What I have learnt about MMT So far.

MMT in a Nutshell

The main argument of this theory is that the Central Bank and the Government are not like a household or a company, but they are where the money comes from. Therefore, the primary balance of a government is no longer a problem in this theory.

I also wrote about MMT here. "WHAT is MMT(Modern Monetary Theory)? Q and A session."

The relation between the conventional theory and MMT.

In conventional theory, People pay taxes before the government spends money.

On the other hand, in the MMT theory, the government spends money before people pay taxes, and collecting taxes is only to prevent inflation.

MMT is some form of a combination of conventional theories but what it sees is opposite to what the traditional approach does.

In Keynesian economics, more government spending is considered an excellent stimulus to the economy. And in Trickle-down economics, it attempted to enhance its economy by spending money on rich people regarded as Job-creators.

Two of the theories above are partially combined in MMT. Instead of only rich people, the government spends printed money on general or targeted people who can increase the demand with cash because MMT assumes that the demand is the best job creator.

The feasibility and problems

The Former Chair of the Federal Reserve of the United States, Alan Greenspan, said, “there is nothing to prevent the Federal Government from creating as much money as it wants and paying it to somebody”.

So, the government can print much money for people. The problem is whether there is enough product in the system that supplies to meet the demand caused by distributing capital to people. If there isn’t, inflation appears based on the fundamental law of supply and demand. However, MMT can handle this problem by taxation to regulate the need.

So, in theory, there seems to be no problem in applying MMT to the actual economy!

The real problem behind this.

I think MMTer overlooks something.

First, MMT is basically to maximize the productivity of the economy, which means if it is executed as the following monetary policy, it will cause to worsen the pollution and exploitation of resources on the planet. It does not seem like a perfect plan in terms of preserving our environment.

In the future, however, if the system is filled up with green energy and a sustainable economy, MMT can kick in without any considerable problems. Therefore, the conclusion is that MMT is the future standard, probably the following ideology after Capitalism.