Category: Modern Monetary Theory (MMT)

Modern Monetary Theory (MMT) posits that governments with monetary sovereignty, meaning they issue their own fiat currency, can spend without being financially constrained by revenue, as they can always create money to fund their priorities. While MMT emphasizes that a government can afford to spend on public goods and services, it also states that the true constraint is the economy’s real resources, like labor and materials. If government spending leads to inflation by straining these resources, the government can curb it by reducing spending or raising taxes to remove money from the economy.