Wednesday, February 9, 2011

The Fed Is Not Monetizing U.S. Government Debt

Indeed, increases in money supply are "scary", especially if it's to support public sector growth in the form of deficit spending.

MMT is a theory precisely because it hasn't been proven. I will continue to rely on Keynes and point out that his theories are discounted only because governments have never contracted spending during boom times. The effect has been to crowd out the private sector, and we are where we are today. Without a public sector contraction, this is all we will have left.

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