Modern monetary theory (MMT), and its intellectual predecessors, have been somewhat obscure and unconventional branches of economics for many decades, but they have recently gained much more prominence. This column provides a basic catch up for those who have not been paying attention.

MMT has become relevant because it seems to “explain” some of the key events in the post-crisis era, including the persistence of zero interest rates and very low global inflation. Lately, it has also provided a convenient justification for those on the political left who favour a large fiscal expansion in order to finance climate policies, universal healthcare and a public sector job guarantee for unemployed workers (see, for example, the  Green New Deal promoted in the US by freshman Democratic congresswoman Alexandria Ocasio-Cortez). 

Does the doctrine make any sense? MMT has several different strands, some of which are inconsistent with each other and with established conclusions from more conventional schools of macroeconomics.