How Will Modern Monetary Theory (MMT), Reserve Currency Status And Central Bank Digital Currency Impact You

Modern Monetary Theory (MMT) relies on the U.S. Dollar continuing as the world reserve currency.

A reserve currency is a foreign currency held in significant quantities by most world governments via their respective central banks.

It is used as a settlement currency when goods and services between various nations are exchanged.

How Did The U.S. Dollar Become The Reserve Currency

During World War 2, the USA became the primary supplier of weapons and other goods to the Allies. The United States collected gold in exchange for payment and became the largest owner of gold.

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Is The Dollar Losing It’s Reserve Currency Status

The U.S. dollar losing its reserve currency would necessitate another currency to take its place. At this time, no other country’s currency provides stability, convertibility, and wide spread availability as the U.S. dollar.

What Is Modern Monetary Theory (MMT)

Modern Monetary Theory takes this a step further. It states that as long as a country holds reserve currency status, it can keep printing currency to finance its needs without any negative consequences.

MMT is a significant departure from conventional economic theory. Although American economist Warren Mosler developed MMT in the 1970s, it has recently been in the news due to some vocal voices.

Problems With MMT

It overestimates the potency of fiscal policy while underestimating the effectiveness of the monetary policy.

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