MMT

 MMT is an abbreviation for Modern Monetary Theory and is translated as Modern Monetary Theory.


(Some people ridicule it as More Money Theory.)



It is a theory that has caused controversy and is attracting attention in Japan as well, because the US House of Representatives Alexandria Ocasio Cortez, who advocated the "Green New Deal Policy," took up this theory and supported it as a basis for policy implementation. In the United States, it is advocated by Stephanie Kelton, an economist at the State University of New York, and in Japan, it is supported by Takaaki Mitsuhashi and others.



The main points of this MMT theory are as follows.


1. Government expenditure (fiscal expenditure) can be made without relying on taxes or international issuance.


2. The government will not fall into default (bankruptcy) as long as it issues government bonds in its own currency.


3. By taxing and issuing government bonds, it is possible to respond to demand-pull inflation. The idea is that taxation and the issuance of government bonds can remove surplus funds from the market and thus curb inflation.


4. Credit creation and purchasing under inflation are restricted, but economic activity can be accelerated if economic resources (labor force, etc.) are utilized by full employment.


5. Do not compete with the private sector to deal with the shortage of savings due to bond issuance.



MMT may be regarded as a theory that follows the Keynesian economics in the sense that it emphasizes effective demand. However, it is unique to MMT in that it insists on issuing government currency to make up for the budget deficit.



And one of the most common criticisms of this theory in Japan is


1. MMT followers are overconfident in the government's ability to control inflation. When the asset bubble broke out, the government could not prevent the bubble economy. Isn't it too convenient to think that you can control only when you run MMT?


2. Isn't the applicable country limited? Isn't it about the United States, which can issue the dollar, which is the key currency, and Japan, which is deflationary (low inflation rate) with low interest rates?


3. Isn't it ignoring the possibility of hyperinflation?


And so on.



As for the Japanese government, Prime Minister Shinzo Abe and Governor of the Bank of Japan Haruhiko Kuroda have mentioned that they are managing policies to achieve the primary balance, and MMT. It shows that it has a different stance from the supporters of the MMT theory that "Japan is a case study country of MMT". In addition, Finance Minister Taro Aso denies that he has no intention of making Japan an MMT experimental site. Major economists have also denied MMT, pointing out the possibility of hyperinflation.



However, according to this theory, it seems possible to explain the difference between Greece, which has been cornered to financial collapse (default), and Japan, which has not been cornered to that extent.



Both Japan and Greece have large debts of more than 100% of GDP and are compared in that they have huge budget deficits. However, the difference between the two countries is that Greece issued government bonds in euros and was owned by foreign countries (including people), but Japan issued government bonds in Japan, and domestic investors (individual investors). And banks) own it. This seems to be consistent with the fact that the government in 2., which I wrote at the center of MMT theory, will not default (bankruptcy) as long as it issues bonds in its own currency.



* Japan has the right to issue yen (the government has the right to coin money, the Bank of Japan has the right to issue banknotes), but the Greek government does not have that right (the right is in Europe). Central Bank).



Major scholars have criticized MMT, but conclude whether this theory is really the right theory to save a country suffering from deflation or recession, or the wrong theory to move the country in the wrong direction. It may still take some time.



If there is any news that interests me in the future, I would like to take it up.

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