Can The Country Run Out Of Money And Mmt

In the Nov/December 2021 issue of Intereconomics, Françoise Drumetz and Christian Pfister examine Modernistic Monetary Theory (MMT) and approach information technology from the policy consequences that would follow. This paper is a respond to Drumetz and Pfister. It restates the cadre of MMT and offers some suggestions for central banks. Theories are explanations of what we encounter, and MMT describes money creation and destruction. Hence, MMT cannot be and is not a political manifesto. In contrast to about other theories of money, MMT is falsifiable in its core statements, which are based on a residual sheet approach to macroeconomics. Since many fundamental banks already educate the public about the cosmos of modern money through bank lending, it would be most welcome if they would exercise the same for the cosmos of modern money through government spending. Hither, MMT and central bankers can find mutual ground to motility frontward and leave the theory of loanable funds and that of the money multiplier backside.*

Teaching macroeconomics in 2022 is an interesting practice. The textbooks usually rely on the money multiplier. They presume that the fundamental bank lends to banks, which so lend to households and firms. This is contrasted by the announcements of practitioners, mostly central bankers and bankers. ¹ The St. Louis Fed tweeted the following statement to draw attention to Ihrig et al. (2021): "Many econ textbooks include outdated information on how Fed policy influences banks and the economic system. Educators should carelessness the 'coin multiplier,' a popular model that is now obsolete". ² If, nonetheless, the money multiplier is incorrect, so what becomes of the discussion of banks as intermediaries, equilibrating saving and investment? The Bundesbank (2017, 17) writes: "This [the stylized example of the creation of coin] refutes a popular misconception that banks deed only as intermediaries at the fourth dimension of lending – i.e., that banks can merely grant loans using funds placed with them previously every bit deposits of other customers". So, macroeconomics is in need of a new theory. The textbook models have fallen apart, and a new theory of coin is needed. That theory should exist Modern Monetary Theory (MMT), which over the concluding 25 years has matured into a legitimate school. ⁱⁱⁱ

Every bit retold by Ehnts (2020, 293), mainstream economists do not believe that "countries that infringe in their own currency should not worry nigh government deficits considering they tin can e'er create money to finance their debt". Looking at the event from a survey, ⁴ not a single economist agreed with that statement. If these economists had been right, nosotros would accept seen many governments running out of coin in 2020 and 2021. Later all, revenue enhancement revenues complanate, government spending increased and public deficits and public debts skyrocketed. Surely, the Greek government, surpassing 200% of public debt to Gdp in 2021, would be in for a repeat of the euro crisis. It did not happen. Every bit we all know past now, a government cannot run out of its own money for technical reasons. ⁵ The Wall Street Periodical recognises that "important elements of MMT are accepted by much of the financial establishment" and that "the lesson of 2020 was that MMT is right" considering "a government demand never default on debt issued in its own currency" (Mackintosh, 2021). In the eurozone, all national governments fabricated their payments on time – all of them. This needs to be explained. ^six The recent article by Drumetz and Pfister (2021a), published first equally a (longer) Banque de France working paper (Drumetz and Pfister, 2021b), could be the start of a conversation well-nigh how to reconstruct macroeconomics and narrow the deep gulf between theory and practice in both monetary theory and macroeconomics. ^seven

Mainstream macroeconomics, MMT and real MMT: Theory and the table

Drumetz and Pfister (2021a, 360) start their test of the meaning of MMT using a tabular array that summarises their views on both mainstream (theory) and MMT. The tabular array (reproduced as Table i) seems to be a good starting indicate for a discussion of their paper. The first column describes the upshot discussed, followed by the cavalcade that summarises the mainstream view, one that summarises MMT as seen by Drumetz and Pfister (2021a) and one that summarises MMT from my ain view. Apart from the issue of unemployment, I differ with the authors' view of MMT. The reason is, I suppose, that the authors approached MMT from the wrong side. Starting with the research question of what the meaning of MMT would be (in the sense of economic policy or institutional reform), they ignored its logical core and failed to recognise the methodological differences from the mainstream arroyo. This would be comparable to a critique of the mainstream theory by MMT authors that would completely ignore the mathematical model at the core and just hash out the policy implications, i.due east. its supposed meaning. This kind of arroyo implies that the theory is just intellectual manus-waving intended to justify the policy conclusions. But that is non how MMT works. ⁸

Tabular array 1
Mainstream view, Drumetz and Pfister MMT view and original MMT view

		Chief­stream view	Drumetz and Pfister MMT	Original MMT
1	Govern­ment expen­diture is financed by...	taxes	issuing currency	information technology is not "financed"
2	Public debt sustain­ability...	tin exist an issue	cannot be an result	is a political event (if "debt" in own currency)
3	Public bonds are issued...	to finance the public deficit	to distribute income equally office of an involvement rate primary­tenance strategy	equally office of an interest rate main­tenance strategy and/or to satisfy eurozone rules
4	Admission of govern­ment to central bank financing...	should be limited	is unlimited	depends on the laws
5	Public debt purch­ased by the central banking company...	should exist paid off	is paid off	consti­titutes an asset swap for banks
6	Crowding out...	can exist an issue	cannot be an issue	cannot exist the result of a lack of loanable funds
vii	Monetary policy...	has a function to play to stabilise the economy	has no role to play to stabilise the economy	has a role to play to stabilise the economy
8	Interest rates...	are a market variable	are prepare by the government	are set by the central bank
ix	Inflation...	is a monetary issue	is a financial policy issue	is a complex phenomenon
ten	Unemploy­ment...	cannot be fully eliminated	tin can be fully eliminated	tin be fully eliminated
xi	Conven­tional structural policies...	are positive	are negative	can be positive or negative
12	A sovereign economy...	should be competitive	does not accept to be competitive	should aim for full utilize­ment and price stability
13	Skills...	are important deter­minants of income	are loosely linked to income	are of import deter­minants of output
14	Social welfare...	has a cost	has no cost	has a price

Source: Drumetz and Pfister (2021a); writer'south own elaboration.

MMT is, first and foremost, a balance canvass approach to macroeconomics. At its very core lie reserve accounting, then deposit bookkeeping, so sectoral balances bookkeeping. There is very little behaviour in any of this. Equilibrium rules as all balances balance – in both flows and stocks – and there are no assumptions autonomously from the being of a central bank, a Treasury, a banking arrangement and some households and firms. MMT tin simply be learned by mastering its balance sheet approach. Information technology can just exist engaged by discussing the rest sheet operations information technology puts forward. Information technology is here where value is added. Therefore, I suggest looking at some of these explanations in more detail.

Beginning of all, the main insight of MMT is that the mainstream has the sequence wrong. Whereas they assume that government expenditure is financed by taxes (Table 1, row one), MMT assumes that regime spending is financed by money creation. ^nine MMT stresses that the central bank, empowered by the constabulary and serving the country, is the monopoly issuer of currency. In the eurozone, this would exist the European Central Banking company (ECB) and the national primal banks. This logically means that the land has to spend before taxes tin can be paid in euro. When taxpayers pay their taxes (or banks buy government bonds on the primary market), they first need to accept state money. "As the sole issuer of euro-denominated fundamental depository financial institution money, the Eurosystem will always exist able to generate boosted liquidity every bit needed", ECB president Lagarde said co-ordinate to Reuters (2020). ^ten Every bit Kelton (2000) argues, issuers of currency finance their spending by creating coin when they spend and cannot practise otherwise. ^eleven

When the ECB buys government bonds or other fiscal assets in the context of its quantitative easing or its nugget purchase programmes, it "increases the price of these bonds and creates coin in the banking system", equally the ECB (2021) explains on its webpages. With "coin" the ECB means "central bank deposits", also called reserves, since it pays with electronic money and non cash. This process is well understood. In an interview with 60 Minutes, former Federal Reserve Chair Ben Bernanke (2009), was asked where the coin the Fed lends would come from. "It'south non tax money," Bernanke said, "The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a banking concern, we simply use the computer to mark up the size of the account that they take at the Fed." These are the changes in the corresponding balance sheets when the Fed extends a loan to a bank that has enough collateral.

Information technology is obvious who is the issuer of currency and who is the user of currency. The Fed creates reserves when it spends or lends. Reserves are created by the computer software that the Fed runs – the payment system. The fundamental bank is the score keeper of its society. ¹² This is only how commercial banks work. These create bank deposits when lending, which are destroyed at repayment (McLeay et al., 2014).

To understand questions concerning public debt and fiscal sustainability, we demand to look at the manner a national (federal) government spends. It is at the level of balance sheets, which are descriptions of reality, that we can expect to detect an reply. The following description of the federal government of Federal republic of germany spending €100 is based on Ehnts (2016, 119). ¹³ We assume that the twenty-four hours has only started and that the Treasury account of the federal regime of Federal republic of germany (Zentralkonto des Bundes) stands at zero. The Treasury at present instructs the German language key banking company to execute a payment of €100 to a household, who has supplied the Treasury with appurtenances and services. The Bundesbank accordingly credits the account of the seller'due south bank, which then credits the account of the seller. At the same time, forced by its rules of operation, the Bundesbank debits the Treasury business relationship. Table 2 shows what the balance sheets look like.

Table 2
Regime spending of the German federal government

Deutsche Bundesbank
	Reserves €100
	Treasury business relationship -€100
Treasury
Treasury account -€100	Net wealth (Δ public debt) -€100
Bank
Reserves €100	Deposits €100
Household
Deposits €100	Internet wealth €100

Source: Ehnts (2016).

If this is how a federal regime spends in the eurozone, there is no possibility that it can "finance" its spending. Its key banking concern always creates new reserves when it spends on behalf of the government. It cannot spend tax revenues or bail revenues. As the name implies (from French revenir, to come dorsum), when taxes or bonds are paid, the government's money comes back (revenue) to the government. In that location is one complication, though. In the eurozone, central banks are not allowed to finance their governments. This is why at the end of the twenty-four hour period the Treasury account has to go back to nil. This can exist achieved past booking tax and bond sale revenues to the account. The balance in the Treasury business relationship is not money, as the Bundesbank itself notes. ¹⁴ Information technology is a number that matters for operational reasons. The Bundesbank can only spend for and on behalf of the Treasury if at the start of the day the Treasury'due south account is non-negative. Tax and bond revenues are not well-nigh financing, only nigh creating a green traffic light for the Bundesbank. This is a political complexity that other budgetary systems do not take. So, in the eurozone a national (federal) government cannot run out of money as long every bit:

1. taxation revenues are high plenty to bring the Treasury account back to zero or
2. bond revenues are high enough to bring the Treasury business relationship back to null or
3. tax and bond revenues together are loftier plenty to bring the Treasury account dorsum to zip.

This means that a eurozone national government does not run out of coin until it has exhausted its tax revenues and bond revenues. Information technology would only run out of coin due to political reasons that are hardwired into the laws of the Eu, non because its central bank cannot create more euros. MMT sees the buy of government bonds by the central banking concern as an asset swap. Government bonds purchased by the ECB, for instance, are not paid off. ^xv Regime access to key bank financing in the eurozone is therefore limited (Table one, row 4), at least with the standard rules in place. Since 2020, the full general escape clause of the Stability and Growth Pact has been activated and the ECB has initiated its pandemic emergency buy programme (PEPP), ensuring plenty demand for government bonds then that investors perceive them as risk-free. ¹⁶ This means that the national governments are free to spend what they call up advisable until the escape clause is deactivated. Public debt sustainability is a political, non an economic issue (Table 1, row two). This is almost clearly visible when looking at Greece, which had a public debt-to-GDP ratio of 130% in the early 2010s when it ran out of money, but has been doing well in 2021 with a public debt-to-Gross domestic product ratio of more than than 200%.

Government bonds are issued to satisfy eurozone rules (Table i, row iii). Since they provide a run a risk-free asset, at to the lowest degree in expert times, the bonds are also used every bit a means to stabilise the interest rate at some positive level. When a cardinal depository financial institution buys a government bond from a bank, it just marks up the bank'south business relationship. A government bond in the possession of the central banking concern volition lead to an interest payment from the Treasury to the central bank. Since this payment increases the central bank'southward profits and those are unremarkably transferred to the Treasury's account, it is up for discussion whether regime bonds held by a cardinal bank should exist counted towards public debt.

Public debt equals the money that a government has spent and non yet collected back in taxes. This is something fundamentally unlike from a private borrower with debt. The private borrower would have to make a payment to rid herself of debt. The government cannot do that – its payments cause the public debt. Actually, taxpayers would have to make payments in guild for public debt to come down towards zero. Therefore, government bonds held by the primal bank or households practice not plant a debt that has to be redeemed by the regime.

Mainstream, MMT and real MMT: Economical policy and the table

Drumetz and Pfister (2021a, 357) correctly describe the MMT view on crowding out:

The crowding-out upshot on individual spending does not exist in MMT because expansionary fiscal policy is supposed to lower interest rates by providing liquidity to banks rather than raising them by crowding-out the private need for debt financing.

Most central banks intervene in the money market automatically to ensure that the interest rate does not fall (rise) when the government spends (receives tax acquirement). This means that there is no fiscal crowding-out – the government spends reserves that are created anew (and not taken from some pre-existing pot of savings, like the loanable funds theory implies) and the interest rate does non modify. ¹⁷ This, notwithstanding, does not hateful that government spending could not potentially crowd out individual spending. If a federal government takes over a part of the arrangement of an economic system, say wellness care provision or public education, and so obviously individual sector firms would exist crowded out. MMT does non say that the government is better (more than efficient or more effective) than the individual sector. MMT simply highlights the fact that resource used for social welfare have opportunity costs since they are not bachelor for culling private (or public) sector uses (Table 1, row xiv).

MMT helps us to understand what the budgetary arrangement is. Information technology is in place so that the government can provide itself with the resources and workers information technology needs to do its job, which is to fulfil its public purpose (Ehnts and Höfgen, 2019). It is important to note that the government can only purchase what its citizens are willing and able to sell. This means that a government should be interested in having an educated and productive workforce with enough of skills providing the authorities with a higher output (Table 1, row 13). Whether those with higher skills likewise (do or should) receive a higher income is an empirical question and cannot be answered by MMT. The goal of the economic system is to provide us with the goods and services that we need. Public purpose can be served by the private sector too equally the public sector.

Another mainstream view is that the economy should exist competitive (Table 1, row 12). From a MMT perspective, this is mistaken. The economy should be targeting total employment and price stability. A competitive economy might provide these, but rather by gamble and not through macroeconomic policy. If a competitive economy is one in which exports are higher than imports, then the nearly competitive economy that we can think of is ane in which all value added is exported. This ways that wages and domestic consumption are zero and all of national income is in the hands of majuscule owners – inappreciably a promising target for a modern club. The way this undesirable state of affairs would be achieved is through falling wages (given some exchange rate). The further wages fall, the higher net exports will rise. This used to be chosen mercantilist policy or beggar-thy-neighbour policy. A neo-mercantilist policy might be successful, equally the case of Germany seems to prove.

So, what about macroeconomic policy? In mainstream economics, budgetary policy has a role to play to stabilise the economy (Table 1, row 7). It is causeless that an increment (subtract) of the central bank's main interest rate will pb to a decrease (increase) in individual investment. This view has lost its credibility after almost a decade of zero and negative involvement rates and lackluster private investment. MMT and the mainstream agree that an increase of the interest rate might, after some fourth dimension lag, crusade a plummet in individual investment that is big enough to bring down wage growth and, with it, inflation. Even so, almost nobody believes that a autumn in the interest rate would bring about a recovery with rising individual investment. MMT recognises that changes in amass demand thing for private investment. The Biden administration's actions are consistent with this view. Government spending creates, dollar for dollar, private sector income. If firms need to invest before they can sell to the regime, and so they will do it as long as expected positive profits issue. The nominal interest rate is of secondary importance, if at all.

The mainstream view is that the interest rate is and should be the principal policy instrument of monetary policy. MMT disagrees. Fighting inflation by creating unemployment through a rise in the interest rate might work, but in the long run it is a socially damaging policy. After four decades, this kind of budgetary policy has left nearly of the Western economies, and the eurozone specially, with high rates of unemployment and high levels of inequality. The eurozone's rate of unemployment has never been below 7%, which is high compared to other adult countries. Given existing technology, working hours and concrete capital, a consequent lack of government spending has caused amass demand to fall short of what is required for full employment. Mario Draghi, who understands this, has called for more expansionary financial policy over his whole reign as ECB president. Monetary policy should support fiscal policy in finding the right level of spending that is consistent with full employment (Tabular array ane, row 7). This means that the ECB should guarantee the national regime's liquidity and solvency at all times. Only then can we expect that macroeconomic mindset of policymakers to shift from the austerity way to a European New Deal way. With regard to the interest rate, it might brand sense to leave it at zero to ensure that nobody earns risk-free rewards or to set it at 2% in club to support the inflation target of the same size. ^eighteen

The question of whether interest rates are set by the central bank or the market has become clearer in the last few years. If the primal depository financial institution wants, it can steer the overnight interest rate and all other interest rates (yields) along the yield curve for authorities bonds (Mosler and Armstrong, 2019). Japan, while not post-obit Mod Budgetary Theory as Wray and Nersisyan (2021) betoken out, has shown that information technology is possible to direct target bail yields. This ways that markets set interest rates (yields) only to the extent that the key depository financial institution lets them (Table 1, row 8).

History has shown that full employment and price stability are compatible. They are not at the contrary ends of a trade-off, as the Phillips curve implies. In many Western European countries, nosotros had both full employment and price stability in the 1960s. Betwixt 1961 and 1966, the German unemployment rate was below 1% for five consecutive years, with inflation rates between 2.4% and 3.3%

According to MMT, both price level and changes in the price level are mostly driven by the behaviour of the state. Due to the monopoly on currency that it enjoys, the land is the only actor in the economic sphere that tin can pay any wages or prices it pleases (Levey, 2021), which sets the price level. When the country pays different prices, the toll level changes. This also explains what happens in hyperinflation. The governments of Weimar Germany in the early on 1920s and those of Zimbabwe and Venezuela paid higher and higher prices to public employees and also paid more for the currencies, goods and services they procured (Armstrong and Mosler, 2020).

Figure ane shows the empirical relationship betwixt wages and salaries paid by the US government; information technology is much tighter than those between budgetary aggregates and inflation. Bobeica et al. (2019) in an ECB working paper also find that "labor price increases volition be passed on to prices". Nevertheless, MMT does non deny that there are other influences on prices as well. For instance, a rising oil price can drive up the toll level if the rising free energy costs are passed on to consumers. Also, monopolistic competition can drive up prices in areas like education and health intendance. Alternatively, inflation can arise if at that place is a lack of workers in any given area of the economic system, driving up wages there. All of this ways that inflation is a symptom of changes in society and non always a "monetary phenomenon" (Table i, row 9).

Figure 1
Government wage growth and aggrandizement in the United states of america

Percentage change from year ago, annual

Note: Shaded areas indicate U.South. recessions.

Source: Federal Reserve Bank of St. Louis.

An understanding that inflation is not caused by tight labour markets infers that total employment and price stability are possible (Table 1, row 10). Aggregate spending in the economy determines aggregate output, which – given working hours, technology and capital – determines employment. If private spending is not loftier enough to reach full employment, information technology is the chore of the government to increase spending. ¹⁹ After all, it is the taxation liabilities that the government imposes that forces people to expect for paid work. Since the authorities cannot know the future, it is impossible to fine-melody fiscal policy then that full employment results at all times. That is why MMT has suggested the add-on of the Chore Guarantee (Tcherneva, 2020). In this way, those who can piece of work and want to work e'er accept the selection to take on a Chore Guarantee job, which would eliminate involuntary unemployment and act as a macroeconomic stabiliser.

The assessment of conventional structural policies from a MMT perspective is open (Table 1, row 11). If conventional structural policies mean imposing hardship on those earning their income generally through work, at that place is no reason why this should be a preferred policy. MMT recognises that managing the supply side of the economic system and labour relations is important for total productivity and allotment. There is nothing wrong with allotment past the individual sector per se. If, withal, the results indicate a sub-optimal allocation, then the regime should non hesitate to change the rules of the game. This is most important in the context of a Green New Deal (Nersisyan and Wray, 2019). ²⁰

Conclusion

Drumetz and Pfister (2021a, 2021b) should be lauded for their intent to appoint with MMT. As expected, a cultural shock resulted, as MMT is a falsifiable empirical budgetary theory that sets out to explain the real globe whereas the mainstream theory sets out from model assumptions and so moves to the real world. It was the intent of this reply to correct the image of MMT that the authors built up and that is reflected in their Table 1 (also Table 1 of this newspaper). I have argued that before discussing the macroeconomic implications of MMT (what Drumetz and Pfister call the "meaning") we need to become the balance sheets correct. MMT starts with the logic of the payment arrangement (reserve bookkeeping) and and so moves on to sectoral balances. Therefore, it provides a word of the micro-structure that is absent in about of mainstream macroeconomics. It is at this level that the debate of MMT should start, leaving the question of what to do in terms of macroeconomic policy for later.

Drumetz and Pfister are invited to answer to this paper past engaging with the claims made here. Every bit Table ane shows, I think that their representation of MMT is flawed and therefore their sentence of MMT is unreliable. To make some progress, I would ask the authors to explicate in rest sheets how the French federal government actually spends and/or to refute my rest sheets for the German example. I believe my balance sail structure shows clearly that the German Bundesbank is a currency issuer and that it creates new reserves every time the German language federal government spends. If that is the case everywhere in the eurozone, this would mean that the ECB could solve any problem of fiscal sustainability by making the PEPP permanent, as argued by Ehnts and Paetz (2021). The question of how much governments are allowed to spend is divorced from this event.

* This commodity is a reply to Drumetz and Pfister (2021a, 2021b). The author thanks Pavlina Tcherneva and Phil Armstrong for comments on the newspaper. An before and longer version of this newspaper was published as Ehnts (2022).

• ane One of the showtime practitioners to stress that households and firms cannot borrow reserves is Sheard (2013).
• 2 Come across https://twitter.com/stlouisfed/condition/1447612987196456972.
• 3 JEL codes E12 and B52 include Modernistic Budgetary Theory, Mitchell et al. (2019) published a 600-page textbook that tin can replace mainstream textbooks and Kelton (2020) is a New York Times bestseller.
• four https://www.igmchicago.org/surveys/mod-monetary-theory/.
• 5 At that place is nothing to stop a country from enacting laws that would cease the government spending more than, similar the U.s.a. debt ceiling. Then, yet, it is a political determination to run out of money. See Ehnts (2020b).
• half dozen The explanations of mainstream economists seem unconvincing. Krugman (2021), for instance, writes: "But is the Fed really financing the budget deficit? Not actually. At a primal level, households are financing the deficit: the funds existence borrowed past the regime are coming out of the huge savings undertaken by families saving much of their income in an surround where much of their usual consumption hasn't felt safe." The problem with this is that patently the Fed does non infringe household savings (or rather saving since this is about flows). Information technology sells sovereign securities to banks but.
• 7 Some points made in the working paper take been omitted from this version. These points are addressed in Ehnts (2022).
• 8 MMT started in 1996, when Warren Mosler contacted some academics to discuss monetary theory. Mosler, who worked every bit a banker, but also synthetic racing cars (and a ferry), certainly was not looking to write a political manifesto. In Mosler (1995), he thank you Arthur Laffer for "valuable literary assistance and research with this work". In Mosler (1997), his first peer-reviewed academic journal article, he describes at length how the budgetary organization works and how nosotros can utilise information technology to attain full employment and cost stability – hardly a political manifesto.
• 9 It is non a coincidence that his view was used past Margaret Thatcher, who claimed that there would only be taxpayers' money and no public money. The reverse is true, but most macroeconomic textbooks do non reflect that.
• 10 In their abstruse, Drumetz and Pfister (2021) bespeak out that MMT would take gained prominence "in the media and in the public". In 2019, Mario Draghi reportedly said that "the ECB should examine new ideas similar MMT" (Bloomberg, 2019a) while Christine Lagarde said that "MMT is no panacea but may help fight deflation" (Bloomberg, 2019b). John Yarmouth, chair of the House Upkeep Committee, defended the Biden administration'due south policy in terms of MMT, as the New York Times' (2021) Peter Coy notes.
• 11 Come across Tymoigne (2014) for further details on interactions betwixt the Treasury and the Federal Reserve Bank.
• 12 See Armstrong and Mosler (2019).
• thirteen A more contempo version can be establish in Ehnts (2020a).
• 14 This is but logical, since reserves are basically a tax credit. Neither the central banking concern nor Treasury make payments to the State – they are part of the state.
• 15 Interest from bond holdings of the ECB is distributed to the treasuries of the eurozone member states, weighted by the capital key.
• xvi I accept argued for such a plan since the publication of my book in 2014 (in High german; Ehnts, 2014).
• 17 This challenges the concept of monetary and fiscal dominance. The central bank can set and control the interest charge per unit and at the same time execute the authorities'south payments, every bit Fullwiler (2020) shows. Any interest rate the central banking concern sets is compatible with any level of public debt to GDP.
• eighteen MMT recognises that higher interest rates on Treasury bonds increment amass need.
• nineteen Theoretically, a modify in taxation rates works every bit well, but not if information technology reduces taxes mostly for the rich who and then save the additional income.
• 20 Drumetz and Pfister (2021a, 2021b) brand some more than points that are worthy of comment which I address in Ehnts (2022).

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Source: https://www.intereconomics.eu/contents/year/2022/number/2/article/modern-monetary-theory-the-right-compass-for-decision-making.html

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