Fed Chair Powell Says Concept of MMT Is 'Just Wrong'

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Feb.26 -- Federal Reserve Chairman Jerome Powell says the concept of modern monetary theory is "just wrong." He says U.S. debt is fairly high to the level of GDP. Powell speaks before the Senate Banking Committee.

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He says the idea that "deficits don't matter is wrong".

Guron

The collective power that average people gain from understanding MMT is extremely dangerous to the existing neoliberal order.

tottifan

MMT is a description of how things already work. As long as the Fed has an interest rate target, its "repo purchases" are controlled by congress

Jone

According to MMT, deficits do matter but not in the same way as we would normally think.

A person, corporation, a city, US State if they accumulate too much deficits then they are at risk of default and bankruptcy as their income cannot keep up with the interest expense.

This is not the case for the US Federal government or any independent sovereign with its own currency. They can’t go bankrupt in securities they issued in their own currency unless they voluntarily do so.

They can get into inflation and in rare cases hyperinflation and collapse of the currency. Also the deficit is a policy tool that redistributes real purchasing power to the beneficiaries of the new spending. So it matters how the deficit is created from an wealth equality point of view.

It also matters if the deficit was used in a productive way like improving transportation and communication infrastructure, increase domestic energy generation, improve human capital, attract foreign capital in new sectors, among other things. Then the deficit may well be worth it because it will increase real wealth.

Otherwise, if it’s just a give away to the rich or poor for doing nothing, and there is no increase in production, the excess money will most likely cause inflation.

Basta

Someone tell this dishonorable dishonest or moronic fed chairman that the fed is not limited in spending capacity (unless that it paired with a lack of resources or supply side constraint) and that the government does not need to borrow back it’s own currency to pay for anything, in fact the concept of a country borrowing back its own currency is wrong And moreover impossible.

matthewdelaney

“It’s wrong cause I say it’s wrong. Trust me.”

chessenthusiast

The title of this video is misleading. It's another example of how misinformation results from poorly constructed, out of context headlines.

genecat

He says the idea that "deficits don't matter is wrong". MMT does not claim that deficits don't matter. The claim is they don't matter in the way we currently think. Deficits matter if they have a negative effect on inflation. Sometimes they do and sometimes they do not. Deficits spending that does not adversely effect inflation is actually a good, economy stimulating, thing.

jrhammond

Funny because right after this he went to town spending as much as he could supporting any bond for any company.

ChalrieD

The debt of the government is the financial wealth of the private sector.

EBlezien

Powell didn't give any decent reason why the MMT is wrong.

antihero

It's sort of morbidly ironic that he can know so much about money as a technician, but so little about how it actually works as a political and legal token.

derekmcdaniel

Nobody is saying deficits don't matter, what mmt says is that instead of simply trying to keep the deficit down for the sake of keeping it down you should evaluate how much deficit you can add without causing problems i.e. Instead of saying "this is how we're going to pay for the wall" and never actually do it, we say "what will happen if we pay for the wall" and if the CBO says "yeah we can absorb that" then we do it

sftwaredev

these guys dont know how to think outside the corporate corrupt "BOX"

pinzgauernorcal

Nothing new about MMT. Governments been doing this for centuries

jcav

This is comedy now. Wonder what made him switch sides 🤔

landlubber

Jerome Powell is lying under oath too on how the monetary system works

MrHarveyrex

He know exactly how it works. he's a neoliberal He prefers monetary policy over against fiscal policy. Why ? because his interest isn't for the everyday working class citizen it's for his buddies in wall street. He's a lover of money which is power a lover of power.

Juanillo-.

The increase in debt to GDP the Chairman talks about is mostly attributed to "Private" debt, not government debt. He is deliberately conflating government spending and bank loans because they, private banks, lead by the Fed deliberately want to minimize government spending. The banks really desire to create loans at interest to enrich themselves not the society in general.

veronicapalmer

Ive noticed that when house prices go up this is a "healthy" economy according to the establishment. When they go down this is a "failing" economy. Who benefits when they're rising and who benefits when they fall? That tells you the motivation behind the claim. Donald Trump's raging stock market was a payout to the rich which created massive inflation as it slowly trickled into the CPI buckets.

thebubber

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