You may have heard the term “Modern Monetary Theory” (MMT) recently in the financial media or in political discussions. If not, it is likely you will in the months ahead. Investors should pay close attention to these discussions. Why? Because progressive politicians are embracing it as a means of increasing social spending without imposing taxes.
To its advocates, MMT also offers the promise of reducing or reversing the contribution to income inequality and wealth inequality of current conventional monetary policy. However, historical experience with policies similar to MMT has resulted in periods of high and volatile inflation, which is detrimental to real returns of stocks and bonds, and thus, the financial plans of savers and investors.
We invite you to download the latest issue of Investment Perspective. In it we will describe the tenets of MMT, why it has been gaining popularity, some weaknesses in the arguments supporting it, and the risks it poses for the U.S. economy and investors, foreign or domestic.