Does modern monetary theory work?

ValueTrend portfolio manager Keith Richards says MMT is like a dessert that you can eat in unlimited quantities, without weight gain or ever tiring of it.

As just another imperfect being, I try my best to spot my biases. I have my share! One of my biases is the one I have against Modern Monetary Theory (MMT). Like many of you, I have led a disciplined life through career management, budgeting, investing, and saving towards the future. I eat my own cooking—I have saved, invested, and controlled my debt. The MMT concept of (almost) unlimited spending, while ignoring debt and deficits rubs me to try and keep an open mind regarding subjects that—based on my personal education and experience—run counter to my current thinking. After all, like anyone else, I could be wrong! Unlike my wife, who assures me she is never wrong.

So, I forced myself to read The Deficit Myth by Stephanie Kelton. Ms. Kelton worked closely with Bernie Sanders in the United States, so you can probably get a good sense of her ideology. Kelton’s bottom line is that the government is not the same as a household or business. That’s because, unlike you and me or a business, in at least one big way the government can never default. It can print away and pay for whatever it needs. Debt is not a concern because (theoretically) it can be paid back by more printing. The inevitable inflation concern is addressed by Kelton. She notes that the government can control inflation through taxation. Too much money out there? Money being horded by the rich? Tax it out of the system to control spending and to control “inequality”.

Just print the money

Kelton believes that MMT can drive the economy to near full employment. In her own words “well-placed money” in “good places” will stimulate job growth. It is the path to shared prosperity and achieving progressive goals. It means no longer asking how we will pay for things, and instead just creating the money to make them happen. Everyone wins with MMT.

I really did try to look at the MMT idea with fresh eyes and an open mind. I can appreciate the ideas behind Kelton’s book and MMT in general. But—and you will pardon my ignorance as a mere stock trader with an interest in behavioral finance and NOT as a trained economist—(here comes that skeptic in me)—I have a real problem with MMT idealism vs. the reality. As business trainer Brian Tracey said:

“Human beings, by nature, are lazy, greedy, ambitious, selfish, impatient, vain and ignorant. These traits are neither good nor bad by themselves; it is only the way in which we manifest these natural traits that make them positive or negative. These natural traits are the fundamental reasons for why people do what they do.”

In my opinion, for MMT to work you will need:

1. The individual or individuals in government to have the power to print money and spend it.

2. That unencumbered government must have an ethical agenda when deploying the money.

3. That unencumbered, ethical government must have access to massive amounts of unbiased and accurate information. It needs the education, experience and intelligence to interpret that information to make highly informed decisions on the deployment of capital.

Do you believe that such a group exits to manage an MMT approach in our country? In any country? Let’s take a look at the current government of Canada under these categories:

1. Print and spend it

After being elected in 2015, the current Canadian government proposed a ‘MMT-lite’ budget of running a $25 billion deficit in its first three years, then returning to a balanced budget in the 4th year. That didn’t happen. Those deficit numbers tripled in the four years—well before COVID spending began. There was no return to a balanced budget in 2019, as promised.

The government then carried forth on a nonstop spending-and-money-printing spree. This, after managing to convince the NDP to back various spending initiatives—effectively achieving the necessary power to print and spend as it wished. The government recently called an election to achieve an even greater level of power to print, tax and spend as it wishes. While the election didn’t increase their power (in fact, over half of Canadians voted against them), they maintained their current print-and-spend status backed by the New Democratic Party (NDP). So, condition #1—a government with the power to print and spend as it wishes—is currently in place.

So far, so good for the first condition necessary for MMT to work. Let’s go on to condition 2.

2. Ethical, unselfish agenda necessary

I do not think that ANY government can, or ever has, operated within a wholly ethical and unselfish agenda, which is a necessity to make MMT work.

The current government is the least ethical Canadian government on record. It is literally the only government to have been charged twice for ethics violations and brought up on two further investigations (only to have narrowly escaped adding those to their shocking record).

Still—perhaps they are still attempting to spend the debt-raised capital effectively and selflessly. So, let’s ask ourselves. Has the current government, as Kelton said, placed the capital “well” and in “good places”? Or has it gone to private enterprises who may be supporters of the current regime? Like . . . companies such as Loblaw, Bombardier, SNC, Data Sciences? Has it been distributed equally and without bias, or has it gone to friends or those with kickback benefits such as the WE charity or the Aga Khan foundation? Has it gone into widely beneficial Canadian infrastructure and social programs as promised?

Have billions of those printed dollars been sent outside out of the country with no net benefit to Canada? For example, like the many billions sent outside of Canada to African and other nations?

Next—has all of this printed money been deployed unselfishly in a non-self-serving manner—or has any of this money been used to enhance the personal pleasures of those in power, such as personal home renovations, personal playhouses, pleasure trips, vacations and other indulgences of the prime minister and staff?

The answer is—yes, a substantial amount of taxpayer funded capital has been deployed in ways that do not enhance the life of Canadians in any manner. Substantial amounts of capital have been deployed by the current government for purposes that are beyond ethical boundaries and/or beneficial actions to Canadians.

Based on these observations, I would say that, despite the good intentions of MMT, my second condition for it to work has most certainly NOT been met in Canada. It’s clear that much of the capital raised through creating debt and printing money in Canada is being deployed wastefully, selfishly, inefficiently and for a non-Canadian benefit. This too, is at a historically alarming rate. It has not been deployed “well and into good places” as Kelton recommends.

Proponents of MMT might argue that the current Canadian government has been exceptionally unethical and self-serving by historic standards and could easily be replaced with a more ethical one.

Still, a replacement for the current government will still feature flawed humans. As Brian Tracey observes—inherent human behaviour includes aspects of greed, laziness, selfishness etc. MMT requires an altruistic human or group of humans to manage an MMT economic model. I do not believe any such group of humans exists. As a species, we are inherently looking to benefit ourselves. It is impossible to find a group of individuals who will act with complete altruism, while never placing their own needs or privileges ahead of others when given the opportunity. George Orwell’s Animal Farm, quotes the leader of a newly formed socialist government on the farm—“Some animals are more equal than others.”

Condition #2 for MMT to work does not exist now and cannot exist based on inherent patterns of human behaviour.

3: Highly qualified, informed people must govern

Back to our Canadian example (although we can apply this model to any government). Let’s assume that the current government is not as unethical or self-serving as evidence would suggest. Assume that going forward, they will only print money that will be used to benefit Canadians—and do so in an ethical manner.

Condition #3 for MMT to work says the government needs the right information to make those well-intended decisions on spending.

Does any government have access to all information to make these decisions correctly? Can we be assured this information is accurate or reliable? We know that having access to ALL information is next to impossible. In fact, most of the time we have far less information to make informed decisions than we think we do. For MMT to be properly applied and spending to be deployed effectively, the government needs a highly accurate and incredibly deep pool of data. They must interpret the data with no bias or personal opinions. Is that possible?

Good data isn’t enough. It must be interpreted by truly qualified experts with highly specific abilities and expertise. This is essential to place the capital effectively and achieve the promise of MMT.

Oh Canada!

Back to the Canadian example. Our current government is filled with representatives who are not trained economists or financial experts. It is obvious that they do not have the education or experience to analyze complex data and make informed, logical, and intelligent economic decisions. This only comes from years of expertise and specialized knowledge in finance and economics. I would argue that no one in the current Canadian government has the deep business/finance and economics background to make highly informed MMT spending decisions. For example, it is rare to see either Prime Minister Justin Trudeau or Finance Minister Chrystia Freeland properly answer an opposition member’s question in parliament when dealing with calculations, expenditures or numbers.

Mr. Trudeau’s educational background is in liberal arts. His prior employment is not in finance. Bouncer, ski instructor and substitute teacher? Not helpful for running an economy, and especially an MMT-based one. Perhaps he has a team behind him of whiz-bang financial wizards with a myriad of experience who can manage an MMT based economy. Or . . . perhaps not.

In 2021 Mr. Trudeau said: “We decided (the government will) take on that debt to prevent Canadians from having to do it.”

Ms. Freeland’s educational background is in liberal arts. Russian history and Slavonic studies were major areas of study in her formal education. She has minimal economic/finance background.

So—my third criteria for MMT to work is to have complete access to all known information and have highly experienced and informed finance and economics experts use that information to make intelligent decisions.

I believe that condition #3 for MMT to work is not in place in Canada.


The concept of MMT is like finding a type of dessert that you can eat in unlimited quantities, without weight gain or ever getting tired of eating it. As much as some people may like the concept of MMT, I do not think that it will ever work in the real world. Identifying an ethical group of leaders with unlimited access to all data available while possessing the knowledge and expertise to deploy it is, in my opinion, like finding that calorie-free dessert that you will never tire of.

Keith Richards is Chief Portfolio Manager & President of ValueTrend Wealth Mgmt. He can be contacted at He may hold positions in the securities mentioned. The information provided is general in nature and does not represent investment advice. It is subject to change without notice and is based on the perspectives and opinions of the writer only. It may also contain projections or other “forward-looking statements”. There is significant risk that forward looking statements will not prove to be accurate and actual results, performance, or achievements could differ materially from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements and you will not unduly rely on such forward-looking statements. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please consult an appropriate professional regarding your particular circumstances

This is an edited version of an article that was originally published for subscribers in the February 2022, First Report of The MoneyLetter. You can profit from the award-winning advice subscribers receive regularly in The MoneyLetter.

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