US economist Stephanie Kelton, a former adviser to Bernie Sanders, has just embarked on a tour of Australia. Kelton is promoting her vision of government funded jobs to deal with unemployment and underemployment in Australia: a government Job Guarantee. While the idea sounds nice, a government guarantee is nothing but a guaranteed failure.
The economic rationale for this proposal is the idea known as Modern Monetary Theory (MMT), which began gaining popularity in the early 90s, evolving from existing theories developed by economist Georg Friedrich Knapp in the early 20th century. The theory proposes that taxation does not fund government spending and is merely a policy tool to control inflation and unemployment. The same thinking applies to government spending being a policy tool. Further, MMT proposes that when a sovereign nation establishes its currency as fiat money and is the sole supplier, the government commands an unlimited ability to … Read the rest