Aussies cause 13% of all G/H emmissions, page-41

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Crom Valen

44,246 Posts.

2012

17/08/19

09:32

Post #: 40023689
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Originally posted by Scooterdog ↑

Modern Monetary Theory (MMT) doesn’t work.

The basic problem is that MMT proponents mix up the roles of fiscal and monetary policy. They argue that monetary policy should play a supporting role, holding down interest rates to reduce the cost of public borrowing.Meanwhile, the thinking goes, fiscal austerity should be the tool used to hold down inflation when aggregate spending begins to exceed the productive capacity of the economy.Unfortunately, there is a long history suggesting that this approach will not work. In 1968, President Johnson raised taxes and balanced the budget, in the hope and expectation that this would hold down inflation. Instead, inflation got even worse, as monetary policy was still highly expansionary. It is monetary policy that determines the price level, not fiscal policy. . . .Unfortunately, the underlying model used in MMT is based on false assumptions about the inflation process. If you start to rely on a flawed theory as a guide to policy, there will eventually come a time when it will lead policymakers astray, as happened when President Johnson relied on an MMT-type theory and accidentally triggered the greatest peacetime inflation in American history.

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What I’m reading is that MMT adherents state that governments can never go bust as they issue their own currency. Debt is therefore never a problem. In fact, they hold that there is no need to issue bonds (just ‘print’ the money). Of course this is mana from heaven for socialists: a promise of unlimited spending by governments with no consequences.
In my view this rush to embrace MMT from all quarters is a push to vindicate - after the fact - the (failed) policies of central bankers.
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