Wealth management and new wealth creation: a critique of Modern Money Theory (MMT)

Abstract

The debate on monetary policy, currency and its nature has returned to the center of the economic debate in Brazil and in the world. At the heart of the proposed debate are central issues, such as, the impossibility of a sovereign government to not honor debts denominated in its own currency, the central proposition of Modern Monetary Theory (MMT), in addition to putting into doubt what were, until recently, basic assumptions of conventional economic theory, such as the indispensability of a monetary regime supported by an Independent Central Bank, that pursues inflation targets. In this context, this article has two main objectives. First, it seeks to identify more precisely the theoretical frameworks that support two different views on what currency is in a fully developed capitalist economy. On the one hand, the view of the commodity currency, which incorporates the theoretical construction of classical political economy; on the other, currency seen as a social institution, belonging to the Keynesian-Marxist theoretical framework. Second, it seeks to understand the main assumptions of MMT and its points of convergence and divergence in relation to the two views mentioned above. From the Keynesian-Marxist perspective, it is concluded that the theoretical approaches that treat states and markets as abstract entities, operating in ideal scenarios, far from the real economic, social and political conditions of the present moment, such as MMT, are not supported.