Everything you wanted to know about MMT (but were afraid to ask)
Comment of the Day

January 31 2019

Commentary by Eoin Treacy

Everything you wanted to know about MMT (but were afraid to ask)

Thanks to Kevin Muir for this post from his themacrotourist.com blog which is relevant to the current discussion on Fed policy, fiscal policy and political jockeying. Here is a section:

If I am correct, I suspect we will see many Democrat candidates (perhaps all?) adopt MMT as a tenant of their platform. And here is a crazy thought for you - what if Trump beats them to it?

I have long argued that eventually we will hit a period where governments will spend and Central Banks will facilitate their deficits. MMT provides academic justification of where we all know we are headed anyway.

In one of the interviews I watched with Professor Kelton, she said that the idea of deficits being funded with bond issuance is purely a self-imposed limitation. It’s required by law, but in reality, it doesn’t need to be done. The law can be changed. The government could simply spend $100 while only taking in $90 and directly writing cheques against the Federal Reserve to pay for the $10.

Think about how inflationary this will be! But isn’t that the whole goal?

I have always chuckled at the idea that governments were powerless to create inflation. If they want to create inflation - they can. There just needs to be the political will. And it looks like that will has finally arrived.

Eoin Treacy's view

Left-wing politicians in the USA are jockeying for who can announce the largest tax on the “super-rich”. Last week the media were discussing an upper band of 70%, today Bernie Sanders is suggesting a 77% tax and the re-imposition of a heavy estate tax on fortunes over $3.5million. Meanwhile more and more politicians are adopting President Trump’s mantra that deficits don’t matter.

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