Former Federal Reserve chief Janet Yellen said she’s not a fan of modern monetary theory, saying its proponents are “confused” about what can fuel inflation in the economy.
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Yellen took issue with those promoting MMT who suggest “you don’t have to worry about interest-rate payments because the central bank can buy the debt,” she said at an Asian investors’ conference hosted by Credit Suisse in Hong Kong. “That’s a very wrong-minded theory because that’s how you get hyper-inflation.”
The former Fed chair said she was “not a fan” when asked about the decades-old theory, which has gained recent traction in the U.S. particularly amid a run-up in government debt. Yellen joins a list of well-known names such as billionaire investor Warren Buffett and former U.S. Treasury Secretary Larry Summers who have said they’re opposed to the theory.
More from Yellen in Hong Kong:
- Yield-curve inversion happens very easily and doesn’t alone signal a U.S. recession is imminent, though can signal that Fed might at some point need to cut interest rates.
- For quite a long time to come we’ll need to worry that central banks are not going to easily have the tools to adequately respond to financial crisis.
- Also concerned about buildup of corporate debt and leveraged lending; underwriting of some leveraged loans is weak Fed’s process of reducing balance sheet has been running smoothly; Fed will operate with a large balance sheet for a long time to come.