Modern Monetary Theory
Modern Monetary Theory (MMF) inspires a lot of my thinking about money, the economy and politics in general. Like Marxists who have never read Marx, I am enthusiastic about an idea that I only dimly understand.
At its heart, MMF seems to be based on a realistic view about how money is actually created in a modern Western context. The bottom line seems to be that a Government that controls its own currency cannot become bankrupt. In particular, deficits don't matter.
Some of the assumptions that MMF makes don't apply in the real world, most notably that Government debt must not be sold to foreign holders of debt. In fact, massive amounts of US debt is held abroad (most notably by its bitter rival, China).
This little detail about who owns the debt is just a preview of the problems easily missed by armchair economists, such as myself, that build their Utopian theories on the shifty sand of MMF. Having said that, here are some links for a tutorial on the concept:
Bill Mitchel-Down and dirty in a professorial way.
MMF Explained - Deals with the big picture and the fundamental, obvious risk: runaway inflation.
At its heart, MMF seems to be based on a realistic view about how money is actually created in a modern Western context. The bottom line seems to be that a Government that controls its own currency cannot become bankrupt. In particular, deficits don't matter.
Some of the assumptions that MMF makes don't apply in the real world, most notably that Government debt must not be sold to foreign holders of debt. In fact, massive amounts of US debt is held abroad (most notably by its bitter rival, China).
This little detail about who owns the debt is just a preview of the problems easily missed by armchair economists, such as myself, that build their Utopian theories on the shifty sand of MMF. Having said that, here are some links for a tutorial on the concept:
Bill Mitchel-Down and dirty in a professorial way.
MMF Explained - Deals with the big picture and the fundamental, obvious risk: runaway inflation.
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