Modern Monetary Theory: Miracle or Mirage?

In this bonus episode of the New Politics podcast, host David Lewis unpacks Modern Monetary Theory (MMT) – once dismissed as fringe but now at the centre of global economic debate. We explore its intellectual roots, from Georg Friedrich Knapp and Abba Lerner to modern voices like Warren Mosler, Bill Mitchell, L. Randall Wray and Stephanie Kelton, and examine how MMT shapes today’s policy battles over climate change, unemployment and inequality. From Japan’s record debt levels to US COVID stimulus, Canada’s healthcare experiments and China’s infrastructure spending, real-world tests are mounting, sparking fierce clashes between advocates who see MMT as a tool for resilience and critics who warn of runaway inflation. Is it the future of economic management or a dangerous illusion?

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Reading list:

1. Kelton, S. (2020). The deficit myth: Modern Monetary Theory and the birth of the people’s economy. PublicAffairs.
2. Knapp, G. F. (1905). The state theory of money. Macmillan.
3. Lerner, A. P. (1943). Functional finance and the federal debt. Social Research, 10(1), 38–51.
4. Levy Economics Institute. (2025). The rise of the modern monetary system (Working Paper No. 1234). Levy Economics Institute of Bard College. https://www.levyinstitute.org/publications/the-rise-of-the-modern-monetary-system
5. Mitchell, W. (2025, August 8). The failure of austerity and the construction slowdown in the UK [Blog post]. Bill Mitchell – Modern Monetary Theory. https://billmitchell.org/blog/?p=62704
6. Mitchell, W., Wray, L. R., & Watts, M. (2019). Macroeconomics. Red Globe Press.
7. Murphy, R. P. (2025). MMT: Dead wrong [Audio podcast episode]. Mises Institute Podcast. Mises Institute. https://mises.org/library/mmt-dead-wrong
8. Palley, T. I. (2019). Modern Monetary Theory (MMT): A policy polemic for depressed times. Real-World Economics Review, 89, 147–160. http://www.paecon.net/PAEReview/issue89/Palley89.pdf
9. Phys.org. (2025, May 15). Economist: Modern Monetary Theory could benefit Canada. Phys.org. https://phys.org/news/2025-05-modern-monetary-theory-economist-canada.html
10. Tcherneva, P. R. (2020). The case for a job guarantee. Polity Press.
11. Wray, L. R. (2015). Modern Monetary Theory: A primer on macroeconomics for sovereign monetary systems (2nd ed.). Palgrave Macmillan.