Do Budget Deficits Matter? Modern Monetary Theory Explained

#241 Why modern monetary theory isn't worried about federal budget deficits, why budget deficits never go away and what are the risks if budget deficits get too large. We also explore what else proponents of modern monetary theory believe.

For show notes and more information on this episode click here.

• [0:22] What is Modern Monetary Theory?
• [3:20] Taxes create demand for fiat money.
• [5:32] Taxes and government bonds don’t finance the federal government.
• [8:56] Budget deficits increase the net financial assets of the
• private sector.
• [13:16] Taxes destroy money.
• [13:46] The private sector determines the size of the budget deficit.
• [14:58] The concerns of crowding and losing faith.
• [19:08] Even government spending has to be constrained.
• [20:02] The dangers of the Federal Reserve controlling interest rates.
• [21:45] Modern Monetary Theory is correct in terms of how the economy actually works.
• [23:25] Do federal budget deficits matter?

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