Modern monetary theory, or MMT, has been getting a lot of attention lately, often celebrated as a revolutionary breakthrough. However, there is absolutely nothing new about it. The very basis of the theory, the idea that governments can finance their expenditures themselves and that therefore deficits don’t matter, actually goes back to the Polish Marxist economist Michael Kalecki (1899–1970).

MMT as a Centralization Tool

MMT says that the national debt means that we owe the money to ourselves, so the central bank in combination with the political branch, which gives its blessing and approval, can now together spend as much as they want without facing any consequences. In other words, we can print our way to prosperity. The only real problem according to the theory is that there is not enough money and not that resources are scarce and therefore limited.

To understand the basic idea behind this, let’s use the game Monopoly as an example. If players decide to double the amount of Monopoly money to play with, the logical outcome will be that people start to pay much higher prices for the locations on the board. Whenever more money is chasing the same amount of goods, prices will rise. Another lesson is that the bank will always win, especially when it has the power to change the rules at any time during the game.

The main cause for most of the problems of our days is the current central banking system. But how many people have ever thought about what money is or how it came into existence? How many know whether it was always used as debt security by government declaration or if it once was a property title, as it still pretends to be?

Well, I can tell you that over the past decades, I haven’t met a lot of people who have really thought about these questions. At the same time, our public education system and the mass media ensure that the next generation won’t think about them either.

Meaningless distractions, alternative facts, and daily doses of fear effectively crush most inquisitive instincts. It’s a process that Immanuel Kant recognized a long time ago and described in the following way:

First, these guardians make their domestic cattle stupid and carefully prevent the docile creatures from taking a single step without the leading strings to which they have fastened them. Then, they show them the danger that would threaten them if they should try to walk by themselves. Now this danger is really not very great; after stumbling a few times they would, at last, learn to walk. However, examples of such failures intimidate and generally discourage all further attempts.

With MMT, a massive shift in terms of centralization of power will take place. Drastic changes in our current system would be possible, with a massive push away from the private sector and from individual freedom toward more government control.

This is extremely dangerous. History is our witness that centralization in the hands of government, particularly when coming from a so-called morally superior ideology, never has a good outcome for the people. State officials, institutional actors, and those closest to the top of the power pyramid were the only ones who ever benefited from such systems.

MMT essentially gives carte blanche to such interest groups to boost government spending to astronomical levels. At the same time, it allows for a government-enforced massive redistribution of wealth and a gigantic misallocation of capital within a very short period of time.

by Claudio Grass for Mises