Tag Archives: Modern Monetary Theory

Modern Monetary Theory

credit: Jennifer Baron via Pittsburgh Signs

Seeing so many references to Modern Monetary Theory on apparently-respectable blogs, I have finally slogged thru an explanation of it.  Seems pretty sensible, really.  Government produces money by spending (or giving it away), eliminates money by taxing, and a steady supply of money is needed to keep its value reasonably stable. The troubles of Ireland, Greece, etc are exacerbated because they don’t control their own currencies, somewhat similar to difficulties occurring under the old gold standard.

It is not a bad thing for government expenditures to exceed revenues, in fact this must have occurred for any money to be in circulation. But declining value of money is likely if this difference isn’t reflected in actual increased wealth.

And, most importantly, money is not wealth.

Seems to make sense as far as it goes.  It doesn’t tell us how to achieve prosperity when the government is out of control. It doesn’t have anything to say about nongovernmental money. I am uncertain how MMT might differ from what I see at the American Monetary Institute. Perhaps these topics are addressed in another part of the site.