MMT explained
The Government Doesn’t “Borrow Our Money”: A Simple Case for Modern Monetary Theory We are constantly told the same story about government finance: The government taxes us. Then it borrows money from investors. Then it spends the money. And if it borrows too much, the debt becomes dangerous. It sounds intuitive. But there is a problem. That is not how modern monetary systems actually operate. The most important insight of Modern Monetary Theory is not that governments have discovered a magical source of free money. It is much more mundane: A government that issues its own currency does not operate financially like a household. A household must obtain pounds before it can spend them. The UK government is the issuer of pounds. That distinction changes everything. Start with what happens when the government spends When the government pays a contractor, employee or pensioner, the banking system records an increase in the recipient’s account. The government’s spending...