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Some of Modern Monetary Theory’s Key Detractors

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Dec. 4 2020, Updated 10:43 a.m. ET

Central banks and MMT

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.

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Detractors of modern monetary theory

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.

Gundlach on MMT

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.

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