We all talk about economics in our everyday conversations. We talk about ‘macro’ and ‘micro’ economics, without using the jargon. When we talk about the government ‘having no money of its own’ or ‘having no money left’ or ask people canvassing for our votes on the doorstep with offers of improved services, ‘how will you pay for it?’ we are using our understanding of economics. That’s the result of politicians, pundits and presenters framing the economy in those terms. Over the last 40 years the profile and importance of the corporate sector as the generators of wealth and money has been raised above the importance of government as policy makers. In fact, in the current way of thinking, government is described as being totally reliant on taxes from the people and borrowing from the markets. This ignores the fact that we don’t use money from ‘The Bank of Barclays’ or ‘The Bank of Google’. All our money is from, or given its validity by, the Bank of England. The Bank is owned by the Treasury – that is to say, the government. How can a country which owns its central bank and which issues its own currency need taxes and borrowing before it can spend? This comes to the core of MMT which many people new to the subject find most difficult to get their heads around. It turns current thinking upside down.
For a clear and easy explanation of this idea watch Stephanie Kelton at the British Library (2018) here.
For a deeper read on the subject of currency sovereignty and its importance in a democracy, read Bill Mitchell and Thomas Fazi ‘Reclaiming the State’.