Modern Monetary Theory (MMT) economists believe that the US Fed’s response to raise interest rates to lower demand should not be the one-stop shop solution to keep prices under control, but suggest other measures such as Medicare for all, cutting the Pentagon budget, repealing some tariffs, and unclogging the ports.
Stephanie Kelton, an economist, a professor at Stony Brook University, and a senior fellow at the Schwartz Center for Economic Policy Analysis at the New School for Social Research, retweeted an article shared by Mehdi Hasan, a journalist and broadcaster and written by Jeanna Smialek, a Federal Reserve and economics reporter at The New York Times, on Modern Monetary Theory (MMT) getting a pandemic try out, with high US inflation now testing it.
A leading proponent of MMT, Stephanie Kelton, suggests that if a government controls its own currency and needs money, to provide food and homes for its people, at a time when the Covid-19 crisis has forced millions out of work, it can just create more money, as long as the economy has the capacity to produce the necessary goods and services.
Kelton supported the $1.9tn spending package that was passed in March 2021, and she stands by that. She trolled economists like Lawrence Summers who touted that the pandemic stimulus overshot what the economy was prepared to produce. However, she also questions how much of the inflation now is driven from the demand it drove. In addition, she argues that a crawling economic recovery is worse than the high inflation.
Kelton believes that a true MMT policy would have considered inflation ahead of time, along with tax increases or other stabilisers built in, while stating that the MMT experiment has not failed.
Win Monroe, an economist and a PhD candidate in finance at the Imperial College Business School, retweeted an article shared by Business Insider on Gen Zers not just holding steady but thriving during the two years of the virus crisis in the US, with unemployment rate for 20- to 24-year-olds being just half a percentage point higher than it was in February 2020.
Aki Ito, a senior correspondent at Business Insider, stated that she is part of a lost generation of millennials, while the Gen Z is graduating to a far better job market after the pandemic, with its financial prospects looking far more promising. The Great Recession of 2008, she wrote was marked by a rush of mass layoffs and bankruptcies causing few businesses to hire workers, a poor start for the millennial generation just out of school. A study further revealed that millennials on average were short of more than $25,000 in earnings, causing economists to label them a lost generation.
The Covid-19 outbreak in 2020 led to vast closures of the economy as well, with one in three people in their early 20s having lost their jobs, just at the start of most Gen Z looking to pick up diplomas. However, Ito believes that the government stimulus programmes have helped the job market to bounce back faster than estimated, with the recovery starting to reach even the youngest workers after two years of the virus crisis. Today, employment levels for the Gen Z are just 3% short of what they were in February 2020.
Claudia Sahm, the director of macroeconomic research at the Jain Family Institute also believes that the pandemic hit the millennials hard, but many policy actions have softened the blow for the young adults today.
Richard Murphy, a professor of accounting practice at the Sheffield University, tweeted on having known that in the spring of 2020 the Bank of England (BoE) agreed that it would fund the UK government to keep it going during the virus crisis, but it has been reported now that it was true.
Murphy shared an article published in April 2020 that highlighted BoE’s plans to directly fund the UK government’s extra spending for the pandemic on a temporary basis. The move would thereby allow the government to evade the bond market until the Covid-19 pandemic subsided, financing unexpected costs such as the job retention scheme where bills fell due at the end of April.