Advocates of Modern Monetary Theory (and other groups, e.g. Positive Money and the New Economics Foundation) tend to favour merging fiscal and monetary policy. That is, they advocate that in a recession, the government / central bank machine (gcbm) should simply create new money and spend it (and/or cut taxes). And if inflation looms, “the machine” should do the opposite: cut spending / raise taxes and “unprint” the money collected or saved. Certainly Abba Lerner suggested the idea on p.40 here. And Milton Friedman suggested the idea (p.250) here.
Mervyn King opposed the idea in this speechand for four reasons, none of which stand inspection.Ralphonomics
Mervyn King opposes merging fiscal and monetary policy – he’s wrong.
Ralph Musgrave
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