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Word is getting out about MMT (Modern Money theory)

Hat tip to Warren Mosler ‘Centre of the Universe’ for this article in Market Watch. Traders seem to be less hidebound by obsolete economic theory -  if it helps make more profits.

Modern monetary theory – which is espoused by a growing number of economists and investment managers because it explains the observable facts better than the obsolete theories driving most of the public discussion – deals with the world as it is without a gold standard.

A better comparison for the U.S. than Greece is Japan, which also enjoys full monetary sovereignty. Japan has a public debt approaching 200% of GDP. This compares to the U.S. at 60% in 2010 and on its way up.

Deficit terrorists have decided arbitrarily that 60% is the maximum limit. They have been predicting the imminent collapse of Japan – for the past 20 years. And yet Japan continues to finance its deficit with rock-bottom interest rates.

The federal government is also not comparable to a household. It does not have a checkbook to balance or a credit card to max out, even though our folksy politicians like to use these metaphors. It does not have to “live within its means” like a family or individual. Our grandchildren will never have to repay all that debt. No one will, ever. It will continue to grow as our economy grows.

All this flies in the face of all the groupthink going on in Congress, in the press and on cable TV. So if you want to reject modern monetary theory as hogwash and cling to theories that worked a century ago, you’re in good company. But think about it, look around you, and decide for yourself what best describes the world you live in.(link to article)

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