Odd Lots From MMT Advocate To Outspoken Critic
Apr 1, 2019
Cullen Roche, author of the Pragmatic Capitalist blog and founder of Orkham Financial, shares his journey from a supporter of Modern Monetary Theory (MMT) to a vocal critic. He delves into the misconceptions about government deficits and challenges traditional views, discussing how extensive deficits can actually align with Keynesian economics. Roche also examines the relationship between MMT and Bitcoin, critiques the lack of empirical support for MMT, and stresses the implications for employment and inflation.
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MMT's Appeal
- Cullen Roche was drawn to MMT because it offered a precise description of the financial system, especially banking.
- The MMT concept of endogenous money, where banks create money, was key to understanding the 2008 financial crisis.
MMT and QE
- MMT practitioners understood that flooding the banking system with reserves wouldn't necessarily cause inflation.
- This contrasted with mainstream views that quantitative easing would lead to hyperinflation.
Deficits and Self-Financing
- MMT's view on deficits links to its understanding of money creation: governments can't run out of the money they issue.
- Unlike households, governments with sovereign currencies are self-financing and don't need external funding.