Modern monetary theory (MMT): Nothing modern or new

Democratic economists in the United States are championing MMT, a new monetary theory that says that the fiscal deficit and the public debt can become very large if they are financed by money creation. The limit to the fiscal deficit and the public debt then becomes the capacity of economic agents to hold money, whereas, if the fiscal deficit is financed by bond issuance, the limit is the capacity of economic agents to hold bonds. The former is higher than the latter: economic agents seldom lose confidence in money, whereas they often lose confidence in the solvency of governments. But there is nothing new to this theory: it simply boils down to public debt monetisation by the central bank, which has been implemented in the form of quantitative easing in the United States, Europe and Japan: when the central bank purchases government bonds, issued to finance an increase in the fiscal deficit, it gives rise to additional holdings of money and not bonds . .