WARNING: The Advance of Mad Monetary Theory Continues

By Robert Wenzel

Once again I feel compelled to discuss Modern Monetary Theory, a theory developed and promoted by the former hedge fund manager Warren Mosler.

MMT is essentially a mad money printing scheme. The best way to think of it is to consider what monetary economics would look like if the surrealist Salvador Dali took up Keynesian economics and spun out his own theory from it.

And don't think for a minute that there aren't crazed Keynesian notions mixed into the theory.

Even the New York Times columnist, Keynesian and Nobel laureate Paul Krugman knows this, although he seems to be aware of how mad MMT is and tries to distance Keynesianism from it.

From Bloomberg:

“I don’t think MMT is right,” Krugman says in an interview, then promptly qualifies the remark. “A lot of it is right, but the parts that are right are perfectly consistent with a smart take on ordinary Keynesian macroeconomics.” 

The Bloomberg quote comes from an article written on MMT titled, A Hedge Fund Guy Lefties Can Love: Warren Mosler’s unorthodox take on fiscal policy is catching on with progressive Democrats.

The essay also notes:

[P]rogressive politicians such as Bernie Sanders and Alexandria Ocasio-Cortez argue that the Democratic Party failed to grasp the lasting trauma inflicted by the Great Recession, a key reason it was beaten by Trump eight years later. On that wing of America’s opposition party, more interested in offering voters bold (and expensive) leaps forward than business as usual, MMT ideas are catching on...When Ocasio-Cortez, in an early TV appearance following her surprise win in a New York primary in June, called on Congress to use “the power of the purse” to fund social programs, she was nodding at this idea.

And then there is this:

 Second-generation MMTers include Stephanie Kelton, a professor at Stony Brook University who, as an adviser to Sanders, can claim to be one of the more influential economists in American politics now.

It should also be noted that Bloomberg executive editor of digital news Joe Weisenthal seems to be sympathetic to MMT as is Breitbart economics editor John Carney. So it does jump the political divide.

The glue holding all together is a perspective that governments can create prosperity by printing money to support government borrowing which in turn supports government spending.

Mosler in the conclusion to his book, Soft Currency Economics II: The Origin of Modern Monetary Theory, put it this way:

The supposed technical and financial limits imposed by the federal budget deficit and federal debt are a vestige of commodity money. Today's fiat currency system has no such restrictions... 

Errant thinking about the federal deficit has left policy makers unwilling to discuss any measures which might risk an increase in the amount of federal borrowing.

That "errant" thinking would be the view that you can't create something out of nothing and that government borrowing and spending squeezes out private sector activity.

Is it any wonder that big government people like Sanders and Ocasio-Cortez are fans of MMT?

With the advance of socialism among the young, can greater MMT advocacy be far behind?

It's time for another dose of your anti-MMT vaccine: Buy more gold coins.

Robert Wenzel is Editor & Publisher of

EconomicPolicyJournal.com and Target Liberty. 

More about Wenzel here.