The case against Modern Monetary Theory

As Stephanie Kelton notes in her book The Deficit Myth, governments with access to a printing press are “currency issuers” (exceptions include, most obviously, members of the eurozone). 

As such, all their spending could, in principle, be financed via the creation of cash. Taxes may serve other purposes — the redistribution of income and wealth, the discouragement of “sinful” behaviour — but, in the world of MMT, they serve no useful macroeconomic role.

The alternative of multiple business failures and mass unemployment is of no use to anyone. In the process, however, we are in effect borrowing from our collective economic futures. 

The political process will decide whether that bill comes in the form of higher taxes, more austerity, rising inflation or eventual default.  

Stephen King FT 22 October 2020

https://www.ft.com/content/bcb523c3-7448-4cd6-a2d2-69b8f13be8f3

 

The author is HSBC’s Senior Economic Adviser and author of ‘Grave New World’