Modern Monetary Theory

Modern Monetary Theory is a macroeconomic framework holding that a government issuing its own currency can always make payments in that currency, while inflation and real resources constrain its spending.

Chartalism: A theory that money derives its value and acceptance partly from the state’s power to impose tax obligations. MMT draws on chartalism to explain why state-issued currency is accepted.
Mainstream macroeconomics: The broad body of economic models and research used in contemporary academic and policy analysis. MMT disputes some standard accounts of how deficits and monetary policy constrain governments.
Job guarantee: A public program offering paid employment at a set wage to anyone willing and able to work. MMT proponents often present it as an employment policy and an automatic stabilizer.
Abba P. Lerner: An economist who developed functional finance, arguing that public finance should serve economic goals. Lerner’s framework anticipated MMT’s emphasis on consequences over balanced budgets.
Inflation tax: The loss of purchasing power borne by holders of money when inflation rises. It highlights who may bear the costs when policy expands nominal demand.
State theory of money: The view that states help define money by selecting the unit in which taxes and public obligations are payable. This account of monetary authority underpins MMT’s description of sovereign currency.
Loanable funds: A model in which saving supplies funds that borrowers demand, helping determine interest rates and investment. MMT rejects the idea that sovereign government borrowing must draw on a fixed pool of prior savings.
Functional finance: An approach that judges fiscal policy by its effects on employment, output, and prices rather than budget balance. Its outcome-based budgeting is a direct precursor to MMT policy recommendations.
Warren Mosler: An American economist and investor associated with the early development and promotion of Modern Monetary Theory. Mosler helped formulate and popularize the modern framework.
Phillips curve: A model describing a possible relationship between inflation and unemployment. Debates about the curve shape disagreement over how spending affects prices and employment.

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