People who understand economics, please S'plain this to me. Modern Monetary Theory

[CleverNickname]

In a nutshell, MMT says that the US can spend as much as it wants because, as a global reserve currency, it can just print more US dollars.

It helps if you remember that MMT doesn't stand for "Modern Monetary Theory", it stands for "Magic Money Tree".

[Joe in PNG]

[Pacioli]

IRelying on Congress to raise and lower taxes at just the right time is ludicrous and defies human nature.

P.J. O'Rourke said it best in his book Parliment of Whores
Giving money and power to politicians is like giving alcohol and prostitutes to teenage boys.

[0ddl0t]

The over simplistic portion of my brain says: If we can just have the govt spend and spend without worrying about balancing the ledger, why can't we just forget about the other side of it too? We can cut taxes!

That's basically Reaganomics (aka "voodoo economics"). To spur the economy out of 70's stagflation, Reagan's Economic Recovery Tax Act of 1981 lowered the top marginal tax bracket from 70% to 50%, the lowest bracket from 14% to 11%, and slashed estate taxes all while raising spending (particularly defense).



The ultimate goal of deficit spending, whether liberal MMT or conservative Reaganomics, isn't to spend unlimited money. It is to spend just enough to put everyone/everything to work. Once there are no more unemployed workers and idle machines, spending is supposed to normalize. MMT & Reaganomics really only differ on who gets first crack at the money (i.e. whether wealthy people keep more of their money or whether it is redistributed to the lower incomes).

The key is "responsible" deficit spending relies on the US dollar being a preferred currency around the globe. If a third world country wants a loan, banks generally don't want to be paid back in the local fiat currency which can be highly unstable - they want to be paid in US dollars. If US fiscal policies undermine that global faith in the US dollar, the house of cards comes crashing down.