modern monetary policy

Monetary policy deals with the management of the money supply and the circulation of money in the market. The monetary policy is run by the central banks which increases or decreases the money supply according to the need. Such policies impact the inflation rates in the market.

Modern Monetary Policy

Modern monetary theory is of the view that governments which have a fiat currency system is free and should print as much money as they need to spend because they cannot go broke or be insolvent unless a political decision to do so is taken. These policies are known as so-called modern monetary policies.

DISADVANTAGES:

  • The implementation of so-called modern monetary policy means governments do not need taxes or borrowing for spending since they can print as much as they need and are the monopoly issuers of the currency. So, a valued currency is not solving the problems but a printing press is doing this job for countries.
  • This excessive printing of money is causing depreciation effect on the value of currencies. The situation is more or less the same for all countries.
  • If the trendy implementation of modern monetary policy continues, one day a country like the US can also go into hyperinflation. Such a sign is an alarming situation and countries must take action against such policies of central governments.

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