Modern Monetary Theory

Executive Summary

• Modern Monetary Theory is the central banking model that private bankers do not want anyone to know about.

Introduction

MMT is very close to what is proposed on this website, but it works with the existing private central bank design. It points all the same benefits of a public central bank but appears to stop just short of calling for one. MMT has significant overlaps with Keynesianism.

The Focus on MMT

MMT’s major focus is on puncturing what it considers a myth that deficit spending is a problem. Its tenants are described in the following quotation.

“(The government) Can pay for goods, services, and financial assets without a need to first collect money in the form of taxes or debt issuance in advance of such purchases; (the government) Cannot be forced to default on debt denominated in its own currency; (the government) Is limited in its money creation and purchases only by inflation, which accelerates once the real resources (labor, capital, and natural resources) of the economy are utilized at full employment; (the government) Can control demand-pull inflation[14] by taxation which removes excess money from circulation; (the government) Does not compete with the private sector for scarce savings by issuing bonds.”

Source: Wikipedia

https://en.wikipedia.org/wiki/Modern_Monetary_Theory

Who Wants MMT to Go Away?

Naturally, MMT is despised by mainstream economists and private banking interests for which mainstream economists produce PR.

MMT is also explained as follows

“MMT says monetarily sovereign countries like the U.S., U.K., Japan, and Canada, which spend, tax, and borrow in a fiat currency they fully control, are not operationally constrained by revenues when it comes to federal government spending. Put simply, such governments do not rely on taxes or borrowing for spending since they can print as much as they need and are the monopoly issuers of the currency. The central idea of MMT is that governments with a fiat currency system under their control can and should print (or create with a few keystrokes in today’s digital age) as much money as they need to spend because they cannot go broke or be insolvent unless a political decision to do so is taken. ”

“What happens if you were to go to your local IRS office to pay your taxes with actual cash?,” wrote MMT pioneer Warren Mosler in his book The 7 Deadly Frauds of Economic Policy First, you would hand over your pile of currency to the person on duty as payment. Next, they’d count it, give you a receipt and, hopefully, a thank you for helping to pay for social security, interest on the national debt, and the Iraq war. Then, after you, the taxpayer, left the room, they’d take that hard-earned cash you just forked over and throw it in a shredder.”

Mosler is interviewed in this video.

“MMT says that a government doesn’t need to sell bonds to borrow money, since that is the money it can create on its own. The government sells bonds to drain excess reserves and hit its overnight interest rate target. In the early 1990s when investors were afraid Italy would default, Mosler understood this wasn’t a possibility. His firm and his clients became the largest holders of Italian lira denominated bonds outside of Italy. Italy did not default and they made $100 million in profits. Political leaders like Alexandria Ocasio-Cortez and Bernie Sanders have espoused MMT, and economist Stephanie Kelton, who first came across Mosler’s ideas on the listserv and is now arguably the face of the theory, served as chief economic adviser to Sanders during his 2016 presidential campaign.””

Source: Investopedia

https://www.investopedia.com/modern-monetary-theory-mmt-4588060

Stephanie Kelton, the author of The Deficit Myth, the most popular book on MMT, is interviewed by Jimmy Dore in this video.

Steve Keen covers MMT in this video.

This is another good video on MMT with Stephanie Kelton.