MMT Is a Disaster Waiting to Happen, by James Rickards

There is no economic theory so stupid that it won’t have its adherents in academia. From James Rickards at

MMT is the most potentially damaging economic doctrine I have ever encountered, with the exception of communism.

Let’s begin with the idea that the Fed and Treasury should be merged in practice so that the Fed will monetize any amount of spending or borrowing the Treasury wants.

The reason markets have any confidence at all in the Fed is precisely because they are perceived as independent of congressional spending plans. MMT takes this confidence for granted and assumes the Fed can just crank up the printing press whenever the Treasury likes.

But, as soon as this kind of coordinated effort appears, markets will lose confidence, inflation expectations will soar and interest rates will skyrocket. The plan would collapse before it really began. This is exactly the type of adaptive behavior by investors and markets that MMT academics do not understand.

MMT says that a currency issuer such as the U.S. can never go broke because it can simply print money to pay off the debt (provided the borrowings are in the same currency as the printed money). This may be true in some narrow, literal sense, but it does not mean investors have to wait around for the trainwreck.


The evidence is strong that debt-to-GDP ratios above 90% are a major headwind for growth. Today that ratio is 130% and heading higher. More borrowing does not produce growth; it simply makes the debt problem worse.

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