Modern Monetary Theory Is Wrong: Inflation Is Coming

Huge government deficits, a too rapidly increasing money supply, rapidly rising energy prices and a potential capital shortage, will lead to inflation.

Many economists and much of the public are beginning to worry about the massive increase in the money supply and the massive increase in deficit spending. With a public debt approaching $30 trillion and a money supply that has increased by 25% in the last two years, the worry seems justified. However, Modern Monetary Theory (MMT) says we have nothing to worry about.

MMT says that since the US uses a currency that is not backed by anything other than faith in the government, more money can always be printed to pay off the debt. And the increase in the money supply will not necessarily lead to inflation.

Deficit spending has been a normal occurrence since the early 1960s. In fact, in the last 58 years, the federal government has had 54 years of deficit spending. The only exceptions happened from 1997 to 2000, when President Clinton reduced the capital gains tax rate from 28% to 20%.

That rate reduction triggered an investment boom which led to increased revenue from capital gains taxes and a rapid 4 ½% annual GDP growth rate during each of those four years. Because Clinton declared in his 1996 State of the Union speech that, “The…