Putin's Inflation? Homegrown Modern Monetary Theory Is to Blame

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Prices of goods and services in the economy seem to be going through the roof, and both consumers and producers suffer from the falling value of their money. Unfortunately, the public turns to politicians in Washington and economists around the world for answers.

While president Joe Biden and his administration call it Putin's price hike, the US Bureau of Labor Statistics reports that over the last twelve months, the all items index increased 7.9 percent before seasonal adjustment. The reported twelve-month increase has been steadily rising and is now the largest since the period ending January 1982. The all items less food and energy index rose 6.4 percent, the largest twelve-month change since the period ending August 1982. The energy index rose 25.6 percent over the last year, and the food index increased 7.9 percent, the largest twelve-month increase since the period ending July 1981.

Meanwhile, the government’s debt has exploded to $30 trillion, up from about $10 trillion at the start of the 2008 downturn and $5 trillion in the mid-1990s. While such startling evidence is directly in contradiction with the official narrative of the White House, political elites either ignore the problem altogether or blame the wrong people. Part of the root of this calamity is found in the foundation of economic beliefs of the Biden administration.

Even though Treasury secretary Janet Yellen has distanced herself from modern monetary theory (MMT), as a student of James Tobin, she continues to remain an inflationist who believes that government should play a more active role in the economy. For example, she supported the $1.9 trillion stimulus plan signed in March 2020 even though the money was created from thin air. While she does not officially endorse MMT, nonetheless her views of economics do not stray far from MMT orthodoxy.