When a fringe economic theory goes mainstream and is actually implemented by policymakers you better pay attention. The once-fringe theory in question is called Modern Monetary Theory, or MMT for short.
The assumption behind MMT is that massive government spending helps the economy grow to its full potential, including full employment, and also finance major programs like universal healthcare, free college tuition, and green energy initiatives. Sound familiar?
What about the burgeoning federal debt? Not an issue according to Federal Reserve Chairman Jerome Powell. In an interview on National Public Radio this week Powell said: “Given the low level of interest rates, there’s no issue about the United States being able to service its debt at this time or in the foreseeable future.”
Enter today’s guest, Paul McCulley, who wrote an academic paperback in 2013 titled: “Helicopter Money, Or How I Stopped Worrying and Love Fiscal-Monetary Cooperation.”
McCulley is currently an adjunct professor at Georgetown business school where he teaches a very timely multi-disciplinary course combining law, economics, monetary policy, global finance, and behavioral finance.
I asked McCulley to explain why he believes helicopter money and the unprecedented fiscal and monetary cooperation we are seeing today is so essential, and not an issue.
WEALTHTRACK Episode #1739; Originally Broadcast on March 26, 2021
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PAUL MCCULLEY
- Financial Thought Leader,
- Former Chief Economist, PIMCO,
- Adjunct professor, Georgetown University McDonough School of Business
MAKE SURE YOU ARE INVESTED IN SOME BENEFICIARIES OF AN ACCELERATING ECONOMY
Laggards of last decade coming to life
- Value stocks should outperform growth
- Small-caps should outpace large companies
- International stocks, particularly in emerging markets should lead domestic
Read the academic paper “Helicopter Money, Or How I Stopped Worrying and Love Fiscal-Monetary Cooperation” [pdf]
UNIQUELY POSITIONED
- Buy Emerging Market Equities, especially value stocks
- Beneficiaries of global fiscal stimulus and end of Federal Reserve’s pre-emptive tightening policy
No stock mentions in this episode.
Paul McCulley from the WEALTHTRACK Archives:
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POST PANDEMIC WISH
Paul McCulley shares what’s at the top of his post-pandemic wish list.
