Why Modern Monetary Theory Is Wrong About Government Debt
John Aziz | Jul 07, 2013 04:42AM ET
I’ve taken some criticism — particularly from advocates of growth of American-Chinese trade measures and retaliations , to see how loose policy (of a far lesser order than the sort of thing advocated in modern monetary theory) can exacerbate frictions in the global currency system.
Governments controlling their own currencies are likely to continue to defy the prescriptions of the modern monetary theorists for years to come. And that means that expansionary increases in government debt relative to the underlying economy will continue to be a prelude to contractionary deleveraging, just as is the case with the private sector. All debt matters.
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