Sovereign nations running fiat monetary systems can completely eliminate their national debt
While heterodox economic frameworks suggest that sovereign governments issuing fiat money face no strict financial constraints in their own currency, mainstream economic analyses emphasize that attempting to completely eliminate or radically manage national debt without regard for fiscal realities leads to severe inflationary pressures and other macroeconomic instability.
The claim touches on Modern Monetary Theory (MMT) and fiat monetary sovereignty, which argue that sovereign issuers of fiat currency do not face financial insolvency risks in their own currency. However, mainstream literature and critiques of MMT point out that attempting extreme fiscal maneuvers or ignoring debt accumulation triggers severe inflation, capital constraints, and institutional instability. Therefore, the claim is heavily contested in economic literature, with disagreement over whether 'can' implies practical feasibility or merely theoretical accounting capability.
Sovereign nations running fiat monetary systems possess theoretical mechanics to issue currency without strict financial constraints, though mainstream economics emphasizes that eliminating national debt causes severe inflation.
Hook A. Towards an institutional "landscape" view of modern money creation mechanisms and some reflections on their ecological significance.. 2023. https://doi.org/10.1007/s11625-023-01304-5
The paper notes that a government with a fiat currency can spend new money into existence, highlighting the unique mechanics available to currency-issuing sovereigns.
Olaoye OO, Omokanmi OJ, Tabash MI, Olofinlade SO, Ojelade MO. Soaring inflation in sub-Saharan Africa: A fiscal root?. 2023. https://doi.org/10.1007/s11135-023-01682-z
The study shows that high public debt levels create severe inflationary pressures, indicating that unconstrained debt accumulation is economically destabilizing.
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Omran F, Zelmer M. Deficits Do Matter: A Review of Modern Monetary Theory. 2022. https://doi.org/10.2139/ssrn.4094414
The paper explains that monetary sovereign governments do not face strict financial constraints in their own currency, though real resource constraints still apply.
Omran F, Zelmer M. Deficits Do Matter: A Review of Modern Monetary Theory. 2022. https://doi.org/10.2139/ssrn.4094414
The review critiques Modern Monetary Theory for overstating monetary sovereignty and ignoring real-world open-economy constraints.
Vladimir A. BELYAEV. Money, debt, and the budget deficit: Contrasting views of the mainstream and modern monetary theory. 2025. https://doi.org/10.24891/qmfebd
The article highlights significant weaknesses and contentious issues in theories claiming absolute fiscal freedom for sovereign governments.
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