Thread by @DeficitOwls

Does Modern Monetary Theory say we should just print a ton of money and use it to pay for things?

No! It's even more radical: MMT says we're *already* doing that, 100% of the time. (1/n)

We're taught in elementary school that government can get money to spend from 3 sources: taxes, borrowing, or printing money. So the link goes: get money -> spend money.

MMT cuts that link. The government doesn't "get money" from anywhere. It just spends. From thin air. (2/)

When the government spends, that adds money (deposits/reserves) to the economy. Sometime later, some of that money gets used to pay taxes, and some gets used to buy government bonds, which we sometimes call "borrowing." Any amount left over gets counted as "money creation." (3/)

That's the cycle of government spending. Spend first, then tax and sell bonds later. After the government collects taxes or sells bonds, does it then have more money? is this money available to use for the next cycle of spending?

No. Government always spends from thin air. (4/)

So why then do we bother to tax or sell bonds if the government isn't doing it to get more money?

Taxes and bond sales DO have other purposes. Taxes create demand for the currency and prevent inflation. Bonds offer savers a safe asset that they can hold to earn interest. (5/)

There are various constraints that govs impose on themselves to make it appear like the above statements are not true. But these constraints turn out not to make a difference for the net result, which is the same either way. Read more about that here github.com/MMTonGithub/MM… (6/)

So remember: Modern Monetary Theory is not a proposal to change how gov spending works. The spending process already works just fine. It's about aiming the discussion towards what the *real* limits are, because the limits people usually talk about are totally imaginary. (Fine)