Less Noise, More Signal The Macro Model You are Using is Probably Broken
Apr 2, 2026
Douglas Padgett, macro researcher and founder of Applied MMT, blends Modern Monetary Theory with system-dynamic forecasting. He explains how government spending creates private financial assets and drives profit cycles. The conversation covers fiscal acceleration metrics, treasury flows, private credit cycles, and why fiscal flows can predict markets and assets like Bitcoin.
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Government Spending Creates Private Savings And Profits
- Government spending is a net financial asset add to the private sector that creates profits and kicks off private credit cycles.
- Douglas Padgett explains spending creates deposits for sellers and reserves for banks, enabling banks to extend loans that expand balance sheets and profits.
How A Gym Debate Sparked Applied MMT
- Douglas discovered MMT after watching a Warren Mosler vs Bob Murphy debate and spent a day validating the claims with data.
- That elliptical-session moment led him to build Applied MMT and tools to model fiscal flows and forecasting.
Profits Are The Core Driver And Government Is The Primary Source
- Profits drive the business cycle and come from three sources; MMT highlights government spending as the primary net source of private profits.
- Using the Kalecki profit equation, Padgett shows government spending adds net financial assets which then allow the private sector to leverage and generate further profits.
