Comment: Gold and Modern Monetary Theory

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Gold and Modern Monetary Theory

Neo-Keynesians, a.k.a. advocates of Modern Monetary Theory (MMT), abhor gold claiming that it doesn’t provide enough flexibility to monetary authorities nor enough inelasticity to the money itself. Warren Mosler is an intellectual political & economic leader of the MMT school of thought and according to Mosler’s Law, “There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.” Well I guess that’s debatable, but they also promote a policy initiative authored by Mosler known as the ELR program, which is an acronym for Employer of Last Resort. In effect the government would provide a guaranteed full employment backstop for all unemployed who are willing and able to work at some minimal nominal wage of say $10/hr, but social welfare as we know it today would be a thing of the past. Without going into all the details, Mosler argues that the ELR would provide full employment AND price stability. My question to the MMT camp and to everyone else is, if the Mosler ELR were to become law and performed as advertised, would it be reasonable to expect the price of gold to appreciate, fall or stabilize?

Ed Rombach