theflowerpot

Modern Monetary Theory, called MMT, is a modern theory of how fiat money works and some implications of this. I don't know the intricate details of this theory but there are some broad conclusions you can draw about someone who talks positively about it. I'll try to very briefly summarize the understanding I have got from how MMT people view the world. Fiat money is different from real-world commodities in a significant way because it is possible to print any amount of it. The American government can never default on their debts if their debts are in the form of dollars because the US government is able to print literally any amount of dollars. A significant and fundamental reason why fiat money is then valuable (even if the supply could become infinite) is that you need it to pay taxes in the US. The government does not accept tax payments by ANY other means. This means that if you are a US citizen when the tax day comes you will be forced to "buy" dollars from other people in order to avoid going to jail, this creates a demand for the dollar irrespective of the supply. Moreover, the tax amount is also decided by the government, which means that they can create whatever level of demand they want or the dollar by US taxpayers. So how does fiat work? Firstly, every single dollar in the world has been printed by the American government (FED) and the act of printing and the act of government spending are exactly the same. The only way to spend is to print and the only way to print is to spend. However, since all spending prints money, the government tries to also destroy money. It does this via taxation, you can look at it like every dollar taxed is burned. Generally, however, the government spends more than it taxes, which is called running a deficit, which means that they print more money than they destroy. This creates something called inflation. You can look at inflation as a tax on liquidity which is just a fancy word for cash. If the government prints the same