The Economic Perspective: “Modern Monetary Theory”

This is Mary Walden with economist MW, welcoming you to the economic perspective.  Today’s program looks at modern monetary theory.  Mike, there’s an idea floating around in national policy circles that many of our economic problems could be solved if the government simply printed more money.   This idea goes under the title of modern monetary theory.  Give us an explanation and evaluation.

 

Mike:  Summary Answer

  1. The government – specifically the Federal Reserve – can effectively print money
  2. Can push that money into the banking system – which can loan it – or can loan to the federal government – which can spend it
  3. In both cases, more economic activity occurs in the economy, which presumably causes more hiring and bigger paychecks
  4. Critics worry about two things
  5. Possibility of more inflation – some economists that would automatically happen and eliminate many of the benefits of the increased spending
  6. Also would increase the debt of the federal government
  7. Either way, look for more discussion of this idea
  8. I’m MW

 

Mary:  And I’m Mary Walden for the Economic Perspective, an NC State Extension program from the Department of Agricultural and Resource Economics