Modern Monetary Theory (MMT) demonstrates that sovereign currency-issuing governments cannot become insolvent in their own unit of account, yet these same governments routinely behave as if they are revenue-constrained. This paradox — formal sovereignty coexisting with self-imposed austerity — raises profound questions about who truly governs money. This paper argues that sovereignty is not a unitary attribute but a fractured condition, divided across three registers: formal, functional, and ideological.
Formally, governments retain the authority to issue currency and extinguish liabilities through taxation. Functionally, private banks and supranational institutions wield shadow sovereignty by creating credit, enforcing fiscal conditionalities, and disciplining governments through market reactions. Ideologically, austerity narratives and household analogies naturalize scarcity, embedding constraint into common sense and foreclosing democratic imagination.
By synthesizing MMT’s descriptive insights with political economy and cultural theory, this paper re-theorizes sovereignty as a contested field rather than a binary attribute. Drawing on the works of Wray, Kelton, Mosler, McMurtry, Polanyi, and Gramsci, it situates monetary practice within a broader struggle over democracy, legitimacy, and collective provisioning. The conclusion argues that reclaiming sovereignty requires interventions across all three registers — asserting public monetary authority, restructuring financial institutions, and dismantling austerity narratives. In an era of overlapping economic and ecological crises, such reclamation is not optional but necessary for the survival of democratic society.
