Introduction
This article deconstructs traditional perceptions of money, moving away from the vision of a neutral medium of exchange toward a theory that views it primarily as a debt relationship and a tool of power. By analyzing L. Randall Wray’s Modern Monetary Theory (MMT), the text challenges the popular belief in the scarcity of state financial resources, arguing that in a monetarily sovereign state, spending precedes taxes. A key element of the discussion is the Job Guarantee, presented as a mechanism that stabilizes the economy and serves as a nominal anchor for the currency. The text provokes reflection on the role of the state in the economy and alternative methods of economic stabilization.
Money and Taxes: Sovereignty through the Lens of MMT
In the MMT framework, money is not a thing, but a debt relationship—a record of a claim embedded within an institutional order. The state first establishes a unit of account and then imposes obligations in that unit. It is taxes that drive money, as they generate an unavoidable demand for the issuer's currency, which is necessary to settle dues. From this perspective, public spending precedes tax revenue—the government must first supply the system with currency through its spending (so-called "keystrokes") so that the private sector has the means to pay taxes.
Full monetary sovereignty requires specific conditions: issuing one's own currency, levying taxes in that currency, a floating exchange rate, and an absence of debt denominated in foreign currency. In such a system, real resources—labor, technology, and raw materials—constitute the only true limit to state spending. A sovereign issuer cannot go bankrupt in its own currency, but it must manage the economy's available productive capacity.
Inflation, Banks, and Financial Stability
For MMT, inflation is a resource barrier, not a simple result of the money supply. It is a signal that nominal demand has exceeded the economy's productive capacity. Parallel to the state, commercial banks operate by creating private money at the moment a loan is granted—the loan creates the deposit. However, as Hyman Minsky’s financial instability hypothesis states, stability is destabilizing. Long periods of calm lead to excessive risk-taking and speculation, which inevitably build financial bubbles.
MMT significantly reduces systemic risk in the perception of business. A state deficit is treated as a private sector surplus, which stabilizes income. Understanding that the state is the lender of last resort allows for a better assessment of liquidity risk. However, the key is to distinguish between money creation for productive versus speculative purposes, which requires robust regulation of the banking sector.
The Job Guarantee as an Economic Anchor
The Job Guarantee (JG) is a policy proposal that stabilizes the business cycle by automatically absorbing the unemployed during recessions and releasing them back to the private sector during booms. This program serves as a nominal anchor for the currency, as the fixed wage in the program sets a fundamental benchmark for the structure of wages and prices. It is an alternative to orthodox policy, which attempts to buy price stability at the social cost of unemployment.
In an open economy, monetary sovereignty provides flexibility, though a floating exchange rate necessitates the real management of the balance of payments and energy imports. The dispute between MMT and orthodoxy thus concerns the very nature of public debt—for MMT, it is a tool for resource coordination. Effective local management within the JG allows for meaningful labor allocation where the market fails, provided there is central funding to ensure the program's automaticity and standards.
Summary
In a world where financial limits prove to be more conventional than real, are we ready to trust the state as an architect of prosperity rather than merely a budget guardian? Is the Job Guarantee a utopia or a pragmatic step toward a society that values the dignity of work over the fetish of price stability? Randall Wray shifts the weight of the discussion from the question "can the state afford it?" to "is the state capable?". Perhaps the future of the economy depends on whether we dare to view money not as an end in itself, but as a tool for building a more just and resilient world.
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