Joe Weisenthal and Tracy Alloway of Bloomberg report that the U.S. is spending like a ‘drunken sailor.’ They write:
The idea of the US government spending money like a “drunken sailor” is a well-worn cliché in both financial markets and political spheres. Everyone from billionaire investor Stanley Druckenmiller to JPMorgan’s long-time CEO Jamie Dimon has deployed the phrase to describe the swelling federal deficit.
But you probably wouldn’t expect to hear the remark from anyone associated with the heterodox economics approach known as Modern Monetary Theory — let alone the movement’s ideological godfather. That’s because one of the main contentions of MMT is that when a government spends and borrows in its own currency, that debt shouldn’t be understood in the same way as private household debt, because there’s no risk of default. This, in theory, allows for a greater level of fiscal flexibility than what is commonly understood.
In the latest episode of the Odd Lots podcast, Warren Mosler, whose work helped spawn the MMT movement, says he sees a toxic mix of high debt levels and historically large deficits running headfirst into a Federal Reserve that’s still using traditional inflation-fighting techniques in the form of high interest rates. […]
But the 75-year-old retired fund manager, who currently resides in the US Virgin Islands, adds a caveat.
“It may turn out I’m completely wrong and we have a total economic collapse with the 7% deficit,” he says. In that case, “You’ll never hear from me again.”
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