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The key difference is that central bankers were in a very different state of mind in 2008. MMT realy imposed itself post 2008. So while it's relevant to brace
by satellite2 5y ago
The key difference is that central bankers were in a very different state of mind in 2008. MMT realy imposed itself post 2008.
So while it's relevant to brace for a small crash due to interest rates adjustments if inflation continues, I wouldn't bet on a full scale snowballing cash grab, that killed relatively healthy institutions like in 2008.
Short term money market have been greatly improved and central banks have shown multiple times their readiness to intervene.
The part that is always glossed over in MMT is that taxation is thr regulatory factor. Except that in this low trust political climate it's absolutely impossible that anyone manages to raises taxes.
Thus, I think that inflation is the greatest of current risks. Especially unacounted inflation (housing, healthcare services...).
- rebelos 5y ago> The key difference is that central bankers were in a very different state of mind in 2008. MMT realy imposed itself post 2008. > So while it's relevant to brace for a small crash due to interest rates adjustments if inflation continues, I wouldn't bet on a full scale snowballing cash grab, that killed relatively healthy institutions like in 2008. This is a dangerous view because you're assuming the Fed won't be backed into a corner like Volcker. They may end up having to choose between the markets and the integrity of the dollar. When entertaining the counterfactual, it seems in hindsight like Volcker made the right call (and many economists endorse that notion), even though it manifested considerable short term pain.
- satellite2 5y agoI think the situation might be similar that's right. But Volcker increasing rates took a lot of time to curb inflation and didn't cause a crash like in 2008.