This post continues the story of quantum economics, which began here. There is a summary of posts to date at the end of this post.

Can you please note when reading this post and others in the series that I am not suggesting that quantum physics and economics are akin to each other. Instead, I am exploring how quantum thinking might help build new economic narratives, which is quite a different goal.

Infinite Promises, Finite Energy (MMT and Constraint)

“The state can create money. It cannot create wheat.” – anonymous

Modern Monetary Theory (MMT) has clarified something economists long obscured: a currency-issuing government cannot run out of money. It can always pay in its own currency. It does not need to tax first, or borrow first. It spends by creating money, and taxes later to control inflation and reclaim capacity.

This insight overturns the myths of austerity. But it also raises a question: if the government can create unlimited money, does that mean we face no constraints? Can we fund anything we want? The answer is both yes and no. Yes, money is unlimited. No, real resources are not.

Quantum thinking helps explain this tension. Money is like energy: it can be issued in infinite units, but the energy per unit depends on the resources available. If promises outstrip reality, the value of each promise falls. The challenge is not to limit promises, but to anchor them in the finite energy of the real world.

First: MMT's central claim

At its core, MMT makes three points:

1. Government spending precedes taxation. The state creates money when it spends. Taxation withdraws money later.

2. Borrowing is optional. Government bonds are not financing tools but interest-bearing savings accounts for the private sector.

3. The real limit is inflation. The state can create unlimited money, but if it spends beyond real capacity, prices rise.

This is not a theory but a description. It is how modern money works.

Second: the illusion of financial constraint

Politicians and pundits like to say “there is no money” when justifying cuts. This is false. A sovereign government cannot run out of its own currency. The Bank of England cannot bounce the government's cheque.

The illusion of financial constraint is a political tool. It keeps the public compliant. It justifies austerity. It disguises choices as necessities.

But once we accept that money is unlimited, the conversation shifts. The real question becomes: what are the constraints that matter?

Third: the finite energy of resources

In physics, energy is conserved. You can convert it from one form to another, but you cannot create more.

In economics, real resources — land, labour, energy, materials — are finite. You can mobilise them, distribute them, and use them more efficiently. But you cannot conjure them from nothing.

Money can be created without limit. Resources cannot. The energy of the economy is fixed by physical and social capacity.

Fourth: promises versus capacity

Issuing money is a promise: a promise that goods and services will be delivered in exchange. But if the promises exceed what can be delivered, the value of each promise falls.

This is inflation. Too much money chasing too few goods. The problem is not that money has been created. It is that resources have not expanded to match.

The lesson is simple: money creation must be matched to real capacity. Create promises in line with energy, and the system is stable. Create promises beyond energy, and the system overheats.

Fifth: productive use of promises

All this being said, not all spending is equal. How money is used determines whether capacity expands or contracts.

• Consumption spending uses existing capacity. If resources are idle, this is harmless. If resources are tight, it can create inflation.

• Investment spending expands capacity. It trains workers, builds infrastructure, creates renewable energy. It increases the energy available for future promises.

• Speculative spending does nothing. It traps promises in asset markets, inflating prices but not capacity.

This is why austerity is doubly foolish. It cuts investment, shrinking capacity. And it leaves speculation unregulated, allowing promises to destabilise.

Sixth: inequality as a waste of energy

When wealth is concentrated, money is hoarded or speculated. The potential energy is not released into productive use. The system stagnates.

Redistribution is not envy. It is efficiency. By taxing idle wealth and funding public services, government channels promises into real flows. It turns trapped energy into circulating waves.

Inequality is not just unjust. It is an economic drag.

Seventh: inflation as a measurement problem

In quantum physics, measurement is tricky: the act of observing changes the system. In economics, inflation is similar.

Inflation is the signal that promises have exceeded capacity. But how we measure it is contested. Do we focus on consumer prices? On wages? On asset prices? Different measures reveal different truths.

• Consumer inflation might be low, while asset inflation is rampant.

• Wages might be stagnant, while rents surge.

• Essential goods might rise faster than luxuries.

To treat “inflation” as a single number is to miss the complexity. It is a blurred signal of deeper imbalances. And those imbalances have a significant social impact. House price inflation, whilst wages are static, prices people out of homes, for example. This problem of measurement is not just academic: it is a live issue of consequence, but has been too often ignored. 

Eighth: policy for finite energy

What does policy look like if we take this seriously?

1. Invest in capacity. Expand renewable energy, public transport, education, healthcare. Increase the real energy of the system.

2. Manage demand. Use taxation to withdraw excess promises when resources are strained. But target taxes at the wealthy and at speculation, not at ordinary consumption.

3. Control speculation. Prevent standing waves of financial energy that destabilise without expanding capacity. Capital controls, financial transaction taxes, tighter regulation.

4. Plan transitions. Climate change makes finite energy more pressing. Transitioning to net zero requires aligning money creation with the energy of sustainable resources.

Ninth: the politics of abundance and constraint

MMT frightens orthodox economists because it reveals abundance: money is not scarce. But it also reveals the real constraints: resources are scarce.

The politics of the future must hold both together. We are not constrained by money, but by energy, land, labour, and climate. The role of government is to align infinite promises with finite capacity.

A politics that pretends money is scarce will fail. A politics that pretends resources are infinite will also fail. Only a politics that sees both truths can succeed.

Conclusion

Money is infinite. Resources are not.

The challenge of economics is to connect the two: to use the unlimited power of money creation to mobilise the limited power of real resources. To expand capacity through investment, to sustain flows through consumption, to prevent destabilisation through speculation.

This is not a counsel of despair. It is a call to realism. Austerity is a lie. Inflation is a signal. Policy is a choice.

If we direct promises wisely, we can mobilise the energy we have to meet social need, build resilience, and sustain the planet.

And only then can we fund the future.

Previous posts in this series

1. Discussing quantum economics, accounting, money and more
2. Quantum economics, part 1: Why Quantum Thinking Matters for Economics
3. Quantum economics, part 2: Money as Particle and Flow
4. Quantum economics, part 3: Entanglement and Double-Entry Bookkeeping
5. Quantum economics, part 4: Quantum Uncertainty and Economic Forecasts
6. Quantum economics, part 5: Speculation, Potential, and Energy

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