Last edited Thu Apr 23, 2020, 09:19 AM - Edit history (1)
the national debt may well be around a year from now, maybe more, it is already at 27 trillion (with the new 3.8 trillion dollar deficit added post COVID-19 outbreak) per multiple people on Morning Joe today) giant macro-experiment where it is somewhat put to the test.
https://en.wikipedia.org/wiki/Modern_Monetary_Theory
Modern Monetary Theory or Modern Money Theory (MMT) or Modern Monetary Theory and Practice (MMTP) is a macroeconomic theory and practice that describes the practical uses of fiat currency in a public monopoly from the issuing authority, normally the government's central bank. Effects on employment are used as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires. MMT is an evolution of chartalism and is sometimes referred to as neo-chartalism. Its macroeconomic policy prescriptions have been described as being a version of Abba Lerner's theory of functional finance.
MMT advocates argue that the government could use fiscal policy to achieve full employment, creating new money to fund government purchases. According to advocates, the primary risk once the economy reaches full employment is inflation, which can be addressed by raising and gathering taxes and issuing bonds to reduce money and the velocity of money in the system. MMT is debated, with active dialogues about its theoretical usefulness, the clear useful real world practical applications and implications, together with the varying effectiveness of its targeted use and varying challenges of its policy prescriptions.
MMT's main tenets are that a government that issues its own fiat money:
Can pay for goods, services, and financial assets without a need to collect money in the form of taxes or debt issuance in advance of such purchases;
Cannot be forced to default on debt denominated in its own currency;
Is only limited in its money creation and purchases by inflation, which accelerates once the real resources (labour, capital and natural resources) of the economy are utilized at full employment;
Can control demand-pull inflation by taxation and bond issuance, which remove excess money from circulation (although the political will to do so may not always exist);
Does not need to compete with the private sector for scarce savings by issuing bonds.
These tenets challenge the mainstream economics view that government spending is funded by taxes and debt issuance. The first four MMT tenets do not conflict with mainstream economics understanding of how money creation and inflation works. For example, as former Fed Chair Alan Greenspan said, "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." However, MMT economists disagree with mainstream economics about the fifth tenet, on the impact of government deficits on interest rates.
A 2019 survey of leading economists by the University of Chicago Booth's Initiative on Global Markets showed a unanimous rejection of assertions that the survey attributes to modern monetary theory.
Views have changed with the 2019–20 coronavirus pandemic.
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