Modern Monetary Theory


The shift in interest [in Modern Monetary Theory] predates the COVID-19 crisis, but the virus has given MMT a huge boost. Governments around the globe have been quick to dramatically expand their budgets in response to the crisis, with deficits of 10 per cent of GDP becoming routine. Economists, even those who have spent a lifetime warning of the perils of budget deficits and government debt, seem to accept these astronomical deficits with equanimity. Stranger still, central banks everywhere are abandoning time-honoured conventions and funding these budget deficits to a greater or lesser degree by buying government bonds – what is often called ‘printing money’. This seems to be the same as the MMT core message – run deficits to maintain full employment and fund them by money-printing. Mainstream economists are adamant that they are not supporters of MMT, although just where they disagree is sometimes unclear.