Legal and Regulatory Restrictions on Modern Monetary Theory (MMT)
Modern Monetary Theory (MMT) demonstrates that sovereign currency issuers like the United States face real resource constraints rather than nominal revenue limits, spending money into existence through reserve credits while utilizing taxation and bond sales to manage inflation, steer capital, and regulate interest rates (Kelton, 2020; Mosler, 1994). However, despite this operational reality, the US political economy remains legally bound to debt issuance through an entrenched statutory apparatus—including the Second Liberty Bond Act of 1917, the Federal Reserve Act of 1913, the Treasury-Federal Reserve Accord of 1951, and Title 31 of the US Code—which bars direct debt monetization and mandates that outlays from the Treasury General Account be matched by collected taxes or open-market Treasury auctions. Consequently, expanding federal spending to address critical public challenges like climate resilience and social welfare requires not only changing the public orthodoxy equating sovereign finance with household budgets, but also actively dismantling the legislative barriers that compel public investment to masquerade as commercial debt.
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About Me
Professor (full) at State University of New York (SUNY) Korea since 2016. Research Professor for Stony Brook University. Moved to Austin, Texas in August 2012 to join the Digital Media Management program at St. Edwards University. Spent the previous decade on the faculty at New York University teaching and researching information systems, digital economics, and global political economy
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anthony.pennings@sunykorea.ac.kr
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