While Lagarde said MMT is no panacea, she didn’t reject it outright.Interestingly, Christine Lagarde finds that MMT economist's modeling is solid, but she can't quite bring herself to follow though. Still progress, even so.
“While it is tempting, when you look at the sort of mathematical modeling of it, and it seems to stand, there are big caveats about it, such as if the country is in a liquidity trap, such as if there is deflation. Well then, in those circumstances, it could possibly work for a short period of time probably, because interest rates stay low until such time when they start going up. And then it is a bit of a trap.”-- April 11, 2019, IMF press conference
Bloomberg
The World of Monetary Policy, According to Christine Lagarde
Carolyn Look
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ReplyDelete... because interest rates stay low until such time when they start going up. And then it is a bit of a trap.” Christine Lagarde
ReplyDeleteNot interest rates (since the CB can keep those low) but price inflation.
And yes it is a trap since MMT proponents propose to curb price inflation with taxes on the non-rich - at a time when their cost of living is already going up!
The insights of modern monetary theory COULD be used to construct an ethical fiat creation system and abolish privileges for the banks but instead they may be used to discredit deficit spending itself.
Joke of the day.
ReplyDeleteWhat will the IMF do when Lagarde leaves?
It'll carry on largardless.