Brazilian Version of Modern Monetary Theory Involves Risks

TL;DR

André Lara Resende, a proponent of the Real Plan, is now advocating for Modern Monetary Theory (MMT).
MMT posits that governments issuing their own currency face different financial limitations than households or businesses.
The theory suggests taxes are primarily for controlling inflation and demand for currency, not solely for funding expenditures.
Applying MMT in Brazil risks de-anchoring inflation expectations, leading to persistent inflation.
It could also result in fiscal indiscipline, increased public debt, and currency devaluation due to capital flight.
The theory might weaken the Central Bank's autonomy and lead to distorted resource allocation through public credit.
Politically correcting MMT-induced imbalances would be difficult, potentially harming the poor the most.
Brazil's past economic experiments, like the 'Nova Matriz Econômica,' showed negative outcomes from similar interventions.

Continue reading the original article