Saturday, April 4, 2020

Dirk Ehnts – The Eurozone is Fully Committed to Modern Monetary Theory (MMT)

In my book “Geld und Kredit: Eine €-päische Perspektive” (3rd edition, 2020) I gave the following recommendation on p. 243 (English version available here):
“This [stabilizing employment in the eurozone with fiscal measures] can be done by the ECB declaring that, in case of doubt, it will buy up all the government bonds of eurozone countries. This would make national government bonds risk-free. It must then be clarified which deficit limits are reasonable in times of upswing and recession. This would leave (or re-establish) the responsibility of national governments for full employment.”
This is exactly what has happened now: deficit limits are lifted, government bonds are risk-free. This was already implied. The previous ECB President Mario Draghi said in September 2019 that the ECB should explore new ideas such as MMT (here). His successor, Christine Lagarde, remarked half a year earlier that MMT is not a miracle cure, but could help to combat deflation (here). A key insight of the MMT is that government debt and deficits are not a problem (here), as the central bank ensures that government bonds are risk-free. The ECB is now doing the same. So all lights are on green: national governments can increase their spending at will. A financing question does not arise. Failures cannot occur, so questions of liability are also irrelevant....
Brave New Europe


Matt Franko said...

“ Christine Lagarde, remarked half a year earlier that MMT is not a miracle cure, but could help to combat deflation ”

LOL always with their “inflation!” paramount in their scrambled eggs they call their brains...

AXEC / E.K-H said...

Did MMTers not advise Italy to get out of the Eurozone and to solve their problems by issuing their own sovereign currency? Oh yeah, that was yesterday, today MMTers are for a risk-free Eurobonds and European solidarity.

Never forget: Public Deficit = Private Profit and it is even better for the Oligarchy if the bonds are unconditionally backed by the ECB.

The MMTers wet dream: macroeconomic profit from deficit-spending, fixed interest income taxed from the 99-percenters for the foreseeable future, and zero risk.

What is the difference between science and economics? Scientists give their best to save lives, economists print money for the Oligarchy.

Egmont Kakarot-Handtke