by Joakim Book
The American Institute for Economic Research
Charles Goodhart, a brilliant banking historian and professor at the London School of Economics, recently said that “I have never seen a theory so criticized, in theory, and actually followed in practice.” He was talking about MMT, Modern Monetary Theory.
Some of last year’s pandemic measures, and even more so the latest $1.9 trillion deficit-funded package, look suspiciously like an MMT moment: fiscal policy is willing to shower money on anything and everything they like, while everyone else worries about inflation numbers. The Federal Reserve backstops the bond market by buying hundreds of billions worth of bonds every month. Unbelievably large, and largely unprecedented, the Federal government deficit last year (over $3 trillion and on track to rival that this year), has the Treasure wrestling economic control from an otherwise supreme central bank.