Modern Monetary Theory

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Modern Monetary Theory or Modern Money Theory (MMT) is a non-mainstream macroeconomic theory concerning the role of fiscal and monetary policy in sovereign governments that borrow and issue government debt in their own currency. MMT has been described as a heterodox theory. It departs from mainstream economic consensus by rejecting the conventional model of central bank independence. MMT argues that responsibility for achieving full employment while maintaining price stability should rest with the elected government, with the central bank limited to accommodating the government's fiscal needs. In MMT, public expenditure is financed through money creation, with no intention of later refinancing it through taxes. MMT proponents acknowledge that money-financed spending is sustainable only while the economy has spare capacity, such as unemployed workers and underused production facilities. Once full capacity is reached, further money creation will generate inflation, which the government should...

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