Thread by @KristinLangen

It was a pleasure to present first thoughts of my master's thesis on #MMT and #degrowth at the @WSSAcon in Denver. I’m currently writing my thesis at @presseunikassel and @LevyEcon. I’d happy for any comment and feedback. A thread 1/

When the government spends, it must either collect #taxes or take on #debt – so the widespread assumption. A growing economy does not pose a problem, as long as g > r the debt-to-GDP ratio declines over time, particularly if loans have low interest rates and long maturities 2/

However,if the economy stops growing or if it even declines, the debt ratio rises and tax revenue declines. If one assumes that the economy should not grow endlessly for socioecological reasons #degrowth @timparrique @MGSchmelzer, how can government spending then be financed? 3/

Here, that’s the thesis: modern money theory (#MMT) offers a way out. It shows that government spending is never a borrowing or collecting operation but that spending, taxation and bond issuance are steps of every financing process of the government. 4/

The tax revenues and debt ratio thus lose relevance because states with sovereign currencies actually do not need to collect taxes or borrow to finance their expenditures. From the perspective of MMT, the financing of government spending no longer depends on #growth . 5/

Governments with monetary sovereignty do not need to care about GDP growth, they need to care about the #resources available within the economy.The question is not what sovereign governments have the money for, but what they want to use #labor and scarce natural resources for. 6/

However, many countries do not have monetary #sovereignty. One of the most prevalent examples is the euro zone: Member states have no sovereign currency as only the #ECB has the power to issue euro reserves. 7/

Member states depend on the #ECB to make payments beyond their national borders (depend on reserves for the clearing process). The ECB is not allowed to finance the member states and the #MaastrichtCriteria restricts the budget deficit and the debt ratio. 8/

As far as I know: National Central Banks within the EMU can issue euros (everyone can issue IOUs as long as they get accepted #Minsky), however they face the threat of Maastricht and depend on the ECB to fulfill the clearing process. I am happy about comments on that. @DEhnts 9/

So,the balance sheets of EMU treasuries matter,which creates a growth dependency of public spending. However,the ECB guaranteed whatever it takes to save the #euro and bought government bonds on the secondary market,which enabled states to spend money independent from growth. 10/

As a conclusion: The financing of government spending within the EMU does not depend on #GDP growth (tax revenues and debt ratio) as long as the #ECB guarantees to buy government bonds and the member states do not need to redeem them. 11/

If growth is necessary to finance government spending and #decoupling of resource use and GDP growth fast enough to reach the 1.5°C #climate target is not possible, there is a socialecological dilemma. Bringing #degrowth and #MMT together, represents an opportunity. 12/

There is interesting literature on the topic already by @jasonhickel, @r_mastini, @g_kallis, Brandon Unti, Blake Alcott, @DEhnts, @michipaetz, @MauriceHoefgen and more