The Drift To Austerity (Manuscript Excerpt) — Brian Romanchuk

Debates about fiscal policy and government debt are arguably what created most of the publicity for Modern Monetary Theory. After the Financial Crisis of 2008, government debt-to-GDP ratios rose, which was a greater concern in the euro area as there was a limit on that ratio within the Maastricht treaty. At the same time, there was popular anger at bank bailouts across the political spectrum – bankers caused the crisis, and then were bailed out by governments. This free-floating anger attached to worries about government debt. As a result, governments implemented austerity packages, which typically consisted of cutting spending on social welfare programmes.

Although this debate helps explain the rise of MMT, one could argue that the consensus has drifted in the direction of MMT. Moreover, the fact that MMTers have been pushing for looser fiscal policy for some time is well known. As such, I am keeping this treatment relatively brief....

Bond Economics
The Drift To Austerity (Manuscript Excerpt)
Brian Romanchuk