Modern Monetary Theory Quotes

the government relies on two sources of funding: it can raise your taxes, or it can borrow your savings.

The debt isn’t the reason we can’t have nice things. Our broken thinking is. To fix our broken thinking, we need to overcome more than just an aversion to big numbers with the word debt attached. We need to beat back every destructive myth that hobbles our thinking.

It comes out as “bring back manufacturing jobs” or “make America great again.” But it’s really about replacing the lost sense of job security and what a middle-income job was once able to provide.

MYTH #3: One way or another, we’re all on the hook. REALITY: The national debt poses no financial burden whatsoever.

A false alarm is sounded that government budget deficits will increase consumer prices — with no discussion of how private-sector credit deflates economies. The problem is that credit is debt — and paying debt service to bankers and bondholders (and various grades of loan sharks) leaves less income available to spend on goods and services. So debt deflation is today’s major problem, not inflation.

This is the bold new age of Modern Monetary Theory, which holds that excess has no consequence because the government can tax the economy into prosperity and the treasury is bottomless, or something like that.

The government doesn’t want dollars,” Mosler explained. “It wants something else.” “What does it want?” I asked. “It wants to provision itself,” he replied. “The tax isn’t there to raise money. It’s there to get people working and producing things for the government.

MYTH #4: Government deficits crowd out private investment, making us poorer. REALITY: Fiscal deficits increase our wealth and collective savings.

Government financial balance + Nongovernment financial balance = Zero

Government deficit = Nongovernment surplus

It’s the economy, stupid”),

separate two of the most important issues regarding entitlements: the government’s financial ability to pay and our economy’s productive capacity to deliver promised real benefits.

The central lesson of the COVID-19 fiscal response is that money is not scarce. Without delay, governments around the world appropriated budgets that dwarfed any other post-war crisis policy.

The government can create money. So, what’s the point of taxes? Why does the government need to take my money in taxes?18 I told the folks at Planet Money that MMT recognizes at least four important reasons for taxation.19 We’ve already touched on the first. Taxes enable governments to provision themselves without the use of explicit force. If the British government stopped requiring its people to settle their tax obligations using British pounds, it would rather quickly undermine its provisioning powers. Fewer people would need to earn pounds, and the government would have a harder time finding teachers, nurses, and so on who were willing to work and produce things in exchange for its currency.

If central banks can convince people that inflation will move higher, people will begin spending more money today (why wait to buy something if prices are heading up?), and the added demand will actually move prices higher. Still others see inequality and wage stagnation as key drivers of slow growth and de minimis pressure on wages and prices. Some say wage growth and a more equitable distribution of income would help bolster demand among lower- and middle-income households, thereby helping to create some inflationary pressure.

A metallic money, the augmentation or diminution of the quantity of metal available for which is independent of deliberate human intervention, is becoming the modern monetary ideal. The significance of adherence to a metallic-money system lies in the freedom of the value of money from State influence that such a system guarantees.

The only solution was to tie the hands of macroeconomic policy makers.7 Instead of giving the Federal Reserve discretion to trade lower unemployment for higher inflation, the central bank should be forced to accept the fact that a certain amount of unemployment was necessary to keep inflation stable. As we will see, MMT contests this framework.

That bidding process pushes prices higher, giving rise to inflationary pressures. To mitigate that risk, the tax needs to offset enough current spending to free up the real resources the government is trying to hire. The problem is that because this particular tax is levied on a tiny cadre of uber-rich people, it won’t open up much (if any) fiscal space.

Money is not indefinitely divisible. Even with the assistance of money-substitutes for expressing fractional sums that for technical reasons cannot conveniently be expressed in the actual monetary material (a method that has been brought to perfection in the modern system of token coinage), it seems entirely impossible to provide commerce with every desired fraction of the monetary unit.

It’s also important that they don’t promise to convert their currency into something they could run out of (e.g., gold or some other country’s currency). And they need to refrain from borrowing (i.e., taking on debt) in a currency that isn’t their own.3 When a country issues its own nonconvertible (fiat) currency and only borrows in its own currency, that country has attained monetary sovereignty.

Taxes are critically important, but there’s no reason to assume the government must raise taxes whenever it wants to invest in our economy. In practice, the federal government almost never collects enough taxes to offset all of its spending. Deficit spending is the norm, and everyone in Washington, DC, knows it. And so do voters. That’s why so many politicians complain that Congress needs to get its fiscal house in order before it’s too late.

The historical record is clear. Each and every time the government substantially reduced the national debt, the economy fell into depression. Could it have been a remarkable coincidence? Thayer didn’t think so. He blamed the “economic myths” that drove politicians to wrestle their budgets into surplus on the flawed belief that paying down debt was both morally and fiscally responsible.45 As we see from the insights of MMT, government surpluses shift deficits onto the nongovernment sector.

The point is, not every deficit serves the broader public good. Deficits can be used for good or evil. They can enrich a small segment of the population, lifting the yachts of the rich and powerful to new heights, while leaving millions behind. They can fund unjust wars that destabilize the world and cost millions their lives. Or they can be used to sustain life and build a more just economy that works for the many and not just the few. What they can’t do is eat up our collective savings.

governments budgeted anywhere from one-tenth to more than one-half of their economies to fight the pandemic. No taxpayers were called upon to foot the bill, no creditors were asked to lend them money. Governments voted for the budgets they considered to be necessary and their central banks made the payments. The size of the response was all the evidence one needed to grasp the monetary reality. Governments which issue and control their own currencies face no financing constraints and no threat of insolvency or default.

All that the State need do, and can do, in order to preserve the monetary system undisturbed, is to refrain from such intervention. That is the essence of the monetary theory of the classical economists and their immediate successors, the Currency School. It is possible to refine and amplify this doctrine with the aid of the modern subjective theory; but it is impossible to overthrow it, and impossible to put anything else in its place. Those who are able to forget it only show that they are unable to think as economists.

it’s easy for businesses to increase supply in response to more spending. But as an economy moves closer to its full employment limit, real resources become increasingly scarce. Rising demand can begin to put pressure on prices, and bottlenecks can develop in industries that are experiencing the greatest strain on capacity. Inflation can heat up. Once the economy hits this full employment wall, any additional spending (not just government spending) will be inflationary. That’s overspending, and it can even happen if the government’s budget is balanced or in surplus.

THE economic consequences of fluctuations in the objective exchange-value of money have such important bearings on the life of the community and of the individual that as soon as the State had abandoned the attempt to exploit for fiscal ends its authority in monetary matters, and as soon as the large-scale development of the modern economic community had enabled the State to exert a decisive influence on the kind of money chosen by the market, it was an obvious step to think of attaining certain socio-political aims by influencing these consequences in a systematic manner. Modern currency policy is something essentially new; it differs fundamentally from earlier State activity in the monetary sphere.

The difference gave China a $420 billion trade surplus (the US carried the opposite, a $420 billion trade deficit with China). Americans paid for those goods with US dollars, and those payments were credited to China’s bank account at the Federal Reserve. Like any other holder of US dollars, China has the option to sit on those dollars or use them to buy something else. Uncle Sam doesn’t pay interest on the dollars China keeps in its checking account at the Fed, so China usually prefers to move them into what is effectively a savings account at the Fed. It does this by purchasing US Treasuries. “Borrowing from China” involves nothing more than an accounting adjustment, whereby the Federal Reserve subtracts numbers from China’s reserve account (checking) and adds numbers to its securities account (savings). It’s still just sitting on its US dollars, but now China is holding yellow dollars instead of green dollars. To pay back China, the Fed simply reverses the accounting entries, marking down the number in its securities account and marking up the number in its reserve account. It’s all accomplished using nothing more than a keyboard at the New York Federal Reserve Bank.

debt. Perhaps we should start by giving it another name. The national debt is nothing like household debt, so using the word debt just leads to confusion and unnecessary angst. We could just refer to it as part of our net money supply. I doubt yellow dollars will catch on, but hey, it’s worth a shot! In Shakespeare’s Romeo and Juliet, Juliet famously inquires, “What’s in a name?” She wasn’t troubled when she learned that Romeo was a Montague. For her, “A rose by any other name would smell as sweet.” Love, as they say, is blind. On the political stage, words matter. It’s time to come up with a new name for these interest-bearing dollars.

The only thing we owe China is a bank statement.

The worry is that Uncle Sam could lose access to affordable financing if China refuses to keep buying Treasuries. There are a number of problems with this thinking. For one thing, China can’t avoid holding dollar assets without wiping out its trade surplus with the United States. That’s not something China wants to do, since shrinking its exports to the US would tend to slow its economic growth. Assuming it wants to keep its trade surplus intact, it’s going to end up holding dollar assets. As financial commentator and former investment banker Edward Harrison put it, “the only question for China is which dollar assets [green dollars or yellow dollars] it will buy, not whether it will go on a US dollar strike.

Let’s assume the BOJ comes out tomorrow and purchases the entire stock of JGBs by creating bank reserves (money) and cancels the debt.” Poof! The debt is gone. Lonergan then asks, “What would happen to inflation, growth and the currency?” In his view, “nothing would change if you had 100% monetization of the stock of JGBs!” To some, this might seem preposterous.

Fiscal surpluses suck money out of the economy. Fiscal deficits do the opposite. As long as they’re not excessive, deficits can help to maintain a good economy by supporting incomes, sales, and profits.42 They’re not imperative, but if they disappear for too long, eventually the economy hits a wall.43 As Frederick Thayer, the prolific writer and professor of public and international affairs at the University of Pittsburgh, wrote in 1996, “the US has experienced six significant economic depressions,” and “each was preceded by a sustained period of budget balancing.”44 Table 1 details his findings.

From 1942 until 1947, the Federal Reserve—at the behest of the Treasury Department—actively managed the government’s borrowing costs. Even as spending to fight World War II drove the federal deficit to more than 25 percent of GDP in 1943, interest rates trended lower. That’s because the Fed pegged the T-bill rate at 0.375 percent and held the rate on twenty-five-year bonds at 2.5 percent. As MMT economist L. Randall Wray put it, “the government can ‘borrow’ (issue bonds to the public) at any interest rate the central bank chooses to enforce. It is relatively easy for the central bank to peg the interest rate on short-term government debt instruments by standing ready to purchase it at a fixed price in unlimited quantities. This is precisely what the Fed did in the United States until 1951—providing banks with an interest-earning alternative to excess reserves, but at a very low rate of interest.

improve the public discourse, we need to think like a deficit owl. Those hawks and doves we met in Chapter 3 spend too much time squawking about red ink and not enough time helping the public to see what that red ink means for the rest of us. To see the full picture, you have to be able to look at the flow of payments from a different angle. That’s what makes the deficit owl a better budget bird. (Say that three times fast.) The owl has full range of motion: it can turn its head to see what the others are missing. A handy guy to have around if you want the entire picture.

Uncle Sam’s red ink is our black ink! His deficit is our financial surplus. Just follow the money: $100 goes into our bucket; $90 goes back out to pay taxes; $10 is left in our bucket.

lawmakers can feign empathy with their constituents while claiming their hands are tied because of the deficit. If they couldn’t hide behind the deficit myth, what excuse would they use to justify withholding support? It helps

MYTH #5: The trade deficit means America is losing. REALITY: America’s trade deficit is its “stuff” surplus.

Having won the election in 2016, Trump has continued to stick with the message that the US is locked in a losing competition when it comes to trade. Even some of his presumptive opponents echoed those sentiments. Senator Bernie Sanders, for example, has tweeted: “It’s wrong to pretend that China isn’t one of our major economic competitors. When we are in the White House we will win that competition by fixing our trade policies.” Certainly, Sanders aimed (and still aims) to fix trade policy by protecting workers and the environment. Yet there is a tinge of anxiety that progressives share with conservatives: fear of the trade deficit itself.

The truth is, a trade deficit is not in and of itself something to fear. America doesn’t need to zero out its trade deficit to protect jobs and rebuild communities. As long as the federal government stands ready to use its fiscal capacity to maintain full employment at home, there is no reason to resort to a trade war. Instead, we can envision a new world trade order that works better, not for corporations seeking to exploit cheap labor and escape regulations, but for millions of workers who’ve received such a raw deal under previous “free trade” policies in the post-NAFTA era. Reenvisioning trade also can lead to better policies for developing countries and for the global environment.

yields rose sharply. Just as the Greek government was incapable of preventing a spike in borrowing costs, countries that fix their exchange rates sacrifice control of their interest rates. From an MMT perspective, “this explains the very high interest rates paid by governments with perceived default risk in fixed exchange rate regimes, in contrast to the ease a nation such as Japan has in keeping rates at 0 in a floating exchange rate regime, despite deficits that would undermine a fixed exchange rate regime.

lesson is simple. Currency regimes matter. The simple crowding-out story was built for a world that no longer exists. Yet conventional economic theory treats the sequence of falling dominoes as an inevitable consequence of deficit spending. The truth is the story has limited applicability. As Timothy Sharpe put it, “financial crowding-out theory was initially proposed and analysed in the context of a convertible currency system, that is, the gold standard and the Bretton Woods fixed exchange rate agreement (1946–1971).” Taking into account different currency regimes changes everything. That’s what Sharpe discovered in a sweeping empirical investigation, where he separated countries that fit the MMT model—that is, those with monetary sovereignty—from those that fix their exchange rates or borrow in a foreign currency. Consistent with MMT, he concluded that “the empirical evidence reveals crowding-out effects in nonsovereign economies, but not within sovereign economies.” In other words, it’s a mistake to apply the crowding-out story to monetary sovereigns like the US, Japan, the UK, or Australia.

Modern Monetary Theory is old wine in new bottles. The old wine consists of the belief that the value of money is created by government dictate and the volume of money is unlimited because government offers citizens no choice but to use their money as payment for taxes.

Think about it. Jeff Bezos, the richest man in America, has an estimated net worth of $110 billion. How many fewer cars, swimming pools, tennis courts, or luxury vacations will Bezos purchase after 2 percent of his wealth is taxed away? The answer is not many. A small, annual tax on a fraction of his net worth isn’t going to crowd out much of his spending. When it comes down to it, he’s more of a saver than a spender. Billionaires save their wealth in the form of financial assets, real estate, fine art, and rare coins. A wealth tax might make the infrastructure bill appear fiscally responsible, but it makes a lousy offset if the government wants to increase spending in an economy that doesn’t have much available slack.

Sticking with the $2 trillion infrastructure proposal, MMT would have us begin by asking if it would be safe for Congress to authorize $2 trillion in new spending without offsets. A careful analysis of the economy’s existing (and anticipated) slack would guide lawmakers in making that determination. If the CBO and other independent analysts concluded it would risk pushing inflation above some desired inflation rate, then lawmakers could begin to assemble a menu of options to identify the most effective ways to mitigate that risk. Perhaps one-third, one-half, or three-fourths of the spending would need to be offset. It’s also possible that none would require offsets. Or perhaps the economy is so close to its full employment potential that PAYGO is the right policy. The point is, Congress should work backward to arrive at the answer rather than beginning with the presumption that every new dollar of spending needs to be fully offset. That helps to protect us from unwarranted tax increases and undesired inflation. It also ensures that there is always a check on any new spending. The best way to fight inflation is before it happens. In one sense, we have gotten lucky. Congress routinely makes large fiscal commitments without pausing to evaluate inflation risks. It can add hundreds of billions of dollars to the defense budget or pass tax cuts that add trillions to the fiscal deficit over time, and for the most part, we come out unscathed—at least in terms of inflation. That’s because there’s normally enough slack to absorb bigger deficits. Although excess capacity has served as a sort of insurance policy against a Congress that ignores inflation risk, maintaining idle resources comes at a price. It depresses our collective well-being by depriving us of the array of things we could have enjoyed if we had put our resources to good use. MMT aims to change that. MMT is about harnessing the power of the public purse to build an economy that lives up to its full potential while maintaining appropriate checks on that power. No one would think of Spider-Man as a superhero if he refused to use his powers to protect and serve. With great power comes great responsibility. The power of the purse belongs to all of us. It is wielded by democratically elected members of Congress, but we should think of it as a power that exists to serve us all. Overspending is an abuse of power, but so is refusing to act when more can be done to elevate the human condition without risking inflation.

The tax isn’t there to raise money. It’s there to get people working and producing things for the government.

It ain’t what you know that gets you into trouble. It’s what you know for sure that just ain’t so

The government can create money. So, what’s the point of taxes? Why does the government need to take my money in taxes?18 I told the folks at Planet Money that MMT recognizes at least four important reasons for taxation.19 We’ve already touched on the first. Taxes enable governments to provision themselves without the use of explicit force.

Viewed through the lens of MMT, we see that the US government is nothing like a household or a private business.

Taxpayers weren’t funding the government; the government was funding the taxpayers.

He put them in a situation where they needed to earn his “currency” to stay out of trouble. Each time the kids did some work, they got a receipt (some business cards) for the task they had performed. At the end of the month, the kids returned the cards to their father. As Mosler explained, he didn’t actually need to collect his own cards back from the kids. “What would I want with my own tokens?” he asked. He had already gotten what he really wanted out of the deal—a tidy house! So why did he bother taxing the cards away from the kids? Why didn’t he let them hold on to them as souvenirs? The reason was simple: Mosler collected the cards so the kids would need to earn them again next month. He had invented a virtuous provisioning system! Virtuous in this case means that it keeps repeating.

MMT helps us to see why countries that fix their exchange rates, like Argentina did until 2001, or that take on debt denominated in a foreign currency, like Venezuela has done, undermine their monetary sovereignty and subject themselves to the kinds of constraints faced by other currency users,

the US Treasury instructs its bank, the Federal Reserve, to carry out the payment on its behalf. The Fed does this by marking up the numbers in Lockheed’s bank account. Congress doesn’t need to “find the money” to spend it. It needs to find the votes! Once it has the votes, it can authorize the spending. The rest is just accounting. As the checks go out, the Federal Reserve clears the payments by crediting the sellers’ account with the appropriate number of digital dollars, known as bank reserves.16 That’s why MMT sometimes describes the Fed as the scorekeeper for the dollar. The scorekeeper can’t run out of points.

Only the scorekeeper is different. Uncle Sam doesn’t need dollars. When he collects taxes from us, he’s just subtracting away some of our dollars. He doesn’t actually get any dollars.

If you’re not already doing so, you should probably sit down. Are you ready? Your taxes don’t actually pay for anything, at least not at the federal level. The government doesn’t need our money. We need their money. We’ve got the whole thing backward!

Obviously, the issuer of the dollar can have all the dollars it could possibly want. “The government doesn’t want dollars,” Mosler explained. “It wants something else.” “What does it want?” I asked. “It wants to provision itself,” he replied. “The tax isn’t there to raise money. It’s there to get people working and producing things for the government.” “What kinds of things?” I asked. “A military, a court system, public parks, hospitals, roads, bridges. That kind of stuff.” To get the population to do all that work, the government imposes taxes, fees, fines, or other obligations. The tax is there to create a demand for the government’s currency. Before anyone can pay the tax, someone has to do the work to earn the currency.

Currency regimes matter.

This is exactly what conservative economist Marvin Goodfriend had in mind when he warned in 2012 that if the Fed allowed the unemployment rate to dip below 7 percent, it would “give rise to a rising inflation rate in the next few years, which would just be disastrous for the economy.” But Goodfriend was wrong. Three years after his warning, unemployment had dropped to 5 percent, yet inflation was lower than it was when he made his initial prediction. Why did he (and others) get it so wrong? One problem is that the natural rate of unemployment

As New York Federal Reserve Bank president William C. Dudley explains: “we do not know with much precision how low the unemployment rate can go without prompting a significant rise in inflation. We do not directly observe the non-accelerating inflation rate of unemployment, or NAIRU. Rather, we only infer it from the response of wage compensation and price inflation as the labor market tightens.

Think of a poorly maintained roadway. You get a smooth ride until you encounter a pothole or a bump in the road. You can try to steer clear of hazards, but at some point, you’re destined to hit one. At that point, you could be in for a rough ride.

As a share of gross domestic product (GDP), the national debt was at its highest—120 percent—in the period immediately following the Second World War. Yet, this was the same period during which the middle class was built, real median family income soared, and the next generation enjoyed a higher standard of living without the added burden of higher tax rates.

Either way, the problem is matching people to chairs, not a lack of chairs. If only they had gotten the right education, or the right skills, or had the right motivation and personal discipline, they could find jobs.

When we think about entitlements, we should be thinking about how to make sure our economy will remain productive enough to supply the material goods—health care and consumption goods—that it will take to provide for the needs of future beneficiaries.

hit the 1.5 degree target, the world will need to cut its fossil fuel use in half by 2030 and eliminate all fossil fuel consumption by 2050.

So how do we take advantage of the potential benefits that a sovereign currency affords the people of our nation while at the same time guarding against the risk of overspending? You might be tempted to argue that we already have safeguards in place. The debt ceiling limit, the Byrd rule, and PAYGO might look like effective checks on overspending. They aren’t. And it’s not because it’s easy for Congress to get around the rules. It’s because under current budgeting procedures, Congress doesn’t have to consider inflation risk when it wants to spend more. Remember, it put the Federal Reserve in charge of price stability. So, members of Congress only ask whether new spending will increase the deficit, not inflation. That’s the wrong question.

The reason the loanable funds story is not in sync with reality is that it asks us to treat the federal government like a currency user. When we reject this naïve lens, we see that countries like the US aren’t dependent on borrowing to fund themselves, nor are they at the mercy of private investors when they do sell bonds.17 Uncle Sam is not a beggar, who must go hat in hand, in search of funding to support his desired spending. He’s a muscular currency issuer! He can choose to borrow (or not), and Congress can always decide what rate of interest it will pay on any bonds it decides to offer. That’s not true of all countries, but it is true of those with monetary sovereignty.

MMT perspective, the purpose of selling bonds is not to “finance” government expenditures (which have already taken place) but to prevent a large infusion of reserves from pushing the overnight interest rate below the Fed’s target level.19 Selling bonds is entirely voluntary in the sense that Congress could always decide to do things differently.

prioritizes human outcomes while at the same time recognizing and respecting our economy’s real resource constraints.

Second, the government’s budget isn’t supposed to balance. Our economy is.

central bank should be forced to accept the fact that a certain amount of unemployment was necessary to keep inflation stable. As we will see, MMT contests this framework.

Your taxes don’t actually pay for anything, at least not at the federal level. The government doesn’t need our money. We need their money. We’ve got the whole thing backward!

MMT rejects the ahistorical barter narrative, drawing instead on an extensive body of scholarship known as chartalism, which shows that taxes were the vehicle that allowed ancient rulers and early nation-states to introduce their own currencies, which only later circulated as a medium of exchange among private individuals.

Copernicus

unemployment

From inception, the tax liability creates people looking for paid work (aka unemployment) in the government’s currency.

economist William Vickrey put it, well-targeted deficits “will generate added disposable income, enhance the demand for the products of industry, and make private investment more profitable.

Nations do not exist in isolation. Peoples have always roamed the globe in search of different opportunities. Nations principally trade to expand their consumption possibilities. In a world where we produce to consume, receiving goods and services is better in material terms than sending them elsewhere.

An MMT understanding allows us to appreciate that there would be no financial impediment for a government building national industries, funding research and development, providing first-class universities and apprenticeship training and the rest. If a nation with its own currency slides into oblivion by closing its manufacturing sector, cutting career public sector jobs and relying on low-paid and precarious service sector jobs for employment creation, then that has little to do with running external deficits, and everything to do with political choices.

While export spending boosts national income, we consider exports to be a cost in the sense that they deprive the domestic population of the use of the real resources that are used up in the production of the goods and services sold abroad.

While export spending boosts national income, we consider exports to be a cost in the sense that they deprive the domestic population of the use of the real resources that are used up in the production of the goods and services sold abroad.

An MMT understanding allows us to appreciate that there would be no financial impediment for a government building national industries, funding research and development, providing first-class universities and apprenticeship training and the rest. If a nation with its own currency slides into oblivion by closing its manufacturing sector, cutting career public sector jobs and relying on low-paid and precarious service sector jobs for employment creation, then that has little to do with running external deficits, and everything to do with political choices.

For less developed countries, a currency-issuing government faces different issues to that of an advanced nation, especially where essentials like food and energy must be imported. In the case of less developed countries, specific problems cannot be easily overcome by just increasing fiscal deficits.

The multilateral institutions that were introduced in the Post World War II period to coordinate international aid – the IMF and the World Bank – have failed in their respective missions. They became agents for the ‘free market’ ideology and through their structural adjustment packages and related policies have made it harder for a nation to develop.

A half century of neoliberalism has brought the world to the brink of collapse. Only concerted effort and cooperation by the world’s governments provides any chance of survival. Understanding MMT does not make this easy. But it helps us to recognize what the true constraints are: resources, initiative, politics, imagination.

For those with an open mind, it has become increasingly clear that MMT provides a sound basis for developing an understanding of the operation of a monetary economy, enabling economists and political analysts to better understand the nature of the opportunities that are available for policy.

Taxes reduce the demand for physical resources from the non-government sectors. Resources which then become available for purchase by the government in pursuit of the socio-economic programme it was elected to provide.

Tax avoidance is nature’s way of telling you your tax code is too complicated. Simplify the code and the problem will go away.

Taxation policy has to be framed with the end goal in mind, which is to release real resources the public sector wishes to buy in the current period.

Functional analysis of the taxation mechanisms via the MMT lens leads to a fundamentally different view of taxation.

The evidence is plain to see all around us: in an era of multiple pandemics that threaten the continued existence of human life on planet earth, we are stymied by imaginary constraints concocted by economists.

The state sets the terms of exchange for its currency with the prices it pays when it spends, and not per se by the quantity of currency that it spends.

Demand originates with the state. Without state spending, the value of the currency is unspecified and there is no aggregate demand. Only subsequent to state spending can the currency obtain absolute value and non-government spending take place.

when there is a line outside the Job Guarantee Office, you know you need to spend more; when there is not, you do not. And once in place as a programme, there is no need for new legislation in the face of every downturn.

inflation is a zero-sum game: there are always winners and losers, not just losers. The idea that it is only the latter has been encouraged by neoliberal scholars in order to justify policies that lead to economic contraction every time upward pressure is placed on wages by low unemployment rates.

One recurrent question relates to the conditions required to make governments implement an employment guarantee programme? How high would the unemployment rate have to be? How high would poverty have to be? And the answer in Argentina: until the protests were unbearable! When this happened, policymakers worked with real urgency to solve the problem.

for an MMT advocate, an employment guarantee should be a permanent feature of the economy, providing the opportunity for everybody ready and willing to work, but unable to find suitable employment, with the opportunity to contribute meaningfully to the quality of life for the community.

MMT recognizes that finance is not a limited resource. It is manufactured and created in the act of spending. In the modern world, the exclusive monopoly to issue the currency endows governments with unparalleled spending power. For MMT, that the issuer can spend without technical constraints is a rather trivial observation. What MMT stresses is that taxes and borrowing cannot pre-fund the issuer of the currency, as the currency must be provided before it can be used for tax collections or bond purchases. The substantive question for MMT then is how to deploy this spending power for achieving the two central macroeconomic goals: full employment and price stability.

Given the differences in pandemic-related job losses across the globe, the second lesson of the pandemic was that unemployment is a policy choice.

inflation is often a supply-side phenomenon with multiple causes. Inflation generated by strong aggregate demand beyond full employment is rarely observed, apart from the immediate post-World War II (WWII) period.

inflation is often a supply-side phenomenon with multiple causes. Inflation generated by strong aggregate demand beyond full employment is rarely observed, apart from the immediate post-World War II (WWII) period