The last few weeks have seen a spike in commentaries surrounding modern monetary theory (MMT). A column by Prof. Stephanie Kelton, Andres Bernal, and Greg Carlock at Huffington Post and an endorsement from Representative Alexandria Ocasio-Cortez (D-N.Y.) have triggered negative responses by a number of reputable economists. George Selgin, Larry Summers, Paul Krugman, and Ken Rogoff (just to name a few) have all expressed concerns (to put it mildly) about the implications of applying MMT.
A common thread in these (and other) responses is that it is not clear what MMT really stands for. Advocates of MMT seem to use conventional terms in unconventional ways, and that creates confusion. On top of this, what exactly MMT means changes as time goes by, thereby adding frustration to confusion.
At its core, MMT maintains that a government cannot go broke as long as it can issue its own currency. Large fiscal deficits can be paid for by “printing money” (or, more technically, monetizing deficits). Standard monetary theory maintains that such a policy causes inflation. MMT, in contrast, holds that such a policy is not inflationary, because there are idle resources.