Black holes or evolution [Aki Mori]
Mori Akira Profile
Economist. Affiliated with a think tank (United States). Specializes in exchange-rate policy, monetary policy, macroeconomic policy, and financial regulation. Interacts with market participants, financial authorities, and policy makers to analyze exchange rate movements from multiple perspectives.
*This article is a reprint and editing of an article from FX攻略.com, November 2019 issue. Please note that the market information stated in the text may differ from current market conditions.
In elementary school, I loved looking at the stars through a telescope bought by my grandfather. I remember being amazed at how many stars there were when I looked up in the countryside. From junior high to high school, my interests shifted from space to mathematics and biology. In high school I belonged to the rugby club, but I also studied for entrance exams with real determination.
During adolescence, I read many books, including Stephen Jay Gould's The Panda's Thumb. My favorite is his paper “To Mickey Mouse with Biological Respect.” The first Mickey Mouse was depicted as a mischievous rascal. However, as he grew into a national symbol, Mickey Mouse evolved into a playful and endearing character, and his facial features and body became more childlike (neoteny: paedomorphosis).
What do humans find cute? And what evolutionary meaning lies in the affectionate feelings adults have for infants? I was very excited by Gould’s analysis on these questions.
What is MMT?
MMT (Modern Monetary Theory) translates to “Modern Monetary Theory” in Japanese. A country that has its own currency can issue currency without limit. Therefore, the theory posits that default due to debt repayment is impossible.
This economic theory was developed by professors Stephanie Kelton, Bill Mitchell, Randall Wray, and Warren Mosler. Kelton, one of the proponents of MMT and a professor at St. Lawrence University (New York), served as an adviser to Democratic presidential candidate Bernie Sanders during the 2016 election.
The main claims of this theory are: 1) governments with their own currency face no fiscal budget constraint; 2) governments can always generate inflation; 3) government deficits are offsets to surpluses in other sectors.
To go a little deeper and explain this theory concretely: for example, as long as the U.S. economy continues to grow and create jobs, the United States can borrow in its own currency, the dollar, without inflation, so the federal debt can increase without fundamental problem.
On the other hand, European countries adopted a single currency, the euro, and as a result can argue that Europe’s debt problems exist. For instance, the Greek central bank is under the umbrella of the European Central Bank (ECB), so it cannot provide unlimited liquidity and faces default risk.
Under this theory, because the government cannot be deterred from expanding fiscal policy by cutting spending, it may seem like an economics that does not worry about a fiscal budget’s black hole. What do you think?
