WHAT is MMT(Modern Monetary Theory)? Q and A session.

Quick Introduction

I have had a headache researching this term, MMT, but it is worth learning because This theory, and probably the 4th industrial revolution, might be saviours of this extreme stagnant economy.

Putting the 4th industrial revolution aside, this theory, MMT, will become very important in the next few years, and this theory may become the future standard when one country wants to get out economically from prolonged stagnancy.

What is MMT in one word?

It says it is OK for governments to expand their expenditure without considering their Primary balance, especially when it has a destructive deflationary spiral.

What is that policy for?

This policy is for trying to maximize and

reach the physical limit of production to get out of the stagnant economy with

deflation.

MMT causes Crowding out. Will it be a problem?

First, the term, Crowding out is; If the government issues plenty of its bonds for its expenditure, the abundance of the bonds leads to a decline in Bond prices which also necessarily causes an increase in interest rates. This naturally affects interest rates to become higher in the private sector, which means it becomes harder for people to use money more than they have. Simply, it becomes harder for people to make a loan. That is crowding out when the government can spend money on whatever it likes while citizens become unable to spend money without heavy restrictions or higher interest rates.

It, however, will not necessarily be a problem because if a government has a deficit, that means someone is in surplus. Therefore, the government spending money to expand its debt means that it also is

making someone’s surplus bigger. MMT is helping the private sector rather than causing crowding out.

In conclusion, it causes crowding out, but it also systematically has an automatic countermeasure. Therefore, it will not be a huge problem.

MMT will lead to hyperinflation. Have you forgotten the burning hot inflations in European countries after World War I?

MMT would say no, it does not cause hyperinflation because MMT is forming a pair with the method of preventing inflation. The technique is mainly raising the tax rate.

Further questions I have and have yet to be answered.

・causing to some extent of inflation and raising

the tax rate at the same time sounds ridiculous to me because inflation itself seems to be a form of taxation for specific people.

The point I should consider in this question,

1. is inflation a form of taxation? 2. Maybe inflation has several types: one caused by printing money, healthy inflation, and unhealthy inflation.

Although I feel a little bit suspicious about MMT, perhaps considering MMT is essential, especially in the current economic situation here, because it might be a breakthrough in this financial situation. Therefore, I will discuss MMT in the following articles as well. Thank you very much.