Why the Critics of MMT Are Wrong
19 November 2016 | Pago Pago, American Samoa
The critiques and critics of Modern Monetary Theory ignore and do not recognize the limitations on MMT recognized and professed by its own adherents, which I have outlined earlier. This is foolish and disingenuous. Inflation is such a limitation, but to critique MMT because it can be inflationary simply ignores part of the theory and is not a valid critique. The same is true of all other MMT critiques.
As a student of Milton Friedman for years in my PhD program, studying primarily monetary theory with him, I was well prepared to learn MMT at a high level of detail and sophistication, as a new theoretical break through that came later but built on much I had learned.
The core practical teaching of MMT is, for a nation with a sovereign fiat currency, within broad parameters and subject to MMT's own limitations, the government, unlike businesses and households, is not subject to an income or budget restraint, and so can have much higher debt or not without adverse consequences than businesses and households can. We observe that in fact for the US where private debt levels can be and have been major problems -- some leading to collapse, recessions or both --- but public debt levels have historically never been such a problem in the US. MMT is the reason why.
This is why I say that there is no valid critique of MMT once it is properly understood within its own parameters and subject to its own limitations.