Bill Michell's blog Monday is "The Ministry for the Future has some MMT lessons on fiscal policy." - Politics | PoFo

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The Ministry for the Future has some MMT lessons on fiscal policy

Bill wrote, “I found the reference to MMT in the book very interesting because it reveals that our academic work is now entering popular fictional narratives and that means the ambit of our ideas is widening and the ideas are now being applied to different agendas.

The pages I received came from Chapter 73 (pages 365-366), which has a two-page discussion about Modern Monetary Theory (MMT). The author writes in his future scenario that 'Enough governments were convinced by MMT to try it. That it influenced so much policy through the late 2030s was regarded as a sign either of progress or of desperate fantasy solutions.' While the discussion is interesting, I want to focus on one of the ideas the author presents because they illustrate an important distinction between ‘Keynesian’ and ‘Post Keynesian’ thought on fiscal policy and MMT analysis."

Bill goes on to explain what happens to a nation that has a trade deficit of 2% of its GDP. MMTers asserts this this is a 2% leakage of income out of the economy that must be made up for somehow to keep the GDP constant. In current mainstream econ., ideally it is made up by bank lending, but MMT thinks Gov. fiscal policy, i.e. deficit spending is better. ... ment-75119


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