● The 3rd largest record ever… Controversy heating up fiscal deficit In the

midst of the Corona19 crisis, controversy over the formation of an additional budget of 35.3 trillion won was controversial. This year's budget, which was confirmed at the end of last year, is the largest ever, at 512 trillion won. For the first time in history, the budget scale has been increased three times, and if the first, second, and third are combined, the scale of this year will reach 59.2 trillion won.

The funding for the 3rd additional revised budget is 10 trillion won in restructuring expenditures, 1,400 trillion won in the fund itself, and 23.8 trillion won in government bonds. A deficit of 112 trillion won is expected. In this case, the national debt will increase to 840 trillion won, and the ratio of national debt to GDP will rise to 43.5%.

According to the National Assembly Budget Policy Office's '3rd Additional Budget Analysis' released on June 26, "The 3rd supplementary implementation is expected to deteriorate the management financial balance. In the mid to long term, while dealing with the economic crisis caused by Corona 19, "It is a time when financial management is in desperate need to manage fiscal soundness." It also raised questions about the effectiveness and feasibility of some projects planned by the Cardinals.

In response, 30 members of the Democratic Party, along with the Special Committee on Budget and Settlement of the National Assembly, said, "The original function of the budget office is a government check, but it is not allowed to subdue small matters or to'intellect for intellectual'." Made a statement. In order to overcome the economic crisis in accordance with Corona 19, fast and strong measures are urgently needed, and the Ministry of Budget Policy is also to cooperate.

Korea, as well as the United States and other countries around the world are pouring unprecedented government budgets in response to the recession of the Corona 19, the most serious since the Great Depression of the 1930s. It was accompanied by unusual measures to pay living expenses to individual citizens. It was based on the judgment that it is necessary to take preemptive measures to stabilize the livelihood of the people and not to put the economy at risk without worrying about the financial situation.

The book,'The Balanced Financial Theory', which is currently on topic, is wrong; The secrets of currency and the theory of modern currency' are empowering the government's policies to save the economy through financial input. ``The balance of financial theory is wrong,'' which translates a revised version of ``MMT (Modern Money Theory)'' by Professor L. Randall Wray of the Department of Economics at the University of Missouri in the United States. 'Don't worry about debt and inflation, the government must boldly put in place for full employment and economic growth,' he argues.


● MMT, "The government is not insolvent" In

traditional economics, money was created as a'intermediary of exchange' to eliminate the inconvenience of exchanging goods and goods. In addition, it has become a'measure to measure value' and'a means to store value', making currency a convenient and reducing transaction cost to become the No. 1 publicity to revitalize the market economy. In order, the real economy was born first, and then the currency supporting it was born.

Modern Money Theory (MMT) defines "Money as the'Money of Account' issued by a sovereign state as a means to collect tax. ``One of the most important powers the sovereign government claims is the authority to impose and collect taxes (including items payable to the government, including fines and fees). Taxes are charged in the country's fiat currency.' Money is a calculation unit that taxes and collects, and is a debt certificate that the government pays in advance to collect tax.

MMT says that'taxes drive money' and that'as long as the state has the authority to impose and collect taxes, the money cannot be insolvent'. If you issue a lot of money, inflation may occur because the value of money decreases and prices rise, but it is an unfounded claim that if there is too much currency, over 50% of hyperinflation per month occurs.

The government could curb inflation by raising taxes or reducing spending. Although hyperinflation occurred in Brazil, Zimbabwe, and the Weimar Republic after World War I, it was argued that it was the result of a combination of socio-political turmoil, disruption of production capacity, and weak government, not just increased currency.


The theory of modern currency (MMT), preached by Randall Ray, describes it as'financial deficit is essential for the monetary economy to return.' The government's fiscal deficit is the income of the private sector, so the government has to spend first and the private sector can generate income based on this to earn taxes. This argument is based on an accounting identity where the economy of a country is divided into government, private and foreign sectors, and the sum of these three sectors is zero (Gross Domestic Product (Y) = Private Consumption (C) + Corporate Investment (I) + Government Expenditure (G) + Net Expenditure (NX)]. If the government makes a surplus, the sum of the private and foreign sectors becomes a deficit.

MMT argues that the notion that'the government can only spend taxes to make money' and'banks can only make loans with deposits' is wrong. 'All tax and deposit receipts refer to the repayment of debt, and in order for repayment of debt, debt must first be created'. Logically, the'creation of debt' comes first, and'repayment' comes later. The logic is that'you must sin first and then atonement is possible.'

Therefore, the government does not need to worry about the debt ratio, and in order to remove the constraints on the debt ratio, the government will change the current method of fiscal expenditure, in which the government budgets and receives approval from the parliament and issues bonds to execute the finances. Suggests. First, the government issues a guarantee to the central bank and proposes to create a currency based on this guarantee, but exclude the government's guarantee from debt. The second method is to hand over the central bank's right to issue money to the government and issue a high-valued government to execute the finances. The government-issued currency is not included in the debt-to-equity ratio, so you don't have to worry about the national debt ratio. It is argued that the central bank can still create currencies without deposits, so the result is the same.

'Most developing countries have a sovereign currency, which means they can afford to buy anything that can be bought in a domestic currency. That includes living without a job.' In addition, the government argues that as a'responsible person for the final employment', all the resources should be mobilized to fully hire the people to have the jobs they want. He also argues that imports are more effective than exports to achieve full employment. Export is a cost in that foreign workers consume the goods produced by domestic workers, and import is a convenience.

"There can never be a situation where the government is running out of money. The government has always had the financial capacity to take care of all of us. The problem is political will. What we need is to solidify our will and build politics." "It takes a good story frame." He also writes, "The modern monetary system is a truly amazing creation. It allows individuals to make choices while at the same time allowing the government to get the resources it needs to achieve a just society."


● Just press Enter to create a currency… Is currency'free lunch'?

In Modern Money Theory (MMT), Lander Ray argued that the government could not be insolvent under the Fiat Money system, which appeared after the abolition of the gold standard in the days of President Nixon of the United States in August 1971. Many people are guilty of hitting the computer's enter key to create a huge currency, but they say, "Just hitting the enter key to get a'free lunch' is what every sovereign government always does." The sovereign government claims that if you need money, you can tap the computer keyboard to print the money whenever you need it.

However, mainstream economists continue to argue that this theory of modern currency theory confuses the fiscal policy enforced by the government with the monetary policy enforced by the central bank, and takes fiscal dominance for granted. Criticize it is not possible. The central bank's increase and decrease in the supply of money to commercial banks is monetary policy, which means it must maintain its independence from the fiscal policy implemented by the government.

In a democratic system, the government is constantly tempted to expand fiscal spending, and if the central bank does not maintain the value of money as an independent monetary policy, inflation occurs due to falling monetary value, as in the case of Brazil or Argentina. It's going to crash.

In particular, criticism that the currency can solve all problems and that it is not understandable about MMT's insistence on stimulating the economy by printing the currency so that it does not appear as a debt on the balance sheet. The idea that you can save money and save the economy is that inflation and exchange rate rises, but not in open and closed economies.

Professor Jun-Ho Ham of the Graduate School of International Studies at Yonsei University said, "Even if you put in taxes or put in debt, you have to pay back the money you spend. What money cannot solve, money cannot solve. Money is only a subsidiary means of economic activity. Government fiscal expenditure is a means of stabilization in times of crisis. The main thing in economic growth is that mainstream economists think that private investment is important." Said.

Kim Seok-jung, a consultant at Hyundai Marine & Fire, who translated Richard Kue's book "Lessons from Japan's Great Recession," which deals with Japan's long-term recession, said, It is true that financial input is necessary, and the important thing is where to spend money, rather than spending expenditure and creating short-term jobs. "We will have to put in the construction of overseas network infrastructure to open up the market."


The world's financial markets have returned to pre-Corona19 levels as countries around the world invested unprecedented amounts of money in the event of Corona19. However, in line with the movements to ease containment measures in each country, Corona 19 is expected to spread again, and a second shock to the global economy is expected to be inevitable.

There is also growing concern about moral hazard, such as the massive amount of money being used to buy corporate bonds of high-end companies and entering speculative asset markets. As indiscriminate support mass-produces zombie companies, the voice that selective support and restructuring measures should be prepared is also gaining strength.

Since the global financial crisis in 2008, interest rate cuts and quantitative easing have had little effect on the economy, while inflation of asset prices such as stocks and real estate has deepened the polarization of wealth. Is gaining its own power.

However, there is no'free lunch' in that the debt once created cannot be removed from the balance sheet and someone has to pay it. In the short term, it can be said that'balanced finance theory is wrong' in the short term, as Lander Ray argued in modern currency theory, but in the medium and long term,'oriented toward balanced finance' will ensure the sustainability of households, businesses, and governments. .