Thursday, March 31, 2011

A deeper look at Modern Monetary Theory

Of course Paul Krugman is correct when he says that right now a bigger deficit would help rather than hurt.

But he also argues that adherents to the unorthodox Modern Monetary Theory, which says that deficits are never important, are wrong.  Deficits are only harmless and even desireable now because we are at the zero interest bound and facing disinflation if not deflation.

Steve Randy Waldman takes a deeper look at MMT and claims Krugman's formulation is unfair.  Waldman, as usual, gives a very intelligent examination.  He holds his cards close to his chest, however, so I'm not sure what I'll think of his take until in next post he reveals it.  However, I don't quite agree, based on what he says now, that what Krugman says is unfair, Krugman is merely being brief and Krugman admits that.

I think it's interesting to click through Randy's links, such as this one:

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