The Bank of England in the context of "Modern Monetary Theory"

Modern Monetary Theory or Modern Money Theory (MMT) is a macroeconomic theory that describes the nature of money within a fiat, floating exchange rate system. MMT synthesizes ideas from the state theory of money of Georg Friedrich Knapp (also known as chartalism) and the credit theory of money of Alfred Mitchell-Innes, the functional finance proposals of Abba Lerner, Hyman Minsky's views on the banking system and Wynne Godley's sectoral balances approach. Economists Warren Mosler, L. Randall Wray, Stephanie Kelton, Bill Mitchell and Pavlina R. Tcherneva are largely responsible for reviving the idea of chartalism as an explanation of money creation.

MMT frames government spending and taxation differently to most orthodox frameworks, and instead relies on functionalist readings of historical events and evidence, such as the use of Tally sticks, or the creation of The Bank of England. MMT states that the government is the monopoly issuer of its currency and therefore must spend currency into existence before any tax revenue can be collected. The government spends currency into existence and taxpayers use that currency to pay their obligations to the state. This means that taxes cannot fund public spending in a nominal monetary flow sense, as the government cannot collect money back in taxes until after it is has been issued into the economy. In this kind of monetary system, the government is never constrained in its ability to pay, rather the limits are the real resources available for purchase in the state's currency.