**Modern Monetary Theory** basically speculates that countries that spend, tax and borrow government-issued funds are [not constrained when it comes to their spending] (https://www.businessinsider.com/modern-monetary-theory?r=US&IR=T). If a country has a **fiat currency** (money that is not backed by commodities but by government-issuing) then they'll never run out of money because they can always just create more. It only applies to countries that issue their own currency. Government-issued debt, or a bond, is a debt issued by a government & sold to investors to fund government spending. This kind of debt is issued when a government wants to spend more than it has raised in tax revenue. It essentially needs to borrow money, which has to be paid back at some point. Often, a government will make interest payments to multiple creditors - it's [a system of trust] (https://www.investopedia.com/terms/g/government-bond.asp) based on the assurance that the debt will eventually be paid back. Central banks can buy up these government-issued bonds by printing currency to pay for them. This means the money [goes back into economic circulation] (https://theconversation.com/explainer-why-the-government-cant-simply-cancel-its-pandemic-debt-by-printing-more-money-148514). Some people argue that this means the creditors have been paid off & the government should be able to write off this debt. However, the bonds are still in existence, they are just circulating as currency - which the banks (acting as independent entities) can claim interest on. The debt will still have to be honoured by the government. Basically: **MMT says that a country that has its own currency doesn't ever really need to worry about building up government debt**. It can always just create/print more money to pay the interest. A country's central bank can always generate more money to effectively finance infinite government spending. - However, this contradicts [the independent nature of the banks] (https://www.bankofengland.co.uk/knowledgebank/how-is-the-bank-of-england-independent-of-the-government). MMT also argues that since the government can create as much money as it wants to fuel the economy, taxes aren't used to fund government initiatives. Instead, taxation relieves the economy when government spending overrides the availability of resources, [resulting in inflation] (https://www.investopedia.com/ask/answers/111314/what-causes-inflation-and-does-anyone-gain-it.asp). According to MMT, the only thing the government needs to be wary of when spending is the availability of resources. Proponents of the theory argue that this means such a government could create full employment. However, a major flaw of MMT is that it doesn't have a proven history of successful application. In the 1970s there was [a period of simultaneous high inflation & low employment] (https://www.investopedia.com/articles/economics/09/1970s-great-inflation.asp) - showing that the two don't necessarily correlate. [Many economists oppose MMT] (https://www.businessinsider.com/paul-krugman-interview-inflation-mmt-government-stimulus-spending-economic-recovery-2021-5?r=US&IR=T) and criticise it for being too simplistic. They argue that if the government started spending according to MMT, [debt and inflation would skyrocket] (https://www.nationalaffairs.com/publications/detail/the-weakness-of-modern-monetary-theory). [Hyperinflation] (https://www.investopedia.com/terms/h/hyperinflation.asp) is caused by an increase in the supply of money & upward pressure on prices following supply shortage - MMT strongly runs the risk of this. As the US economist Milton Friedman once said, **"The government doesn't have any money. The only power it has is to take from some and give to others."**