The thrust of this approach is to maintain effective demand sufficient for purchase of production (supply) at full employment by offsetting non-government saving desire with the currency issuer's fiscal balance.
[citation needed] This does not apply to price level rising due to supply shock, such as an oil crisis provoked by a cartel exerting a monopoly, or shortage of real resources, e.g. due to natural disaster, war, or climate.
[citation needed] This view is based on a Treasury-based monetary regime in which money is created through currency issuance mediated by government fiscal expenditure.
Similarly, taxes are seen not as a funding operation for government expenditure but as a means to withdraw non-government net financial assets created government expenditure in order to control effective demand and thereby reduce inflationary pressure as needed iaw[check spelling] the sectoral balance approach and functional finance.
[citation needed] This latest view is quite the opposite of the credit-based monetary presumptions of monetarists, which MMT regards as appropriate to a convertible fixed-rate regime like the gold standard but not to the current non-convertible floating rate system that began when then United States president Richard Nixon shut the gold window (as part of the Nixon shock) on 15 August 1971, and was later adopted by most nations, excepting those that pegged their currencies, ran currency boards, or gave up currency sovereignty as did members of the European Monetary Union in adopting the euro as a common currency.
This reduces idle resources and presents the possibility of achieving actual full employment (allowing 2% for transitional) along with price stability, which monetarism presumes inflationary.