Modern monetary theory is not the future — it’s already here: Don Pittis
Despite mainstream scoffing, credible economists say COVID-19 means MMT is no longer just theory
When modern monetary theory began to emerge into popular consciousness almost two years ago it carried with it an odour of coming from the distant economic fringe.
Opposed by many traditional economists from both the left and the right, MMT as it became popularly known, was the idea that governments didn’t have to raise new taxes to increase spending.
Instead, like the funding for the Second World War, governments that controlled their own currencies, claimed the theory, could borrow from their own central banks and keep on spending, creating economic growth and jobs until inflation finally kicked in.
Only a year and a half after I first wrote about MMT as a radical idea that effectively offered a bottomless piggy bank for new government spending, it appears that the fringe is going mainstream. And as COVID-19 pulls the rug out from under economic growth, some economists are beginning to face up to the fact that a version of MMT has moved from economic conjecture to economic fact.
Fear of being complicit
“The problem we have is that MMT is considered so fringe that many economists are even afraid to talk about it for fear of being viewed as complicit,” said Frances Donald, global chief economist at Manulife Investment Management in a phone interview.
But she said refusing to address the reality of what governments and central banks around the world are already doing is a mistake.
“Like it or not, elements of MMT are already so embedded in our economy and financial system since COVID-19 developed that burying our heads in the sand isn’t going to help us,” said Donald.
Certainly a search for economists to discuss MMT shows Donald is something of a rarity in her forthrightness. Many are reluctant to give the theory credibility, saying things like “but you can’t keep on borrowing forever.”
Source: Don Pittis | CBC News