Perspective: The left comes up with an economic idea silly enough to rival the Trumpublicans
By Allan Sloan Allan Sloan Email Bio Columnist March 22 at 2:55 PM There must be something in the air or water in Washington that encourages politicians and their followers to fall in love with what I call fantasy finance. Also known as making up numbers.
Now, fantasy finance is being peddled by left-wing Democrats who are embracing something called Modern Monetary Theory. Which really should be called Magic Money Theory. Or the Lefties’ Laffer curve.The Laffer curve, you may recall, was created by supply-side economist Arthur Laffer. It predicted that federal tax cuts would more than pay for themselves by boosting economic activity and goosing government revenue.
When MMT first emerged, I did a little research and figured it was so silly that it would have a short shelf life. That’s why I didn’t write about it. But now that MMT seems to be gaining ground and is getting treated with respect, let me offer up a few thoughts on just one aspect of how this theory won’t work in the real world.These thoughts, by the way, are based on how the financial world actually works. Not on how academic ideologues and other true believers would like the world to work.
As an example, these folks cite Japan, which has run massive budget deficits without running up interest rates very much or generating much inflation. The Japanese central bank has printed gazillions of yen, and everything is great .But even if you disregard other examples of countries printing their own currency to fund deficits — can you spell Venezuela? — the United States isn’t Japan.
Foreigners own about $6.3 trillion of our $16.2 trillion of publicly held Treasury debt. People all over the world happily sell goods and service to U.S. consumers and businesses in return for dollars, which in many cases they prefer to their own currency.
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