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Yellen Says She’s ‘Not a Fan of MMT’ as List of Detractors Grows

Enda Curran
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Yellen Says She’s ‘Not a Fan of MMT’ as List of Detractors Grows

(Bloomberg) -- Former Federal Reserve chief Janet Yellen said she’s not a fan of modern monetary theory, saying its proponents are “confused” about what can fuel inflation in the economy.

Yellen took issue with those promoting MMT who suggest “you don’t have to worry about interest-rate payments because the central bank can buy the debt,” she said at an Asian investors’ conference hosted by Credit Suisse in Hong Kong. “That’s a very wrong-minded theory because that’s how you get hyper-inflation.”

The former Fed chair said she was “not a fan” when asked about the decades-old theory, which has gained recent traction in the U.S. particularly amid a run-up in government debt. Yellen joins a list of well-known names such as billionaire investor Warren Buffett and former U.S. Treasury Secretary Larry Summers who have said they’re opposed to the theory.

More from Yellen in Hong Kong:

Yield-curve inversion happens very easily and doesn’t alone signal a U.S. recession is imminent, though can signal that Fed might at some point need to cut interest ratesFor quite a long time to come we’ll need to worry that central banks are not going to easily have the tools to adequately respond to financial crisisPopulism is source of great uncertainty as workers in Europe and U.S. blame lackluster wage growth and living standards on globalizationAlso concerned about buildup of corporate debt and leveraged lending; underwriting of some leveraged loans is weakFed’s process of reducing balance sheet has been running smoothly; Fed will operate with a large balance sheet for a long time to come

--With assistance from Natalie Lung.

To contact the reporter on this story: Enda Curran in Hong Kong at ecurran8@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Michelle Jamrisko

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