And Daniel Alpert, a managing partner of the investment bank Westwood Capital, credited the theory with preventing him from panicking that rates would soar when the Federal Reserve set off a brief “taper tantrum” in 2013 and announced it was easing its stimulus program.
Over the past couple of years, he said, the Fed tried everything — “it did a belly dance to get long-term interest rates up” — and it didn’t work.
M.M.T., Mr. Alpert said, “successfully debunks 40 years of misassumptions of how markets and public credit work.”
Explaining M.M.T.’s Appeal
Progressive politicians like Senator Bernie Sanders of Vermont and Representative Alexandria Ocasio-Cortez of New York are among the most vocal supporters of M.M.T., but the theory’s appeal crosses political lines in part because it offers a narrative for a series of events that the established wisdom failed to anticipate or explain.
Big government deficits, for instance, were supposed to mop up available pools of capital and drive up interest rates, which would, in turn, elbow out private investors, damage growth and feed inflation.
But the last decade was different. When deficits soared after the recession, interest rates fell and savings rates climbed. Investors are awash in capital. The economy has been expanding, slowly, for 10 years, with unemployment and inflation rates ensconced at record-low levels.
One reason for the misjudgments may be that the economic models that confidently strode down the mainstream were hammered out in the decades after World War II, when American companies had an enormous appetite for capital investment. “We don’t live in that world anymore,” said Mr. Koo of Nomura. Today, vast fortunes shift across oceans in an instant, currencies are untethered from gold, and your local coffee shop may no longer accept cash.
Article source: https://www.nytimes.com/2019/04/05/business/economy/mmt-wall-street.html?partner=rss&emc=rss
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