Monetary Policy Takes Center Stage: MMT, QE or Public Banks?

As alarm bells sound over the advancing destruction of the environment, a variety of Green New Deal proposals have appeared in the US and Europe, along with some interesting academic debates about how to fund them. Monetary policy, normally relegated to obscure academic tomes and bureaucratic meetings behind closed doors, has suddenly taken center stage.

The 14 page proposal for a Green New Deal submitted to the US House of Representatives by Congresswoman Alexandria Ocasio Cortez does not actually mention Modern Monetary Theory, but that is th it’s e approach currently capturing the attention of the media – and taking most of the heat. The concept is good: abundance can be ours without worrying about taxes or debt, at least until we hit full productive capacity. But the devil is in the details…. Continue reading

The Venezuela Myth Keeping Us From Transforming Our Economy

Modern Monetary Theory (MMT) is getting significant media attention these days, after Alexandria Ocasio-Cortez said in an interview that it should “be a larger part of our conversation” when it comes to funding the Green New Deal. According to MMT, the government can spend what it needs without worrying about deficits. MMT expert and Bernie Sanders advisor Prof. Stephanie Kelton says the government actually creates money when it spends. The real limit on spending is not an artificially imposed debt ceiling but a lack of labor and materials to do the work, leading to generalized price inflation. Only when that real ceiling is hit does the money need to be taxed back, and then not to fund government spending but to shrink the money supply in an economy that has run out of resources to put the extra money to work.

Predictably, critics have been quick to rebut, calling the trend to endorse MMT “disturbing” and “a joke that’s not funny.” In a February 1st post on The Daily Reckoning, Brian Maher darkly envisioned Bernie Sanders getting elected in 2020 and implementing “Quantitative Easing for the People” based on MMT theories. Continue reading