What is Modern Monetary Theory?

Modern Monetary Theory is, in one sense, just reality. In the other and more important discussion MMT is a simple ignorance of the original question being asked.

Modern Theory

The modern part of the theory comes from the fact that we’ve really only had fiat currencies these last few decades. Before the mid 1970s at least some sort of lip service was paid to the idea that the value of a currency was backed up by something or other.…

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Deficits, National Debts Do Matter – Interest Rates And Debt Spirals

One of the wilder Modern Monetary Theory contentions is that national debts simply don;t matter. Just keep printing the money to pay the interest, roll over the rest. This isn’t, you’ll be amazed to hear, quite how it works. For people who do lend money tend to get quite concerned about whether they’ll get repaid. Risk, interest rates, these therefore matter:

Public debt and the risk premium: A dangerous doom loop
Cinzia Alcidi, Daniel Gros 23 May 2019

The relationship between high public debt and low interest rates is once again at the forefront of debate.This column shows that countries with high debt levels pay a risk premium.…

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Why MMT Will Fail Part XVIII – No One Does Predict Recessions Or Booms

The basic underlying conceit of modern monetary theory is that it’s possible for the really clever people – you know, those who would run an MMT system – to know what macroeconomic conditions are going to be in the immediate future. They they can print the right amount of money, spend the right amount, to smooth out recessions, tax the correct amount to deflate booms without recession or inflation. This requires that we can in fact forecast macroeconomic conditions accurately enough to be able to manage those fluctuations.…

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The Problem With Modern Monetary Theory – Explained For Children So MMT Enthusiasts Can Understand

This is a rather good explainer for children about what happens if a country decides it can get richer just by printing a lot more money. Which is, at heart, that modern monetary theory contention, that we can just print lots more money and go buy all the stuff we want. Which isn’t quite how it works out of course. So, the explanation for children, possibly one that’s simple enough for even MMT enthusiasts to grasp it.…

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The End Game Of Modern Monetary Theory

As we know Modern Monetary Theory is the latest great new plan from the left. Governments aren’t constrained by not having any money to do good things with, they can just make it and spend it, Yippeee!

And then we’ve this cautionary little tale about how the end game plays out. There’re more than just the one of those cautionary tales of course, Zimbabwe and Venezuela come to mind. Or perhaps Argentina:

Nestor Kirchner’s appetite for cash gifts — but not in Argentine currency — is now legendary.

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The Problem With Modern Monetary Theory

Much of Modern Monetary Theory is, as its proponents insist, simply true. Governments can create more of their own fiat currency at will. How much tax there is at the Treasury isn’t, unless in extremis, a limitation on how much government can spend. There are parts that aren’t quite and wholly true. It isn’t so that fiat money only gains its value from the willingness of a government to accept it as tax payments. Bitcoin has value, however absurdly, it’s a fiat currency and you can’t pay tax in it.…

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Problems With Sovereign Money – MMT – And The Benefits Of The Current System

Rather one for the monetary geeks here, a look at sovereign money and why and how the current system might be better.

Sovereign money: A challenge for science
Hans Gersbach 31 October 2018

There has been an intense academic and policy debate on what monetary architecture is the most appropriate recently, but many issues are still unresolved. This column looks at the circumstances under which the current system and the sovereign money system yield the same outcomes, the core arguments in favour of the current system, and what advantages a sovereign money architecture might offer.…

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Quite Remarkable How Badly Modern Monetary Theory Describes The Economy

There is a new initiative to bring the joys of Modern Monetary Theory to the UK. The Gower Initiative. In the interests of journalistic inquiry the first of their explanatory notes opened, the one on inflation. In which we are told the following things:

There could be a variety of reasons for an increasing deficit and it isn’t always correlated with government spending.

For example:

A country that imports more than it exports will usually need continual government deficits to keep its domestic economy growing.

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Modern Monetary Theory Just Won’t Work In The Real World

I righteously and justly make fun of Richard Murphy and his, ahem, considerations of matters economic. But just for the one time I’ll do him the honour of taking him seriously – and still show why his ideas don’t work.

This is about modern monetary theory. Much of which is actually right in its basic ideas, it’s the application to the real world that doesn’t work. So, here’s Murphy:

The first is that as a matter of fact all government spending is paid for out of money newly created for the purpose and that this is then cancelled by taxation.

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