![]() ![]() ![]() As debt is in its own currency, such countries can always overrule market sentiment on interest rates. ![]() #3: The truth about national debt and “crowding out”. An economy becomes inflationary when combined public and private spending brings it to “full employment”. Governments with monetary sovereignty should use inflation as the measuring stick for overspending, and not the deficit. ![]() A country with monetary sovereignty cannot spend without limit but should not be confined by the same budgetary ideas as a household. Where the state issues its own currency, the federal budget is not the same as a household budget because it is a currency issuer, not a currency user. #1: Distinguishing currency issuers and currency users. Instead of focusing on self-imposed budget constraints, Kelton suggests we should instead use inflation and real resource limits as the measuring stick for public spending. It seeks to explain why for countries with monetary sovereignty the federal budget is fundamentally different to the household budget, and why deficits are generally good for the economy. The Deficit Myth is an introduction to Modern Monetary Theory (MMT), an economic school of thought that is growing in popularity. ![]()
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