Proposals to abolish the (central) government bond market is one of the striking features of Modern Monetary Theory. In the current context, it is debatable how much difference that such a change would make. I avoid attempting to be a forecaster, but it is safe to say that it would not be a true “surprise” if developed economy policy rates remained below 1% for a good portion of the 2020s. (This observation is consistent with bond market pricing at the time of writing.). This is a basic extrapolation of behaviour of past cycles. This time could be different, but it is no surprise if it is not. Meanwhile, some neoclassical economists are agitating for negative policy rates, which makes the MMT proposal look much more sensible by contrast.
(Note: This is an unedited draft from my upcoming MMT primer. Most of the controversy around this subject is dealt with elsewhere in the text. I have kept this short, as it is covered already in "Understanding Government Finance".)
Mike Norman Economics
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