Modern Money Theory, Its Theoretical Structure and Examining from Tax and Budget Theory of Public Finance

Sato Kazuaki

doi:10.50898/pfsjipf.16.0_152

<p> This paper confirms the basic structure of Modern Money Theory (MMT) and examines it from tax and budget theory of Public Finance. Although MMT expands the endogenous money supply theory developed by the post-Keynesians to the vertical money such as cash, reserves, and public bonds, issued by the central government and the central bank, the complexity of the theoretical structure hinders its understanding. This paper explains MMT by classifying it into the following theoretical systems: “money is a debt” derived from the definition of “horizontal money creation” and its attendant “accommodation,” “vertical money creation” and its attendant “monetary sovereignty,” “taxes-drive money view,” “debt hierarchy,” which integrally grasps horizontal money and vertical money, and “Stock-Flow Consistent.” Furthermore, by adding the recognition of “Money Manager Capitalism” and “Minsky’s half century,” the “Need for a budget deficit” was derived. Combining “functional finance with these systematic monetary theory,” the structure leading to the policy proposal of “Job Guarantee Program (JGP)” was explained. Finally, by examining MMT’s tax and budget theory in detail, we have come to a point out that there is a different perspective from the existing Public Finance.</p>

Modern Money Theory, Its Theoretical Structure and Examining from Tax and Budget Theory of Public Finance

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