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The Portfolio Doctor

My blog provides valuable insights into Nobel Prize-winning financial strategies for investors. By utilizing decades of worldwide peer-reviewed capital markets research and analysis, I demonstrate how to build better investment portfolios with lower risks. I also examine common financial media misinformation and how investors can make better financial decisions.

Debt Denial Is a Threat to America

‘Modern monetary theory’ rests on dangerous, false premises. The U.S. won’t grow its way out of the red.

By: Desmond Lachman

Do deficits matter? Between Republican tax cuts and Democratic spending proposals, U.S. lawmakers act as if the answer is no. Lately, academic economists have echoed the sentiment, advocating large, unfunded infrastructure spending programs—the main thrust of former International Monetary Fund chief economist Olivier Blanchard’s recent presidential address to the American Economic Association. “Put bluntly,” Mr. Blanchard said, “public debt may have no fiscal cost.”

This view, known as modern monetary theory, rests on false premises. One is that the U.S. government will likely be able to borrow at low rates indefinitely. Another is that so long as the U.S. nominal growth rate is greater than the rate at which its government borrows, America can always grow its way out of debt problems.

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