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Conventional fiscal thinking in Canada has long equated government responsibility with balanced budgets and deficit avoidance. However, these assumptions are rooted in a flawed analogy between household finance and national economics. In reality, sovereign currency-issuing governments like Canada are not financially constrained in the same way households are.
Modern Monetary Theory (MMT) clarifies that such governments:
- Issue their own money to finance spending;
- Do not need to tax before they spend;
- Are constrained by inflation, not solvency;
- And can run deficits as necessary to support full employment and public well-being.
Canada meets all criteria for monetary sovereignty: it issues its own currency (CAD), has a floating exchange rate, and does not borrow in foreign currencies. These facts empower the federal government to undertake strategic, non-inflationary investment in areas like green infrastructure, universal care systems, affordable housing, and Indigenous-led development — without relying on austerity or market intermediaries.
Key contributions of this paper include:
- A comprehensive introduction to MMT for Canadian policy audiences;
- Clarification of common misconceptions, including inflation and debt myths;
- Sectoral policy applications, showing how MMT can be used responsibly across health, housing, climate, and justice;
- Integration with regenerative and life-value frameworks, proposing new metrics for public investment based on human and ecological flourishing;
- A vision of participatory fiscal governance that democratizes money and restores public trust in government capacity.
The time has come to abandon fear-based austerity and embrace a future of coherent, life-centered economic stewardship. MMT offers the technical foundation. Canada must now summon the moral and political will.
