By Eric Tymoigne
On one side, critics argued that MMTers say nothing new when MMTers emphasize US government’s monetary sovereignty; “everybody knows this” is a common refrain. On the other side, critics argue that MMT incorrectly merges the US Treasury and Fed into a US government, which ignores the fact that the US Treasury can run out of money because it needs to tax and issue bonds first before it can spend.
Something is amiss. This post shows that MMT can be understood from two viewpoints. One is the consolidation viewpoint and another is the coordination viewpoint. Both lead to the same conclusion; money is never an issue. US government can’t run out of money, US Treasury can’t run out of money. They are other implications in terms of public finances (the role of taxes, the role of Treasury issuances, debt sustainability, etc.) and monetary policy but the post does not address these issues. Continue reading