Can the government just print endless money with no consequences? Well, maybe. The idea that money has to be tied back in physical goods like gold or silver is a fading ideology, and our modern system of Fiat currency ties the value of money to consumer confidence in the government that backs it. Even with that said, printing endless money sounds like a bad thing, no? Well, possibly. It could lead to massive economic collapse and the devaluing of everyone’s money. However, some economists think that. If done right, governments can just keep printing money with few repercussions. That theory is well summarized in something known as modern monetary theory or MMT. Modern monetary theory states that countries that are monetarily independent, like the US, UK, Canada, and Japan, are not constrained by the amount of money they can bring in from taxes or revenues in determining their budgets. In other words, countries that don’t rely heavily on. Other currencies don’t have to worry about balancing their budgets. If the US brings in $10 in taxes, they could theoretically spend 121520 without issue. But this is oversimplified. Why would economists think that this could work? After all, isn’t a balanced budget good and debt bad in microeconomic situations like a household? This is certainly true, but macroeconomics for countries? Works differently. Under the guidelines of MMT, governments wouldn’t need to rely on taxes or borrowing money from bond sales selling their debt to consumers because they issue the money in the 1st place and no one else can print the money other than that country. This is a really challenging idea, especially when contrast with the typical idea that debts are bad and a balanced budget is the only way to succeed financially in many senses the ideas of. MMT flip on their head traditional economic beliefs about how a government interacts and controls its own economy. If the principles of MMT work, it could be used to fund massive healthcare reform, debt reform and otherwise reset many failing economic systems, particularly in the US. One of the core principles of MMT states that in countries that have a Fiat currency system that they fully control, like the US, Canada, and other countries. They can simply print as much money as they need, as the government really can’t go broke because it makes its own money. Detractors to MMT say this would be irresponsible as it would massively devalue the currency inflation, causing the country to be in massive amounts of debt with a valueless currency. But here’s what makes MMT work. Theoretically, it’s the idea that government debt isn’t a key factor in the economy like many think it is. Global, economically important countries like Japan and the US and others can carry a much greater budget deficit without worry, according to MMT. And small deficits can actually cause recessions, since debt spending or deficit spending is what grows wages and savings. If a country runs a small deficit, savings in wages would actually fall theoretically. That is. Macroeconomics is complicated, like we said. According to the principles of MMT, government debt is just the government putting money into the economy, stimulating it for growth. MMT supporters don’t have their head in the sand, though they recognize that inflation could be a major negative side effect to this type of spending. However, inflation can actually be fought with political policy by adjusting interest rates and other macroeconomic cogs. It’s in this way that one can’t view government debt in the same way that you view household debt because the government. Has some control over its lenders as it makes the currency itself. An oversimplified analogy would be like a homeowner having the ability to hurt their mortgage companies profits unless the mortgage company gave them better terms on their mortgage. But if the government can print and less money, why are taxes needed then? Well, under MMT taxes are used to take money out of the economy to control inflation and make sure the economy doesn’t burn out and eventually. Crash traditional instruments like bonds and taxes that are generally viewed as revenue generators for the government under MMT would simply be ways for the government to drain excess cash from the economy as a way to control the currencies value. According to MMT economists, the unemployment rate is a direct result of the government spending too little after collecting taxes if you’re unable to find a job in the private sector some. MMT policies would allow for termed government or local community employment to control inflation. This idea also insists that rather than just paying welfare to people who sit at home and never plan to find a job, the government could employ them, cleaning up the community and serving the government citizens while they looked for private sector work. But why do economists think MMT would work? Did they just pull this out of thin air? Well, it all started with the American economist Warren Mosler. Mosler first theorized the concepts of MMT in the 1970s while working as a trader on Wall Street in the 1990s, many investors were worried that the country of Italy would be unable to pay back their loans. Mosler, now having solidified many of his theories, knew that this was impossible. Since Italy created their own currency in his firm, thus became one of the largest holders of Italian currency, Italy consequentially didn’t default in Mosler made about $100 million, but the theories of MMT from Mosler were mostly ignored by economists over time, largely due to how subversive they were to traditional macroeconomic theory. Thanks to the Internet, though, MMT has become more of a popular economic outlook. MMT is also supported by many more progressive political leaders in the US, perhaps to its own demise. Alexandria Ocasio Cortez and Bernie Sanders both hold on to MMT as a potential future path for the US economy, but for the most part we’ve made modern monetary theory sound pretty rosy in this article.

   So what are some drawbacks? Detractors state that MMT can simply be used for countries already in economically depressed times. It cannot do well in a thriving economy. MMT would essentially cause a country to only care about its own economy or currency. It doesn’t leave much room or provide much guidance for how international politics would thus impact the economy. If the US adopted MMT and over time the international community stopped relying on the US as much and thus didn’t want dollars as payment, the US dollar could trend towards worthless like mentioned before since the US dollar is a Fiat currency. Most world currencies today. Its value depends on consumer sentiment in the government that creates it. Nobel Prize winning economist Paul Krugman is one of the major detractors to MMT, stating that driving up government debt like MMT supposes would almost certainly lead to hyperinflation and devalue the currency. So what do you think of MMT? Is it a pipe dream of overreaching governments or a potential solution to the failings of many modern economic theories? Be sure to comment below and make sure you share this so that others can learn what MMT is and how it might work.