Thursday, December 26, 2013

What is “MMT”?

In some of my posts on Facebook, Progressive Policy Digest, The Soap Blog, or in my emails I have referred to "MMT". I usually get no questions or inquiries about it, which seems to reflect a lack of knowledge of the subject. Basically, MMT prescribes a path that would have had us at full employment long ago, and from a federal debt perspective, is the exact opposite of the austerity currently being pushed by both political parties, so it's very important. In spite of it's name, it's not modern, not exclusively monetary, and certainly not theory. It's an explanation of how economics and banking works in a country with it's own currency. It's understood by all good economists at the Fed and think tanks around the country that are not wedded to an ideological agenda. But, it can't seem to penetrate the Washington Consensus, the mainstream media, or the lay public, who continue to think the federal government must operate like an individual or a state that only uses the currency, which is the exact opposite of the way it works.

The macroeconomic literature provides the evidence for the validity of MMT, but is beyond the understanding of lay people. "What is Modern Monetary Theory, or “MMT”? by Dale Pierce is a lay explanation by a non-economist of the basics of MMT. For background and an historical perspective explore the three part series on MMT at New Economic Perspectives by the same author.

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