Some of Modern Monetary Theory’s Key Detractors

Modern monetary theory (or MMT) stipulates that as long as central banks can keep inflation in check, full employment can be achieved through government spending and even deficits. It also states that a government that issues its own currency cannot go broke because it can keep on printing currency to cover its obligations.

There are many proponents of the theory. One of its biggest supporters is Democratic presidential candidate Bernie Sanders. This theory started to be openly discussed after it gained support from Democrat Alexandria Ocasio-Cortez.

Sign up for Bagels & Stox, our witty take on the top market and investment news, straight to your inbox! Whether you’re a serious investor or just want to be informed, Bagels & Stox will be your favorite email.

The theory, however, has even a bigger list of detractors including current Federal Reserve chair Jerome Powell, Warren Buffett, Carl Icahn, and Jeffrey Gundlach, among others. Their major argument is that MMT could wreck the fiscal order of a nation by sparking very high inflation.

We have discussed in detail in Modern Monetary Theory Might Have Takers, but Gundlach Isn’t One why Gundlach thinks “MMT is a crackpot idea.” He adds that MMT is just a way of monetizing debt and could lead to a “significant boycott of long-term bonds” (BND) (AGG). He, however, believes that the idea of MMT could gain popularity if the US (SPY) (DIA) enters a recession in 2020 ahead of the US (QQQ) presidential election.