Michael Avery from Rabobank has written a report on “MMT”
Summary
The COVID-19 crisis has, as expected, seen moves towards Modern Monetary Theory (MMT) to deal with soaring public deficits and debt
MMT states that governments only face inflation limits to money printing: while inflation is low for now, it won’t stay that way forever
Only eight countries in the world meet our proposed MMT criteria: leaving aside the US,these countries need the rare combination of sovereign currency, simultaneous fiscal deficitand current account surplus, plus good governance
As such, MMT may be a very strong medicine but, in almost all instances the cure is likely worse than the disease – a fact that will increase geopolitical stresses ahead
Looking at the specific example of India, we show that a major MMT fiscal package could push inflation up to 12% and the currency down by 25%