MMT's Godfather Says the US Government Is Spending Like a Drunken Sailor
Odd Lots
Bloomberg
4.5 • 2K Ratings
🗓️ 8 July 2024
⏱️ 54 minutes
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Summary
Modern Monetary Theory has gained prominence over the last several years by offering an alternative view on the constraints to fiscal policy. The basic gist is that the size of the deficit is not per se problematic. What matters are real resource constraints, and that if government spending gets too high — or is spent in unproductive ways — then inflation can materialize as too much money collides with insufficient supply. Another argument that some MMT adherents make is that the conventional path to fighting inflation (higher interest rates by the Federal Reserve) can actually be inflationary, because the coupon payments made by the government to Treasury holders constitute a form of government spending or fiscal expansion. In this episode of the Odd Lots podcast, we speak with Warren Mosler, the intellectual godfather of MMT, to explain the mechanisms at play and assess the current macro environment. Perhaps surprisingly, Mosler is concerned with the combination of high government debt loads, high deficits (which he characterizes as spending like a drunken sailor), and the orthodox approach the Fed is taking to fighting inflation. With debt as high as it is, the annual interest payments due to these rate hikes has gone up significantly, creating a situation that mainstream economists might call Fiscal Dominance. He explains how this environment is a recipe for consistently higher and sustained inflation in the years ahead.
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| 1:01.0 | Podcasts, Radio News. Studios. Hello and I'm Tracy Alliesenthal. And I'm Tracy Alleway. |
| 1:24.0 | Tracy, you know there's that theory. |
| 1:26.0 | People say it from time to time about, in different contexts, |
| 1:30.0 | different schools of thought, and kind of gets dismissed is crankishness sometime that |
| 1:34.4 | higher rates can be a contributor to inflation. Yes, yes, and actually I'm hearing this |
| 1:39.0 | more and more interestingly enough so you used to hear you know little rumblings of it every once in a while but I |
| 1:44.9 | swear in the past two or three months a lot of people have been talking about this and I guess the |
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