Seems a bit silly. Or is it? Modern Monetary Theory reminds us that governments of countries that have their own currencies and floating exchange rates (like in the UK), by implication, can never ‘run out of money’ or have to be dependent on taxation revenue and private borrowing to finance their activities. In other words, when politicians claim there’s ‘no magic money tree’ they are plain wrong!
Supporters of MMT remind us that governments are able to sanction as much spending as they want ( just think of the implications for education?), as long as there are enough goods and services available to buy. Like Keynes, they remind us that the economy doesn’t run like a household and that if governments cut back on expenditure – by promoting ‘austerity’ and trying to ‘reduce the deficit’ then both output and standards of living can only fall.
Needless to say, despite ‘Quantitative Easing’ ( where government pumps billions into the banking system) being used in Europe and America, MMT is not current orthodoxy – even Jeremy Corbyn’s Labour Party although much more fiscally progressive that the Tories , still talks about the need to ‘balance the books’.
Proponents of MMT in this country have now come together through the Gower Institute. Access its website at http://gimms.org.uk/ where you’ll find useful material written for a non specialist audience.
5 thoughts on “There is a ‘magic money tree’”
Thanks for the reference and for debunking the myth that a nations’ economy can be equated with a household budget
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