It’s hard to believe that as recently as February, when I first brought up the concept of a new economic model that was poised to radically alter the world we’re living in, MMT was as obscure as an extra in an old Cecil B. DeMille bible film. Yet, a mere two months later, you have to try extremely hard to ignore Modern Monetary Theory and its swelling number of disciples.
John Maynard Keynes, an English economist and author, has been held in high esteem for several decades thanks to his groundbreaking work in economics in the early 20th century. The theory he popularized in an attempt to better understand the Great Depression, aptly named Keynesian theory, revolutionized demand-side economic policy at the time.
Towards the tail-end of July, the Commerce Department reported that Gross Domestic Product (also known as GDP), or the total value of goods and services produced in the US, increased at an annual pace of 4.1% in this year’s second quarter. As expected, President Trump took a victory lap around these numbers, which were the highest GDP growth results since 2014. (However, lost in the fanfare was the fact that the first quarter GDP number was revised down from 2.9% to 2.3%.)
A recurring theme in various EVAs over the years is the importance of the yield curve. Sorry, I know a term like that can literally throw non-professional investors—i.e., those with a real life—for a curve. But, unlike with so many human relationships, it’s NOT complicated.
Zero interest rates have made a great many people a great deal richer. But paradoxically they have strangled wealth creation. The reason for this is that enterprise is overwhelmingly a phenomenon found among smaller companies. Among big companies it is a rare quality.