is why the Russians and a virus can play havoc!
But suddenly there is hope.
If you have anytime wondered that if Pakistan can print its own money, the Rupee, why does it not just print a bundle and pay of all its domestic debt, then you will love MMT - Modern Monetary Theory!
Admittedly this theory also lies in a fictional world - but so what!
MMT argues that a country with its own currency needs not worry about accumulating too much domestic debt, since it can always print more money to pay off the interest and the debt. Pakistan can never run out of Rupees to pay its creditors. And ever since the death of the gold standard, there is no limit to printing paper money. Make sense till now?
MMT proponents also argue that the natural rate of interest on fiat currency is zero, and setting interest rates by regulation only helps the investor class make more money. Frankly, their argument that tweaking interest rates is ineffectual because businesses will invest, despite a higher interest cost, if the proposal is profitable - makes sense. Free market supporters should agree with MMT on letting the market set the interest rates rather than a regulator!
MMT also points out that since loans make deposits rather than vice versa, every time there are more loans there will be more deposits and logically the interest rate will come down! Is that not amazing?! And here we were led to believe that interest rates controlled inflation because they inhibited consumption!
Obviously, by now all the Econ 101 followers are screaming hyper inflation; yeh, yeh, we get it!
MMT, however, does not! According to MMT, inflation can only happen if there is more demand than real stuff; and taxation is how you fight inflation and income inequality. Excessive pricing power, such as in the case of hoarding, will however need to be curtailed by regulatory, in our case police, action.
Honestly speaking, MMT makes as much sense as any other economic theory!
And all of the above can happen simply by someone at the State Bank of Pakistan, pressing a few keys on their laptops; creating more money by crediting the banks' accounts with it.
So what would happen if one fine morning, the government decided to pay of its entire, or at least most, domestic debt of around Rs 21 trillion, by the stroke of a pen, or well by pressing a few keys on the computer. And simultaneously, increased taxes on gains on shares and real estate to the maximum bracket, limited the amount an individual could invest in National Saving Schemes, limited and linked purchase of foreign currency to disclosed sources, linked purchase of gold to disclosed sources, introduced tradable export certificates scheme, came up with a scheme of tangible incentives for investment in agriculture and industry such as land as public equity, provided protectionism not to textile but new industry, and most importantly abolished the policy rate whilst at the same time disallowed negative rates on deposits.
What could go wrong?
We could go bankrupt! But are we not already, according to most economists? And again for the record, I did not dream up MMT.
On the flip side, the government will have more money to spend on development, since it can print now as much as it wants and there would be full employment. And since everyone will be flush with liquidity, and speculative investment will be taxed heavily and monitored, capital investment, with the right incentives and appropriate protection, might just increase! The risk of inflation may even be limited to the amount of liquidity that flows to everyone other than the rich class, and considering how deposits and banking are currently skewed, things look positive.
And if it does not work, we could perhaps reverse everything by a few keystrokes?!
Admittedly this sounds like science fiction. However, since economic plans A to Z have never actually worked, we probably need to imagine more!
So while doubling over with laughter, just for the heck of it, would it hurt to do a model for a no debt fictional world?
(The writer is a chartered accountant based in Islamabad. Email: [email protected]. The views expressed in this article are personal. The views are not necessarily those of the newspaper)