So what is actually happening is that, exactly as modern monetary theory says, government cash injections create private saving. And when the government injects money into the economy private wealth increases. The government has done that through QE and not debt, but there’s still more money, and the reality is that as this chart shows a great many people will have a great deal more savings as a result.
So is there a cost to all this? Undoubtedly there is. But it’s not to the government, where interest costs are falling. It’s to society at large as inequality grows. That’s the side effect of this crisis.
On the very same day he also tells us that:
In other words, negative real interest rates are here to stay for now.
Which is interesting, don;t you think? For investing in something with a negative real return doesn’t look like a great way to get rich….