Modern Monetary Theory needs the "Modern" part to actually work. It is a description of an economy with a well-developed (hence "modern") financial system that

Modern Monetary Theory needs the "Modern" part to actually work. It is a description of an economy with a well-developed (hence "modern") financial system that is plagued by overproduction and demand shortfalls rather than underproduction. In such an economy, there is little difference between the government "printing" a bond and the government "printing" a reserve -- especially as modern economies pay interest on reserves. These are both perfectly liquid instruments, with the government bond being a cash-equivalent. What makes it a cash equivalent is that a modern financial sector is able to convert the liabilities that people want to hold into the liabilities present in the economy, thus in such a modern economy if the government issued a mix of 10% reserves and 90% bonds, but people wanted to hold 50% deposits and 50% debt, then the banking system would step in and convert one into the other (for a small fee). This is as opposed to most mainstream economies which assume that the liabilities that people hold are the ones the government issues and there is no financial sector to intermediate between the two. So in the modern economy, it's silly to obsess about the number of reserves but ignore the number of bonds, bonds and reserves are all the same and as there is no difference you might as well only issue reserves that pay whatever the policy interest rate happens to be and stop bothering with bonds altogether. Then there are other parts of MMT that are a bit zany -- for example the belief that savings demands are inelastic and thus the policy rate can always be at zero, but that has nothing to do with reserves/bond distinction. That is not the situation in Venezuela, which does not even have a functioning market economy let alone a modern financial system. Venezuela is closer to the situation in Zimbabwe where the banking system has collapsed, the economy has collapsed, and people have lost faith in the currency. So let's say that the private workers need to eat 100 units of food, and the government workers need to eat 100 units of food, but only 100 units of food is produced. In a well organized economy you admit there is a food shortage and issue rations so everyone gets a coupon for 1/2 a unit of food. In that ration system, it doesn't matter how much money you have -- money is a bit worthless for buying food -- but the hope is that the situation is temporary and prices go back to normal, so people don't rush to try to unload their paper money for food they just leave their paper money alone and the government doesn't fire up any printing presses. In effect those ration cards are a new currency that is temporarily introduced to prevent the old currency from going haywire. That's what the US did in WW2. But what if there is no public admission of shortages and the government isn't competent enough to create an effective rationing system? Then it prints up enough money to buy 100 units of food and gets into a bidding war with the private sector. So now the price of food goes way up, and the people in the private sector have lots of money but not much food, and the people in the government sector have the printing press and more food. Then day 2 happens, and the government has to print up even more money to buy 100 units of food, because they are bidding against the same people who were overpayed with printed money in period 1. So the price of food goes up even more. Then day 3 happens, and the government must print even more money to buy up the food. Thus you have this spiralling inflation where the ability of the people to outbid the government in period n is the sum of all the overpayments that happened in the previous periods. Thus, mathematically this is an exponential function. Ultimtely farmers refuse to sell their food for any amount of government money at all and the currency becomes completely worthless. That was the situation when Zimbabwe kicked out the white farmers, and it is the situation of Venezuela in which the non-productive sector eventually exceeded the productive sector. It is also what happened in Weimar when there was a perfect storm of economic collapse from the Depression, a promise to pay massive war debts (with printed money), and massive social unrest due to worker strikes (whose higher wages were also provided by printing money). Note that Modern Monetary Theory, as it is purely about the financial side of things, has no magic when there are too many people and not enough to eat. MMT deals with modern economies that face problems of overproduction rather than underproduction, and demand shortfalls are the cause of recessions rather than supply shortfalls. It is also about finally shredding the distinction between bonds and reserves in an economy in which both are perfectly liquid cash equivalents. [1] https://www.investopedia.com/terms/r/repurchaseagreement.asp https://www.investopedia.com/terms/r/repurchaseagreement.asp