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    The false promise of modern monetary theory

    I have posted on Modern Monetary Theory before- I think right after AOC brought it up when running for office, and since then. Here is another article that explains why MMT is a false promise.



    The false promise of modern monetary theory

    Once upon a time, not that long ago actually, the federal deficit and national debt mattered.

    In 2008, then-presidential candidate said, “We’re just taking out a credit card from the Bank of China, essentially. We're borrowing that money. And we’ve added $4 trillion worth of debt since George Bush took office. Keep in mind, just to give you some perspective, the first 42 presidents amassed $5 trillion worth of debt.”


    During his two terms, Obama added $8.6 trillion to the national debt — more than double his predecessor. President Trump added $6.7 trillion. In one term.


    As of this writing, the U.S. national debt stands at $28.1 trillion. In 1960, the U.S. national debt was $286 billion. In 1980, it increased to $908 billion. By 2000, it grew to $5.6 trillion. In 2010, it ballooned to $13.5 trillion. Just seven years later, it crossed the $20 trillion threshold.


    America’s debt-to-GDP ratio is also on an unsustainable trajectory. In 1960, it was 53 percent. In 1980, it decreased to 34 percent. In 2000, it ticked up to 58 percent. As of 2020, it had skyrocketed to 129 percent — exceeding the previous high of 118 percent, set at the end of World War II.


    This is significant. And ominous. We can blame our debt debacle on many things: decades of out-of-control entitlement spending, the pandemic, costly wars in the Middle East, to name a few.


    However, let’s not overlook the meteoric rise of modern monetary theory (MMT).


    For those unaccustomed with MMT, in essence it states that the U.S. government can print and spend money limitlessly. Deficits don’t matter. Neither does the national debt.


    MMT has several high-profile adherents, from Sen. Bernie Sanders (I-Vt.) to Rep. Alexandria Ocasio-Cortez (D-N.Y.).


    Many books have been written on MMT, most famously “The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy,” by Stephanie Kelton.


    In a nutshell, MMT true believers claim that age-old economic dogma is backwards. MMT turns traditional economic theory on its head.


    According to Investopedia, “The central idea of MMT is that governments with a fiat currency system under their control can and should print (or create with a few keystrokes in today's digital age) as much money as they need to spend because they cannot go broke.”


    Actually, governments can and do go broke when they defy the rules of commonsense economics.
    One of MMT's fatal flaws is that it ignores the interest rate. If US interest rates returned to its historic average of ~4-5%, the amount of money we would spend on interest payments would crowd out our discretionary spending budget. That is practically everything other than SS, Medicare, and Medicaid.
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    MMT: Keynesian Principles With a Frightening Twist

    MMT has emerged in recent times as a supposedly feasible alternative to modern economic conventions, some proclaiming it as the answer to our economic ills. Conceded or not, what MMTers advocate is what every Marxist, socialist, or big government adherent relishes – a further loosening of the unwieldy, insatiable government beast from its financial moorings - in effect, a Soviet style monetary system and its unproductive, squandering sham of an economy.






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