Draghi Open to MMT and a People's QE
It was bound to come to this, and right on time too.
Outgoing ECB President Mario Draghi says the ECB Should Examine New Ideas Like MMT
European Central Bank President Mario Draghi said the Governing Council should be open to ideas such as Modern Monetary Theory, while noting they’re closer to fiscal policy and should be directed by governments.
Draghi was responding to a question from European lawmakers about helicopter money and the best ways to channel funds to the economy in a way that helps inequality. He mentioned MMT and a recent paper by former Federal Reserve Vice Chairman Stanley Fischer -- the adviser on Draghi’s doctorate -- which said central banks should put money “directly in the hands of public and private sector spenders.”
Putting money directly into consumer's hands is a people QE, and ignoring government deficits on the theory they don't matter is one of the tenants of MMT.
“These are objectively pretty new ideas,” Draghi said. “They have not been discussed by the Governing Council. We should look at them, but they have not been tested.”
Not Been Tested?!
That's not exactly true. Japan wasted trillions of dollars building bridges to nowhere and it solved nothing. The best one can say is Japan has not imploded yet.
Of course the MMTers will respond Japan did not do enough MMT, as if building more bridges to nowhere would actually solve problems.
Dam the Rules, Tests Ahead
“When you look at them closely, you realize the task of distributing money to one subject or the other subject, that’s typically a fiscal task,” he said. “It’s a government decision, not the central bank...It’s the political governance of these ideas that needs to be addressed.”
Draghi knows full well that both ideas he espouses testing are against the Maastricht Treaty on which the Eurozone was founded if they were done in a large enough size to matter.
But Draghi simply does not give a damn.
- It's not his problem. His term ends October 31, 2019.
- The Italian banking system is insolvent so we need new "creative" ways to fix things.
- What better time than now to propose such actions when you can dump the new ideas on hand-picked replacement clown Christine Lagarde?
One fundamental assumption of MMT (and an obvious false one) is that governments will do wise things with the money they create out of thin air.
History shows the asininity of that theory.
Mike "Mish" Shedlock