Not so Modern Monetary Theory

Source: American Institute for Economic Research
by Clifford E Thies & Gary M Pecquet

“Modern Monetary Theory is a heterodox theory arguing that the deficit is a shibboleth. With fiat money, there should be no fear of deficit spending. If the economy is underperforming, just have the government spend more. Following the Financial Crisis of 2008, Paul Krugman bemoaned that the world wasn’t being invaded by space aliens because such a threat would induce massive, huge, ginormous spending, and that spending would solve all our economic problems. … Instead of restraining spending because of concerns about the deficit and inflation, Modern Monetary Theory says spend freely. If inflation results, just raise taxes. What is valid about the connection of fiat money and taxation was discussed by Adam Smith and incorporated by the British Parliament into the Currency Acts of 1751 and 1764.” (07/24/22)