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Arguably, bad policies - such as was pursued by mainstream economists in the 1960-70s can create inflationary pressure. Fiscal policy needs to be tightened to avoid inflationary pressures if regulatory measures are not enough.

Arguably, bad policies - such as was pursued by mainstream Keynesian economists in the 1960-70s can create inflationary pressure. Fiscal policy needs to be tightened to avoid inflationary pressures if regulatory measures are not enough.

The fear of a “cascade” probably refers to fear of hyperinflation. The textbook “Macroeconomics” by William Mitchell, L. Randall Wray, and Martin Watts (Wray & Mitchell are leading authorities on MMT, considered co-founders along with Warren Mosler) explains in Chapter 21 how mainstream theories about hyperinflation are incorrect in that they blame monetary financing. Instead, if we look at real world cases, hyperinflation is typically the result of the impairment of real productive resources. In the case of Weimar, there were gold reparations as well the occupation of the Ruhr.

If we turn to page 343 of “Macroeconomics” by William Mitchell, L. Randall Wray, and Martin Watts (Wray & Mitchell are leading authorities on MMT, considered co-founders along with Warren Mosler) the authors state: “...when MMT says that government spends by keystrokes, this is a description, not a prescription. If critics were correct that government spending by printing money necessarily leads to high inflation or hyperinflation, then most developed nations would have at least high inflation, if not hyperinflation all the time because they all spend by keystrokes.”

The fear of a “cascade” probably refers to fear of hyperinflation. The textbook “Macroeconomics” explains in Chapter 21 how mainstream theories about hyperinflation are incorrect in that they blame monetary financing. Instead, if we look at real world cases, hyperinflation is typically the result of the impairment of real productive resources. In the case of Weimar, there were gold reparations as well the occupation of the Ruhr.

To add to the previous point: there is a difference between fiscal spending (e.g., handing households \$1 trillion) versus “quantitative easing” (the central bank buying \$1 trillion in existing bonds, which increases the money supply and reduces bonds held by the public). The difference should be obvious: handouts create an income flow, the second is just a secondary market financial transaction. MMT proponents argued that QE accomplishes almost nothing, saying that it is just a swap between two types of government liabilities. It should be noted that some neoclassical economists have made the same observation.

Since MMT proponents argue that QE accomplishes nothing, it is very hard to understand why some critics argue that MMT is just advocacy of “monetary financing.”