Modern Money Theory

A Primer on Macroeconomics for Sovereign Monetary Systems

verfasst von: L. Randall Wray

Verlag: Springer Nature Switzerland

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

This book, a revised new edition, examines how money is created and how it functions within global exchange rate regimes to highlight how monetary policy can promote economic growth, full employment, and price stability. It provides an introduction to the basics of macroeconomic accounting and the domestic monetary system, as well as fiscal operations, tax policy for sovereign nations, alternative exchange rate regimes. New topics, including central bank clearing, responses to the COVID-19 pandemic, the rise of inflation, and how to finance a Green New Deal, are also discussed.

Modern Money Theory provides the reader with a framework for understanding real world economies. It will be relevant to students, researchers, and policymakers interested in monetary policy.

Inhaltsverzeichnis

Frontmatter

Chapter 1. The Basics of Macroeconomic Accounting

Abstract

In this chapter we are going to begin to build the necessary foundation to understand modern money. Please bear with us. It may not be obvious at first why this is important. But you cannot possibly understand the debate about the government’s budget (and critique the deficit hysteria that typically grips most nations) without understanding basic macro accounting. Nor can you understand the problems in Euroland—which have to do with the set-up of its monetary system, not with the supposed profligate spending of lazy Greeks, Spaniards, and Italians. So be patient and pay attention. No higher math or knowledge of intricate accounting rules will be required. This is simple, basic stuff. It is a branch of logic. But it is extremely simple logic.

L. Randall Wray

Chapter 2. Spending by Issuer of Domestic Currency

Abstract

In previous sections we have examined in detail the three balances approach developed largely by Wynne Godley. In some sense all of that is preliminary to examining the nature of modern money. Further, a key distinguishing characteristic of MMT is its view on how government really spends. Beginning with this chapter we will develop our theory of sovereign currency.

L. Randall Wray

Chapter 3. The Domestic Monetary System: Banking and Central Banking

Abstract

All “modern money” systems (including those of the “past 4000 years at least” as Keynes put it) are state money systems in which the sovereign chooses a money of account and then imposes tax liabilities in that unit. It can then issue currency used to pay taxes. In this chapter we return to our analysis of the operation of today’s monetary system, examining the denomination of IOUs in the state money of account.

L. Randall Wray

Chapter 4. Fiscal Operations in a Nation That Issues Its Own Currency

Abstract

In this chapter we will begin to examine our next topic: government spending, taxing, interest rate setting, and bond issue—that is, we will examine fiscal policy for a government that issues its own currency. Note that it is not possible to completely separate fiscal policy from monetary policy, especially in the area of the issue of treasury debt. We will therefore include in this chapter interest-targeting operations by the central bank.

L. Randall Wray

Chapter 5. Tax Policy for Sovereign Nations

Abstract

We have argued that taxes drive currency. Sovereign government does not need taxes for revenue, but to create a demand for its currency. With that in mind, we need to rethink tax policy. How best to drive the currency? What kinds of taxes are best? Besides driving a currency, what else can taxes be used for? We explore such issues in this chapter.

L. Randall Wray

Chapter 6. Modern Money Theory and Alternative Exchange Rate Regimes

Abstract

The previous discussions were quite general and apply to all countries that use a domestic currency. It does not matter whether these currencies are pegged to a foreign currency or to a precious metal, or whether they are freely floating—the principles are the same. In this chapter we will examine the implications of exchange regimes for our analysis.

L. Randall Wray

Chapter 7. Monetary and Fiscal Policy for Sovereign Currencies: What Should Government Do?

Abstract

In this chapter we will turn to what government ought to do. This chapter will specifically treat only sovereign government—one that issues its own floating rate currency. From the chapters above, that will make it clear that we are addressing only a government that does not face an affordability constraint. The floating rate regime provides the greatest domestic policy space. Nations that peg or manage their exchange rates might have less policy space, depending on their own situation.

L. Randall Wray

Chapter 8. Policy for Full Employment and Price Stability

Abstract

In this chapter we will examine policy that will promote full employment with price stability. Most economists believe that full employment and price stability are inconsistent. Indeed, unemployment is seen as a “tool” to be used to promote price stability. In this chapter we first examine MMT’s approach to full employment. We will argue that it is possible to pursue full employment in a manner that actually enhances price stability. In the next chapter we examine high inflation and hyperinflation. Many critiques of MMT argue that if the principles of MMT were followed (in particular those that follow from the functional finance approach of Lerner) the result would be runaway inflation. We will dispel those fears.

L. Randall Wray

Chapter 9. Inflation and Sovereign Currencies

Abstract

In this chapter we will examine the MMT view of inflation and hyperinflation. The usual belief is that budget deficits and full employment are prone to cause inflation if not hyperinflation. Many critics even argue that following MMT is necessarily inflationary—the path to ruin. Let us first see how inflation is defined. We then turn to hyperinflation and to fears that quantitative easing might spark inflation. We will examine the claim that MMT policy was adopted during COVID and that the relief packages fueled inflation beginning in 2021. Finally we turn to MMT’s views on policy to promote price stability.

L. Randall Wray

Backmatter

Titel: Modern Money Theory
verfasst von: L. Randall Wray
Verlag: Springer Nature Switzerland
Electronic ISBN: 978-3-031-47884-0
Print ISBN: 978-3-031-47886-4
DOI: https://doi.org/10.1007/978-3-031-47884-0