I found a very difficult sentence in a piece by Mainly Macro on “Fiscal rules and MMT”.
(Original text in Times New Roman; My comments in Arial narrow; My attempt at the text in Helvetica bold.)
What I call the ‘consensus assignment’ in modern macroeconomics is that monetary policy keeps output stable at a level that leaves inflation at target over the medium term, and fiscal policy stabilises the ratio of government debt to GDP.
Most mainstream macroeconomists understand that assignment does not work at the Zero Lower Bound (ZLB), but a few disagree. To those that follow MMT fiscal rules that target the deficit are wrong because they think fiscal policy should do the job monetary policy is supposed to do in the consensus assignment, even outside the ZLB.
There are altogether too many acronyms, too many ‘that’s, serving as adjectives and as pronouns of various nouns, and too little punctuation. In the second paragraph, I do not know if he is saying “understand x” or “understand that y” (where x=“that assignment” and y=“assignment”). And is he talking about ‘those who follow fiscal rules’, or those who follow MM theory” ? I would have to write several versions to cover all options. In the last sentence, the pronouns drift around in a disconcerting way. (“…because they think..” ; who thinks? The ‘fiscal rules’ or the ‘followers of the MM theory’.
There is consensus among modern macroeconomists that it is the role of monetary policy to keep inflation at its target level (with output stable), while it is the role of fiscal policy to stabilise the ratio of government debt to GDP. (I.e. the printing presses are not normally used to pay off government debt; but why not.)
It is widely understood by the mainstream (with a few dissenters) that this division of roles does not work when interest rates hit zero. According to modern monetary theory, it is a mistake to expect fiscal policy to do the job conventionally assigned to monetary policy.
(Those who follow MM Theory regard as wrong the use of fiscal policy to do the job of monetary policy. Even outside the ZLB. Or perhaps they think the opposite. I am totally lost. )
