Brad DeLong on MMT as functional finance.
In my view, the economics of Abba Lerner—what is now called MMT—is not always right: It is not always possible for the government to spend freely to attain full employment, use monetary policy to keep the debt under control, and rely on rising inflation as the only signal needed of whether and when policy needs to be tightened. Why not? Because it is possible that the bond market can get itself into an unsustainable position, in which underlying inflationary pressures are masked until it is too late to rebalance government finances without a financial crisis.
But, in my view, right now the economics of Abba Lerner is 100% correct. The U.S. (and Europe!) should use expansionary fiscal policy to rebalance the economy at full employment and potential output. And interest rates are so low that doing so does not require any additional monetary policy steps to keep the debt under control.WCEG — The Equitablog
Yes, expansionary fiscal policy in the North Atlantic would solve many of our problems. Why do you ask?
Brad DeLong
See also
Economist’s View
'MMT and Mainstream Macro'
Mark Thoma | Professor of Economics, University of Oregon
"We all knew this all along." Uh huh.
