Can We Create All the Money We Need?
Over the past decade, government debt in the U.S. and elsewhere has reached unprecedented heights. Yet the supposed costs of this debt are nowhere to be seen. Excessive debt, we’ve been warned, will lead to mass flight by investors and spiking interest rates, or else spiraling inflation and a collapse in the currency. But in the U.S. and elsewhere, record-high public debt has been accompanied by record-low interest rates and low inflation.
These developments have opened the door for a revival of old-fashioned Keynesian views, in which government deficits are seen not as a problem to be solved but a useful tool of demand management—and today an essential source of economic recovery.
Many mainstream economists have backed away from the view that deficit-financed public spending is necessarily risky or counterproductive. Space has also opened in public debate for non-mainstream thinkers who argue full-throatedly for a bigger, more active public sector, freed from imaginary financial constraints. The most visible of these today is the school called Modern Money Theory or Modern Monetary Theory (both terms are used), or MMT.
Both supporters and opponents tend to present MMT as a monolith, a doctrine that breaks radically with established schools of thought and must be accepted or rejected in its entirety. But in my view it’s better—both more accurate and more productive—to see it as a body of arguments within an older Keynesian tradition of economics. Contrary to the sense you might get from both supporters and detractors, it’s not a crystalline logical structure where, if you remove one piece, the whole thing collapses. Rather, like most emerging bodies of thought, it’s a ramshackle assemblage of parts built at different times for different purposes, tied together with loose solder of association and inference rather than tight bonds of deduction.
Read more: https://prospect.org/culture/books/mmt-can-we-create-all-the-money-we-need/
(American Prospect)
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The rest of the world has been terrified at the thought of dropping the dollar as the global reserve currency. The Dubya Debacle proved that.
But if they ever do, it's hello Argentina.
A million (old) Argentine pesos; they were worth about $10 when replaced by a new currency in 1983 (which has since been replaced twice).
