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Why Does Everyone Hate MMT?
Report

Why Does Everyone Hate MMT?

GMO, 2019

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Editorial Rating

8

Qualities

  • Controversial
  • Eye Opening
  • For Experts

Recommendation

Modern Monetary Theory (MMT) is all the rage these days in economic circles. Advocates say that countries that issue their own currencies can run their treasury printing presses at will to finance fiscal priorities. But opponents squawk that MMT flies in the face of traditional economic rationale and would lead to hyperinflation, massive debt and economic malaise. Investment expert James Montier gets to the bottom of the controversy in a strong rebuff of the economic mainstream. Financial types will find this a compelling, provocative read.

Take-Aways

  • Defenders of neoclassical economic theory disparage Modern Monetary Theory (MMT) as insanity.
  • MMT posits that nations that issue obligations in their own currencies ultimately control conditions within their economic ecosystems, and thus face little risk of an externally sourced default. 
  • MMT backers say that “loans create deposits,” which generate reserves, while the established orthodoxy clings to the belief that “deposits create loans.”

About the Author

James Montier is an economist and a member of the asset allocation team at GMO LLC.