Proceedings of the 46th International Academic Conference, Rome

MODERN MONEY THEORY IS A HOAX AS ITS ARGUMENTS ARE CONTRADICTORY, BASED ON IRRATIONAL PROPOSITIONS, AND IMPRACTICAL

NABA KUMAR ADAK

Abstract:

The purpose of this paper is to apprise the readers of the MMT’s misconception misrepresentation relating origin and character of money, monetary policy, fiscal policy and to explain that these concepts and theories of MMT are hypothetical and have no connection with how present economy is functioning and that if the suggestion of MMT for increasing budget-deficit without provisioning how that deficit will be redeemed then this policy of increasing deficit heedlessly will lead the economy as a whole to a catastrophe and collapse. This is a conceptual/ theoretical paper that addresses various definitions, concepts, theories and practices that the MMT believes to be prevalent in the present economics studies and economic activities are unrealistic and their suggestions are unhelpful for smooth function of the economy. Based scholarship, I make an argument that these need to be corrected or re-addressed. Bolstered by published research in this domain, I further argue that this exercise is necessary in order to eliminate the negative effects of the MMT theories on the economy at large. The other purpose of this paper is to make suggestions about how and why money originated and how the present monetary and fiscal policies are being framed and followed and how those policies can be corrected to facilitate smooth functioning of the economy and to achieve sustainable economic growth. To make economy function properly and to make sure that the economy does not face any austerity or unemployment or ineffective production and distribution system, the faults or defects with the MMT that is gaining ground among economists should be explained clearly and conclusively so that economists do not fall in the trap of MMT’s imaginary and hypothetical theory of ‘functional finance’ and ‘a government that issues its sovereign currency can never go default’. And finally, grounded in scholarly literature, I also argue that other notions relating to monetary, fiscal and financial policies also need to be clearly understood to make those policies viable and efficient for the economy to have a balance between production and distribution.

Keywords: functional finance, hierarchy of money, Modern Money Theory, credit theory of money, state theory of money, printing money, theory of consolidation between government and central bank, full employment, High powered money

DOI: 10.20472/IAC.2019.046.001

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