Modern Monetary Theory

Abstract

This chapter begins with an explanation of the three core statements, or axioms, at the heart of modern monetary theory: (1) monetary sovereign governments face no purely financial budget constraints; (2) all economies, and all governments, face real and ecological limits relating to what can be produced and consumed; and (3) the government's financial deficit is everybody else's financial surplus. This leads on to a discussion of the macroeconomic policies suggested by modern monetary theory, and potential institutional reforms to clarify the fiscal space available to monetary sovereign government.