{"id":90644,"date":"2026-03-06T12:19:59","date_gmt":"2026-03-06T12:19:59","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=90644"},"modified":"2026-03-06T14:52:54","modified_gmt":"2026-03-06T14:52:54","slug":"making-false-claims-about-mmt-is-not-useful","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2026\/03\/06\/making-false-claims-about-mmt-is-not-useful\/","title":{"rendered":"Making false claims about MMT is not useful"},"content":{"rendered":"<p>James Meadway, the person who became John McDonnell's chief economics adviser when I declined the job because I would not support the austerity and fiscal rules analysis that John signed up to,\u00a0 has <a href=\"https:\/\/www.theguardian.com\/world\/2026\/mar\/05\/globalisation-under-threat-britain-economy-iran-conflict\" target=\"_blank\" rel=\"noopener\">written this in The Guardian:<\/a><\/p>\n<blockquote><p>Supporters of modern monetary theory take this truth and use it to talk up the ability of the British government to issue money or ignore its debt. Monetary constraints, they argue, are ultimately not a real constraint on economic activity, and at least in principle, it is possible to imagine a world in which the UK agrees to renegotiate its various debts with everyone else and so reduces this overwhelming external exposure.<\/p><\/blockquote>\n<p>I know only one person who is more obsessed with their hatred of modern monetary theory than James Meadway is, and that is Ann Pettifor. She thinks modern monetary theory is all about helicopter money and the Positive Money agenda, when neither claim is remotely true, and all she reveals is her lack of reading or comprehension. Unfortunately (and I wish this were otherwise), James is in the same place. Let me explain what he gets wrong:<\/p>\n<p><strong>1 - The significance of debt<\/strong><\/p>\n<p class=\"p1\">Firstly, he implies that MMT supporters\u00a0argue that governments can simply ignore their debt. <span class=\"s1\">This is <\/span>not an MMT argument<span class=\"s1\">. <\/span>What MMT actually says is something quite different. It says:<\/p>\n<ol start=\"1\">\n<li>\n<p class=\"p1\"><span class=\"s1\">A government that issues its <\/span>own sovereign currency<span class=\"s1\"> (like the UK with sterling) <\/span>cannot be forced into default on debt denominated in that currency<span class=\"s1\">.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\">That is because the government can always ensure that the central bank creates the reserves needed to settle payments.<\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span class=\"s1\">Government bonds are therefore <\/span>not operationally necessary to finance spending<span class=\"s1\">.<\/span><\/p>\n<\/li>\n<li>Debt is not then the issue others claim it to be, because this \"debt\" does in fact represent voluntary deposits with the government, on average, not repayable, in the UK's case, for more than 15 years.<\/li>\n<\/ol>\n<p class=\"p1\">But this does <span class=\"s3\">not mean debt can be ignored<\/span>. Debt still matters because:<\/p>\n<ul>\n<li>\n<p class=\"p1\">Interest payments affect income distribution.<\/p>\n<\/li>\n<li>\n<p class=\"p1\">Bond issuance influences monetary policy operations.<\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span class=\"s1\">Debt levels may have <\/span>political and inflationary implications<span class=\"s1\">.<\/span><\/p>\n<\/li>\n<\/ul>\n<p class=\"p4\"><span class=\"s1\">So MMT does <\/span>not say debt is irrelevant<span class=\"s1\">. It says <\/span>default risk is different for currency-issuing governments<span class=\"s1\">. That is, as a matter of fact, true. An economist who does not understand that has really not mastered their subject.<\/span><\/p>\n<p><strong>2 - Money printing<\/strong><\/p>\n<p>Secondly, James claims that MMT says governments can simply \u201cissue money\u201d. This is implicit in his claim that supporters of MMT \"talk up the ability of the British government to issue money.\" This wholly misrepresents MMT as advocating <span class=\"s3\">money printing as a policy tool<\/span>. That is simply untrue, not least because MMT\u2019s core point is <span class=\"s3\">descriptive<\/span>, not promotional. It says:<\/p>\n<ul>\n<li>\n<p class=\"p1\"><span class=\"s1\">In modern monetary systems<strong>, <\/strong><\/span>government spending already creates money<span class=\"s1\">. That is factually correct.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\">When the Treasury spends, the Bank of England credits bank reserves.<\/p>\n<\/li>\n<\/ul>\n<p class=\"p1\">So MMT is explaining <span class=\"s3\">how the system already works. It is <\/span>not proposing a new mechanism. What it says is that spending precedes taxation and bond sales operationally. This is an <span class=\"s3\">accounting fact<\/span>, not a political slogan.\u00a0 And as a matter of fact, no serious MMT economist \"talks up the ability of the British government to issue money.\" Instead, they recognise reality, and that reality is that the UK government creates every pound that it spends<\/p>\n<p class=\"p1\"><b>3 - Monetary constraints<\/b><\/p>\n<p class=\"p1\">Thirdly, James suggests that MMT denies constraints. He says MMT suggests that:<\/p>\n<blockquote><p>Monetary constraints \u2026 are ultimately not a real constraint on economic activity.<\/p><\/blockquote>\n<p class=\"p4\"><span class=\"s1\">This is a <\/span><strong>major misrepresentation<span class=\"s1\">.<\/span><\/strong><\/p>\n<p class=\"p1\">MMT is explicit that <span class=\"s3\">constraints absolutely exist<\/span>, but they are <span class=\"s3\">not financial<\/span>. The real constraints are:<\/p>\n<ol start=\"1\">\n<li>\n<p class=\"p1\"><span class=\"s1\">Real resources<\/span> \u2013 labour, skills, materials, energy.<\/p>\n<\/li>\n<li>\n<p class=\"p1\">Productive capacity<span class=\"s1\">.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span class=\"s1\">Inflation risk<\/span> when spending exceeds capacity.<\/p>\n<\/li>\n<li>The need to protect the environment<\/li>\n<\/ol>\n<p class=\"p1\">MMT repeatedly emphasises that the real limits to government spending are these things <strong>and<\/strong> inflation, with which it is obsessed.<\/p>\n<p class=\"p4\"><span class=\"s1\">So MMT does <\/span>not in any way say there are\u00a0 no constraints<span class=\"s1\">. <\/span><span class=\"s1\">Instead, it <\/span>redefines them correctly, in economic reality, which is what matters.<\/p>\n<p><b>4 - Renegotiating or cancelling external debt<\/b><\/p>\n<p class=\"p1\">Fourth, James suggests that MMT leads to:<\/p>\n<blockquote><p>imagining a world in which the UK renegotiates its debts with everyone else.<\/p><\/blockquote>\n<p class=\"p1\">This claim is simply unrelated to MMT. MMT does <span class=\"s3\">not require debt renegotiation<\/span>, nor does it depend on it. At most, it says we need floating exchange rates. which is hardly contentious.\u00a0 It does so recognising two important issues:<\/p>\n<ol start=\"1\">\n<li>\n<p class=\"p1\">Most UK government debt is sterling-denominated. <b><\/b>That means the UK can always service it. In fact, it can never fail to do so, which makes it very hard to imagine why renegotiation might ever be needed.<\/p>\n<\/li>\n<li>\n<p class=\"p1\">Foreign holdings of gilts are not external debts in foreign currency. They are still sterling liabilities. There is then no default risk in such holdings.<\/p>\n<\/li>\n<\/ol>\n<p class=\"p4\"><span style=\"box-sizing: border-box; margin: 0px; padding: 0px;\">MMT, therefore, does\u00a0not need debt restructuring to function. Instead, it recognises that the issue is never likely to exist, because it does not. This is economics rooted in reality, again.<\/span><\/p>\n<p class=\"p1\">The comment made confuses <span class=\"s3\">sovereign currency debt<\/span> with <span class=\"s3\">foreign-currency debts<\/span>, which are fundamentally different. That is a category error, and a very basic one.<\/p>\n<p><b>5 - External exposure threatens the UK government\u2019s ability to spend<\/b><\/p>\n<p class=\"p1\">Fifth, James suggests the UK government faces:<\/p>\n<blockquote><p>overwhelming external exposure.<\/p><\/blockquote>\n<p class=\"p1\">This reflects another common misunderstanding. For a currency-issuing government like the UK:<\/p>\n<ul>\n<li>\n<p class=\"p1\">Foreign holders of gilts <span class=\"s1\">cannot force default, ever<\/span>.<\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span class=\"s1\">Those foreigners hold <\/span>sterling assets<span class=\"s1\">.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\">The UK government <span class=\"s1\">creates sterling<\/span>.<\/p>\n<\/li>\n<li>It follows that there is no external pressure.<\/li>\n<\/ul>\n<p class=\"p1\">The real issue with external balances is <span class=\"s3\">exchange rate pressure<\/span>, not solvency. MMT acknowledges this. But again, that is a <span class=\"s3\">macroeconomic management issue<\/span>, not a financial constraint in the household sense, as James wholly incorrectly implies.<\/p>\n<p><strong>6 - The deeper misunderstanding<\/strong><\/p>\n<p class=\"p1\">The fact is that James' comments all ultimately assume the <span class=\"s3\">household analogy or household budget myth is real. This suggests that a government must<\/span> finance spending by borrowing from others. MMT\u2019s core challenge is that this is entirely inaccurate.<\/p>\n<p class=\"p1\">In reality:<\/p>\n<ol start=\"1\">\n<li>\n<p class=\"p1\">Governments <span class=\"s1\">spend first<\/span>.<\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"box-sizing: border-box; margin: 0px; padding: 0px;\">Taxes\u00a0withdraw the money the government creates with its spending from the economy.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span class=\"s1\">Bonds <\/span>support interest rate policy and provide a safe asset deposit facility<span class=\"s1\">.<\/span><\/p>\n<\/li>\n<\/ol>\n<p class=\"p1\">James' misunderstanding stems from his assumption of <span class=\"s3\">a pre-modern view of public finance<\/span>.<\/p>\n<p><b>7 - In summary<\/b><\/p>\n<p class=\"p1\">James falsely attributes several positions to MMT:<\/p>\n<ol start=\"1\">\n<li>\n<p class=\"p1\">That governments can <span class=\"s1\">ignore their debt<\/span>.<\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span class=\"s1\">That MMT advocates <\/span>printing money freely<span class=\"s1\">.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span class=\"s1\">That MMT claims <\/span>there are no constraints on spending<span class=\"s1\">.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\">That MMT depends on <span class=\"s1\">renegotiating debt<\/span>.<\/p>\n<\/li>\n<li>\n<p class=\"p1\">That foreign holders of government debt create <span class=\"s1\">solvency risk<\/span>.<\/p>\n<\/li>\n<\/ol>\n<p class=\"p1\">None of these claims is to be found in MMT. MMT says they are all untrue. To that extent, I agree with James. He is arguing with a straw man.<\/p>\n<p class=\"p1\">MMT\u2019s actual argument is far simpler:<\/p>\n<blockquote><p>A currency-issuing government cannot run out of its own money. The real constraint on spending is inflation caused by resource limits.<\/p><\/blockquote>\n<p>If only James would stop pretending MMT says things it does not, we could then have a serious debate. I think that would be useful. Making false claims about MMT is not.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>James Meadway, the person who became John McDonnell&#8217;s chief economics adviser when I declined the job because I would not support the austerity and fiscal<br \/><a class=\"moretag\" href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2026\/03\/06\/making-false-claims-about-mmt-is-not-useful\/\"><em> Read the full article&#8230;<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[204,35,174,106],"tags":[],"class_list":["post-90644","post","type-post","status-publish","format-standard","hentry","category-economic-justice","category-economics","category-modern-monetary-theory","category-politics"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/90644","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=90644"}],"version-history":[{"count":3,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/90644\/revisions"}],"predecessor-version":[{"id":90657,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/90644\/revisions\/90657"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=90644"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=90644"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=90644"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}