As the eurozone’s economy sinks, the European Central Bank is thinking big. That’s worrying, says Matthew Lynn.
Europe is in a pickle and has run out of ideas, so it might be tempted to give MMT a try, but some European countries are not happy that Germany will be the main benefactor again.
Will MMT go mainstream?
The ECB can’t cut interest rates any more and it has already bought up almost all the bonds it is allowed to. If it wants to go any further then it needs to come up with something different. The outgoing president of the ECB, Mario Draghi, last week spoke approvingly of “modern monetary theory”, the economic theory that the government can take on almost unlimited debt financed by the central bank so long as inflation isn’t a problem, then use that money to finance its spending.
MoneyWeek
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