SMT vs. MMT
Sound Monetary Theory vs. Modern Monetary Theory In this piece I will contrast Sound Monetary Theory (SMT) with Modern Monetary Theory (MMT). The term SMT may be as new to you as MMT, but I will reveal that you already know everything about SMT, unlike its upstart rival, MMT. By asking a few simple questions, it will become clear which theory is superior in describing the real world. 1. Where does money come from, who makes it? SMT – Obviously, money is only made when people in the private sector make a profit. Entrepreneurs and big corporations such as Apple, Sony, Tesla make millions if not billions every year. Banks make money by charging interest. Even governments can make money by selling land and so on. Organisations that lend money clearly need the savings of richer people to give to creditors. MMT – Only banks can make money, essentially out of thin air, though some argue that a balancing asset is needed such as a promise to pay it back. P...