MMT is alive, but not so well

We don’t call it that, but what we are seeing is government implementing Modern Monetary Theory (MMT) – spending and more spending without revenue to back it up.

Even the decline in the deficit is short lived, resulting mostly from decline in COVID spending.

And we are seeing the results. With the combination of very low unemployment, supply shortages and inflation we are headed to the result that MMT proponents predict – higher taxes and higher interest rates.

BENGALURU (Reuters) – The Federal Reserve is expected to deliver two back-to-back half-point interest rate hikes in May and June to tackle runaway inflation, according to economists polled by Reuters who also say the probability of a recession next year is 40%.

With the unemployment rate near a record low, inflation the highest in four decades and a surge in global commodity prices set to persist, most analysts say the Fed needs to move quickly to keep price pressures under control.

The latest April 4-8 Reuters poll of more than 100 economists forecast two half-point rate rises this year, the first such move since 1994, taking the federal funds rate to 1.25%-1.50% by the June meeting.

By Indradip Ghosh and Prerana Bhat

One comment

  1. Federal funds rate was raised last month by 0.25%, the first of predicted 7 rate changes for the year. If the next 2 changes are 0.50% each, then assuming the last 4 are just 0.25% each, we will be at minimum 2.55%-2.50% by end of the year. Hopefully the economy is strong enough to handle this quick of change.

    Liked by 1 person

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