Dr. Martin Hash Podcast

Modern Monetary Theory, or MMT, is not that modern; it was academically proposed by Georg Knapp in 1905 as a contrast to the Gold Standard. There were hints of it before by Adam Smith, John Stewart Mills and even Karl Marx. Economist Randall Wray is a contemporary proponent, and Socialist Presidential candidate, Bernie Sanders, based his proposed economic policies on it. The term “Modern Monetary Theory” was actually coined by Wall Street trader Warren Mosler in the 1970s when he became rich by understanding that money is imaginary.

Few other people understood the MMT concept because they could not grasp that money is imaginary; they were taught that money is a bartering convenience so that people don't have to trade chickens, and that it's simply a stand-in for something real; but Knapp argued “money is a creature of law,” which means The State can wish it into existence. Exploiting the fact that money is imaginary leads to the idea that it can be created as needed to fund public policy, and there would be no national debt because government would not need to borrow money, nor collect taxes. The risk of MMT is inflation, which can be held in check as long as production equals consumption. In past practice, most MMT implementations have failed spectacularly, resulting in hyperinflation, but those were all examples where consumption exceeded production, caused war, famine, collectivism, or some other production-limiting catastrophe. The U.S. actually practices MMT via its giantic National Debt, though most economists don't admit it.