Understanding Modern Monetary Theory

A new video series called “New Economic Thinking.” The series will feature dozens of conversations with leading economists on the most important issues facing economics and the global economy today.

This episode features Warren Mosler, president of the financial services firm Valance Company and one of the founders of Modern Monetary Theory (MMT), speaking about what MMT tells us about economic policy. He explains not only what policy makers can do but also what they should do in the current economic environment. How can MMT help get the economy back on track? Watch the interview to find out.

MMT is a descriptive framework of the macroeconomic system. It is applicable to countries that use fiat non-convertible currency with a flexible exchange rate. It proponents are often also proponents of functional finance. Modern monetary theory shows that countries do not ever face a risk of being unable to pay their debts (the solvency constraint) but may, under certain circumstances, face undesirable inflation if a deficit is run in excess of the needs of the economy (the inflation constraint).

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