eli5 What is Modern Monetary Theory?
In: Economics
It’s a theory that governments should, essentially, print money to finance spending and then raise taxes to rein in inflation.
Most economists do not take it seriously. In general, it will shift spending away from the private and toward the public sector and you would likely end up in a situation with low private spending and high savings rates which then get eroded away by inflation which finances public sector spending. In other words, people don’t spend much because of high tax rates and then lose value on the money they have saved to finances government spending.
If you believe that the state, generally, does a better job of directing spending than individuals in most situations, then you might not have a problem with this. However, let’s just say that that is not a common belief held among economists.
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