Rebecca Rojer has done meticulous work describing Modern Monetary Theory (MMT), and seeing as how it is an approach that is both becoming more popular, and is in opposition to the (almost always wrong) economic orthodoxy, it pays to understand this:
Too often the origins of our economic ills are cloaked by a mystical reverence for some autonomous money spirit. The economists behind Modern Monetary Theory (MMT) seek to lift money’s veil by studying the specific actions that occur as money is created, circulated, and destroyed.
For those seeking a grand, unifying sociopolitical economic theory, MMT will disappoint. But as an analytic tool, MMT clarifies who holds genuine power—sovereignty—within society, and how they organize the money system to serve their interests. Unsurprisingly, this is often a story of tremendous cruelty and exploitation.
But the revelation that the rules of money are not immutable laws of nature but are instead created and constantly modified by people opens up possibilities beyond the scope of our current political imagination. The questions become: What sort of society do we want? Do we have the physical resources to support that society? And finally, how the hell do we muster the political will to get there?
At its core, MMT sees money as being a construct that derives from the willingness of the state to use coercion, and frequently violence, to enforce the use of a token for value.
Typically, this is done through taxation. The sequence runs like this:
- Government: Pay your taxes.
- Citizen: Here is some grain.
- Government: Nope, you have to use my coin.
- Citizen: But I have no coin.
- Government: Then sell your grain to give coin to me.
- Citizen: Sell my grain to who?
- Government: You can sell it to me, or to the blacksmith who I paid for spears, or to whoever the blacksmith paid with my coin.
Thus, Money is born.
Read the rest. It opens a world of possibilities not imagined by our current leaders..