When US Keep Increasing Its Debts Level

What will happen when US Keeping Increasing Its Debts Level?

No one knows, but we are about to find out.

The traditional monetarist idea is that if debt increases one of three things will happen….

1. interest rates will rise which will kill the economy
2. you have too much to pay, and so you’ll default, or
3. you’ll have to print money to pay the debt and you’ll have hyperinflation

But the modern monetary theorists say that this is all wrong, and you can increase debt indefinitely and print money to pay the debt and as long as you have real productive assets that aren’t being used then everything will be fine. Note that this only works for the US. In any other country, if you run huge debts, your creditors will dump your currency, and you won’t have any cash to buy exports. But US can print US dollars.

Until last year (2020), the MMT guys were considered a bit crazy kooks, but you have a situation in which if you don’t massive print money now, the economy will collapse. So they were the only guys with politically realistic policies.

So we will see what happens.