Key Takeaways
- • Activist investor Carl Icahn warned that Modern Monetary Theory (MMT) could undermine U.S. fiscal soundness and trigger ruinous inflation, according to Bloomberg News.
- • Icahn joins a group of prominent critics that includes Warren Buffett and Federal Reserve Chairman Jerome Powell.
- • The U.S. federal deficit is estimated to reach $1.1 trillion in fiscal 2020, expanded by the tax cut and higher military spending under the Trump administration.
- • MMT holds that a sovereign currency issuer can run larger deficits provided inflation stays contained; its most vocal proponent is Rep. Alexandria Ocasio-Cortez (D-N.Y.).
- • Bill Gross has argued the U.S. could double its deficit without problem, underscoring that the financial community is not unanimous on the issue.
Summary
Carl Icahn, the 1980s corporate raider and former adviser to President Donald Trump, has added his voice to the growing opposition to Modern Monetary Theory, according to Bloomberg News. Icahn cautioned that while governments can print money up to a point, exceeding that threshold could be very dangerous. "We don't want to hit a wall that you can't recover from," he said. "Once you get into an inflationary spiral, it's very difficult to get out of it—and therein lies the danger."
Icahn's position places him alongside a broad range of prominent financial figures who have criticized the theory. Critics span the political spectrum, from Warren Buffett, a Democrat, to Federal Reserve Chairman Jerome Powell, a Republican. MMT has become a cause célèbre of the Democratic Party's left.
MMT holds that a country that issues its own currency, such as the United States, has room to run larger deficits as long as inflation remains tame. Proponents argue the additional fiscal capacity could fund initiatives such as the Green New Deal and social spending. Rep. Alexandria Ocasio-Cortez, a New York Democrat, is the theory's most vocal advocate.
The debate arrives as the federal deficit is projected to reach $1.1 trillion in fiscal 2020. The article attributes the deficit's expansion under Trump in part to the tax cut and increased military spending. The financial community remains divided. Bill Gross has said the U.S. could double its deficit without any problem, illustrating the range of views on the question of how much fiscal expansion the economy can absorb.
"summary" field note: this summary is intended for institutional readers.
Icahn's position places him alongside a broad range of prominent financial figures who have criticized the theory. Critics span the political spectrum, from Warren Buffett, a Democrat, to Federal Reserve Chairman Jerome Powell, a Republican. MMT has become a cause célèbre of the Democratic Party's left.
MMT holds that a country that issues its own currency, such as the United States, has room to run larger deficits as long as inflation remains tame. Proponents argue the additional fiscal capacity could fund initiatives such as the Green New Deal and social spending. Rep. Alexandria Ocasio-Cortez, a New York Democrat, is the theory's most vocal advocate.
The debate arrives as the federal deficit is projected to reach $1.1 trillion in fiscal 2020. The article attributes the deficit's expansion under Trump in part to the tax cut and increased military spending. The financial community remains divided. Bill Gross has said the U.S. could double its deficit without any problem, illustrating the range of views on the question of how much fiscal expansion the economy can absorb.
"summary" field note: this summary is intended for institutional readers.
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