Stephanie Kelton is out with her rebuttal to Paul Krugman. You can read it here. MMT is so crazy it even baffles Paul Krugman and the Keynesian school. There are so many holes in MMT and her thinking it would take much more time than is worth to rebuttal it all. Her first paragraph is what got me. She starts off with this:
There is a doctrine among mainstream economists holding that: (1) government deficits push interest rates higher and (2) rising interest rates crowd out private investment. The government can take more of the economy’s financial resources, but only at the expense of lost private investment. This means that running budget deficits has at least some downside. Paul Krugman is a believer in this doctrine. I’m not…
We know from supply and demand that if the supply of something increases the price decreases (all other things being equal). That is, if an entity issues more and more debt, the price of this debt will decrease i.e. interest rates will rise. Her first point, effectively says, this is not true. In one sentence, she rejects supply and demand.
Her second point was destroyed by Milton Friedman a long time ago.
Capital is not unlimited. Government borrowing crowds out the private sector. The question should be asked, ‘what would people have done if they did not lend their money to the government?’