MMT most definitely isn’t, despite having the same acronym. The idea of the ‘magic money tree’ is designed to make people think the potential for public spending is a fantasy idea promoted by those who don’t understand the limits and constraints that government is subject to. Our argument, on the contrary, is that we are very conscious of the constraints but that they are real resources rather than fictitious accountancy goals. This can be explained in two ‘rules’ for the economy:
- A government with its own currency (like the £ sterling), its own central bank (like the Bank of England), a floating exchange rate, and no foreign currency debt, faces no financial budget constraint at all.
- Such a government faces real and ecological constraints. As a society, we cannot run out of pounds, but we can run out of – or misuse – people, skills, technology, infrastructure, natural and ecological resources. There are limits, but the limits are ‘real’ and not financial. Governments should therefore focus their policies on human and ecological resources not the deficit.
The core international MMT team has spent nearly 25 years creating and developing this body of work. Understanding it leads to an appreciation that governments can only operate in a tightly disciplined fiscal policy environment if they want to be responsible and serve the community.