This is not inconsistent with MMT economics. MMT economists are experts in fiat money economies . They recognize deficits can not only be too large but also too small. Somehow the myth got started that MMT economists maintain that deficits don't matter at all. Although some MMT economists may have said on occasion that deficits don't matter in regard to specific circumstances, they have been misunderstood.
Four years ago I got interested in MMT economics and began to study it. It developed into a specialty discipline after 1971 and by now there are those who have spent a working lifetime in pursuit of a better understanding of fiat money economies and how they do, and don't, differ from economies constrained by commodity based money. Here's part of what I have learned as it relates to inflation.
Inflation is largely function of sovereign surpluses and deficits, private sector credit and sovereign bond issuance, all relative to productivity. Deficits can expand the supply of readily spendable money, credit does expand it, and sovereign budget surpluses can contract it. Bonds temper the supply of readily spendable money. When the supply of money expands at a rate greater than the supply of available goods and services, i.e., productivity, inflation can be expected. However to the extent that money supplied in excess over what is justified by productivity can be absorbed into bonds, inflation can be sidetracked. Bonds are an interest bearing temporary store of money and a tool of the central Bank. The can also be seen as latent inflation (vide infra). However they are not needed, as MMT economists point out, when the government wants to spend in excess over revenues. The government does not have to issue bonds to do this, though it gives every appearance of "borrowing money"when it issues bonds.
Inflation is dependent on the supply of readily spendable money relative to productivity. Money that sits idle in reserve accounts at the Fed and money tied up in bonds will not cause inflation. Therefore the long term concern regarding deficits should be, at least in part, over the limits of economies to absorb excess money into sovereign bonds and service them. The existence of limits on new sovereign bond issuance and the servicing of bonds tells us that in the long run, in addition to all of us now alive being dead, deficits do matter.
Fiat currency is in effect backed by productivity. One could say that countries with fiat currency are on a productivity standard. Zimbabwe is an interesting example. Farm productivity plummeted after Mugabe nationalized the farms and gave the land to his freedom fighters. The result was hyperinflation caused by grossly insufficient productivity to back the currency.
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