Modern monetary theory, or MMT, has been getting a lot of attention lately, often celebrated as a revolutionary breakthrough. However, there is absolutely nothing new about it. The very basis of the theory, the idea that governments can finance their expenditures themselves and that therefore deficits don’t matter, actually goes back to the Polish Marxist economist Michael Kalecki (1899–1970).
On December 12, Christine Lagarde introduced her goals and vision in her first rate-setting meeting as the new president of the European Central Bank (ECB). On the actual policy front, there were no surprises. She remained committed to the path set by her predecessor, Mario Draghi, and kept the current monetary stimulus unchanged.
The money supply growth rate rose again in January, climbing to a 36-month high. The last time the growth rate was higher was during February of 2017, when the growth rate was 7.9 percent.
The US budget had a deficit of $32.6 billion in January compared with a deficit of $13.3 billion in December and a surplus of $8.7 billion in January 2019. The yearly growth rate of government outlays rose by 22.2 percent in January from 7 percent in the month before and 6.7 percent in January of last year.
When discussing policy proposals that could improve people’s economic livelihoods, the options appear to be quite narrow. On one side, you have those who wish to expand public administration, a process that usually involves inordinate amounts of spending, increased taxation, and the inevitable expansion of the regulatory state.
[This interview with Jeff Deist and Hans Hoppe will appear in the upcoming issue of The Austrian (March–April 2020).]
JEFF DEIST: Your recent talk in Vienna mentioned growing up happy but poor, the son of East German parents who had been driven west during the Cold War by the Soviets. Can you elaborate on the lasting impact their experience had on you, in terms of how you view state power and its attendant evils? Are you in some ways still influenced by their “eastern” roots?
[In the second part of this interview, Brazilian journalist André de Godoy speaks with Antony Mueller about the relationship between credit and money, the inflationary process, and its relation to the real economy. How will the current debt binge end? What comes after Quantitative Easing?]
[André de Godoy, a Brazilian journalist from the Mackenzie University of São Paulo, interviews economics professor and Mises scholar Antony Mueller about the causes and consequences of credit expansion and the relations between credit, money, and price inflation.]
André de Godoy: Please explain the relationship between the money supply, the price level, and economic activity.
The false notion that the US has eliminated virtually all of its barriers to foreign imports has been repeated more and more in recent years. The claim is made both by advocates for free trade and by its critics. For instance, Patrick Buchanan has claimed that only American elites “are beneficiaries to free trade,” implying that the US either has free trade or something close to it.
