🌐 Modern Monetary Theory – a Simple Explanation
April 4, 2025
MMT stands for Modern Monetary Theory. It sounds academic. But it's for everyone.
The theory says: A country like the USA, Japan, or the UK can create its own money. It doesn't have to "get" it first. It is not a household. Households spend only what they earn. But the government is different. It must first spend money before we citizens can even have it to pay taxes.
Crazy, right?
This was first recognized by Warren Mosler. He wasn't a professor. He was a practical man. He worked in financial markets. He asked himself: How does money really work?
And his answer was: Money is an invention. A tool. It comes from nothing—not magic, but accounting.
What about inflation?
Good question.
MMT says: Inflation isn't automatically caused by printing money. It's about what happens next. If too much money chases too few goods—then prices rise.
But as long as we have unused capacity (e.g., unemployed workers, idle factories, unused land), we can spend money without prices immediately increasing.
So we don't just look at the amount of money. We look at supply and demand in the real world.
One last point: When the government runs a deficit, it doesn't mean "we're all in debt." It just means: The government spends more than it collects—and exactly that is our money.
Government deficit = citizens' surplus. Our savings are the flip side of government spending.
❓ FAQ
Isn't this just money printing?
Yes, but it's nothing new. It happens every day. The question is: Where does the money go? Who gets it?
Won't everything get more expensive?
Only if too much demand meets limited supply. If resources are unused, inflation is not an issue.
But what about debt?
A government cannot "run out of money" in its own currency.
It can always pay—the problem isn't the money, but the real economy.
Then why do we need taxes?
Not to fund spending, but to control demand, correct inequality, and stabilize the monetary system.
Is this just theory?
No. MMT describes how state money already works today—often without transparency and benefiting the wrong groups.