Money & Macro Talks Was MMT Wrong About Inflation? | Stephanie Kelton (The Deficit Myth)
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Feb 13, 2024 Stephanie Kelton, Professor discussing the relevance of Modern Monetary Theory (MMT) and the role of government in controlling inflation. They cover topics such as the impact of government spending on inflation, the role of central banks, the Deficit Myth in the COVID era, involvement in political administrations, understanding inflation and fiscal policy, government budgeting during COVID, and the role of government and central banks in fighting inflation.
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Behind The $1.9T COVID Package
- Stephanie Kelton described working on the Biden transition task force that helped shape the $1.9 trillion COVID package.
- She said lawmakers like House Budget Chair John Yarmuth read her book and felt empowered to pass large fiscal support.
Supply Shocks Drove Inflation More Than Stimulus
- Kelton argues the inflation spike was driven mainly by supply shocks, not just excess demand from fiscal stimulus.
- She points to goods-focused demand, brittle supply chains, and successive shocks like Ukraine and COVID waves.
Fiscal Role Was Limited In Excess Inflation
- Fiscal support did add demand and exacerbated bottlenecks, but studies show it was a small share of excess inflation.
- Kelton cites analyses estimating the $1.9T package added only a few tenths of a percent to inflation.