Modern Monetary Theory (MMT) is a post-Keynesian macroeconomic framework asserting that fiscal deficits are essentially inconsequential, monetary policy should be subordinate to fiscal policy, and monetary authorities ought to issue base money to finance massive government programs. MMT promises to eliminate involuntary unemployment and address social issues such as poverty and climate change. MMT is rooted in the belief that all money is a creation of the State, engineered through legal frameworks to facilitate governmental control over economic activities.<\/p>\n

According to MMT, the government, which can issue its currency at will, cannot go bankrupt. However, there are obvious limitations to this power, like the inability to control the currency’s value. MMT also redefines the traditional functions of money\u2014medium of exchange, store of value, and unit of account\u2014asserting that these functions are mere byproducts of government policy rather than intrinsic properties like scarcity and divisibility. This theory leads to the controversial notion that a government could dictate any item as money\u2014be it acorns, IOUs, or Bitcoin\u2014solely based on legal declarations, disregarding their properties, a concept starkly at odds with real-world economic dynamics.<\/p>\n

No Coherent Theory of Value<\/h2>\n

The most significant shortcomings of Modern Monetary Theory is its approach to the theory of value. Instead of a subjective theory of value, where prices emerge through the preferences of individual actors, like personal spending or saving decisions, MMT replaces this with a democratic or collective theory of value.<\/p>\n

According to MMT, the value of money is not derived from its utility in monetary functions\u2014such as a medium of exchange, a store of value, or a unit of account. Instead, in MMT money’s value originates from the collective acceptance and trust in the state that issues it. This acceptance then supposedly confers value onto the money. In other words, MMT reverses the traditional understanding: it is not that something valuable becomes accepted as money, but that something becomes valuable because of forced acceptance as money.<\/p>\n

The value of money is reliant on the State being the economic calculator of sorts, instead of the individual market actors. The aggregate preferences of society along with central planning expertise go into an equation and full-employment is the result. This is not a joke. They don’t have a theory of value beyond what was just explained.<\/p>\n