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Alexandria Ocasio-Cortez is a fan of a geeky economic theory called MMT: Here's a plain-English guide to what it is and why it's interesting

Alexandria Ocasio-Cortez is a fan of a geeky economic theory called MMT: Here's a plain-English guide to what it is and why it's interesting
ANDREW KELLY/Reuters



Congresswoman Alexandria Ocasio-Cortez said Modern Monetary Theory (MMT) should be "a larger part of the conversation" in an interview with Insider in January.




MMT is a big departure from conventional economic theory. It proposes governments that control their own currency can spend freely, as they can always create more money to pay off debts in their own currency.




The theory suggests government spending can grow the economy to its full capacity, enrich the private sector, eliminate unemployment, and finance major programs such as universal healthcare, free college tuition, and green energy.




If the spending generates a government deficit, this isn't a problem either. The government's deficit is by definition the private sector's surplus.




Increased government spending will not generate inflation as long as there is unused economic capacity or unemployed labour, MMT proposes. It is only when an economy hits physical or natural constraints on its productivity — such as full employment — that inflation happens because that is when supply fails to meet demand, jacking up prices.




MMT proponents argue governments can control inflation by spending less or withdrawing money from the economy through taxes.




Needless to say, traditional economists have some issues with all this.



US Representative Alexandria Ocasio-Cortez isn't afraid to voice controversial opinions, as her proposals of a Green New Deal and 70% top income tax rate show.
The millennial congresswoman and Instagram sensation added to that list when she said Modern Monetary Theory should be "a larger part of the conversation," in an interview with INSIDER in January. And Democratic presidential candidate Bernie Sanders has an economic advisor who is an MMT proponent.
MMT is a significant departure from the traditional view of economics taught in most business schools.
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