Friday, 16 April 2010

A primer on Modern Monetary Theory (MMT)

Modern Monetary Theory (MMT) is an attempt to explain how 'money' comes about in a way that is different to classical economic theory. If true it shows that the way the government runs the financial part of the economy is inefficient and that we actually have much more flexibility to get us out of the current recession than we are using. Scary stuff.

Economies out there like Japan and the US are not behaving as classical money theory suggests they should. Our own government has issued £375 billion of new currency and nothing much happened. The data is suggesting strongly that we don't understand what is happening. Perhaps MMT explains it. At the moment I don't know.

Please read:
Deficit spending 101 – Part 1

Deficit spending 101 – Part 2

Deficit spending 101 – Part 3
Then read:
Will we really pay higher taxes?

Will we really pay higher interest rates?
Then read:
Fiscal sustainability 101 – Part 1

Fiscal sustainability 101 – Part 2

Fiscal sustainability 101 – Part 3
Then read:
Functional finance and modern monetary theory 


Some more stuff here:


The good Professor Scott with a primer on the operational realities of the monetary system
My own How the government's super platinum credit card works


An interview with Professor Bill Mitchell in the Harvard Review, gives an excellent overview of MMT