Warren Mosler uses the MMT lens to explain how both Scotland and Wales can enact progressive policies once they are separate from the rest of the United Kingdom
In late August 2025, Warren Mosler, the founder of Modern Monetary Theory, delivered a landmark presentation in Cardiff. It was the first time he considered how his insights could be used to support the successful economic independence of both Wales and Scotland.
“When you’re trying to explain policy and what will work, what will be progressive, [mainstream assumptions are] a significant obstacle” – Warren Mosler.
In sum, supporting policymakers in reframing and removing outdated views of our economy is a significant challenge. There is no doubt about that. However, there are signs that some policymakers are open to other economic perspectives.
MMT in Wales
A former member of the Senedd Cymru and three prospective candidates who are very likely to be part of the 2026 intake were in the audience for Warren’s talk, which was the start of a process that will inform parties in the Senedd that there is an alternative to the UK’s austerity paradigm.
As ever, Warren challenges mainstream economic thinking. He explains how the standard mainstream economic narrative holds most governments hostage, based as it is on an economic understanding that has not shifted since the end of the gold standard—an economic framework that hasn’t been applicable for almost fifty years.
Warren explains how the MMT lens would help policymakers understand the potential to expand the policy options for Scotland and Wales should they become independent and launch their own currency.
MMT means no more gold standard thinking
Rigidly holding to gold standard thinking in a world of fiat money creation—where money is not linked to a fixed exchange rate or a commodity like gold—stymies progressive policies. With an up-to-date understanding, using the MMT lens, governments will be able to create a wellbeing economy based on full employment.
Warren tackles six areas where the mainstream has things “backwards”. He focuses on trade, savings and investment, jobs, the money creation sequence, unemployment, and interest rates. This is the core of the MMT lens for an independent Scotland and Wales.
He applies his MMT principles directly to the questions facing an independent Wales and Scotland, offering a fresh and radical perspective on how these nations could approach economic sovereignty. Should Scotland and Wales:
- Issue their own currency?
- Be concerned about the trade deficit they will both inherit?
- Sell long-term government bonds?
- Set high interest rates?
- Encourage savings to be able to invest?
- Pursue full employment?
Warren highlights the challenges faced by progressive administrations in Edinburgh and Wales. Warren says,
“You are up against people having things backwards. So, when you’re trying to explain policy and what will work, what will be progressive, it’s a significant obstacle. I just don’t want you to underestimate the size of that obstacle.”
Trade, Investment/savings, Jobs, Money Creation Sequence, Unemployment, and Interest Rates are “all backwards”. William Thomson (left) and Warren Mosler (right) in Cardiff. August 2025.
Warren Mosler and the MMT lens for an independent Scotland and Wales
We have broken down the MMT worldview, focusing on the six areas where mainstream policy is incorrect.
1. Trade Deficits and Exports
Mainstream economics frames exports as a national victory and imports as a loss, but Mosler turns this on its head. He explains that real wealth is defined by a country’s “pile of stuff” — the goods and services it can produce and consume. Every import contributes to making this pile bigger, while every export contributes to making it smaller. Strategically, some goods, such as steel or vaccines, may need to be produced domestically. However, for consumer goods, the logic is simple: imports are a benefit, while exports are a cost. Mosler ridicules the idea that countries are exploited when others send them goods, showing that the true problem with imports is only if they stop. He stresses that unemployment is the greatest waste of all, costing more in lost output than all wars in history; therefore, the priority should always be full employment and maximizing real wealth, rather than chasing export surpluses.
2. Investment and Savings
Mainstream thought teaches that savings fund investment, but Mosler insists this is completely backwards. In reality, investment creates savings. When a bank makes a loan to finance a factory, the loan itself creates a deposit — new money — which becomes someone else’s savings. Incentivising private savings through tax breaks for pensions and similar schemes creates a drag on demand, since unspent income must be offset by others going into debt or by government deficits. He emphasizes that large deficits are not evidence of irresponsibility but rather the mirror of high savings desires. If everyone saved more of their income, unemployment would rise unless deficits expanded. Misunderstanding this relationship between savings, debt, and investment leads to bad policy prescriptions that fail to sustain employment.
3. Jobs as Cost vs. Benefit
Contrary to political rhetoric that celebrates “job creation,” Mosler stresses that jobs are a cost, not a benefit, but instead highlight a failed full employment policy. The economic benefit comes from the output that jobs produce, not from the act of employment itself. We should already have full employment! If we did, we would value jobs as a cost, not a benefit. He illustrates this by pointing out that if everyone were already fully employed, adding jobs would simply waste labor that could be used elsewhere. Policies that promote projects based on creating more jobs — for example, favoring renewable energy because it requires more workers than coal — misrepresent the economic reality. Extra jobs reduce productivity, since more labor is tied up to achieve the same output. The real measure should be whether the project’s outputs are worth the opportunity cost of the labor, not whether it “creates” employment in itself.
4. Sequence of money creation
Mainstream views suggest that governments must first collect taxes or borrow before they can spend, but Mosler explains that the sequence is actually the opposite. The government must first spend money, which is used to pay taxes and buy bonds. Taxes are essential not for revenue but for creating demand for the government’s currency, as they compel people to seek paid work. The leftover after taxes is what shows up as savings or government debt. He emphasises that unemployment exists only because the government has not spent enough to meet both tax obligations and satisfy savings desires. Bond sales are not financing operations, but rather a means of shifting funds between accounts at the central bank. Misunderstanding this leads to false fears about deficits and debt sustainability.
5. Unemployment
Unemployment arises when government spending is insufficient to cover both tax obligations and desired private savings. Tax liabilities generate the need for employment and income, but if government expenditure does not provide enough financial balances to meet these obligations and accommodate savings, individuals are left involuntarily unemployed. Persistent unemployment is therefore evidence of an inadequate fiscal stance, not a natural feature of labour markets. The existence of unemployment signals that fiscal policy has failed to ensure sufficient demand to match the economy’s productive capacity.
6. Interest Rates and Monetary Policy
Mosler shows how mainstream thinking about interest rates is “180 degrees backwards.” Raising rates does not fight inflation by tightening money but instead increases government deficit spending through higher interest payments on reserves and bonds. These payments flow only to people who already have money, and in proportion to how much they hold, making the policy regressive and inflationary. He calls interest payments a form of “UBI for the rich.” He highlights Japan and the Eurozone as cases where low or zero rates coincided with low inflation, while countries with high rates, such as Argentina and Turkey, suffered severe inflation due to the large fiscal injections required to cover interest expenses. The true “natural rate” of interest under a floating exchange rate is zero; anything above that is a distortion that exacerbates inequality and inflationary pressures.
The MMT worldview
This framework is a macroeconomic model of our economy. It can be viewed as the MMT worldview that informs MMT policy. This is, of course, a model with certain assumptions that must be tailored to individual situations and circumstances. This is how all world views should inform policy.
Warren’s position, which I support, is that this is a ‘starting position’ that is based on a real-world understanding of modern money and provides a much more solid foundation for creating a progressive economy in newly independent nations.
Warren’s visit was covered in this interview in Nation.Cymru.
Audio podcast coming soon.
By William Thomson
