November 12, 2020
This article is authored by two investment luminaries from Epoch Investment Partners: William W. Priest, CFA — Executive Chairman, Co-CIO and Portfolio Manager Kevin Hebner, PhD — Managing Director, Global Investment Strategist. It explores modern monetary theory and whether it’s the saviour of the economy or a pathway to economic damnation.
Proponents of modern monetary theory (MMT) assert that governments can and should fund their spending simply by printing money. From their perspective there is no limit to government debt issuance, provided two conditions are met:
- The country controls its own printing presses and currency
- Inflation remains benign.
Under these circumstances, MMT acolytes envisage a complete convergence of fiscal and monetary policy, which should be used to finance ‘mission-oriented spending goals’.