In today's environment of ultra-low interest rates and massive monetized fiscal deficits, the dangerously naive policy prescriptions offered by Modern Monetary Theory are being realized more or less by default. Whether central banks will be able to regain control after the current crisis is an open question.
FRANKFURT – Many people are now proclaiming that the COVID-19 pandemic has provided proof positive that Modern Monetary Theory (MMT) is the only way forward for governments. To the uninitiated, MMT probably sounds extremely sophisticated – even scientific. Its representatives speak as though they have developed a new economic paradigm comparable to the Copernican Revolution in astronomy. Yet behind the sleek title and confident policy pronouncements lies a message that is as simple as it is dangerous, particularly now that governments around the world are spending freely to keep their economies afloat during the pandemic.
FRANKFURT – Many people are now proclaiming that the COVID-19 pandemic has provided proof positive that Modern Monetary Theory (MMT) is the only way forward for governments. To the uninitiated, MMT probably sounds extremely sophisticated – even scientific. Its representatives speak as though they have developed a new economic paradigm comparable to the Copernican Revolution in astronomy. Yet behind the sleek title and confident policy pronouncements lies a message that is as simple as it is dangerous, particularly now that governments around the world are spending freely to keep their economies afloat during the pandemic.