MMT - Chap 4 - Fiscal Operations in a Nation That Issues Its Own Currency
In the Chapter the author examines fiscal policy for a government that issues its own currency. 4.1 Introductory principles Statements that do not apply to a sovereign currency issuer According to the author, the following statements are common beliefs that actually are false and do not apply to a sovereign currency-issuing government. Governments have a budget constraint (like households and firms) and have to raise funds through taxing or borrowing. Budget deficits are evil, a burden on the economy except under some special circumstances (such as a deep recession). Government deficits drive interest rates up, crowd out the private sector, and lead to inflation. Government deficits take away savings that could be used for investment. Government deficits leave debt for future generations; the government needs to cut spending or tax more today to diminish this burden. Higher government deficits today imply higher taxes tomorrow, to pay interest and principal on the debt that