The Basics of Modern Monetary Theory

4 Jun

alittleecon

I haven’t done a post specifically about Modern Monetary Theory (MMT) for a while now, although that is the perspective from which I approach a lot of the issues I blog about. With that in mind, I thought I’d go back to basics and write a beginner’s guide to MMT as I see it. Any errors that follow will be mine alone. Please let me know if you spot one!

What is MMT?

Modern Monetary Theory (MMT) is a branch of the heterodox Post Keynesian school of economics. At a basic level it is comprised of the following ideas:

  1. Taxes drive money;
  2. Taxes and borrowing don’t pay for government spending;
  3. Countries like the UK cannot go bust;
  4. Functional finance;
  5. Sectoral balances;
  6. Endogenous money;
  7. Governments should pursue full employment;
  8. Focus on real resources, not money.

So what do all these things means? In turn then:

1. Taxes drive money

In theory…

View original post 1,427 more words

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