Trillions of dollars are needed for the UN’s Sustainable Development Goals and those of the Paris Agreement to be met – both are critical for a sound and sustainable economy. Yet existing policies are hindering the necessary flows of capital and require a reset. Enter Modern Monetary Theory (MMT).
We believe it is clear that under the MMT, governments and central banks can have more scope to spend than previously thought, as also set out in our Investment Outlook for 2022 Shooting the rapids.
Adopting a framework that is more relaxed about government debt levels and deficit spending, and shifting the focus of central bankers to real world issues such as (the systemic risks around) climate change, could help address the enormous challenges, while still monitoring the long-term stability of the economy and overall financial stability.
