What we're reading: The NYT's Patricia Cohen reports on how a long list of Wall Street heavyweights is embracing Modern Monetary Theory, or MMT. Quoted in her article: Jan Hatzius, chief economist at Goldman Sachs; Paul McCulley, former chief economist at Pimco; Mohamed El-Erian, former Pimco CEO; Ray Dalio, founder of Bridgewater Associates; Richard C. Koo, chief economist at Nomura; and Dan Alpert, managing partner at Westwood Capital.
While none of the Wall Streeters can be considered doctrinaire adherents of MMT, they all find it useful in terms of understanding the point at which government spending stops being a productive investment in the economy and starts risking harmful levels of inflation. None of them think we're anywhere near that point today.
Their message: For the time being, the government should keep on spending, even it doesn't raise taxes. The economy — and the market — will only benefit as a result.
"For me an economic approach must help me understand the world, and provide me with some useful insights (preferably about my day job — investing). On those measures let me assure you that MMT thrashes neoclassical economics, hands down."