I was reading something a short while back about our current rate of inflation, 8.6%, and what is causing it. One of the reasons given was MMT, or Modern Monetary Theory. That is accurate, but not true.
The classic definition of inflation is too much money chasing too few goods. Indeed, MMT can be the cause of too much money, and probably is. The government has been throwing money at people for over two years now, subsidizing unemployment, keeping business afloat, and in our case just sending us free money, hoping we would spend it. We did not.
As I understand it, we have been practicing MMT for over fifty years now, since 1971 when Nixon closed the gold window, the “Nixon Shock” as it was called. Prior to that time, based on the Bretton Woods Agreement of 1944, gold was pegged at $35 an ounce, and the US guaranteed that exchange. But even on the gold standard, we have had bouts of inflation.
The source of that “too much money”? The same as always – deficits. Here’s a chart of inflation since World War II. In addition, shocks to the pricing system like the rise of crude oil from $5 to $40 per barrel in response to two (fake) embargoes had a ripple effect through the economy. Poor Jimmy Carter was a deer in the headlights.