Modern Monetary Theory (MMT) is often called Post-Keynesian Economics because of how it treats government deficits and spending. A well-known proponent of MMT is Stephanie Kelton.
MMT is a macroeconomic theory that challenges traditional views on government spending and fiscal policy. According to MMT, a government that issues its fiat currency can never run out of money and can, therefore, spend as much as it needs to meet its obligations. The only restriction on spending is inflation. Thus One of the key principles of MMT is that governments should focus on managing inflation rather than worrying about budget deficits. MMT argues that as long as there is unused economic capacity, such as unemployed labour and idle resources, government spending can stimulate economic growth without causing inflation.
MMT also emphasises the role of taxes in controlling inflation and ensuring the currency’s value. According to MMT, taxes create a demand for the currency and prevent excessive spending that could lead to inflation.
Critics of MMT argue that it inevitably leads to excessive government spending, inflation, and currency devaluation. They also question the practicality of implementing MMT in real-world economies.
I was initially concerned about the relationship between MMT and Degrowth Economics. It seemed that MMT relied on growth to overcome the inflationary effect of creating money. In fact, the inflationary effect can be managed through redirecting priorities into a Green New Deal-style growth where MMT releases the concern for the size of the deficit and the resultant concerns about where funds will come from to finance social and energy transitions. “Here we argue that such productivism is unnecessary, and that MMT can be understood as a valuable tool for a degrowth transition.”
The relationship of MMT and degrowth is discussed in this paper. Hickel does not agree with my concern.
Modern Monetary Theory presents a different perspective on fiscal policy and government spending, challenging conventional economic thinking and discussing alternative approaches to managing economies.
https://youtu.be/lp0NBod3Hsw?feature=shared
https://youtu.be/x3TJFoQWCHA?si=t1wa6kUocVHsK1wj
https://youtu.be/qSYlzxczAY4?feature=shared
Regarding this view of the origin of money. His definition of money evolving as a medium of exchange is in itself simplistic, but even if money did evolve as a medium of exchange. Governments can also introduce and use fiat currency as a basis for the tax system and centrally control the economy, stopping others from issuing exchange tokens, although local currencies do exist on a small scale. In other words, the development of fiat currency and the origin of exchange tokens in general can have their own story.
MMT is a theory of fiat currency specifically, so it is legitimate for theorists to use the origin of fiat currency as the basis of MMT.