Is Modern Monetary Theory Dead?
Or taking a victory lap on the soft landing runway
Fishing for Answers
Several years ago, before the Covid debacle, I spent a very pleasant August weekend in Maine, courtesy of my friend David Kotok. Camp Kotok is not just about fresh air, fishing, and fine wine. Most of the invited guests are either economists or financial types. We are expected to do our homework, and sing for our supper.
I was asked to speak at a session on Modern Monetary Theory (MMT) along with Jim Bianco, Danielle diMartino Booth, and Samuel Rimes. This theory posits that fiscal spending and sovereign debt are fine, as long as the country issuing the debt can repay it in its own currency—eventually. To listen to our discussion from back in those days of innocence four years ago, click on the caption below—Jim does a great job of explaining MMT.
The Covid-19 Detour
Then came the economic shock of our lifetimes. Life came to a government-mandated standstill. In the US unprecedented fiscal stimulus saved millions of people, and tens of thousands of businesses, from bankruptcy and worse. In the inflation aftershocks that followed, MMT and its companion, Team Transitory, were quick to be discredited. US debt grew by trillions of dollars, which many commentators called both inflationary and unsustainable. This group includes my most recent podcast guest, Tim Congdon on the Hale Report who worried that this increase in debt could lead to a recession, or perhaps worse.