The argument of this paper is thus that a government can never run out of money. It can rather, by definition, afford to provide full employment and all the other things mandated by the constitution in the directive principles of public poli….CounterCurrents
Basically Modern Money Theory shows that there is no solvency risk for a government that issues its own currency. It can’t go bankrupt. It’s not possible for it to run out. You cannot spend more than tax revenue and go bust, because you can always issue more currency. But you can put your own constraints: so in (the US there is debt limit, no other country has this, the US has had it since 1913. But the debt limit has always been raised as needed, so it was a constraint that was never constraining. But sometimes there is a pressure like a political pressure recently by Republicans to try to enforce policy change. You can impose a debt limit constraint and force the government to default on its promise to pay on bonds, or social security, that is a self imposed constraint. In fact Congress can just get rid of the debt limit all together, because it is stupid.) (In India the Fiscal Reserve and Budgetary Management Act is a similar constraint that should be abolished) . There is no reason why the government cannot continue to spend simply by issuing more currency. The government debt is nothing other than private sector savings. If you have your own currency, you can always afford to spend more, so you can always afford full employment. The policy implication of modern money theory is thus that you can afford full employment and all the other things mentioned in the directive policies. There may be inflation but you cannot run out of money….
In other words the government does not understand that it can issue credit to millions of household and state government and other accounts to create demand and create work and create the money that will later come back in tax, to replace the failed global corporations, but it is in any case not the tax that is financing government spending but the money that the government has created in order for the households and small firms to be able to pay tax.
Modern Money Theory And The Demonetisation Catastrophe In India
Anandi Sharan, environmental historian and Board member of the global environmental platform CBD Alliance