It has reinforced a dangerous economic myth. By pretending that the government must go cap-in-hand to the markets to raise funds, QT sustains the false idea that austerity is unavoidable. The reality is that the government, through the Bank, creates its own money. QT hides that truth.
QT makes explicit the costs of having created money then spent it.
MMT says print, spend and then reduce the money supply if inflation arises. Tax is one way to reduce the money supply, of course – so we can reverse inflation by running a budget surplus. Or, we can reduce inflation by reducing the effects of MV=QP by pushing up interest rates and thereby reducing the wide money supply created by our expansion of the narrow money supply.
QT isn’t hiding anything. QT is making explicit the costs of MMT.
Yes, it’s an option, but…. has this ever happened in recorded history?
Just curious..
Or, we can reduce inflation … by pushing up interest rates
At which point the news will be full of people complaining that they can’t afford a house because the mortgage rates are too high. So the interest rates won’t be raised and inflation will soar and politicians will shrug and say it’s out of their hands.
It’s cargo-cult. They think creating money creates value. So they create the money and then sit back and wait.
I note the BoE is helping Starmer and Reeves in a way they never did for Truss and Kwarteng. QT is being reduced significantly, thus reducing the upward pressure on gilt yields, and also changing the age profile of its sales, also to try and massage gilt yields down.