Sat 2010-07-24 16:01 EDT
The Center of the Universe >> Blog Archive >> We need YOU!
MISSION: To deploy an army of MMT proponents to respond to deficit terrorism on the web. Go to offending articles. Neutralize flaws. Report back to home base...
MMT proponents Topic in The Credit Debacle Catalog
MMT proponents recommend deficit spending (1).
Credit Writedowns Mon 2010-07-19 12:08 EDT
Misunderstanding Modern Monetary Theory
Paul Krugman wrote a post today regarding MMT called "I Would Do Anything For Stimulus, But I Won't Do That (Wonkish)." The gist of Krugman's post was to refute Modern Monetary Theory's view on money and deficits...Krugman's post mischaracterizes both MMT and Galbraith's statement...Krugman is trapped in a gold standard view of money as he assumes the government must issue bonds to fund itself. He forgets that we live in a fiat world...the problem for deficits is not national solvency but inflation and currency depreciation. That makes me worried about deficits. If that makes me an inflation hawk and anti-deficit, then so be it. Nevertheless, MMT does say the same thing about deficits, namely that they can lead to inflation. But MMT also says that inflation is not a problem when you have an enormous output gap from 17% underemployment. MMT proponents recommend deficit spending to close that gap. But you can't spend at will under MMT; eventually the output gap closes and inflation becomes a big problem...