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MMT = Keynes 2.0

Summary:
From Lars Syll As time goes on, and 2020 turns into 2021, the long-held idea that governments are like households and businesses that have to repay their debts, or even that government deficits must be financed by debt at all, will increasingly be exposed as a mistake. It will be more or less a return to Keynes, except with the twist that the Keynesian aim of balancing the budget over the course of the cycle – deficits in bad times, surpluses in good times – doesn’t matter, not that anybody has actually achieved that lately anyway. In future 2020 will be seen as the year when Keynes 2.0 got underway – when monetary and fiscal policy merged and a more sophisticated theory of government took hold, in which spending has no limit apart from the capacity of the economy. As debt continues to

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from Lars Syll

As time goes on, and 2020 turns into 2021, the long-held idea that governments are like households and businesses that have to repay their debts, or even that government deficits must be financed by debt at all, will increasingly be exposed as a mistake.

MMT = Keynes 2.0It will be more or less a return to Keynes, except with the twist that the Keynesian aim of balancing the budget over the course of the cycle – deficits in bad times, surpluses in good times – doesn’t matter, not that anybody has actually achieved that lately anyway.

In future 2020 will be seen as the year when Keynes 2.0 got underway – when monetary and fiscal policy merged and a more sophisticated theory of government took hold, in which spending has no limit apart from the capacity of the economy.

As debt continues to be monetised, it will become obvious that without economic bottlenecks, spending and deficits can increase with no negative inflationary and welfare impacts.

Alan Kohler / The Austral

Lars Pålsson Syll
Professor at Malmö University. Primary research interest - the philosophy, history and methodology of economics.

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