Bigger deficits don’t cause inflation OR loss of confidence --- MMT is main-stream theory and works in Japan and the U.S.

(Matt, “How the Government Pulls Coronavirus Relief Money Out of Thin Air,” New York Times, pg online @ Proquest //um-ef)

But the Fed isn’t an ordinary bondholder: By law, it has to pay its profits to the Treasury. That means when the Treasury makes payments on bonds held by the Fed — either paying interest or paying it off at maturity — almost all the money eventually moves back to the Treasury. When a government bond is involved, the cash moves from one government pocket to another. “Once the central bank buys them, it’s as if the Treasury never issued them in the first place,” said Dr. Kelton, who was an adviser to Senator Bernie Sanders’s 2016 presidential campaign. “For all intents and purposes, they’re retired.” The CARES Act borrowing is, in many ways, the natural result of an evolution that began with the 2008 financial crisis. The bond-buying programs that central banks undertook around the world helped ensure low-cost financing for governments running giant deficits as policymakers contended with a deep recession and a prolonged period of lackluster growth. And despite constant, high-decibel warnings that such an approach would surely ignite a surge of inflation, it never happened. That was a legitimate concern: Financial historians often point to disastrous periods when a central bank printed money for the government to pay its debts. A common example is Weimar Germany, when the central bank churned out banknotes that allowed the fragile government to repay onerous World War I reparations with essentially worthless marks, impoverishing most of the country in the process. But at other times, the idea has worked just fine: Japan’s central bank has been buying huge chunks of the government’s bonds — effectively financing the central government of the world’s third-largest economy for years — without triggering the kind of inflation that traditional economic views would expect. Adherents of M.M.T. have long argued that the United States can — and probably should — run much larger budget deficits than it did already. In recent years, this belief has been most often associated with left-leaning politicians such as Mr. Sanders and Representative Alexandria Ocasio-Cortez of New York. But the ideas have found broader currency in some unlikely places, such as Wall Street. In recent years, some at huge money management firms and gold-plated investment banks have increasingly turned to M.M.T. as a useful analytical framework to understand the strong links between central banks and markets that have grown since the financial crisis. “M.M.T. has been invoked so many times by completely mainstream people and politicians,” said L. Randall Wray, a professor of economics at Bard College who has written seminal papers on modern monetary theory. “Even Trump used almost word for word what we’ve been saying all along.” (“You never have to default because you print the money,” Mr. Trump said as a candidate in 2016.)