Modern Monetary Theory

Austrians and MMTers should be on the same side. After all, both camps understand the relationship between money and credit, and both understand the full ramifications of having fiat money. They should be on the same side arguing against…

The claims about “unsustainable deficits” gained new urgency this week as S&P warned that it was downgrading US federal government debt from stable to negative (see here for recent debate). This appeared to be a blatantly political…

Given S&P's decision to downgrade the U.S. credit rating to outlook negative, it bears remembering how we got here. I think the key word is deleveraging.

Michael Tanner is a Cato Institute Senior Fellow and L. Randall Wray is Professor of Economics, University of Missouri, Kansas City. The two discussed opposing views on how to deal with the U.S. federal deficit in a radio interview…

Yesterday, Paul Krugman wrote: Portugal’s government has just fallen in a dispute over austerity proposals. Irish bond yields have topped 10 percent for the first time. And the British government has just marked its economic forecast…

The essential idea is that the “money supply” in an “entrepreneurial economy” is demand-determined – as the demand for credit expands so does the money supply. As credit is repaid the money supply shrinks. These flows are going on all the…

About a year ago I wrote a post called "Out of control US deficit spending". The purpose of the post was to begin a series of posts presenting the modern monetary theory (MMT) framework from a deficit hawk's perspective, what I…

As promoters of MMT, we are all very keen on Abba Lerner, who was one of the first to articulate the foundations of the approach. Lerner believed that the government should maintain the level of aggregate spending in the economy (either by…

This note comes from an American equity analyst. I have underlined the most important parts. I will give my interpretation below: Bank Money held by those in the real economy is contracting. Fed Money is a different animal. Fed…

Let us start with honesty about budget deficits and government debt. There is no honest economic argument against running budget deficits when the economy is below full employment. While we can debate about which programs government ought…