PDSnet Glossary

Term

Categories

Introductory Technical Fundamental Economics Opinion Sectors International Regulatory Other Markets

Versions

Name	synonyms = 1, variations = 2, abbreviations = 3

Publish: (0 = no, 1 = yes)

Definition

Modern monetary theory or MMT proposes the idea that a government with a fiat currency can and should print money to finance its overspending, rather than raising taxes or reducing spending. The logic is that government with control over the money supply cannot go insolvent because it can always print its way out of financial difficulties. Obviously, the flaw in this approach is that printing money (also called "quantitative easing") can result in rising inflation. Proponents of MMT use the example of Japan which has one of the highest government debts in the world to suggest that the government deficit in America (currently around $30 trillion) could go much higher. The esteemed international economist, Nouriel Roubini, says, "...keeping interest rates low and continuing to pile up debt has become the path of least resistance and the softest way to redistribute wealth/income from savers/creditors to borrowers/debtors. But by definition, easy money feeds more debt. Easy money also leads to asset inflation, and eventually to bubbles. There will be a reckoning. It could come in the form of a great crash, bursting the bubble and triggering default, or inflation, or even stagflation".

Edit Glossary Term