MMT – fail

The Washington Post article on Modern Monetary Theory is getting a bit of air play on blogs – even Mankiw picked it up.

Amusingly, given the superior tone that these folks adopt in their interviews, there are a number of school boy errors.

Jamie Galbraith, for one, makes the reserve howler:

“It seemed clear to me that . . . flooding the economy with money by buying up government bonds . . . is not going to change anybody’s behavior,” Galbraith says. “They would just end up with cash reserves which would sit idle in the banking system, and that is exactly what in fact happened.”

Joe Gagnon (the Fed’s QE1 guy) slams them as clueless – saying they “have no idea how quantitative easing works”.

Perhaps if these folks demonstrated knowlege of old fashioned monetary policy, their Modern Monetary Theory might be taken more seriously.