Modern Monetary Theory

MMT, an abbreviation of Modern Monetary Theory, and alternatively known as Mosler Economics, Neo-Chartalism, the Kansas City Approach and soft currency economics, is a highly influential and emerging economic school spearheaded and financed by hedge fund manager and perennial independent political candidate Warren Mosler. This economic school argues that the concept of unemployment is initially created via a violent threat to pay land or real estate taxes via a non-issued, government monopolized, fiat currency. It further argues that without the government further violently demanding its monopolized fiat currency from citizens, no citizen would value the currency, and the value of the currency would fall to 0. This is related to the reason that MMT believes a 'universal basic income' (UBI) or similarly generous welfare program would cause hyperinflation if it covered the costs of consumer spending. Because MMT believes a UBI in the USA would remove the threat of violence from taxation, causing people to not want to work for for the government. MMT further states this UBI would remove the US dollar's ultimate value as an avoid-government-jail card and quickly leave the government currency with no higher value than tulips.

MMT argues that because unemployment is caused by taxation, unemployment can be entirely eliminated through decreasing taxes and/or increasing spending directed at job growth. According to MMT, the control and availability of real resources are the main determinants of inflation from federal government deficits in monetarily sovereign nations as well as the cost/benefit of international trade with at least one monetarily sovereign government participating.

MMT rejects that issuers of a currency are constrained in spending the same way users of a currency are. MMT argues that governments who are the sole issuer of their currency cannot involuntarily default on that currency, and that their federal government debt is just a record of private sector savings. MMT therefore dismisses that a growing US federal government debt is a threat to the solvency of the nation. Rejecting monetarism, MMT also rejects that increased size of the US federal government debt is automatically an indicator of inflation.

MMT vs New Keynesianism

Paul Krugman, a highly publicized New Keynesian economist argues that MMT is a useless repackaging of Keynesianism and therefore not in meaningful contrast with most mainstream, academic economic theory, including New Keynesianiasm. MMT proponents argue that MMT has differing views from New Keynesianism and most modern academic economics. MMT argues that most mainstream, academic economics ignores that the US government and similar governments control the price floor and therefore primarily control inflation through all existing price setting. Secondly, MMT states that the aforementioned federal governments never spend taxpayer revenue and always dispose of it, which they argue is different than mainstream theory. Thirdly, MMT also argues that mainstream economics mistakenly believes the US Federal Reserve has a meaningful ability to stimulate the economy in a non-inflationary and non-regressive manner.

MMT proponents

Policy prescriptions from proponents

MMT argues that MMT 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. MMT proponents insist these are their own personal opinions informed by MMT and not an "MMT opinions" per se.

Income and corporate tax reduction

Mosler, the founder of the school, is notably against corporate taxation, believing that it punishes the economy and workers for little reason. Warren advocates for an elimination of all income tax.

Transitional job guarantee program

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.

List of prominent proponents

University of Missouri - Kansas City

• Professor of Economics Mat Forstater
• Associate Professor of Economics Scott Fullwiler

Bard college

• Professor of Economics Randall Wray
• Professor of Economics Pavlina Tcherneva

Economic professors from other colleges

• Professor of Economics and Public Policy at Stony Brook University Stephanie Kelton
• Professor of Economics & Finance at the University of Western Sydney, Australia Steve Keen
• Chair in Government/Business Relations at the University of Texas at Austin, Lyndon B. Johnson School of Public Affairs Kenneth Galbraith
• Professor of Economics at University of Newcastle, NSW Australia Bill Mitchell
• Economics professor at New School for Social Research in New York City Ed Nell

Former US federal politicians

• 2019-2023 US Federal Congressional Budget Committee Chair John Yarmuth

Pundits

• Progressive and populist pundit Steve Grumbine
• Conservative libertarian YouTube channel Volitional Science Network

Traders

• Hedge fund manager Warren Mosler
• Former hedge fund manager, former floor trader, current investment advisor, pundit, and trader Mike Norman

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

MMT and at least its proponents, Stephanie Kelton, started entering the political establishment in 2015 via the US Democratic, Congressional House Budget Committee as a chief economic advisor.

2016 Bernie Sanders presidential campaign

US senator Bernie Sanders hired Stephanie Kelton as his chief economic adviser for his 2016 presidential run. 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