MMT & Post-Keynesianism
System Improvement (RIDE instead of RICH)

🔵 Prof. Dr. Dirk Ehnts – one of the leading MMT economists in the German-speaking world, currently a scientific adviser at the European Parliament. His book "Geld und Kredit: Eine €uropäische Perspektive" (Metropolis-Verlag, 4th ed. 2020, ISBN 978-3-7316-1433-3) explains how money actually comes into existence and how sovereign money creation works. dirk-ehnts.de · Book at Metropolis-Verlag

🔵 Aaron Sahr – social researcher at the Hamburg Institute for Social Research, author of "Keystroke-Kapitalismus" (2017). Sahr describes money not as a technical mechanism but as a social relationship of debt and trust, shaped historically and politically – and therefore open to democratic redesign.

🔵 Prof. Dr. Heiner Flassbeck – former State Secretary at the German Federal Ministry of Finance and UNCTAD economist. He emphasises the central role of aggregate demand, wage policy and investment as drivers of economic development – against the neoclassical supply-side dogma of the "Agenda 2010" era. flassbeck-economics.de

🟢 IMK – Institute for Macroeconomics and Business Cycle Research at the Hans Böckler Foundation (Düsseldorf) and its annual FMM Forum for Macroeconomics and Macroeconomic Policy – the most important Post-Keynesian research and discourse institution in Germany, bringing together international economists outside the neoclassical mainstream. imk-boeckler.de

🟢 Keynes Gesellschaft e. V. – a German-speaking association for a pluralist, demand-oriented economics in the Keynesian tradition. It fosters dialogue between academic research, economic policy practice and the broader public. keynes-gesellschaft.de

🔵 Money is created as credit, not as savings: The vast majority of the money used in everyday life is bank money created by commercial banks, above all through lending – it is not "printed" by the central bank. From an MMT perspective, government financing ultimately works through the interplay of the state, commercial banks and the central bank, without the state needing to collect taxes first (MMT: "The state spends first – and recovers money later through taxes"). According to MMT this logic holds for states with their own, non-convertible currency; for eurozone states it holds only to a limited extent, because they do not issue the euro themselves.

🔵 According to MMT, taxes do not primarily fund the state, but instead control inflation (withdrawing purchasing power), redistribute income, steer behaviour and create fundamental demand for the state currency (chartalist function). Outside the MMT school this view is contested – but the shift in perspective remains fundamental to MMT's fiscal-policy thinking.

🔵 Demand is the key (Flassbeck): From a post-Keynesian perspective, existing productive potential alone is not enough: businesses only produce and invest at a corresponding scale if they expect sufficient demand and sales. Supply-side factors such as productivity, technology, capital stock and labour supply remain relevant alongside. Wages, government spending and investment create the demand that makes growth and employment possible. Wage restraint – as practised in Germany since the 2000s – structurally weakens domestic demand and exports the country's deflationary problem abroad.

🔵 Money as a social trust relationship (Sahr): The value of the euro does not arise from a gold backing or intrinsic worth, but from the legal order, tax obligations, social acceptance and trust. Understanding this allows monetary policy to be seen as a democratically configurable instrument – not a law of nature.

🔵 1. How are investment & innovation financed? Public future-oriented investment (the energy transition, digitalisation, education) is financed by the state directly through sovereign money creation – it "spends first and taxes afterwards" (in MMT logic; only to a limited extent for eurozone states). The limit is not financing capacity but real capacity (labour, raw materials, energy). Private investment continues to run through ordinary bank credit (money arises as credit, not as savings deposits). Unlike HME/RICH or Commodity Money+, there is no dedicated value store or backing mechanism – the limit is demand plus real capacity, not a money-supply rule.

🔵 2. How is the economy stimulated – what are the performance incentives? Primarily through demand management (Flassbeck): wages, government spending and investment create the demand that makes production and employment possible in the first place – not the other way around. A state job guarantee acts as an automatic stabiliser and "employment buffer" instead of an unemployment buffer. A wage policy tied to productivity and inflation prevents wage dumping. This is a demand-side, fiscal-policy stimulus – not a circulation impulse built into money itself as in HME/RICH, and unlike there, there is also no targeted relief for labour income: according to MMT, taxes serve primarily to manage inflation and redistribute income, not to finance the state.

🔵 3. How does the value of money stay stable? For consumer-price inflation, MMT does not see the limit in the money supply but in reaching real capacity constraints – if demand exceeds the real supply of goods, taxation acts as a purchasing-power sink and the job guarantee functions as a price anchor from below. How reliably this can be calibrated in practice – when an economy is truly capacity-constrained and how quickly taxes or spending cuts work against inflation – is one of the central open questions and remains contested. For asset-price inflation, the answer is weaker: as this page itself states, it is addressed primarily through political steering and regulation – compound interest, the Cantillon effect, and the debt-money mechanism itself remain structurally untouched. This is precisely where the comparison with HME/RICH begins, which locates these causes in the monetary and property system itself rather than in treating their political consequences.

🟣 Asset price inflation remains unresolved: As long as money can be hoarded as a store of value and invested in asset markets (real estate, equities, commodities), asset prices will structurally rise faster than wages and consumer prices. MMT itself offers no systemic brake here; many Post-Keynesians do propose wealth and land-value taxes, credit regulation and macroprudential policy against the Matthew effect.

🟣 The wealth gap remains structural: Without a demurrage charge on large fortunes and without a structural brake on capital accumulation, MMT-financed prosperity can repeatedly collapse back into inequality. Taxes can counteract this – but they do not resolve the mechanism systemically.

🟣 The growth compulsion remains at the core: Interest and debt structures in the private banking sector can generate substantial growth pressure; whether this amounts to a strict systemic growth compulsion is debated among economists. MMT can improve public investment – but it does not structurally address the growth pressure generated by interest obligations in the private economy.

🟣 Practical calibration remains open: Whether an economy is truly hitting its capacity limit, and how quickly taxes or spending cuts dampen inflation, is hard to determine in practice. The room for durably non-inflationary public financing depends on utilisation – one of the decisive points of dispute about the MMT approach.

🟣 The real external constraint remains: That a currency-issuing state cannot become insolvent in its own currency does not mean it can import unlimited real goods it cannot produce itself – energy, chips, raw materials. This constraint is real, not monetary, and MMT is right to stress it more than naive "savings-constraint" narratives – but it does not disappear.

🟣 Private money creation remains uncontrolled: The vast majority of bank money continues to be created by commercial banks – guided by return expectations, not the common good. HME/RICH creates a democratic alternative through the Monetative (a fourth branch of state power for money issuance); MMT leaves this power essentially with the banks.

🟣 No debt-free money: The vast majority of FIAT money continues to be created as interest-bearing private bank credit. The MMT framework improves how the state handles this reality – but it does not change the basic construction. The difference from HME/RICH's debt-free Monetative remains fundamental.

🔵 Flassbeck's diagnosis: He locates the main problems in wrong macroeconomic policy: insufficient demand, wage dumping, current account imbalances, financial market dominance and the design flaws of the Eurozone. He is particularly critical of countries like Germany boosting their competitiveness through suppressed wages, thereby structurally deepening imbalances within Europe.

🔵 Flassbeck's starting point: He accepts the current FIAT monetary system, including private money creation by commercial banks. In his view, the problem arises not from the fact that banks create money, but from the fact that politics and regulation steer the economy badly.

🔵 Flassbeck's policy demands: coordinated European wage policy · stronger public investment · active fiscal policy instead of austerity · stricter regulation of financial markets · limiting speculative capital flows · correcting current account imbalances through better European coordination.

🟣 HME/RICH goes deeper: It looks not only at economic policy but at the structure of the monetary and economic system itself as the root cause of many problems. Asset price inflation, money as a commodity, systemic wealth concentration, unearned income and persistent trade imbalances are understood not primarily as regulatory failures – but as consequences of the existing system architecture itself.

🟣 Foreign trade as an example: While Flassbeck seeks to correct trade imbalances politically (coordinated wage policy, European alignment), HME/RICH aims to balance them systemically – through currency parities, real-economy adjustment mechanisms and, where necessary, balancing tariffs.

🟢 Japan: Japan has for decades carried a very high level of public debt in its own currency, with low interest rates and low inflation over long periods.
🟠 MMT proponents read this as evidence that solvency in one's own currency is not the problem; critics point to special factors such as high domestic savings, central-bank purchases, demographics and deflationary pressure.

🟢 Argentina & foreign-currency debt: Countries with heavy foreign-currency debt and weak trust in their own currency have repeatedly experienced inflation, currency and debt crises.
🟠 From an MMT view this is no counter-example but the consequence of foreign-currency debt and import dependence; critics see precisely the limit of the approach.

🟢 Inflation 2021–2023: After Covid fiscal packages, supply-chain disruption and the energy-price shock, inflation rose sharply in the US and the eurozone.
🟠 It is disputed how much was driven by fiscal demand and how much by supply shocks – a test case for how well capacity limits can be recognised in practice.

🟣 Assessment of this page: Cross-country comparisons neither clearly confirm nor refute MMT; the approaches have never been tried in pure form. This explicitly includes HME/RICH (see the note on the HME/RICH page).

🟣 The low-threshold entry: No constitutional amendment, no building of new institutions, no international coordination as a precondition. An enlightened parliament, an engaged central bank and a changed fiscal culture suffice – in theory – for substantial improvements.

🟣 Communicable and connectable: "The state is not a household", "government debt is private sector savings", "full employment is financeable" – these are statements that work in parliamentary debates, in the media and in classrooms. That has communicative and political value.

🟣 As an intellectual bridge to deeper reform: Once someone understands that money is not a scarce resource, they are open to the next step: why not change the construction of money itself? MMT can be a springboard for deeper reforms like HME/RICH.