I sort of follow everything the author says until the last paragraph. It seems to be missing the last sentence.
“If there is inflation, the Bank of England’s task will be to choke it off by raising interest rates, and/or reversing QE. Or the government could try out the MMT proposal to stifle the inflation with higher taxes. The trouble is that all these responses will also depress economic activity. In such circumstances, the MMT doctrine of free spending will not look so attractive after all. “
Shouldn’t the next sentence be, “the current monetarist doctrine will also not look so attractive”.
a) Both doctrines claim that increased spending and debt associated can provide a stimulus to the economy.
b) Both doctrines agree that too much spending (and debt) will result in inflation. Although they don’t agree when structurally, this occurs.
c) Both doctrines agree that if inflation increases past some point, steps need to be taken that will reduce economic growth. Although the prescriptions differ, they aren’t de facto mutually exclusive (ie one can both increase interest rates and increase taxes)
Following the current empirical evidence from the recent 10 years (in the US and Europe) and 30 years or so in Japan, the behavior of inflation wrt to spending/debt seems to contradict the “classical” model. (at least for fairly developed countries with reasonably sound legal/economic structures and who can borrow relatively freely in their own currency).
So, this begs the question: which makes more sense given the evidence?
