Krugman’s Latest Comment on MMT

In a recent post, “Franc Thoughts On Long-Run Fiscal Issues”, Paul Krugman has once again engaged with Modern Monetary Theory (MMT). His main argument this time concerns the difference, if any, between issuing debt when the government net spends rather than simply allowing balances to mount in reserve accounts. He agrees that under current circumstances zero interest short-term debt and zero-interest reserves are close substitutes, but argues that issuing debt and allowing reserves to mount will have different macroeconomic implications when interest rates are positive.

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