Modern Monetary Theory doesn’t work. Just ask the ancient Romans.
MMT asserts that “monetarily sovereign countries like the U.S., U.K., Japan, and Canada, which spend, tax, and borrow in a fiat currency that they fully control, are not operationally constrained by revenues when it comes to federal government spending,” explains Investopedia. “Put simply, such governments do not rely on taxes or borrowing for spending since they can print as much as they need and are the monopoly issuers of the currency.”
The foolishness of such a theory is plain to see for serious economists and historians, but it has found adherents in both political parties. Whether he realized it, former President Donald J. Trump seemed to embrace MMT. When confronted with the national debt, Trump instructed Gary Cohn, former director of the White House National Economic Council, to “Just run the presses — print money,” a 2018 CNBC article read.
Along the same vein, when Rep. Alexandria Ocasio-Cortez introduced her Green New Deal in 2019, she affirmed that much of it wouldn’t be propped up by tax revenue, but rather by printing money. She consequently exposed MMT to larger audiences, and has remained a proponent of it.
While misguided, MMT advocates are right about one thing: governments will never run out of money as long as they keep printing it. However, that money can become utterly worthless, and there are examples of this dating back thousands of years.
Ancient Rome grew into one of the greatest empires the world has ever seen. Despite its glory, it made some bone-headed financial decisions—leading to financial crises. Roman emperors, like modern presidents, loved to spend money. They oversaw ambitious building programs—paving roads and raising temples—but they also funded Rome’s two largest expenditures: a massive standing army of around 300,000-600,000 legionaries at its peak and the grain dole, which helped feed around 200,000 or more Romans.
Rising costs and dwindling revenues weren’t a terrible cause for concern in old Rome—at least at first. Spendthrift emperors kept bleeding state coffers, but budgetary shortfalls forced them to make some interesting monetary policy decisions. Like in MMT, Rome realized it had a virtual monopoly on issuing currency, and emperors took advantage of this revelation. As my friend Lawrence W. Reed and I wrote in 2015, “We print, they mint(ed),” but not only did they increasingly mint coins, they also simultaneously debased them.
For much of Rome’s life, the silver denarius was the currency’s link coin. Under Augustus, Rome’s first emperor who reigned from 27 BC-14 AD, the denarius was nearly 100 percent silver and weighed 84 coins to a pound. Mere decades later, subsequent Roman leaders began to incrementally reduce the purity and weight of the denarius to ensure that the state had enough denarii to pay for everything emperors wanted—even if it included frivolous nonessentials like games and opulent palaces. By 241 AD, during Emperor Gordian III’s reign, the denarius reached a low point. The denarii were only 48 percent silver and almost 150 coins to the pound.
Gordian ultimately decided to abolish the denarius, but silver coins of a kind remained for some time. Yet they were continually debased and eventually had little more than a slight silver coating that could be rubbed off. Even though emperors likely tried to hide their monetary meddling, the Roman people were wise to their schemes.
At first, markets seem to have adjusted accordingly. Prices rose as money became less valuable. But in time, the Romans lost faith in the faltering currency, and the economy was thrown into a tailspin. Despite being ubiquitous, money became worthless in many ways: some communities opted to use ghost currencies instead; Romans began to trade commodities rather than relying on Roman money; the government sometimes collected taxes in goods instead of coinage; and Rome slumped into a deep and protracted economic depression.
While there were other factors that contributed to the economic collapse, including barbarian incursions and imperial instability, Rome’s version of MMT was without a doubt partially responsible for their struggles. Even so, some modern disciples of MMT claim that this wouldn’t happen in modern America because MMT supporters supposedly understand that deficit spending could reach unsafe levels.
However, they claim that mounting debt isn’t the best indicator of a looming crisis; the subsequent inflation is. Thus, in a perfect world, just before inflation were to get out of hand, the government would take corrective action. If you put faith in a government to do the right thing and adequately cut spending when they’ve been allowed to wildly deficit spend with impunity, then I’ve got a bridge to sell you in ancient Rome.
