Modern Monetary Theory (MTT) has widespread support in Europe and an emboldened group of admirers in the United States, starting with Rep. Alexandria Ocasio-Cortez (D-NY).
One prominent economist hopes it never makes its way to our shores.
Fox Business’ Julia Limitone reports:
“You look at Italy with over 130% debt to GDP. You look at Lebanon 150% — even us — we’re at about 103% and in fact academic studies show that whenever that debt to GDP ratio is over 90% — guess what? It slows down economic growth,” former JPMorgan economist Anthony Chan told FOX Business’ Stuart VarneyOpens a New Window. on Tuesday.
The economic line of thinking argues that debt doesn’t matter and a country that prints its own money can never go bankrupt. However, Chan had a very different explanation.
“Their argument is it doesn’t matter as long as the interest rate is below the inflation rate. But over time what happens when that debt to GDP ratio just gets out of control– over 90%, over 120%, 130% — it becomes a major problem and then you can’t do anything about it but just accept reality,” he explained.
New York Congresswoman Alexandria Ocasio CortezOpens a New Window., earlier this year, told Business Insider that the theory “absolutely” needs to be “a larger part of our conversation.”