Understanding Modern Monetary Theory (MMT)

Modern Monetary Theory (MMT) challenges traditional views of currency and government spending by emphasizing the unique nature of fiat currency. Unlike gold-backed currencies, modern fiat systems allow governments to issue money without a fixed limit, provided they manage the risk of inflation. MMT advocates argue that the government should focus on utilizing its financial capacity to address challenges like employment and climate change, rather than worrying about balance sheets that mirror household budgets. This approach encourages policymakers to rethink constraints on spending and recognize that the economy’s capacity to absorb money is more critical than fears of deficits.