Modern Monetary Theory

MMT, an abbreviation of Modern Monetary Theory, and alternatively known as Mosler Economics, the Kansas city approach and soft currency economics, is a Chartalist economic school originally spearheaded and financed by hedge fund manager and perennial independent political candidate Warren Mosler. This economic school argues that in modern, developed countries which monopolize their own currency, taxes are the ultimate source of unemployment, and that unemployment can be eliminated through decreasing taxes or increasing spending directed at job growth. According to MMT, the control and availability of real resources are the main determinants of inflation from government deficits as well as the cost/benefit of trade between countries.

MMT argues that governments who are the sole issuer of their currency cannot default on that currency, and that their national federal debt is just a record of public sector savings. MMT dismisses that a growing US federal government debt is a threat to the solvency of the nation or automatically an indicator of inflation.

According to MMT, participation in modern governments with market economies is initially a result of a violent threat to pay taxes in a non-issued, government monopolized currency. It argues that without this violent threat of taxation, no one would want to work for the currency, and the value of the government's currency would be 0. This is related to the reason that MMT believes a 'universal basic income' (UBI) or similarly generous welfare programs would cause hyperinflation if it covered the costs of consumer spending. Because MMT believes a UBI would remove the emotional value of the violent threat of possibly not owning the currency, causing people to not want to work for for the government, and therefore remove the dollars ultimate value as an avoid-government-jail card, leaving it with no higher value than tulips.

Paul Krugman, a highly publicized Keynesian economist argues that MMT is not substantially different from Keynesian and therefore mainstream economic theory. MMT proponents argue that MMT has differing views from Keynesian and modern economics. MMT argues that mainstream economics ignores that the US government and similar governments determine inflation through price setting. Second, MMT states that the aforementioned federal governments never spend taxpayer revenue and always dispose of it, which they argue is different than mainstream theory. MMT also argues that mainstream economics overemphasizes the role of the federal reserve in it's ability to stimulate the economy in a non-inflationary manner.

MMT proponents

Policy prescriptions from proponents

MMT argues that it is simply a description of the real world, and not a prescriptive theory. Publicized MMT proponents are close circles however and they often share policy recommendations, which they insist is their own personal opinion informed by MMT and not an "MMT opinion" per se. Mosler, the founder of the school, is notably against corporate taxation, believing that it punishes the economy and worker for little reason. Warren advocates for an elimination of the income tax. Most prominent MMT proponents primarily push a national transition jobs program which pays the minimum wage, to transition as much of the unemployed into wage work as possible.

Presence of MMT in prominent federal government campaigns and offices

2004 Bush administration

Mosler claims that the 2004 deficit spending during the Bush administration was as a result of a conversation Mosler had with a chief economist of the administration. This deficit spending was famous for it's reduction of prescription drug costs.

2015 Congressional Budget Committee

The theory and at least one associated economist started entering the political establishment in 2015 via the US Democratic, Congressional House Budget Committee.

2016 Bernie Sanders presidential campaign

US senator Bernie Sanders hired one of the few prominent, self-identified MMT economists (Stephanie Kelton) as his chief economic adviser for his 2016 presidential run.Stephanie Kelton. Levy Economics Institute.</ref> At the same time, Sanders did not explicitly advocate much of the economic theory of his chief economic adviser. To the contrary, Sanders often spoke of needing to fund programs in such a way MMT says is an irrational way of looking at government spending. The contrast between Sanders and his economic adviser could be due to the fact that he personally agreed with the theory, but found stating the theory unpalatable to American voters who were already immersed in decades of neoliberal economic theory. It's also possible he did not understand the theory (like Richard Wolff didn't understand for at least 5 years) and was just making trendy hiring decisions.

Unknown time during Trump presidential administration

Mosler also claims Donald Trump had someone who read and agreed with MMT theory as an economic adviser sometime during his term as president of the USA.

2019-2023 Congressional Budget Committee

MMT arguably found it's most vocal, elected proponent in 2019-2023 US Congressional House Budget Committee chair John Yarmuth, who, according to MMT economist Stephanie Kelton, read MMT economic texts and publicly promoted the theory.

See also

• Economics