CBC on MMT

CBC Radio posted a discussion of MMT in the midst of the COVID-19 pandemic. It was generally well done, and I recommend you listen to it (37 minutes). The reporter provided a decent overview of economics from Keynesianism through monetarism to the present day. On the whole, he was fair and objective.

However, I heard a lot about MMT advocating unlimited spending with scant mention of the inflation limit. What MMT says is that monetarily sovereign governments are not limited in the amount of money they can – not should – create. MMT also clearly emphasizes that overspending risks inflation, which is the real limiting factor.

Steve Ambler, a Canadian economics professor included in the piece, offered the possibility that MMT might be proven right if inflation doesn’t increase over the next few years. My question to him would be: Have you ever heard of a country named Japan? Japan’s debt-to-GDP ratio has been over 200% for years and they still have no inflation problem. MMT has been proven right for a couple decades already.

Although it wasn’t specific to this program, I was reminded how mainstream economists constantly assume premises with no justification or proof. For example, many economists hold that a debt-to-GDP ratio of 1 is the limit of sustainability. Despite Japan’s evidence to the contrary, they still believe that.

No wonder economics is called the dismal science.

2 thoughts on “CBC on MMT”

  1. Overspending
    Tom,

    I think what MMT emphasizes is real resources. When overall spending exceeds the productive capacity (ability to produce goods and services from real resources including labor) of the economy, that puts upward pressure on prices.

    PatO

    1. I’m good either way.

      I’m good either way. Inflation relates to the imbalance of spending relative to available real resources, so the relationship can be expressed in terms of either variable.

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