Not so Modern Monetary Theory

Modern Monetary Theory is a heterodox theory arguing that the deficit is a shibboleth

• If the economy is underperforming, just have the government spend more
• Government spending isn't constrained by tax revenue or even by the ability of the government to borrow
• The government has only to print up whatever amount of money is needed for spending
• MMT says that money has no intrinsic value, but is essentially an unbacked or fiat currency
• To fight inflation, the government can remove some of the money sluicing around in the economy by raising taxes
• This use of taxation to fight inflation effectively brings us back to mainstream economics
  1. Adam Smith, in The Wealth of Nations examined the experience of tax-backed fiat currency in British North America, and said that if the quantity of paper money was kept below the amount payable in taxes, and if it were otherwise convenient as a medium of exchange, that paper money would circulate at its face value.
  2. The first President of the Republic of Texas, Sam Houston, estimated the demand for a national medium of exchange to be $800,000, and thought that this demand could be partially satisfied with a limited issue of tax-backed currency, in conjunction with enacting a tariff and restraining spending so as to quickly bring the budget into balance.
  3. This matter came to a head in 1893, when President Grover Cleveland, the last of the hard money Democrats, called an extraordinary session of Congress to repeal the law mandating the issue of a certain amount of silver currency and, thus, commit the U.S. foursquare to gold.
  4. Modern Monetary Theory supposes that money has no intrinsic value, but is essentially an unbacked or fiat currency.

   

https://noqreport.com/2022/07/24/not-so-modern-monetary-theory/